Bouzghaya v. The Queen, docket 2000-2948-IT-I (Informal Procedure)

[OFFICIAL ENGLISH TRANSLATION]

2000-2948(IT)I

BETWEEN:

MOUNIR BOUZGHAYA,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeals heard on July 30, 2001, and judgment issued

orally from the bench on August 2, 2001, at Montréal, Quebec, by

the Honourable Judge Lucie Lamarre

Appearances

For the Appellant:                                The Appellant himself

Counsel for the Respondent:                Vlad Zolia

JUDGMENT

          The appeals from the assessments made under the Income Tax Act for the 1997 and 1998 taxation years are dismissed.

Signed at Montréal, Quebec, this 2nd day of August 2001.

"Lucie Lamarre"

J.T.C.C.

Translation certified true

on this 13th day of February 2003.

Erich Klein, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Date: 20010802

Docket: 2000-2948(IT)I

BETWEEN:

MOUNIR BOUZGHAYA,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

Lamarre, J.T.C.C.

[1]      The appellant is appealing from assessments made under the Income Tax Act ("the Act") for the 1997 and 1998 taxation years. Through those assessments, the Minister of National Revenue ("the Minister") added amounts of $2,485 and $823 to the appellant's income for each of those years respectively. Those amounts represent group insurance premiums and bonus payments made to the appellant by Assurance vie Desjardins-Laurentienne ("the company") during 1997 and until March 1998. The Minister also assessed a penalty of $82.30 for the 1998 taxation year, that is, a penalty equal to 10 percent of the unreported income for that year, in accordance with subsection 163(1) of the Act.

[2]      The appellant is challenging the assessments on the basis that he stopped working for the company on February 1, 1997. He argued that, as of that date, he no longer had to pay group insurance premiums and the company did not have to advance funds to his personal account to maintain his eligibility for the group insurance plan. He asserted that he tendered his resignation verbally to Hamid Djebbari, his branch manager, in February 1997 and that he began working elsewhere. He argued that he was covered by another group insurance plan with his new employer and that he no longer had any interest in or need for coverage by the company as of February 1997.

[3]      Suzanne Michaud, the company's director, sales force compensation, testified that it was not until April 1998 that the company received a formal request from the appellant's branch manager to cancel the group insurance for the appellant. Ms. Michaud testified that all salespersons associated with the company are required to contribute to group insurance. A contract will be terminated only if this is formally requested by the authorized manager. In the appellant's case, it seems that Mr. Djebbari sent a note in September 1997 requesting that the appellant's group insurance be terminated. According to Ms. Michaud, Mr. Djebbari was no longer a branch manager in September 1997 and the cancellation request was therefore not considered at that time but was instead forwarded to the company's financial service. By letter dated May 4, 1998, the company's vice-president, sales, officially terminated the contract (that the appellant and the company had signed on December 1, 1995) as of March 30, 1998 (Exhibits A-1 and I-1, Tab 6). It was therefore as of March 30, 1998, that the contract was cancelled and that the group insurance premiums and bonuses stopped being paid into the appellant's account. The company issued T4s in the appellant's name for the premium and bonus amounts so paid into his account until March 30, 1998.

[4]      The evidence also shows that, although the appellant said that he did not know he was still covered by the company after he left in February 1997, he apparently made claims and received payments under the company's group insurance plan throughout 1997 and until February 15, 1998 (see Exhibit I-2).

[5]      The appellant also argued that Mr. Djebbari was his only contact and, according to him, in 1997 Mr. Djebbari was still the manager of the branch where he worked. Mr. Djebbari died last year.

[6]      I conclude from the evidence that the appeals must be dismissed. First of all, the salesperson's contract signed by the appellant and the company in 1995 (Exhibit I-1, Tab 6) required that written notice be given by a party that wanted to unilaterally terminate the contract (article 30 of the contract). For the termination to take effect, that written notice had to be approved by an authorized member of the company's management (article 31 of the contract). None of this was done in this case. The appellant gave only verbal notice, and it has not been shown that Mr. Djebbari was an authorized member of the company's management who was empowered to approve the termination.

[7]      Moreover, based on Exhibit I-2, which provides the breakdown of the claims and of the benefits paid to an insured person with the appellant's social insurance number, it seems that the appellant took advantage of his group insurance plan until February 1998. If that is the case, he was required to pay the premiums for that plan insofar as his contract with the company was not officially terminated. Since he did not pay the premiums and the company paid them for him, those advances were rightly considered taxable earnings of the appellant's within the meaning of the Act. The company even issued a T4 showing the value of the premiums so paid, and the appellant was obliged to report them in his income for the 1997 and 1998 taxation years.

[8]      Accordingly, it is my view that the assessments are correct. The penalty assessed under subsection 163(1) of the Act must also be upheld, since the appellant failed to report for two consecutive years an amount that had to be included in his income.

[9]      The appeals are dismissed.

Signed at Montréal, Quebec, this 2nd day of August 2001.

"Lucie Lamarre"

J.T.C.C.

Translation certified true

on this 13th day of February 2003.

Erich Klein, Revisor