Gardner v. The Queen, docket 1999-4042-IT-I (Informal Procedure)

Date: 20000925

Docket: 1999-4042-IT-I

BETWEEN:

SHERIDAN GARDNER,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Lamarre, J.T.C.C.

[1] These are appeals from assessments for the appellant's 1993 and 1994 taxation years.

[2] In her Notice of Appeal, the appellant requested that this Court vary the above-mentioned assessments on the basis that she was a deemed resident of Canada pursuant to paragraph 250(1)(c) of the federal Income Tax Act. However, she claimed she was not ordinarily resident in Canada and that her income earned outside Canada thus was not subject to Ontario provincial tax but was subject to the additional federal tax provided for in subsection 120(1) of the Income Tax Act.

[3] By the assessments dated May 30, 1997 (under appeal), the appellant was considered as being ordinarily resident in Canada in the province of Ontario and was therefore charged $13,198.63 in net federal tax and $7,750.84 in net provincial tax for 1993 and $10,195.09 in net federal tax and $5,789.10 in net provincial tax for 1994. The appellant requests that she not be considered a resident of Ontario on the basis that she should be considered to be only a deemed resident of Canada and not a factual resident of Ontario. If she were not in fact resident in Ontario, she would have to pay the section 120 surtax and would be charged net federal tax of $19,855.30 for 1993 and $15,343 for 1994 and no Ontario tax (which had been charged in the previous assessments dated September 19, 1994 and November 14, 1995).

[4] At the opening of the trial, counsel for the respondent presented a motion to dismiss the appeals. The basis for this motion is that this Court has no jurisdiction to allow these appeals for two reasons.

[5] The first is that for this Court to hear and to allow the appeals would result in an increase of the federal tax on the assessments under appeal. Counsel for the respondent referred to case law on that matter. (Harris v. M.N.R., 64 DTC 5332 (Ex. Ct. of Canada); Contonis v. The Queen, 95 DTC 511 (T.C.C.); Joyal v. Canada, [1992] T.C.J. No. 12 (T.C.C.)).

[6] The second is that the appellant is seeking to have this Court determine that she was not a resident of Ontario during the years at issue in order to appeal from assessments of tax under the Ontario Income Tax Act, a matter which does not come under the jurisdiction of this Court. Counsel referred to the Ontario Income Tax Act and to case law (Andrew Paving & Engineering Ltd. et al. v. M.N.R., 84 DTC 1157 (T.C.C.); Stiege v. M.N.R., 91 DTC 808 (T.C.C.) and Hennick v. The Queen, [1998] 4 C.T.C. 2855 (T.C.C.)).

[7] The appellant relies on section 23 and subsection 4(1) of the Ontario Income Tax Act and on section 120 of the federal Income Tax Act in submitting that this Court has jurisdiction to determine whether income is earned in a province and, consequently, whether the appellant was a resident of that province.

[8] The relevant sections of the Ontario Income Tax Act read as follows:

4.(1) Definitions

4. 4.(1) In this section,

"income earned in the taxation year in Ontario" means the amount of income that would be determined to be earned in the year in Ontario for the purposes of determining the amount of income earned in the year in a province under section 120 of the Federal Act;

. . .

"tax payable under the Federal Act" means the amount that, but for section 120 of the Federal Act, would be the tax payable by an individual under Part I of that Act for the taxation year in respect of which the expression is being applied, computed as if the individual were not entitled to a deduction under section 126, 127, 127.2, 127.4 or 127.41 of that Act.

DIVISION E – APPEALS TO THE ONTARIO COURT

(GENERAL DIVISION)

23.(1) Right of appeal

23.-(1) A taxpayer who has served a notice of objection to an assessment under subsection 165(1) of the Federal Act, as it applies for the purposes of this Act, may appeal to the Ontario Court (General Division) to have the assessment vacated or varied. . . .

23.(2) Basis for appeal

23.-(2) In the course of disposing of an appeal from an assessment under this Act, the Court may make a determination in respect of any question relating to,

(a) the residence of a taxpayer for the purposes of the Act;

(b) the amount of income of a taxpayer earned in a taxation year in Ontario for the purposes of section 4;

(c) the amount of tax payable by a taxpayer for a taxation year, based on the amount of tax payable under the Federal Act for that year as defined in section 4;

(d) the amount of tax payable by a qualifying environmental trust under section 2.1.

23.(2.1) Same

23.(2.1) No appeal from an assessment may be taken in respect of the computation of the amount of tax payable under the Federal Act as defined in section 4.

[9] Section 120 of the federal Income Tax Act adds a surtax on income that is not earned by the taxpayer in a province. It reads as follows:

120(1) There shall be added to the tax otherwise payable under this Part by an individual for a taxation year an amount that bears the same relation to

52% of the tax otherwise payable under this Part by the individual for the year that

(a) his income for the year, other than his income earned in the year in a province,

bears to

(b) his income for the year.

[10] Although it seems obvious from the pleadings that the appellant was a deemed resident of Canada in 1993 and 1994 pursuant to paragraph 250(1)(c) of the Income Tax Act (both parties having admitted that she was an employee of Revenue Canada who accepted a three-year assignment in 1992 to work at the Canadian Embassy in Tokyo, Japan), it is not clear that she was also ordinarily resident in Canada (and in the province of Ontario) during those years.

[11] It is obvious that the result requested by the appellant would increase her federal tax liability. The case law establishes quite clearly that it is not in the power of this Court to do this as it would be tantamount to allowing the Minister of National Revenue to appeal his assessment. Such a course of action is not in keeping with the proper interpretation of subsection 171(1) of the federal Income Tax Act, which gives this Court its jurisdiction (see Cooper v. M.N.R., 87 DTC 194 (T.C.C.)).

[12] The appellant's last-minute request that section 120 not be applied if she is to be declared only a deemed resident of Canada and not a factual resident of Ontario is untenable. I have no authority to overlook the application of any section of the federal Income Tax Act. To do so would be acting beyond the law, which I cannot do.

[13] Furthermore, I agree with counsel for the respondent that the question of residence in Ontario or of the amount of tax payable in Ontario has to be determined by the Ontario Court pursuant to the Ontario Income Tax Act and not by this Court. As was said by Judge Christie of this Court, as he then was, in Andrew Paving & Engineering Ltd. et al., supra, at page 1161:

The existence of a collection agreement between the Government of Canada and the Government of Ontario cannot alter this. Division E of the Ontario Act provides for appeals to the Supreme Court of Ontario from assessments made under that legislation. Nothing in the Act, the Tax Court of Canada Act, or any other legislation enacted by or under the authority of the Parliament of Canada purports to confer such jurisdiction on this Court. The Tax Court of Canada is purely statutory in origin and the scope of its jurisdiction is entirely circumscribed by express or necessarily implied federal legislative authority. Moreover, I am of the opinion that if legislation were enacted by Parliament which purported to confer jurisdiction on the Tax Court of Canada to hear appeals from assessments made under the Ontario Act, it would be beyond the constitutional reach of Parliament.

[14] Here the appellant is asking me to vary the assessments on the basis that there is no amount of income earned in Ontario and as a consequence the Ontario provincial income tax assessed should be cancelled and section 120 of the federal Income Tax Act should apply so as to increase her federal tax payable.

[15] I cannot accede to the appellant's request for two reasons. First, as I said earlier, the application of section 120, if it is in fact applicable in the present case, would necessarily result in an increase in the appellant's net federal tax, and it is not in my power to effect such an increase.

[16] Secondly, the only jurisdiction I have is to determine the amount of tax payable at the federal level. The Ontario provincial income tax assessed comes under the jurisdiction of the Ontario Court, as per paragraph 23(2)(c) of the Ontario Income Tax Act. I cannot therefore determine the amount of income earned in Ontario for the purposes of determining the amount of tax payable in the province of Ontario as I do not have jurisdiction to entertain an appeal from an assessment of provincial income tax.

[17] Finally, the appellant referred to the decision in Crossley v. M.N.R. (86-1758(IT), T.C.C., unreported). Although this decision appears to me to be unclear on that question, I note that there was no issue therein with respect to allowing a higher amount of tax to be paid than the amount actually assessed. I find therefore that this decision has no relevance here.

[18] For these reasons, I will grant the motion and dismiss the appeals.

Signed at Ottawa, Canada, this 25th day of September 2000.

"Lucie Lamarre"

J.T.C.C.