Date: 19971008
Docket: 96-4069-IT-I
BETWEEN:
WILLIAM J. STRAIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Christie A.C.J.T.C.
[1]
This appeal is governed by the informal procedure provided for
under section 18 and following sections of the Tax Court of
Canada Act. The year under review is 1994.
[2]
The issues are whether the appellant is liable for interest under
subsection 161(2) and to a penalty under section 163.1 of the
Income Tax Act ("the Act").
[3]
There is no disagreement of any substance about the facts.
Paragraph 8 of the Reply to the Notice of Appeal reads:
"8.
In so assessing the Appellant, the Minister made the following
assumptions of fact:
(a)
during the 1994 taxation year, the Appellant's net income
was $787,333.00;
(b)
the Appellant's chief source of income was neither farming
nor fishing;
(c)
during the 1994 taxation year, the Appellant's income from
which amounts were deducted at source was $562,333.04;
(d)
the Appellant's tax payable for the 1994 taxation year was
$223,238.12;
(e)
the Appellant's tax payable for the year prior to the 1994
taxation year was $177,216.02;
(f)
the Appellant was required to pay instalments of tax in respect
of the 1994 taxation year in the amount of $60,284.00 and failed
to do so."
The appellant expressly agreed at the hearing with paragraphs
8(a) to (e) inclusive.
[4]
In a brief cross-examination the appellant said that he paid
$83,862.00 on April 30. But he made no payments in 1994 directly
to the Receiver General. Direct deductions on account of tax were
made at source by his employer and remitted to the Receiver
General. Further, the appellant's Notice of Objection to
the assessments was entered as exhibit A-1. The facts contained
therein were confirmed by the appellant under oath as true at the
hearing. Paragraph 5 reads: "Total tax payable for 1994
amounted to $361,958. Income tax deducted at source for 1994
amounted to $276,329. The Quebec abatement was $2,600. A balance
of $83,682 was paid on filing before April 30, 1994." The
reference to 1994 is obviously intended to be 1995. This is
confirmed by the appellant's return of income for 1994. It
is dated April 30, 1995.
[5]
Subsections 161(1) and (2) of the Act provide:
"161. (1) Where at
any time after the day on or before which a taxpayer is required
to pay the remainder of the taxpayer's tax payable under
this Part for a taxation year (or would be so required if a
remainder of such tax were payable),
(a) the total of the taxpayer's taxes payable under
this Part and Parts I.3, VI and VI.1 for the year
exceeds
(b) the total of all amounts each of which is an amount
paid at or before that time on account of the taxpayer's
tax payable and applied as at that time by the Minister against
the taxpayer's liability for an amount payable under this
Part or Part I.3, VI or VI.1 for the year,
the taxpayer shall pay to the Receiver General interest at the
prescribed rate on the excess, computed for the period during
which that excess is outstanding.
(2) In addition to the interest payable under subsection (1),
where a taxpayer who is required by this Part to pay a part or
instalment of tax has failed to pay all or any part thereof on or
before the day on or before which the tax or instalment, as the
case may be, was required to be paid, the taxpayer shall pay to
the Receiver General interest at the prescribed rate on the
amount that the taxpayer failed to pay computed from the day on
or before which the amount was required to be paid to the day of
payment, or to the beginning of the period in respect of which
the taxpayer is required to pay interest thereon under subsection
(1), whichever is earlier."
Section 163.1 provides:
"163.1 Every person who fails to pay all or any part of
an instalment of tax for a taxation year on or before the day on
or before which the instalment is required by this Part to be
paid is liable to a penalty equal to 50% of the amount, if any,
by which
(a) the interest payable by the person under section 161
in respect of all instalments for the year
exceeds the greater of
(b) $1,000, and
(c) 25% of the interest that would have been payable by
the person under section 161 in respect of all instalments for
the year if no instalment had been made for that year."
Subsection 156(1) provides:
"156. (1) Subject to section 156.1, every individual,
other than one to whom subsection 153(2) or section 155 applies,
shall pay to the Receiver General in respect of each taxation
year[1]
(a) on or before March 15, June 15, September 15 and
December 15 in the year, an amount equal to 1/4 of
(i) the amount estimated by the individual to be the tax payable
under this Part by the individual for the year, or
(ii) the individual's instalment base for the preceding
taxation year, or
(b) on or before
(i) March 15 and June 15 in the year, an amount equal to 1/4 of
the individual's instalment base for the second preceding
taxation year, and
(ii) September 15 and December 15 in the year, an amount equal to
1/2 of the amount, if any, by which
(A) the individual's instalment base for the preceding
taxation year
exceeds
(B) 1/2 of the individual's instalment base for the second
preceding taxation year,
and, on or before the individual's balance-due day for
the year, the remainder of the individual's tax estimated
under section 151."[2]
[6]
It will be noted that the requirement prescribed under subsection
156(1) of the Act that every individual is required to
make instalment payments is subject to these exceptions:
(a)
if an individual's chief source of income for the year is
fishing or farming and the individual's net tax owing does
not exceed specified amounts (para. 156.1(2)(a));
(b)
if an individual's net tax owing for the particular year,
or for each of the 2 preceding taxation years, does not exceed
the individual's instalment threshold for that year (para.
156.1(2)(b));
(c)
the individual dies and the circumstances stated apply (ss.
156.1(3));
(d)
where amounts have been deducted at source if at least 75% of the
individual's income for the year consists of income from
which tax has been deducted at source (ss. 153(2)); or
(e)
the individual's chief source of income for a taxation year
is farming or fishing in which case (subject to para.
156.1(2)(a)) special payments by instalment are provided
for (ss. 155(1)).
[7]
The appellant is not within any of these exceptions. With respect
to (c) 75% of his 1994 income of $787,333.00 is $590,500.00. The
appellant's income for that year from which amounts were
deducted at source was $562,333.00
[8]
In enacting subsection 156(1) Parliament has decreed that every
individual except those coming within the exceptions described in
the subsection shall pay tax by instalments to the Receiver
General. The appellant's basic contention is that
deductions having been made at source and remitted to the
Receiver General in 1994 by his employer under subsection
153(1)[3] of the
Act which exceeded the amounts required to be paid by
instalments under subsection 156(1) the requirement to make
payments by instalments no longer applies.
[9]
Such an exception not having been included in subsection 156(1)
the appellant can succeed only if he can point to some other
provision or provisions in the Act or regulations made
thereunder that spells this out or from which an exception of
that kind is to be necessarily inferred, and I emphasize the word
necessarily. That has not been done.
[10] The
appellant referred the court to Gill v. M.N.R., 75 DTC 278
(T.R.B.) and Lalonde v. M.N.R., 82 DTC 1772 (T.R.B.). In
these cases the appellant's employer had made deductions at
source, but failed to remit the funds to the Receiver General. It
was held that in the circumstances the appellants were absolved
of the liability to tax to the extent of the deductions. The
employers were found to be agents of the Minister of National
Revenue in making the deductions. I do not think these cases
assist the appellant.
[11] The
matter of deductions at source and of payments by instalments are
different concepts and are only linked to the extent that the
legislation may provide.
[12] Finally
the spectre of possible double taxation was raised. As will have
been seen there was no double taxation involved in this case. In
my opinion subsections 156(1) and 163(1), if taken alone or in
conjunction with each other, cannot properly be construed as
purporting to authorize double taxation. In B.S.C. Footwear
Ltd. v. Ridgeway (Inspector of Taxes), [1972] A.C. 544
Lord Reid said at page 555: "It is a fundamental
principle of income tax law that the same sum shall not be taxed
twice." If it should happen that a taxpayer has, by reason
of deductions at source, or instalment payments, or both,
overpaid tax, this is rectifiable by refund: subsection 164(1) of
the Act.
[13] The
appellant was properly assessed under sections 162 and 163.1 of
the Act. It follows that the appeal must be dismissed.
"D.H. CHRISTIE"
A.C.J.T.C.C.
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