REASONS
FOR JUDGMENT
Lafleur J.
I. OVERVIEW
[1]
On January 24, 2017,
Denise C. Nagel filed with this Court an
application for an order extending the time within which an appeal may be
instituted in respect of a tax reassessment made by the Minister of National
Revenue (the “Minister”) under the Income Tax
Act (RSC, 1985, c. 1 (5th supp.), as amended) (the “Act”), for the 2013 taxation year. A notice of appeal was attached to
the application.
[2]
Ms. Nagel was the sole witness at the hearing.
II. FACTS
[3]
The evidence submitted at the hearing showed the
following:
1. On February 26, 2016, the Minister reassessed
Ms. Nagel for the 2013 taxation year and issued a notice of reassessment
showing a taxable income and a net federal tax payable of zero (the “First Reassessment”). It indicated that
Ms. Nagel “[has] no amount to pay as a result of
this reassessment”. It also showed that the taxing province of Ms. Nagel
was changed to Saskatchewan and indicated that Ms. Nagel had federal
unused tuition and education amounts.
2. A copy of the amended T1 General form—income tax and benefit return—signed
by Ms. Nagel and dated May 19, 2016, showed that she was a resident
of Saskatchewan on December 31, 2013, and that she did not apply for
GST/HST credit.
3. Ms. Nagel served a notice of objection to the First
Reassessment on May 24, 2016. By letter dated June 21, 2016,
the Canada Revenue Agency (the “CRA”)
informed Ms. Nagel that her objection was invalid because “[w]hen a client has filed an objection for issues that are
not considered part of the assessment of tax, penalty or interest, it cannot be
accepted as a Notice of Objection”. By letter dated
October 28, 2016, the CRA confirmed to Ms. Nagel that Ms. Nagel’s
province of residence was being changed to Nova Scotia.
4. On November 3, 2016, the Minister further reassessed Ms. Nagel
for the 2013 taxation year and issued a notice of reassessment showing a taxable
income and a net federal tax payable of zero (the “Second
Reassessment”). It indicated that Ms. Nagel “[has] no amount to pay as a result of this reassessment”.
In the Second Reassessment, Nova Scotia was used as Ms. Nagel’s province
of residence. In addition, the notice of reassessment indicated that Ms. Nagel
had federal unused tuition and education amounts.
III. PARTIES’
POSITIONS
[4]
In the course of the hearing, Ms. Nagel
indicated that she had issues with the reassessments in respect of (i) her
province of residence, as she would like to be considered a resident of
Saskatchewan, (ii) the federal unused tuition, textbook and education tax
credits (subsection 118.61(2) of the Act) as she is not entitled to the
credit since she never reimbursed the student loans, and (iii) the goods
and services tax (GST) determination.
[5]
The Respondent’s position is that this Court has
no jurisdiction because the First Reassessment and the Second Reassessment are
nil reassessments. Consequently, Ms. Nagel can neither object to, nor
appeal from, said reassessments and the Respondent asks that her application be
dismissed.
[6]
Unless otherwise stated, all provisions that
follow refer to the Act.
IV. ANALYSIS
[7]
Subsection 169(1) provides that where a
taxpayer has served a notice of objection to an assessment under section 165,
the taxpayer may appeal to this Court to have the assessment vacated or varied
after either: a) the Minister has confirmed the assessment or reassessed;
b) 90 days have elapsed after service of the notice of objection and
the Minister has not notified the taxpayer that the Minister has vacated or
confirmed the assessment or reassessed. However, no appeal may be instituted
after the expiration of 90 days from the day the notice has been sent to
the taxpayer under section 165 that the Minister has confirmed the
assessment or reassessed.
[8]
Subsection 169(1) reads as follows:
|
169(1) Appeal — Where a taxpayer
has served notice of objection to an assessment under section 165, the
taxpayer may appeal to the Tax Court of Canada to have the assessment vacated
or varied after either
(a) the Minister has
confirmed the assessment or reassessed, or
(b) 90 days have elapsed
after service of the notice of objection and the Minister has not notified
the taxpayer that the Minister has vacated or confirmed the assessment or
reassessed,
but no appeal under this section may be
instituted after the expiration of 90 days from the day notice has been
sent to the taxpayer under section 165 that the Minister has confirmed
the assessment or reassessed.
|
169(1) Appel — Lorsqu’un
contribuable a signifié un avis d’opposition à une cotisation, prévu à
l’article 165, il peut interjeter appel auprès de la Cour canadienne de
l’impôt pour faire annuler ou modifier la cotisation :
a) après que
le ministre a ratifié la cotisation ou procédé à une nouvelle cotisation;
b) après
l’expiration des 90 jours qui suivent la signification de l’avis d’opposition
sans que le ministre ait notifié au contribuable le fait qu’il a annulé ou
ratifié la cotisation ou procédé à une nouvelle cotisation;
toutefois, nul appel prévu au présent
article ne peut être interjeté après l’expiration des 90 jours qui suivent
la date où avis a été envoyé au contribuable, en vertu de l’article 165,
portant que le ministre a ratifié la cotisation ou procédé à une nouvelle
cotisation.
|
[9]
Subsection 167(1) provides that where an
appeal to this Court has not been instituted by the taxpayer under section 169
within the time limited by that section for doing so, the taxpayer may make an
application under section 167 for an order extending the time within which
the appeal may be instituted and the Court may make an order extending the time
for appealing. Subsection 167(5) sets out the relevant requirements.
1.
The application:
[10]
Initially, Ms. Nagel brought an application
for an order extending the time within which an appeal from the reassessment
may be instituted. However, during the hearing, she stated that as she had
indicated in her notice of objection that she wished to make a “fuller response after new and additional
information has been considered”, she is now
also applying to this Court for an order to extend the time to object to a
reassessment.
[11]
Before addressing the application, I have
to state my disagreement with the Respondent’s approach in her submission
relating to the First Reassessment. Since it appears that neither reassessment
was issued beyond the “normal reassessment period”,
as that phrase is defined in paragraph 152(3.1)(b), it is my view
that the Second Reassessment is the only reassessment to be considered as it
rendered the First Reassessment a nullity.
[12]
The nullity principle was confirmed by the
Federal Court of Appeal in Lornport Investments v Canada, [1992] 2 FC 293,
92 DTC 6231 [Lornport], and recently reiterated in Yarmoloy
v The Queen, 2014 TCC 27, 2014 DTC 1058, by former
Chief Justice Rip. In Lornport, the Federal Court of Appeal states:
I have come to the conclusion, in the particular circumstances
of this case, that the second reassessment, which was vacated by the court
order of April 20, 1989, did not supersede and nullify the first
reassessment. It seems to me that the court order amounted to judicial recognition
that the second reassessment, issued as it was beyond the statutory time limit,
was not legally issued. It did not, for that reason, displace and render the
first reassessment a nullity. That reassessment continues to subsist, in my
opinion.
[Emphasis
added.]
[13]
I will now examine the application. In
considering an application for an extension of time—to object or appeal—the
Court must have regard to the statutory time limits as outlined above, provided
that there is an assessment or reassessment of tax, interest or penalties
payable by a taxpayer.
[14]
The difficulty with Ms. Nagel’s application
is that the Second Reassessment shows that no taxes are payable by her for the
2013 taxation year.
[15]
The expression “no tax
is payable” is found in subsection 152(4). It reads:
|
152(4) Assessment and reassessment — The Minister
may at any time make an assessment, reassessment or additional assessment of
tax for a taxation year, interest or penalties, if any, payable under this
Part by a taxpayer or notify in writing any person by whom a return of income
for a taxation year has been filed that no tax is payable for the
year, . . .
|
152(4) Cotisation et nouvelle
cotisation — Le ministre peut établir une cotisation, une
nouvelle cotisation ou une cotisation supplémentaire concernant l’impôt pour
une année d’imposition, ainsi que les intérêts ou les pénalités, qui sont
payables par un contribuable en vertu de la présente partie ou donner avis
par écrit qu’aucun impôt n’est payable pour l’année à toute personne
qui a produit une déclaration de revenu pour une année d’imposition. […]
|
[Emphasis
added.]
[16]
Thus, the Minister may make an assessment or
reassessment of tax, interest or penalties payable by a taxpayer or notify a
person that no tax is payable. Having no tax payable is also referred to as a
nil assessment. An appeal must be directed against an assessment and an
assessment which assesses no tax is not an assessment.
[17]
The general principle that no appeal lies from a
nil assessment has its origin in the Okalta Oils decision such that a
taxpayer can neither object to, nor appeal from, a nil assessment (Okalta
Oils Ltd v Minister of National Revenue, [1955] SCR 824, 55 DTC 1176;
see also Bormann v The Queen, 2006 FCA 83 at para 8, 2006 DTC 6147,
Terek v The Queen, 2008 TCC 665 at para 3,
2009 DTC 1023 [Terek]).
[18]
In Faucher v the Queen, [1994] TCJ No 56 (QL), 94 DTC 1581,
Justice Lamarre Proulx summarized the nil assessment principles and
explained that “there is no
right of appeal from an assessment of a nil amount, or from an assessment of
which a reduction is not requested”. That case was
cited by the Federal Court of Appeal in The Queen v Interior Savings Credit
Union, 2007 FCA 151, 2007 DTC 5342 [Interior Savings]:
it is stated, at paragraph 18, that the Court does not have jurisdiction
to hear an appeal from a nil assessment where no tax is payable.
[19]
Recently, Justice D’Auray of this Court confirmed
in Donaldson v The Queen, 2016 TCC 5, 2016 DTC 1035,
that:
9 In Interior
Savings Credit Union v HMTQ, 2007 FCA 151, the Federal Court of
Appeal applied the principles enunciated in Okalta Oils Ltd, and held
that a taxpayer cannot challenge an assessment where there are no taxes,
penalties or interest assessed for the year. Justice Noël, writing for the
Court, stated as follows at paragraphs 15 to 17:
15 In my respectful view, the
Tax Court Judge erred in dismissing the Crown’s Motion to strike. The
Minister’s power and duty under subsection 152(1) of the Act is to “...
assess the tax for the year, the interest and penalties, if any, ...”. The
taxpayer’s right to object (ss 165(1)) and to appeal to the Tax Court of
Canada (ss 169(1)) can only be exercised in order “... to have the
assessment vacated or varied ...”. It follows that unless the taxpayer
challenges the taxes interest or penalties assessed for the year, there is
nothing to appeal and indeed no relief which the Tax Court can provide (Chagnon
v. Normand (1889), 16 S.C.R. 661 (S.C.C.), at 662).
16 The Tax Court Judge
properly notes in his reasons that the assessment before him was not a nil
assessment. However, he goes on to state that even if it was a nil assessment,
he would nevertheless allow the appeal to continue. The expression nil
assessment does not appear anywhere in the Act. When dealing with a situation
where a person owes no taxes, the Act authorizes the Minister to issue a notice
“that no tax is payable” (subsection 152(4)).
17 Nonetheless, the term
nil assessment is often used in the case law to identify an assessment which
cannot be appealed. There are two reasons why a so-called nil assessment
cannot be appealed. First, an appeal must be directed against an assessment
and an assessment which assesses no tax is not an assessment (see Okalta
Oils Ltd. v. Minister of National Revenue (1955), 55 D.T.C. 1176
(S.C.C.) at p. 1178: “Under these provisions, there is no assessment if
there was not tax claimed”). Second, there is no right of appeal from a nil
assessment since: “Any other objection but one related to an amount claimed
[as taxes] was lacking the object giving rise to the right of appeal ...” (Okalta
Oils, supra, at p. 1178).
[…]
[Emphasis
added.]
[20]
Justice Pelletier of the Federal Court of
Appeal stated in Canada (Attorney General) v Bruner,
2003 FCA 54 at para 3, [2003] GSTC 28, that:
3 . . . Consequently,
a taxpayer is not entitled to challenge an assessment where the success of the
appeal would either make no difference to the taxpayer’s liability for tax or
entitlement to input tax credits or refunds, or would increase the taxpayer’s
liability for tax. . . .
[21]
This comment was confirmed by the same court in Interior
Savings, supra, where Justice Noël specified at
paragraph 31 that:
31 In Liampat
Holdings Ltd., Counsel for the taxpayer relied on Aallcann Wood
Suppliers to argue that a nil assessment could be appealed. The Federal
Court (Cullen J.) held that Counsel had misconstrued Aallcann Wood
Suppliers (at para. 8):
I take Aallcann to mean that
this Court has jurisdiction to consider a nil assessment year where the
computations from the nil assessment year have an actual impact on another
taxation year; it does not give the Court jurisdiction to consider a nil
assessment directly.
[Emphasis added]
This is an accurate statement of the rule set out in Aallcann
Wood Suppliers.
[22]
All those cases stand for the proposition that a
nil assessment issue may not be heard if the success of the appeal would not
make any difference as to the taxpayer’s liability for tax in the taxation year
in issue or a subsequent year.
[23]
Over the years, Parliament has legislated some
exceptions to the general principle to allow objections to, and appeals from,
loss determinations made at the taxpayer’s request (subs 152(1.1)), from a
determination of disability tax credit eligibility (subs 152(1.01)), and
from a determination that a taxpayer is entitled to certain types of credits
(subs 152(1.2) and para 152(1)(b)).
[24]
With respect to a refundable tax credit, it was
ruled that a taxpayer had a right to appeal from a nil assessment in order to
contest the Minister’s determination of the amount of tax deemed by
subsection 127.1(1) to have been paid on account of tax under Part I
for the year, as such determination impacted the potential refund the taxpayer
was entitled to (Martens v Minister of National Revenue
(10 May 1988), Winnipeg 86-519(IT) (TCC), online: TCC
<https://www.scitax.com/pdf/Dckt_NA_10-May-1988.pdf> at paras 8 to
11).
[25]
However, none of the exceptions provided for in
the Act applies in Ms. Nagel’s case: they do not include the tuition,
textbook and education tax credits (subs 118.61(2); and see Terek, supra).
Furthermore, with respect to the GST/HST credit, as Ms. Nagel did not
apply for an amount under subsection 122.5(3) (as it read in 2013) by
checking the box on the T1 return filed, the Minister did not make a
determination under subsection 122.5(3) and did not issue a notice of
determination, and, accordingly, none of the exceptions applies.
[26]
As the evidence indicated that the Second
Reassessment is a nil assessment, Ms. Nagel cannot serve a notice of
objection or a notice of appeal to this Court.
[27]
For these reasons, the application is therefore
dismissed, without costs, and the appeal for the 2013 taxation year is quashed.
2.
Jurisdiction of this Court:
[28]
The following comments are, therefore, not
necessary. Yet, for the enlightenment of Ms. Nagel, I will provide a
few explanations about the jurisdiction of this Court. The Tax Court of
Canada’s jurisdiction, as a statutory court, is found in and limited by
section 12 of the Tax Court of Canada Act (RSC, 1985, c. T-2),
its enabling statute. As to income tax appeals, section 12 of the Tax
Court of Canada Act provides this Court with exclusive and original
jurisdiction to determine the validity and correctness of the assessment of
income tax under the Act.
[29]
The details pertaining to that statutory jurisdiction
and a case decided by the Federal Court of Appeal, Ereiser v The Queen,
2013 FCA 20, 2013 DTC 5036, were specifically brought to
the attention of Ms. Nagel during the hearing. In that decision, the Federal
Court of Appeal stated that:
31 Based on these provisions, this Court has held that the
role of the Tax Court of Canada in an appeal of an income tax assessment is to
determine the validity and correctness of the assessment based on the relevant
provisions of the Income Tax Act and the facts giving rise to the taxpayer’s
statutory liability. . . .
[30]
Hence, this Court has jurisdiction to hear the
case of a taxpayer who has appealed from an assessment or reassessment of tax
pursuant to section 169 (the main right of appeal). The combined effect of
subsections 169(1) and 171(1) is that this Court may dispose of an appeal
from an assessment by dismissing the appeal, or allowing the appeal and
vacating the assessment, varying the assessment, or referring the assessment back
to the Minister for reconsideration and reassessment.
[31]
Again, since no tax is payable under the Second
Reassessment, there is no reassessment of tax Ms. Nagel can object to or
appeal from.
[32]
The concerns that Ms. Nagel noted with
respect to the reassessments pertain to: (i) her province of residence, as
she would like to be considered a resident of Saskatchewan, (ii) the federal
unused tuition, textbook and education tax credits (subsection 118.61(2)
of the Act) as she is of the view that she is not entitled to the credit since
she never reimbursed the student loans, and (iii) the GST determination.
Having addressed the last two points in the previous section of these reasons,
I will only address the first one hereunder.
[33]
As this Court concluded in Weinberg Family
Trust v The Queen, 2016 TCC 37 at para 12,
2016 DTC 1039, “[i]t
has jurisdiction with respect to provincial tax only to the extent that the
jurisdiction is conferred on it by the provinces”.
[34]
Under the income tax statutes of both provinces
of Nova Scotia (Income Tax Act, RSNS 1989, c 217, section 2
(definition of “Court”) and subsection 64(2)) and Saskatchewan (The Income Tax Act,
2000, SS 2000, c. I‑2.01, section 2 (definition of “court”) and
subsection 98(2)), the jurisdiction to determine residency in a province
lies with the Supreme Court of Nova Scotia and the Court of Queen’s Bench,
respectively, and not with this Court.
Signed at Ottawa, Canada,
this 15th day of February 2018.
“Dominique
Lafleur”
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