David Silverman v. Minister of National Revenue, [1989] 2 CTC 2024, 89 DTC 307

Kempo, T.C.J.: —In this appeal concerning the appellant's 1979 taxation year, the essential issue was whether the notice of reassessment dated October 27, 1986 in respect of that year had been issued too late and was thereby statute-barred pursuant to subsection 152(4) of the Income Tax Act (the "Act").

Issue

The particular difficulty here arose out of an amendment to that provision contained in chapter 45, S.C. 1984 (the "1984 Statutes") wherein, to state it first in general terms, the seven-year maximum period for reassessment was reduced to six years, the change being said in subsection 59(5) of the 1984 Statutes to be “applicable to the 1983 and subsequent taxation years”. The subject reassessment, if found to have been validly struck as being under the pre-amended subsection, would have been in time (i.e. within seven years), and as a corollary to that, would not have been in time if the postamendment time (i.e. within six years) was then to have been the applicable time limit.

Facts

The factual allegations are not in dispute and are as found in paragraphs 1 to 6 inclusive of the notice of appeal, thusly:

1. In filing his tax return for 1980, the appellant showed a noncapital loss, which, pursuant to section 111 of the Income Tax Act, was carried back and deducted in computing his taxable income for 1979. The respondent assessed his income and taxable income accordingly.

2. The original notice of assessment of the appellant for 1979 was dated June 24, 1980.

3. On December 31, 1985, the respondent mailed to the appellant a notice of reassessment in respect of 1980, adding a sufficient amount to his net income for that year to eliminate the noncapital loss, which had been previously carried back to 1979.

4. Consequential upon the reassessment for 1980, on October. 27, 1986 the respondent mailed to the appellant a notice of reassessment for 1979 purporting to delete the deduction of the carried-back 1980 loss in the computation of his 1979 taxable income.

5. The appellant duly filed a notice of objection in respect of the reassessment for 1979. On June 5, 1987, the respondent mailed to the appellant a notice confirming that reassessment.

6. The appellant appeals against this reassessment for the reasons hereinafter given.

The reply to notice of appeal offered additional facts that the appellant's 1979 taxation year had been reassessed also by notice dated September 15, 1982 and then again on May 1, 1984.

In summary form, the original assessment from which the clock started to run was dated June 24, 1980. Adjustments to the loss carry-backs to the 1979 taxation year had been made by all subsequent reassessments including the last one which is the subject matter at issue. If it had been struck before June 24, 1986 there could be no validity issue to dispute; as it stands it was dated October 27, 1986 which was approximately four months beyond the sixth year anniversary date.

The words of subsection 152(4) of the Act before the amendment, (those not of relevance having been omitted) were, and I am paraphrasing, that the Minister, under paragraph (b) thereof, was enabled at any time to assess tax, interest and penalties under Part I of the Act within seven years from "the day referred to in subparagraph (a)(ii)” which by its terminology was "the day of mailing of a notice of an original assessment". The phrase “taxation year" does not appear in this provision.

The effect of subsection 59(1) of the 1984 Statutes was to substitute six years in the place and stead of seven years and by subsection 59(5) (the “application provision”) made that amendment “applicable to the 1983 and subsequent taxation years".

Position of Appellant

The appellant's position was that the key operative part of subsection 152(4) of the Act related to time parameters which was as to when the Minister may reassess and that all else in that subsection was essentially subordinate. Therefore the intent and context of the application provision changed only the date as to when the Minister could reassess. Because subsection 152(4) of the Act was inherently concerned with and was focused upon dates only, the words "taxation year" being absent therefrom, the phrase "taxation year" used in the application provision means calendar year. Further, the reference to a year in the application provision does not refer to the taxation year that is being reassessed but to the calendar year in which the notice of reassessment was issued.

If Parliament had intended to preserve two parallel systems (which in this case would last until 1990), it could have easily so stated and that any ambiguity arising out of the application provision should be resolved in this case in favour of the taxpayer.

Position of Respondent

Counsel for the Minister submitted that there is no ambiguity here either in the words employed in the amendment or in the subject application provision. The contextual approach is to be taken when looking at the relevant amending provision as a whole and the way each application provision therein had been worded. Section 59 of the 1984 Statutes amended more than just subsection 152(4) of the Act and in some of the application provisions therein specific commencement dates had been employed. Because subsection 59(5) did not employ a specific commencement date, none was intended. What was intended was the placement of a new time system in relation to and impacting only upon 1983 and subsequent taxation years as stated.

Therefore using this interpretative aid or method, the application provision means and was intended to be in relation to taxation years of 1983 and thereafter and was not said or intended to be applied in relation to any specific date or particularly timed act of the Minister occurring in the 1983 and subsequent calendar years.

When dealing with an enactment in which the overall time aspect was lengthy—here it was seven, then six, years—there was no need for the legislators to be concerned with any particular futuristic date and that given that perspective or context that one particular date would therefore be no different from another, the words employed in the application provision are logically and sensibly interpreted to have the meaning as aforesaid.

Analysis

It is my analysis that, while appellant counsel's submissions are valid and innovative, the position and interpretative approaches by respondent's counsel are the ones to be taken and upheld.

So far as I am aware, the possibility of two parallel systems, here involving the subject limitative periods, are not necessarily unique or unknown to the income tax system and that old rules for past events do continue to apply until naturally terminated while concurrently new rules for ensuing taxation years commence and are ongoing.

In situations where the words used in an enactment may in themselves have the appearance of clarity but may be ambiguous in their transposition, a recognized interpretative aid to resolve the perceived ambiguity or lack of clarity is to look at the amending enactment as a whole as respondent's counsel has done. What is seen in the application provision is the absence of a specified application or commencement date like that used in the immediately following subsection 59(6) provision. I agree that this comparative approach is an interpretative aid or indicator that may be employed to show that Parliament intended to make the subject amendment applicable in relation to the 1983 and subsequent taxation years and that it did not intend to make the amendment applicable on a date arising in the 1983 and subsequent years.

As to resolving any ambiguity in favour of a taxpayer, it Was said at page 246 of Maxwell On The Interpretation of Statutes, 12 ed. that:

The effect of the rule of strict construction might be summed up by saying that where an equivocal word or ambiguous sentence leaves a reasonable doubt of its meaning which the canons of interpretation fail to solve, the benefit of the doubt should be given to the subject and against the legislature which has failed to explain itself.

In this case statutory interpretation aids have been employed to answer the ambiguities raised by the appellant.

It appears that Judge Tremblay of this Court came to the same result in Brodeur v. M.N.R., [1985] 2 C.T.C. 2201; 85 D.T.C. 514 at 517 without, however, having had the benefit of full analytical arguments from both sides as that taxpayer was self-represented.

Conclusion

In conclusion then, and for the reasons given, the Minister was in this case within the permitted seven years and therefore the appeal is to be dismissed.

Appeal dismissed.