Lapointe-Fisher Nursing Home, Limited v. Minister of National Revenue, [1986] 1 CTC 2462, 86 DTC 1357

Bonner, T.C.J.:—This is an appeal from an assessment of income tax for the 1978 taxation year of a corporation which is one of the predecessors of the appellant. The appellant was formed with effect on May 1, 1978, by the amalgamation, pursuant to section 196 of the Business Corporations Act of Ontario, of four corporations. One of the four was Drumcrow Farms Limited (hereinafter “Drumcrow’’).

All attacks made on the assessment under appeal rest on the contention that a number of assessments made by the respondent after he was notified of the amalgamation are nullities. Two of those assessments were made in respect of the taxable income of Drumcrow for a taxation year ending March 31, 1978. The notices of assessment were directed to Drumcrow and not to the amalgamated corporation. The first argument of the appellant is that:

1. because the notices of assessment were given to what counsel for the appellant submitted was “a non-existent corporation” the assessments were nullities; and

2. a subsequent assessment (which is the only one of which proper notice was given) is also invalid because it was not made “with all due dispatch” as required by subsection 152(1) of the Income Tax Act.

An outline of the facts now follows. Drumcrow had two taxation years ending in 1978. The first one ended on March 31, that date having been the normal year-end prior to the amalgamation. The second, as a result of the amalgamation, ended on April 30.

Returns of income for the March 31, 1978, and April 30, 1978, taxation years of Drumcrow were filed in August of 1978 and October of 1978 respectively. The second return was accompanied by a letter to the respondent advising him of the amalgamation and enclosing a copy of the certificate of amalgamation and articles of amalgamation. Both the letter and the enclosures made it quite clear that the effective date of the amalgamation was May 1, 1978, and that the name of the amalgamated company was “‘La- pointe-Fisher Nursing Home, Limited.”

On April 9, 1980, the respondent assessed tax (or perhaps reassessed tax) in respect of the taxation year ending March 31, 1978, of Drumcrow.* [1] Notice of that action (entitled “Notice of Reassessment”) bearing serial no. 328945 was directed to Drumcrow.

On April 27, 1983, the respondent reassessed tax for the taxation year ended March 31, 1978, of Drumcrow. Notice of that reassessment bearing serial no. 773370 was directed to:

Drumcrow Farms Ltd.

c/o La Pointe Fisher Nursing Homes Ltd.

427 Nelson Street

Wallaceburg, Ont.

NBA 4B9

The appellant objected to the reassessment and asserted in the notice of objection that the notice of reassessment was improperly issued against a company no longer in existence.

On August 1, 1984, the respondent mailed yet another notice of assessment to the appellant in respect of the taxation year ending March 31, 1978. That notice, bearing serial no. 1122932 and dated April 27, 1983, was addressed to “Lapointe-Fisher Nursing Home Ltd. (re: Income of Drumcrow Farms Ltd)”. No notice of objection to this assessment was ever filed. It is this assessment which is now under appeal.

Section 196 of the Business Corporations Act, R.S.O. 1970, c. 53, pursuant to which the amalgamation took place, provided:

196. (1) Any two or more corporations, including holding or subsidiary corporations, may amalgamate and continue as one corporation.

(2) The corporations proposing to amalgamate shall enter into an agreement for the amalgamation, prescribing its terms and conditions of the amalgamation and the mode of carrying the amalgamation into effect, and, in particular the agreement shall set out,

(a) the name of the amalgamated corporation; . . .

Although the predecessor corporations must, by reason of section 196, be regarded as continuing in existence as One corporation, it was common ground that the amalgamation was one described in subsection 87(1) of the Income Tax Act. The appellant was therefore, so its counsel argued, a corporate entity which, by virtue of paragraph 87(2)(a) of the Income Tax Act, was deemed, for purposes of the Income Tax Act, to be a “new corporation"’. Paragraph 87(2)(a) reads as follows:

87 (2) Where there has been an amalgamation of two or more corporations after 1971 the following rules apply:

(a) for the purposes of this Act, the corporate entity formed as a result of the amalgamation shall be deemed to be a new corporation the first taxation year of which shall be deemed to have commenced at the time of the amalgamation, and a taxation year of a predecessor corporation that would otherwise have ended after the amalgamation shall be deemed to have ended immediately before the amalgamation; .. .

lt is the duty of the respondent under subsection 152(2) of the Income Tax Act to . send a notice of assessment to the person by whom the return was filed.” That duty, it was said, was not fulfilled by the action of the respondent in sending notice directed not to the “new corporation” but, rather, to the non-existent Drumcrow. In this regard counsel referred, inter alia, to the decision of the Exchequer Court in Lawrence B. Scott v. M.N.R., [1960] C.T.C. 402; 60 D.T.C. 1273.

The final step in the first of the appellant’s arguments involved the assertion that the assessment, notice of which was mailed August 1, 1984, was, by reason of the fact that all prior assessments were nullities, an initial assessment governed by section 152 of the Income Tax Act and thus one which, by virtue of subsection 152(1), the respondent was required to make “with all due dispatch”. The appellant submitted that it was not so made.

The appellant made a second argument that, if the last-mentioned assessment was made with due dispatch, the tax assessed was too high by reason of the inclusion in the computation of income pursuant to paragraph 12(1)(e) of the Income Tax Act of an amount which the respondent assumed had been deducted under paragraph 20(1)(n) of the Act in computing Drumcrow’s income for the 1977 taxation year. That amount, according to the argument, could not be included in the appellant’s income for 1978 by reason of paragraph 12(1)(e) of the Act because the deduction of the reserve in 1977 was effected by a reassessment which was a nullity. It was a nullity because the notice of the reassessment was dated February 20, 1979, and was directed to Drumcrow.

In my view both arguments of the appellant are, as submitted by counsel for the respondent, self-defeating. Both rest, as noted previously, on the premise that all assessments made after the amalgamation, save for the last (notice no. 1122932), are nullities with the result that they must be treated as if they had never been made. The group thus condemned includes the only assessment to which notice of objection was served. A right of appeal to this Court is conferred by section 169 of the Income Tax Act only “where a taxpayer has served notice of objection to an assessment under section 165 . . .” Thus, if the appellant’s premise is right, its appeal must be dis- missed by reason of its failure to satisfy the condition precedent contained in section 169.

When faced with this difficulty counsel for the appellant pointed to a letter sent to the appellant on August 20, 1984, by one of the respondent's officials. It reads in part as follows:

An examination of the Income Tax Return and related assessment information in respect of which you have filed the above Notice of Objection indicates that a replacement Assessment Notice (#1122932) dated April 27, 1983 has been issued. This Notice of Assessment replaced the previous Assessment Notice (#1050029) and the Notices of Re-assessment (#328945 and #773370). Under the authority of Subsection 244(14), you are hereby advised that the Department’s records show that the Notice of Assessment #1122932 was mailed on August 1, 1984.

The Notice of Assessment issued on August 1, 1984 has the effect of nullifying the earlier assessment and the Notice of Objection filed in respect of 1978.

However, under the authority of Subsection 165(7) of the Income Tax Act, you may appeal the Minister’s action directly to the Tax Court of Canada or the Federal Court without serving a new Notice of Objection, or you may file a Notice of Objection to assessment #1122932.

I cannot construe that letter either as any sort of waiver or as a consent to jurisdiction. Even if I could, the position is aptly described by the words of Moss, C.J.O. in Re Port Arthur Election, (1906) 13 O.L.R. 17 at 20:

The Court must be careful to see that it does not usurp a jurisdiction it does not possess. The jurisdiction it has is wholly statutory, and only such as is conferred by the statute can be exercised.

The appeal will therefore be dismissed.

Appeal dismissed.