Guy Gervais v. Minister of National Revenue, [1979] CTC 2003, 79 DTC 30

Delmer E Taylor:—This is an appeal against income tax assessments in which the Minister of National Revenue denied to the appellant the opportunity to utilize the provisions of the Income Tax Act dealing with “general averaging’’ for the years 1974 and 1975. In his Notice of Appeal, the taxpayer indicated that he also claimed the right to general averaging for the taxation year 1973. However, the Board was not provided with any income tax information, particularly a notice of assessment relating to that year. Accordingly the Board’s authority to deal with this matter must be restricted to the years 1974 and 1975.

Facts

During the year 1971 the appellant left Canada to live in France. He returned to Canada in December 1973. During his stay in France he did not file income tax returns in either Canada or France.

Contentions

It was the position of the appellant that he was resident in Canada during the years in question and entitled to any considerations under the Income Tax Act flowing from that status.

The Minister of National Revenue asserted that the appellant was not resident in Canada, and therefore section 118 of the Income Tax Act, SC 1970-71-72, c 63, as amended, providing for general averaging “in the case of an individual who was resident in Canada’’ (italics mine) could not be invoked by Mr Gervais.

Evidence

There was no physical evidence provided but the appellant stated that during the years in question he had been a student of philosophy in France, and his income came from grants from two sources—Canada Council, and the Ministry of External Affairs of Quebec. His wife had accompanied him to France, and worked during that time in another endeavour. Upon his return to Canada, according to him, he prepared and filed income tax returns for the years 1971, 1972 and 1973 and it was his recollection that he had paid about $90 in income tax for the year 1971. In his view, his income for the years 1972 and 1973 (the above-noted grants) was not taxable. Until recently he has been employed by the Government of Canada. He had maintained a bank account in Montreal, Quebec, into which deposits were made on account of these grants, and from which (by way of transfers to a bank account in France) he withdrew funds he required. This Canadian bank account had been a stipulation attached to both grants.

During the course of cross-examination, counsel for the respondent established that the appellant did not have available any evidence (cancelled cheques, copies of the tax returns, etc) which would support his contention that he had filed tax returns for the years 1971, 1972 and 1973. Counsel also informed the Board that a search of tax department records had failed to turn up any indication of the returns.

Argument

The appellant did not present any judicial support for his contention, but counsel for the respondent supplied the Board with certain cases which provided some light on the matter. These cases were:

P W Thomson v MNR, [1946] CTC 51; 2 DTC 812;

Donald MacDonald v MNR, [1968] Tax ABC 502; 68 DTC 433;

George Edwin Beament v MNR, [1952] CTC 327; 52 DTC 1183;

Ronald V Kirkby v MNR, [1972] CTC 2101; 72 DTC 1109;

Michel Truchon v MNR, [1970] Tax ABC 440; 70 DTC 1277.

Findings

Before proceeding to comment on the merits of this appeal, the Board notes for the record that subsequent to filing his appeal, Mr Gervais informed the Board he wished the case to be heard in the French language. The Presiding Member and the Court Registrar assigned to the London sittings were bilingual, and the case was set down for hearing at 2 pm Monday, December 4, 1978, a time agreeable to the appellant. In addition, the Board made arrangements for a court reporter competent in French to be available, and the Department of Justice, acting on behalf of the Minister of National Revenue of Canada, assigned a bilingual counsel to the case. Unfortunately, due to unexpected circumstances, the appellant notified the Board about 11 am on the day set for the hearing that he could not possibly be available in London, Ontario, at the appointed time. The bilingual counsel and the reporter were not available later in the week, and due to the fact that the appellant wished his case to proceed, he decided it should be heard in the English language on the following day. The Presiding Member confirmed with Mr Gervais at the start of the hearing that he was prepared to so proceed.

With respect to the points which arose, it became evident that there was only one issue to be determined—whether or not the appellant was a resident of Canada for purposes of the Income Tax Act during the year 1973. The Board is aware that the status accorded him for 1973 should probably also obtain for the years 1971 and 1972 according to the limited evidence available. However, that determination need not be made for the purpose of this hearing—which deals only with the income tax assessments for the years 1974 and 1975. In addition, the appellant’s alleged status as a student might have some effect on his taxable position, and he has alluded to the “non-taxable” nature of the grants from Canada Council and the Ministry of External Affairs of Quebec. Again, these are not issues specifically before the Board. This decision will only relate to the information available which would shed light on his “resident” status for the year 1973, and matters flowing from that will be left to the determination of the Department of National Revenue.

The salient points, as I see them, are:

(1) The appellant was born in Canada and had been a resident until his departure for France in 1971.

(2) The reason for his departure was to study in France under a particular professor.

(3) He was awarded grants by both the Canadian and Quebec governments to enter this period of study.

(4) He did not file income tax returns for the period he was out of this country, because he believed his grants were non-taxable.

(5) His wife worked in France, presumably to help in supporting the couple.

(6) He completed his studies in France and returned to Canada.

(7) He was subsequently employed by the Government of Canada.

(8) He accepts income tax liability (if any exists) for the years 1971, 1972 and 1973, and asserts that he filed the appropriate income tax returns.

(9) He maintained a Canadian bank account into which all his grant funds were paid during his absence from Canada.

It would be fair comment to note that some aspects of the above facts seemed to arise only during the hearing itself, partially as a result of the efforts of counsel for the Minister to elucidate information from the appellant. I cannot conclude that the taxing authorities would have considered this appellant a non-resident during the year 1973, given a total picture of the circumstances surrounding the period of time he spent in France. This would be tantamount to saying that a major part of students falling into the same general category of completing education abroad, and specifically those on public grants and bursaries, would be regarded for income tax purposes as non-residents of Canada. I find nothing in the legislative record to support that premise, and much which would diametrically be in opposition to it.

Decision

The appellant is declared to have been a resident of Canada for the year 1973, and the appeal is allowed to the extent that such a determination has a bearing on the taxpayer’s right to avail himself of the general averaging provisions of the Income Tax Act for the years 1974 and 1975. The entire matter is referred back to the Minister of National Revenue for reconsideration and reassessment.

Appeal allowed.