Zomac Holdings Limited v. Minister of National Revenue, [1972] CTC 2191, 72 DTC 1150

W O Davis:—In this matter, the appellant company has appealed from a notice of reassessment dated October 21, 1970, whereby the Minister of National Revenue informed the appellant that the tax payable by it in respect of its 1969 taxation year was nil.

When this matter came on before me for hearing at Calgary, Alberta, on November 12, 1971 at a sittings of the Tax Appeal Board as it was then constituted, counsel for the Minister moved for an order of the Board quashing the purported notice of appeal on the ground that, under the provisions of the Income Tax Act, no appeal lay from an assessment stating that no tax was payable.

In its corporate income tax return for its taxation year ended August 31, 1969 the appellant reported net income of $5,716.11 before applying losses carried forward from its 1964 and 1968 taxation years to the extent necessary to reduce its taxable income for 1969 to nil, and thus reported its total tax payable for that year as nil.

On October 21, 1970 the Minister assessed the appellant to nil tax for the said taxation year, not by applying previous years’ losses against the declared net income but by deducting capital cost allowance in the amount of $4,250 and income in the amount of $1,456.11 deemed to have been distributed to its shareholders Mr and Mrs Zaozirny.

On November 16, 1970 the taxpayer made formal objection to the Minister’s assessment and, on March 9, 1971, the Minister issued his notification under the provisions of section 58 of the Act whereby he confirmed that “no tax is payable for the taxation year 1969”. Zomac Holdings Limited then appealed to the Tax Appeal Board.

Mr J M Zaozirny, the agent for the appellant, sought strenuously to establish a right on the part of the appellant to appeal from an assessment whereby no tax was payable by the appellant in a case where the methods of computation employed by the Minister and by the taxpayer to arrive at this result were at variance.

The question of the right of a taxpayer to appeal from a nil assessment has engaged the attention of the Courts for a number of years. One of the most recent rulings in this connection is that of Gibson, J of the Exchequer Court of Canada as it then was (now the Trial Division of the Federal Court of Canada) in Newfoundland Minerals Ltd v MNR, [1969] CTC 639, which was considered and followed by me in Lazis v MNR, [1970] Tax ABC 605. See also Falconbridge Nickel Mines v MNR, [1971] CTC 789 at 795/6.

In the Newfoundland Minerals case (supra), an appeal had been instituted by the taxpayer from an assessment showing the tax payable by the taxpayer to be nil. When this matter in due course came on before Gibson, J, on appeal from the Tax Appeal Board, the Minister of National Revenue moved to strike out the Notice of Appeal on the ground that the Court had no jurisdiction to hear an appeal from a notification that no tax was payable. The Court allowed the Minister’s motion and directed that the Notice of Appeal be struck out on the ground that there was no right to appeal in the circumstances.

A very useful discussion on this ruling of Mr Justice Gibson in the Newfoundland Minerals case is to be found at page 21 of the January- February 1970 issue of the “Canadian Tax Journal” (Issue No 1, Vol XVIII) as published by the Canadian Tax Foundation.

After hearing counsel for the Minister and agent for the appellant in the instant matter, I have concluded that, in view of the present state of the law, I have no alternative but to follow the ruling of the higher Court in the Newfoundland Minerals case (supra).

Therefore, in the circumstances, the appellant’s purported Notice of Appeal herein must be quashed.

Appeal quashed.