Words and Phrases - "due diligence"
Filiatrault c. La Reine, 2017 TCC 232 (Informal Procedure)
CRA had assessed the taxpayer for interest under ETA s. 280 for his failure to file returns for what had now been found by Smith J to be a taxable activity of providing psychotherapy services. Smith J found that such interest was not payable because the taxpayer had established a due diligence defence, based on having consulted on the tax status of his supplies with his accountant and with professionals in his health care network. In this regard, he stated (at paras. 54-55):
l’École polytechnique … 2004 FCA 127, confirms that the reasonable diligence defence can be used against an administrative penalty established under the scheme of section 280 of the ETA [stating]:
[D]ue diligence excuses either a reasonable error of fact, or the taking of reasonable precautions to comply with the Act.
I find based on this, that “in order to establish a due diligence defence to a penalty an appellant must show he either (a) made a reasonable error in his or her understanding of the facts, or (b) took reasonable precautions to avoid the event leading to the penalty”: Comtronic Computer Inc. v. The Queen, 2010 TCC 55, paragraph 35.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Schedules - Schedule V - Part II - Section 1 - Practitioner | Quebec psychotherapist was not a member of the psychologists’ profession | 302 |
Chiang v. The Queen, 2017 TCC 165 (Informal Procedure)
The taxpayer made contributions to his RRSP for the years 1995 to 2005 (except 1998). In preparing his 1995 and 1999 returns, he reported his contributions, but failed to deduct them – but thought that he had. Furthermore, in 1997, he overcontributed based on an incorrect impression that he had unused RRSP deduction room. As a result of these errors, he had a cumulative excess amount as calculated under s. 204.2(1.1). CRA assessed him Part X.1 tax under s. 204.1(2.1) and assessed penalties under s. 162(1) for his failure to file returns as required under s. 204.3(1) reporting his Part X.1 tax liabilities.
After confirming the taxpayer’s Part X.1 tax liability and after quoting (at para. 26) a statement in Corporation de l’École Polytechnique v The Queen, 2004 FCA 127 that a due diligence defence is established if “the person believed on reasonable grounds in a non-existent state of facts which, if it had existed, would have made his or her act or omission innocent,” Sommerfeldt J went on to find that the s. 162(1) penalties should be cancelled, stating (at paras 11, and 27):
… I am of the view that his failure to deduct the contributed amounts, which was unbeknown to him, was due to innocent and reasonable inadvertence.
Mr. Chiang genuinely and reasonably believed that he had deducted the contributions that he had made to his RRSP for 1995 and 1999 and that he had unused RRSP deduction room in respect of 1997. Thus, it is my view that Mr. Chiang reasonably believed in, and was operating under, a mistaken set of facts that, if true, would have resulted in there not having been a cumulative excess amount. Therefore, his failure to file tax returns (Form T1-OVP) for 2004 to 2013 resulted from a reasonable error of fact, so as to be excused by the due diligence defence.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 204.3 - Subsection 204.3(1) | inadvertent overcontributions | 150 |
Ogden Palladium Services (Canada) Inc. v. The Queen, 2001 DTC 345 (TCC), briefly aff'd 2002 DTC 7378, 2002 FCA 336
Before finding that a due diligence defence had not been made out respecting the imposition of a 10% penalty under s. 227(8)(a) respecting failure to withold on consideration, paid to a non-resident company ("Marco"), which the taxpayer unsuccessfully argued was not for "services," and after noting (at para. 40) that a due diligence defence, based on Consolidated Canadian Contractors, was available if it could be made out on the facts, Lamarre J stated (at paras. 41-43):
The issue then becomes one of whether the appellants can positively prove that all reasonable care was exercised to ensure that errors not be made (see Pillar Oilfield Projects Ltd. v. The Queen, [1993] G.S.T.C. 49 (T.C.C.)). This Court has said that a taxpayer is expected to comply with the requirements of the Act with a high degree of diligence, using the sources of information, facilities and resources available to that taxpayer. (See Bennett v. The Queen, 96 DTC 1630 and Somnus Enterprises Ltd. v. The Queen, [1995] G.S.T.C. 4.)
...[T]he appellants did not produce any evidence as to the steps they took with respect to their withholding obligation. Counsel for the appellants contended that the appellants had obtained advice from their professional advisors and that the appellants were justified in believing that no tax was payable by Marco just on a common sense interpretation of the Licence Agreements.
I wonder why those agreements were not filed in evidence if counsel wanted to rely on them to invoke the due diligence defence.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 105 - Subsection 105(1) | ancillary services included | 218 |