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Taxpayer could have advanced grounds of appeal without use of extreme statements

Trial judge rendered judgment on merits of taxpayer’s appeal, which was appealed. Judge remained seized with issue of costs and with deciding appropriateness of parties’ proposal for dealing with identification of confidential information. Taxpayer made statements in its appellate factum alleging that judge was untruthful in reasons, containing untruths about judge, and alleging impartiality on judge’s part. On judge’s own motion, judge considered whether he should recuse himself from remaining issues. Motion granted; judge recused himself. Reasonable, fair-minded, fully informed Canadian would entertain doubt that judge could remain able to reach impartial decisions, and would be left with apprehension of bias. Taxpayer could have advanced grounds of appeal without use of unqualified extreme statements which attacked judge’s integrity. Taxpayer wrongly accused judge of being untruthful in order to advance argument that judge was doing something different in his reasons than he said he was doing. While taxpayer had right to challenge evidentiary foundation of judge’s conclusions, taxpayer told clear untruths about judge when taxpayer stated that certain issues were not put to taxpayer during trial and were raised for first time in reasons, and that judge reframed case after trial. Taxpayer, in factum, wrote about judge’s “palpable antipathy” towards taxpayer, and referred to his analysis as being “infected by his pejorative and unfair comments”. Reasonable person reading only these phrases would believe that such complaints might give rise to serious doubt about judge’s impartiality. One error in reasons, appropriately identified in factum, was acknowledged.
McKesson Canada Corp. v. R. (Sep. 4, 2014, T.C.C. [General Procedure], Patrick Boyle J., File No. 2008-2949(IT)G, 2008-3471(IT)G) 244 A.C.W.S. (3d) 234.



Receipts did not provide breakdown of donation between cash and gift in kind

Minister disallowed tax credits for charitable donations claimed on basis that neither taxpayer made any donations to charity and charitable donation receipts issued to taxpayers by charity did not contain information required necessary to prove gift. Taxpayers appealed. Appeals dismissed. Taxpayers did not prove they made donations claimed. No proof was offered to corroborate their testimony that they made gifts in kind and their testimony alone was too vague to identify specific goods donated or the value that could be attributed to such goods. Amounts shown in tithes records were not reliable. Receipts did not provide breakdown of donation between cash and gift in kind and did not give description of gifts in kind that were allegedly donated. Receipts did not show when gifts in kind were received or what their fair market value was at that time.
Ofori-Darko v. R. (Feb. 17, 2014, T.C.C. [Informal Procedure], B. Paris J., File No. 2013-3652(IT)I, 2013-3809(IT)I) 237 A.C.W.S. (3d) 815.

Customs and Excise


Not open to court to make exceptions to statutory provisions on grounds of fairness

Appellant was approached during H1N1 pandemic to manufacture sanitizing gels. Due to urgency of situation, it started manufacturing sanitizing gels while simultaneously working to complete formulation submission for Canada Revenue Agency (“CRA”) approval. Appellant acknowledged it did not comply with s. 73 of Excise Act (Can.). Minister assessed excise duty payable on packaged spirits under act. Appellant requested court to consider reducing amount of duty assessed, given unintentional nature of offence. Appeal dismissed. Even though appellant had received approval under Natural Health Products Regulations (Can.), at time it manufactured gels, act does not give any exemption on that basis. Court did not have authority to provide relief based on fairness. There was no provision in act that granted judiciary authority to deviate from strict application of its provisions. It was not open to court to make exceptions to statutory provisions on grounds of fairness or equity. Appellant was only assessed duty payable on alcohol and could have faced a harsher situation had Minister imposed penalty. Court was not convinced that appellant was not negligent in failing to comply with act.
International  Custom Pak Inc. v. R. (Feb. 11, 2014, T.C.C. [Informal Procedure], Lucie Lamarre J., File No. 2013-1768(EA)I) 237 A.C.W.S. (3d) 657.

Employment Insurance


Neither worker nor employer able to describe relationship clearly and accurately

Appeal by worker and payer from finding worker was not engaged in insurable employment during three periods on basis worker and payer were related and were not dealing at arms’ length. Payer was roofing company and worker was son of sole shareholder. Payer operated seasonally, usually hiring seven or eight workers each season. Worker had worked for payer since 2001 and incorporated own roofing company of which he was sole proprietor, but worked only for payer. Facts relied on by Minister were that workers sometimes used his own tools, and sometimes used payer’s, had to do jobs arranged by payer and was paid $900 weekly salary, which worked out to $2 per hour more than other workers, to compensate for his supervisory work. Beginning in 2008, worker began to receive additional income for piece work that was performed at same time as his supervisory duties and assisted by other workers. Additional amounts earned by worker were in excess of $70,000 per year and other workers did not receive same piece work payment. It was not disputed that worker’s hourly rate was reasonable. Extra income and compensation for use of truck and equipment to operate second crew were in question. Confusion arose because of worker’s answers on Human Resources self-employment questionnaire. Worker was now clear in his testimony that he had always been employee of payer, he was not operating a roofing company, and confusion arose because he did not know how to qualify his relationship with payer. Appeal dismissed. Facts relied on by Minister were provided by worker and payer through questionnaire and conversations and neither was able to describe their relationship and piece work arrangements clearly and accurately. Relationship was first described as subcontract by worker and appeared as such in payer’s books, during investigative stage worker told officer he was self-employed and paid for piece work, and then at hearing worker claimed piece work actually referred to equipment rentals, a claim not supported by invoices or name of worker’s company. Worker also testified he was employee paid with hourly wage plus commission. Onus was on appellants to establish Minister’s decision was unreasonable and they failed to do so with their differing and inconsistent scenarios. Furthermore, if arrangement of salary plus commission was accurate, it was not an arrangement a non-arm’s length person would enter, given worker’s share was apparently entirely at payer’s discretion.
Michaud v. Minister of National Revenue (Aug. 1, 2013, T.C.C. [Employment Insurance], François Angers J., File No. 2012-457(EI), 2012-440(EI)) 231 A.C.W.S. (3d) 683.



Big step to treat request for change in filing position as notice of objection

Application by taxpayers for order extending time for service of notices of objection to assessment for 2007 taxation year. Assessments were based on applicants’ filings for 2007 taxation year, but applicants did not include deductions in respect of tax shelter investment because they were warned not to by CRA. Applicants later sent T1 requests for adjustment and Minister denied their requests. Applicants then sent notices of objection, which were found to be out of time. Applicants argued their requests for adjustment ought to have been treated as notices of objection or applications for extension of time to file notices of objection, or determination of requests ought to have restarted limitation period. Application dismissed. No provision in Income Tax Act (Can.), required Minister to do what applicants asked, though CRA had tremendous discretion and could have done so. It was not unusual for CRA to treat late filed notices of objection as requests to extend time; however, it would be pretty big step to treat request for change in filing position as notice of objection. Regardless of what Minister could have done, court was bound to accept authority in Armstrong v. Canada (2006), 147 A.C.W.S. (3d) 327 (F.C.A.), as relied on by respondent, which held amended return did not impose any obligation to assess as it was merely a request. Applicants could have filed notices of objection in conjunction with requests and were even warned that responses to their requests might be delayed and they must apply for extension of time to preserve rights, yet failed to do so. Denial of requests were not assessments as there was no tax assessed, and treating these responses as assessments would result in administrative nightmare. Latest assessment date was March 26, 2009, from which applicants had one year, 90 days to application for extension of time. Even accepting applicants’ claim they mailed notices of objection on September 7, 2010, deadline had expired. Requests could not be treated as loss determinations under s. 152(1.1) given applicants were unable to change returns without permission from Minister, for which they had to file timely objection and did not do so.
Petratos v. R. (Jul. 26, 2013, T.C.C., J.E. Hershfield J., File No. 2011-206(IT)APP, 2011-202(IT)APP, 2011-209(IT)APP) 231 A.C.W.S. (3d) 830.



Insufficient to tax taxpayer solely because person under audit pointed to them

Appeal by taxpayer. In payroll audit of group of related companies, companies provided list of subcontractors that included taxpayer’s misspelled name and address. Apart from confirming that taxpayer lived at address provided, CRA did no other verification that taxpayer received any amounts from audited group of companies before assessing him to add $28,000 in income. Appeal allowed. Taxpayer, who spoke only Russian, consistently maintained that he had never heard of any of these companies or their principals, never worked for any of them, and never received any money from them. Taxpayer’s position was plausible prima facie while Minister did not adduce credible evidence to support assessing position. It was simply insufficient to tax taxpayer solely because person under audit pointed to them and provided their name and address. Names and addresses were readily available publicly, and audited companies did not provide social insurance numbers or any other evidence to support amounts allegedly paid to those on list. No reconciliation of taxpayer’s banking records or net worth assessment was conducted. Principal of one company testified that she hired taxpayer as driver but that her company did not pay him. It was entirely possible that taxpayer did work for and got paid by these companies, but evidence fell very short of establishing that conclusion on balance of probabilities.
Gorfain v. R. (Apr. 10, 2013, T.C.C. [Informal Procedure], Patrick Boyle J., File No. 2012-1331(IT)I) 228 A.C.W.S. (3d) 871.



Public college may have credit against tax applied retroactively

Appeal by registrant from assessment by Minister under Excise Tax Act (Can.). Registrant was public college. Registrant purchased three properties on which it paid GST. Registrant was entitled to partial rebate of GST under s. 259 of Act, but failed to report purchases and pay net amount due in timely manner. Registrant noted failure to pay and made late payment, claiming rebate. Minister assessed interest on purchases as of payment due date but credited rebates only as of date they were claimed, so that interest on GST payable was assessed rather than on net amount due for period between payment due date and date of actual payment. Appeal allowed. Section 280 of Act only imposed interest on after-rebate amount owing by registrant. Provisions governing transaction could be read literally to impose tax on gross GST, but this was not purposive or contextual approach. Effect of s. 296(2.1) of Act is that public college may have credit against tax applied retroactively so that no interest arises on full amount of GST prior to rebate, when three conditions are met, and s. 296(2.1)(b) simply presumes that college applying for rebate would have retroactive treatment. Wording of rebate provided in s. 259(3) and (5) supported conclusion that registrant was entitled to rebate. Absurdity would result if sections were interpreted differently so that college that did not apply for rebate would get retroactive treatment, while college that did apply for rebate would not. Allowing rebate where error was discovered by Canada Revenue Agency or late GST return was filed without claiming rebate, but not allowing rebate where late return claiming rebate was filed, was improper. Portion of s. 296(2.1)(b) requiring that no claim for rebate be made could not be ignored in circumstances where claim had not been made at time of reassessment resulting in same rebate.
Humber College Institute of Technology & Advanced Learning v. R. (May. 7, 2013, T.C.C. [Informal Procedure], Campbell J. Miller J., File No. 2012-1721(GST)I) 228 A.C.W.S. (3d) 869.
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