Date: 20041112
Docket: A-116-04
Citation: 2004 FCA 376
NOËL J.A.
SHARLOW J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
MARK SUTCLIFFE
Respondent
Heard at Ottawa, Ontario, on October 27, 2004.
Judgment delivered at Ottawa, Ontario, on November 12, 2004.
REASONS FOR JUDGMENT BY: NOËL J.A.
CONCURRED IN BY: ROTHSTEIN J.A.
SHARLOW J.A.
Date: 20041112
Docket: A-116-04
Citation: 2004 FCA 376
CORAM: ROTHSTEIN J.A.
NOËL J.A.
SHARLOW J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
MARK SUTCLIFFE
Respondent
REASONS FOR JUDGMENT
[1] This is an appeal from an interlocutory order of a Judge of the Tax Court of Canada, rendered in open Court on February 23, 2002, granting leave to the Respondent Mark Sutcliffe to amend his Amended Notice of Appeal.
[2] By that order, the Tax Court Judge allowed the respondent to raise the following issue:
(D)4.A Does Canada have the jurisdiction to allocate as an income earned in a province all or a portion of the amount earned in Canada in the taxation years in issue?
[3] The Tax Court Judge also directed that the amendment be accompanied by a statement of the relief sought as it arose from this issue. She authorized the filing of the statement without prior review of it. This statement has since been filed and is now found at paragraph (G)2 of the Amended Amended Notice of Appeal. It reads:
(G)2. The Appellant requests that the Court make a finding that the method used by the Minister to determine the income earned by the Appellant in Canada during the taxation years in issue is unreasonable and invalid and, further, that the Minister may not allocate all or portion of any income found by the Court to have been so earned in Canada as income earned in a province pursuant to Section 120(4) of the Income Tax Act and Income Tax Regulation Part XXVI;
[4] The appellant maintains that the Tax Court Judge erred in law in allowing the amendment. According to the appellant, it can be plainly seen that the amendment cannot be helpful in determining the real question in controversy in the appeal as the Tax Court does not have jurisdiction to deal with the issue which it raises or provide the relief claimed (The Queen v. Canderel Limited, 93 DTC 5357 at 5360).
Background
[5] The subject matter of the litigation before the Tax Court of Canada are assessments of income tax under Part I of the Income Tax Act (the Act) for a number of taxation years. These assessments were issued on the assumption that a portion of the income earned by the appellant during the relevant years was earned in Canada. The assessments assess federal tax on that portion of the respondent's income that was earned in Canada.
[6] The respondent has appealed these assessments pursuant to subsection 169(1) of the Act which provides:
|
Where a taxpayer has served notice of objection to an assessment under section 165, the taxpayer may appeal to the Tax Court of Canada to have the assessment vacated or varied ... |
Lorsqu'un contribuable a signifié un avis d'opposition à une cotisation, prévu à l'article 165, il peut interjeter appel auprès de la Cour canadienne de l'impôt pour faire annuler ou modifier la cotisation: [...] |
[7] The jurisdiction of the Tax Court in disposing of this appeal is set out in subsection 171(1):
|
The Tax Court of Canada may dispose of an appeal by (a) dismissing it; or (b) allowing it and (i) vacating the assessment, (ii) varying the assessment, or iii) referring the assessment back to the Minister for reconsideration and reassessment. |
La Cour canadienne de l'impôt peut statuer sur un appel: a) en le rejetant; b) en l'admettant et en: (i) annulant la cotisation, (ii) modifiant la cotisation, (iii) déférant la cotisation au ministre pour nouvel examen et nouvelle cotisation. |
[8] At the time of the issuance of the assessments, the Minister also determined whether the Canadian source income could be allocated to one or more provinces. He did so because where Canadian source income cannot be so allocated, a federal surtax is payable to account for the fact that no provincial tax is payable.
[9] In this instance the Minister, applying the formula prescribed for that purpose pursuant to subsection 120(4), concluded that the appellant's Canadian source income was earned in specified provinces in the proportions that he determined, with the result that no federal surtax was applied.
[10] When the Minister makes such a determination, the provinces to which the income is allocated are entitled to assess tax. The record reveals that provincial income taxes were assessed on the basis of this allocation, not under the Act, but under the taxing statutes of respective provinces.
[11] The income tax act of the provinces to which the income was allocated all provide for a right of appeal to the respective provincial superior courts from assessments levying provincial taxes on the basis of this allocation (Income Tax Act, R.S.N.B. c.I-2, s.22; Income Tax Act, R.S.N.S. 1967, c.134, s.22; Income Tax Act, R.S.N.L. 1990, c.I-1, s.26(1); Income Tax Act, R.S.B.C. 1996, c.215, s.42; Alberta Personal Income Tax Act, R.S.A 1980, c.A31, s.30; Income Tax Act, R.S.P.E.I. 1998, c.I-1, s.26; Income Tax Act, R.S.S. 1978, c.I-2, s.26; Income Tax Act, R.S.M. 1988, c.110, s.30; Income Tax Act, R.S.O. 1990, c.I-2, s.23).
[12] The provisions of the Ontario Income Tax Act are fairly representative of the right of appeal provided for under those statutes:
23(2) An appeal from an assessment under this Act may be taken [to the Superior Court of Justice] in respect of any question relating to the determination of,
(a) the taxpayer's residence for the purposes of this Act;
(b) the taxpayer's income earned in the taxation year in Ontario as defined in section 4;
...
4.(1) "income earned in the taxation year in Ontario" means the amount of income that would be determined to be earned in the year in Ontario for the purposes of determining the amount of income earned in the year in a province under section 120 of the Federal Act;
Decision
[13] It is clear based on the record as presently constituted that the amendment authorized by the Tax Court Judge has no relevance to the pending appeals before the Tax Court. Whether the method used by the Minister to allocate income amongst the various provinces is valid or not, the federal tax assessed will remain the same; the validity and correctness of the federal assessments in no way hinges on the allocation as between the provinces. The amendment can only have relevance with respect to the provincial income taxes that have been assessed.
[14] In this respect, the Tax Court of Canada does not have jurisdiction to pronounce on the validity of an assessment of provincial income taxes. This jurisdiction belongs to the superior courts of the respective provinces pursuant to the provincial statutes to which I have referred (see as to this Andrew Paving and Engineering Ltd. et al. v. M.N.R., 84 DTC 1157 (TCC); The Queen v. Bowater Mersey Paper Company Limited, 87 DTC 5382 (F.C.A.); Hennick v. Canada, [1998] T.C.J. No. 562; Gardner v. R., 2002 DTC 6776 (FCA)).
[15] Nor does the Tax Court have the jurisdiction to make the type of declaration contemplated by the amendment unless it results in a change in the federal taxes assessed. The Tax Court of Canada derives its jurisdiction from statute. On an appeal pursuant to subsection 169(1), it may only grant the relief provided for in subsection 171(1) (vary, vacate or refer the assessment back to the Minister).
[16] The Tax Court Judge erred in law when she allowed the amendment as it cannot possibly be of any use in disposing of the appeal before the Tax Court. It was also inappropriate for her to allow for and indeed direct that a statement of the relief be filed (see paragraph 4 above) without first reviewing it.
[17] For these reasons, I would allow the appeal with costs, set aside the decision of the Tax Court Judge and giving the order which ought to have been given, I would dismiss the motion to amend.
"Marc Noël"
J.A.
"I agree.
Marshall Rothstein, J.A.."
"I agree.
K. Sharlow, J.A."
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-116-04
STYLE OF CAUSE: Her Majesty the Queen v. Mark Sutcliffe
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: October 27, 2004
REASONS FOR JUDGMENT BY: Noël J.A.
CONCURRED IN BY: Rothstein J.A.
sharlow J.A.
DATED: November 12, 2004
APPEARANCES:
|
Mr. Marley Dash Mr. David Frayer, Q.C. |
FOR THE APPELLANT
|
|
Mr. Emilio Binavince Ms. Frances Viele |
FOR THE RESPONDENT |
SOLICITORS OF RECORD:
|
Deputy Attorney General of Canada Winnipeg, Manitoba |
FOR THE APPELLANT
|
|
Binavince Smith Ottawa, Ontario |
FOR THE RESPONDENT |