Date: 20020319
Docket: 2001-2238-IT-I
BETWEEN:
RAMESH K. KALIA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
__________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: Meghan Castle
___________________________________________________
Reasons for Judgment
(Delivered orally from the Bench at Toronto, Ontario, on February 6, 2002)
Sarchuk J.T.C.C.
[1] This is an appeal by Ramesh Kalia from assessments of tax with respect to his 1989, 1990 and 1995 taxation years. In computing income for the 1989 taxation year, the Appellant reported employment income from Ontario Hydro in the amount of $61,811 and claimed a business loss in the amount of $4,770. In computing income for the 1990 taxation year, he reported employment income from Ontario Hydro in the amount of $59,604. In the 1995 taxation year, the Appellant received the amount of $194,675 from Ontario Hydro as an award or agreement received by him as a result of a settlement reached between the Appellant and Ontario Hydro under which the parties agreed to terminate a lawsuit. In assessing the Appellant's tax payable for the 1995 taxation year pursuant to subsection 152(7) of the Income Tax Act, the Minister included the amount of $183,075 received from Ontario Hydro in income.
[2] In reassessing the Appellant for the 1989 taxation year, Notice of Reassessment thereof mailed on March 23, 1998, the Minister disallowed business expenses in the amount of $3,583. In reassessing the Appellant for the 1990 taxation year, Notice of Reassessment thereof mailed on March 23, 1998, the Minister reduced employment income reported by the Appellant from Ontario Hydro by the amount of $16,303, which represented that portion of the said income already included in income in 1995.
[3] Subsequently, the Minister reassessed the Appellant for the 1989, 1990 and 1995 taxation years, concurrent Notices of Assessment thereof mailed on June 19, 2000 which had the effect of allowing additional business expenses in the amount of $639 in the 1989 taxation year, allowing carrying charges in the amount of $1,777 in the 1990 taxation year and increasing employment income by the amount of $11,600 in the 1995 taxation year. In addition, the reassessment to the 1995 taxation year also had the effect of treating the payment received from Ontario Hydro in 1995 as Qualifying Retroactive Lump Sum Payment.
[4] The Appellant's position is that:
(i) Since the income for the years 1990 to 1994 was not carried over to the respective years, I do not have RRSP room for these years. My employer is committed to contributing to my pension plan for the years in question. Revenue Canada would not allow my employer to contribute to my pension plan because I do not have enough RRSP room. This alone would result in a loss of retirement income of $7,000 per year in today's dollars. This loss becomes even more significant because due to continuing illness I have been unable to work and contribute to CPP.
(ii) Due to consolidation of my Federal Taxes from the years 1990 to 1994 to the year 1995, my Federal Taxes payable are higher 1995. As a result I have been charged Federal Surtax of over $3,300 in 1995 although my income for all the years in question (1990 to 1995) is too low to trigger Federal Surtax.
(iii) Provincial taxes were higher in 1995 than in previous years but I end up paying higher rate of Provincial Taxes for the years 1990 to 1994 due to consolidation of Federal Taxes of these years to 1995.
(iv) Because the provincial taxes are calculated on consolidated Federal Taxes of the years 1990 to 1995 in 1995, I have been charged provincial surtax of over $6,700 in 1995. Otherwise my income in all these years is not large enough to trigger provincial surtaxes.[1]
[5] More importantly, a further result of the lump sum payment and the settlement created a situation where the parties, in an effort to provide the Appellant with the appropriate employer pension contributions for the period August 1990 to January 3, 1995, reached an agreement but it was subject to Revenue Canada approval. The Minister refused to give his approval and given the circumstances of this particular case the result was that the Appellant did not have sufficient RRSP room for those years. As the Appellant put it, as a further direct result of the manner in which the Minister assessed, he suffered a loss of retirement income.
[6] Now that may be so. However, I am dealing with the totality of the taxpayer's position and what we have before the Court today is the result of the application of retroactive legislation which swept the Appellant into the net, if I may put it that way. However, on balance there is no question that the Minister assessed the Appellant for the taxation year in issue correctly. I do not propose to restate the analysis put forward by counsel for the Respondent. I would only say that she correctly outlined the various sections of the Act relevant to the taxability of the lump sum payment received by Mr. Kalia. There is nothing before me to suggest that the Minister made an error in applying the relevant sections as he did.
[7] The Appellant also raised the issue of fairness and the lack of equity arising as a result of the application of those sections. My only comment on that issue is that on the face of it, it does appear that there may have been a certain degree of unfairness created by the legislation, not by the Minister. However, this Court's jurisdiction is limited to hearing appeals by taxpayers and to determining whether or not the assessment is in conformity with the law, that is, whether the assessment conforms with the relevant sections of the Act. I have no authority beyond that. If I conclude that the tax was imposed properly pursuant to a section of the Act, no matter how unfair that might be, I do not have the equitable jurisdiction to say to the Minister, "Look, you may have applied the law correctly but it is unfair and therefore I want you to re-adjust the assessment in favour of the Appellant". I simply do not have that authority.
[8] I do not know whether the Minister has any right to deal with a fairness submission with respect to anomalies such as this. I do know that the Minister does have certain administrative authority to consider such requests by taxpayers.
HIS HONOUR: Counsel, I am not sure if you can provide any more information, I do know that the Minister has, for example, the right to waive the payment of interest. What limits there are on the Minister's administrative authority to do things like that, I frankly do not know, but it is something that you may wish to make further enquiries about Mr. Kalia. Counsel, do you have any information that you can pass on?
MS. CASTLE: I don't believe that this is a circumstance that the Fairness Committee can deal with.
HIS HONOUR: I'm sorry?
MS. CASTLE: I don't believe that this is the kind of circumstance that the Fairness Committee can deal with.
HIS HONOUR: I know, but the Minister's authority must come from some statute or some --
MS. CASTLE: To waive interest and penalties and extend certain deadlines. But it comes from the Income Tax Act.
HIS HONOUR: Specifically from the Act, and there is nothing further?
MS. CASTLE: Not that I'm aware of.
HIS HONOUR: I'm not sure Mr. Kalia. I frankly have never bothered checking into it, but you may make some enquiries. You might want to make an enquiry through your Member of Parliament because that is the form in which administrative remedial action might be available. I'm not saying it is because I don't know. It might be available but this Court does not have the authority to get involved in that sort of issue.
I have a great deal of sympathy for your position. I think it is an awkward situation where somebody gets caught by retroactive legislation. I won't express my views as to whether it's fair or not, but I think you can read between the lines.
[9] Having said all that, I think it is obvious that my conclusion is that the appeal cannot succeed.
Signed at Ottawa, Canada, this 19th day of March, 2002.
"A.A. Sarchuk"
J.T.C.C.
COURT FILE NO.: 2001-2238(IT)I
STYLE OF CAUSE: Ramesh K. Kalia and
Her Majesty the Queen
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: February 6, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge A.A. Sarchuk
DATE OF JUDGMENT: February 14, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Meghan Castle
COUNSEL OF RECORD:
For the Appellant:
Name: N/A
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
[1] The foregoing four paragraphs did not form part of the reasons delivered orally from the Bench at the conclusion of the hearing.