Tax Court of Canada Judgments

Docket: 2004-1196(IT)I

BETWEEN:

NAVIN JOSHI,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on September 14, 2004 at Toronto, Ontario

Before: The Honourable Justice T. O'Connor
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Craig Maw

JUDGMENT

          The appeals from the assessment and reassessment made under the Income Tax Act for the 2001 and 2002 taxation years are allowed to the extent set forth in the attached Reasons for Judgment and the matter is referred back to the Minister of National Revenue for reassessment and reconsideration in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 26th day of November, 2004.

"T. O'Connor"

O'Connor, J.

Citation: 2004TCC757

Date: 20041126

Docket: 2004-1196(IT)I

BETWEEN:

NAVIN JOSHI,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

O'Connor, J.

[1]      The principal issue in this appeal relates to determining the correct amounts of deductions for the Appellant's moving expenses in the 2001 and 2002 taxation years. The appeal also raises several subordinate issues which will be discussed later.

Facts

[2]      The relevant facts are as follows:

(a)       the Appellant commenced work for the Government of Ontario (the "New Work Location") on July 16, 2001;

(b)      the Appellant, his spouse and four children moved from 30 - 40 Fairfax Court, London, Ontario (the "Old Residence") to 3832 Coachman Circle, Mississauga, Ontario, (the "New Residence") on August 31, 2001.

(c)      The distance between the Old Residence and the New Work Location is more than 40 kilometres greater than the distance between the New Residence and the New Work Location, thus meeting the requirements of the Income Tax Act ("Act") with respect to the distance moved.

(d)      The Appellant's income at the New Work Location during 2001 was $14,140 and during 2002 it was $39,231.00.

(e)       For the 2001 taxation year, the Minister of National Revenue (the "Minister") allowed the Appellant to deduct $7,960.54 in respect of moving expenses.

(f)       The Appellant claims $25,203.21 in moving expenses.

[3]      The determination of the amounts of moving expenses to be allowed will be discussed later but I must first analyze a preliminary issue raised by the Minister that there can be no appeal from a nil assessment and that therefore the appeal with respect to the 2001 year should be quashed as the reassessment for that year is a nil assessment.

[4]      The proposition that a taxpayer may not appeal from a nil assessment is well founded in caselaw. In Canada v. Consumers Gas, [1987] 2 F.C. 60, the Federal Court of Appeal ("FCA") stated at paragraph 13:

...What is put in issue on an appeal to the courts under the Income Tax Act is the Minister's assessment. While the word "assessment" can bear two constructions, as being either the process by which tax is assessed or the product of that assessment, it seems to me clear, from a reading of sections 152 to 177 of the Income Tax Act, that the word is there employed in the second sense only. This conclusion flows in particular from subsection 165(1) and from the well established principle that a taxpayer can neither object to nor appeal from a nil assessment.

[5]      However, caselaw has also enunciated various exceptions to that general proposition. In Martens v. M.N.R., 88 DTC 1382 ("Martens"), Justice Rip considered the correct assessment of refundable investment tax credits in a nil assessment year. The respondent argued in Martens that no appeal lies from a nil assessment and that if the Minister and the taxpayer dispute the determination of the refundable investment tax credit in 1984, then in a future year, when tax is assessed because the Minister's determination of the amount of credits being less than that of the taxpayer results in income, the dispute can be resolved by the Courts at that later time. Justice Rip held at page 3 that "the Appellant has the right under the provisions of subsection 152(1.2) to contest the determination of the Minister by filing a Notice of Objection in the manner provided by section 165 and, if not satisfied with the Minister's decision in respect of the objection, file a Notice of Appeal in the manner provided by section 169. This the Appellant has done. He need not wait for a future taxation year to dispute the determination".

[6]      Likewise, in Joshi v. Canada, 2003 DTC 1550, Justice Hershfield noted that the line of nil assessment cases did not deal with tax credit issues. He held that if there was an issue dealing with tax credits, the Tax Court of Canada has jurisdiction.

[7]      Moreover, in Aallcann Wood Suppliers Inc. v. Canada, 94 DTC 1475, Justice Bowman held that the determination of capital losses in a nil assessment may be considered by the Court if they affect the taxpayer's position in subsequent years (i.e., loss carry-forwards). He stated at paragraph 4:

...One of the reasons for the enactment of subsection 152(1.1) was that no appeal lies from a nil assessment. In the absence of a binding loss determination under subsection 152(1.1), it is open to a taxpayer to challenge the Minister's calculation of a loss for a particular year in an appeal for another year where the amount of the taxpayer's taxable income is affected by the size of the loss that is available for carry-forward under section 111. In challenging the assessment for a year in which tax is payable on the basis that the Minister has incorrectly ascertained the amount of a loss for a prior or subsequent year that is available for deduction under section 111 in the computation of the taxpayer's taxable income for the year under appeal, the taxpayer is requesting the court to do precisely what the appeal procedures of the Income Tax Act contemplate: to determine the correctness of an assessment of tax by reviewing the correctness of one or more of the constituent elements thereof, in this case the size of a loss available from another year. This does not involve the court's making a determination of loss under subsection 152(1.1) or entertaining an appeal from a nil assessment. It involves merely the determination of the correctness of the assessment for the year before it.

[8]      In Liampat Holdings Ltd. v. Canada, [1995] F.C.J. No. 1621, the Federal Court of Canada - Trial Divison stated at page 6:

...I take Aallcann to mean that this Court has jurisdiction to consider a nil assessment year where the computations from the nil assessment year have an actual impact on another taxation year; it does not give the Court jurisdiction to consider a nil assessment directly.

[9]      Finally, in Bruner v. Canada 2003 FCA 54 ("Bruner"), the FCA seems to have broadened the cases in which the Court may review a nil assessment taxation year:

The respondent is appealing from an assessment in which there is no amount in dispute. The provisions of the Income Tax Act relating to assessments and appeals are mirrored in the Excise Tax Act and we see no reason why the principles relating to appeals from nil assessments under the Income Tax Act should not apply to appeals under the Excise Tax Act... Consequently, a taxpayer is not entitled to challenge an assessment where the success of the appeal would either make no difference to the taxpayer's liability for tax or entitlement to input tax credits or refunds, or would increase the taxpayer's liability for tax. When the respondent took the position that there was no amount in dispute, the Tax Court judge should have applied the nil assessment jurisprudence and quashed the Notice of Appeal.

[10]     In the present case, the Appellant argued that 2001 was only a nil assessment year because the Minister, of his own volition, applied the Appellant's education and tuition tax credits, similar to the Minister's action in Joshi v. Canada, supra. However, the Respondent denied this claim, and the Respondent is correct. The 1991 year is a nil assessment year without considering the education and the tuition tax credits.

[11]     Accepting, then, that 2001 was a 'valid' nil assessment taxation year, the issue remains: whether the taxpayer's appeal in respect of the 2001 taxation year should be quashed. In my view, the appeal ought not to be quashed because a determination with respect to the 2001 taxation year impacts the Appellant's tax liability in respect of the 2002 taxation year. This is so because moving expenses are deductible in the year in which they are incurred and in the subsequent year.

[12]     Nil assessment years are generally not subject to the Court's review because in most cases no practical consequence would result from the review - the taxpayer owes no money and hence cannot be put in a superior position. However this theory does not hold in cases such as the present where there is a chance that a taxpayer's liability may be affected (speaking broadly to include years subsequent to the nil assessment year). In my opinion therefore, based on the facts of this case, I may review the 2001 taxation year. In the present case, to employ the language of the FCA in Bruner, the determination as to what moving expenses were deductible in the nil assessment year (2001) may 'make a difference to the tax liability of the taxpayer' in 2002. As a result, this is a proper case in which to review a nil assessment taxation year.

[13]     What is the proper amount of the moving expense deduction? Subsection 62(1) of the Act states:

Moving Expenses - There may be deducted in computing a taxpayer's income for a taxation year amounts paid by the taxpayer as or on account of moving expenses incurred in respect of an eligible relocation, to the extent that

(a) they were not paid on the taxpayer's behalf in respect of, in the course of or because of, the taxpayer's office or employment;

(b) they were not deductible because of this section in computing the taxpayer's income for the preceding taxation year;

(c) the total of those amounts does not exceed

(i) in any case described in subparagraph (a)(i) of the definition "eligible relocation" in subsection 248(1), the taxpayer's income for the year from the taxpayer's employment at a new work location or from carrying on the business at the new work location, as the case may be, and

(ii) in any case described in subparagraph (a)(ii) of the definition "eligible relocation" in subsection 248(1), the total of amounts in computing the taxpayer's income for the year because of paragraphs 56(1) and (o); and

(d) all reimbursements and allowances received by the taxpayer in respect of those expenses are included in computing the taxpayer's income.

Subsection 62(3) of the Act states:

Definition of "moving expenses" - In subsection (1), "moving expenses" includes any expense incurred as or on account of

(a) travel costs (including a reasonable amount expended for meals and lodging), in the course of moving the taxpayer and members of the taxpayer's household from the old residence to the new residence,

(b) the cost to the taxpayer of transporting or storing household effects in the course of moving from the old residence to the new residence,

(c) the cost to the taxpayer of meals and lodging near the old residence or the new residence for the taxpayer and members of the taxpayer's household for a period not exceeding 15 days,

(d) the cost to the taxpayer of cancelling the lease by virtue of which the taxpayer was the lessee of the old residence,

(e) the taxpayer's selling costs in respect of the sale of the old residence,

(f) where the old residence is sold by the taxpayer or the taxpayer's spouse as a result of the move, the cost to the taxpayer of legal services in respect of the purchase of the new residence and of any tax, fee or duty (other than any goods and services tax or value-added tax) imposed on the transfer or registration of title to the new title,

(g) interest, property taxes, insurance premiums and the cost of heating and utilities in respect of the old residence, to the extent of the lesser of $5,000 and the total of such expenses of the taxpayer for the period

(i) throughout which the old residence is neither ordinarily occupied by the taxpayer or by any other person who ordinarily resided with the taxpayer at the old residence immediately before the move nor rented by the taxpayer to any other person, and

(ii) in which reasonable efforts are made to sell the old residence, and

(h) the cost of revising legal documents to reflect the address of the taxpayer's new residence, of replacing drivers' licenses and non-commercial vehicle permits (excluding any cost for vehicle insurance) and of connecting or disconnecting utilities,

but for greater certainty, does not include costs (other than costs referred to in paragraph (f)) incurred by the taxpayer in respect of the acquisition of the new residence.

Subsection 248(1) defines "eligible relocation" as follows:

"eligible relocation" means a relocation of a taxpayer where

(a) the relocation occurs to enable the taxpayer

(i) to carry on a business or to be employed at a location in Canada (in section 62 and this subsection referred to as "the new work location", or

(ii) to be a student in full-time attendance enrolled in a program at a post-secondary level at a location of a university, college or other educational institution (in section 62 and in this subsection referred to as "the new work location"),

(b) both the residence at which the taxpayer ordinarily resided before the relocation (in section 62 and this subsection referred to as "the old residence") and the residence at which the taxpayer ordinarily resided after the relocation (in section 62 and this subsection referred to as "the new residence") are in Canada, and

(c) the distance between the old residence and the new work location is not less than 40 kilometres greater than the distance between the new residence and the new work location...

Subsection 248(1) defines "amount" as follows:

"amount" means money, rights or things expressed in terms of money or the value in terms of money of the right or thing...

[14]     Clearly, the Appellant's move from his Old Residence to his New Residence is an "eligible relocation" for the purposes of the Act. The issue, then, is what deductions pursuant to subsection 62(1) of the Act are to be allowed.

[15]     The moving expenses claimed by the Appellant and those allowed by the Minister of National Revenue (the "Minister") in the October 14, 2003 reassessment and subsequently (at and subsequent to the hearing) as well as an additional amount allowed by this judgment are as follows:

Claimed by Appellant	Allowed in October 14, 2003 reassessment	Allowed subsequently	Additional amount allowed by this judgment
Packaging materials, (storage)                      $500	328.78
Packing and moving Household Effects:                               $9,500	NIL
Temporary Lodging and Meals for 15 Days:    $6,715	198.00
Old Residence Selling Fees
[Real Estate Commission:                          $3,416.20]	3,416.20
[Legal Fees:            $515.74]	515.74
New Residence Purchase Fees:
[Taxes Paid for the Registration of Title:                           $1,754.10]	1,754.10
[Execution Search Fee:                                $33.00]	33.00
[Title Insurance Fee:$170.00]		170.00
[Conveyancer's Closing Fee:                                $58.85]	58.85
[Mortgage Registration and Transfer Fee:           $140.00]		140.00
[Hudac Enrolment Fee:                              $598.00]		598.00
[Legal Fees:            $792.87]	792.87
Utilities Connection Fees:
[Hydro and Water Meter:                              $642]	642.00
[Bell Canada Telephone:                               $ 95]	55.00
[Rogers Cable Vision:                                $ 59.95]	59.95
Household Travel Expenses:                              $212.50	106.25		106.25
Totals                 $25,203.21	7,960.54	908.00	106.25

The total of the last three amounts, ie. $7,960.54 + $908 + $106.25 is $8,974.79.

[16]     The Appellant should not be allowed to deduct $500 in respect of the first item, "Packaging materials", with the exception of the amount allowed by the Minister, namely, $328.78. The Appellant testified that Packaging materials included items that a person would normally use to store and transport household items. Although such items would normally be deductible by virtue of sub-paragraph 62(3)(b), which states: "the cost to the taxpayer of transporting or storing household effects in the course of moving from the Old Residence to the New Residence", the Appellant has failed to present the Court with any evidence as to his actually incurring any costs in excess of the $328.78 allowed.

[17]     The Appellant seeks to deduct $9,500 in respect of the labour provided by the Appellant's wife and family in moving their possessions from the Old Residence to the New Residence. The Appellant did not hire professional movers to transport his possessions; rather, his spouse and family moved the possessions. The Appellant describes how he arrived at the amount of $9,500 in respect of moving and packing expenses as follows: "...I added all the labour, the time and everything that would have really cost my family, in the amount of $9,500 for putting together, packing and moving and unpacking in Mississauga..." In addition, the Appellant called various moving companies and obtained estimates from them of the cost to move his household from the Old Residence to the New Residence. The estimates factored into his determination that it would have cost $9,500 to move.

[18]     The Appellant provided neither his spouse nor the other family members that helped him move any consideration in exchange for their help. Subsection 62(1) states that "There may be deducted in computing a taxpayer's income for a taxation year amounts paid by the taxpayer as or on account of moving expenses..." [emphasis added]. "Amount" is defined in subsection 248(1) as "money, rights or things expressed in terms of money or the value in terms of money of the right or thing..." In the present case, the Appellant did not pay to his spouse or family money, rights or things expressed in terms of money.

[19]     Essentially, the Appellant seeks to ascribe a value to the time and energy exerted by his spouse and family in moving. The Appellant implicitly argues that that the expending of one's energy and labour, or having energy expended on one's behalf is the equivalent, for the purposes of deducting moving expenses under the Act, to paying professional movers. However, section 62(1) does not recognize imputed value as a deductible expense: it requires an amount to be paid before a deduction may be taken. In the present case, no money was spent, so no deduction may be taken.

[20]     With respect to Temporary Lodging and Meals for 15 days, the Appellant seeks to deduct $6,715. Of this amount, the Minister has allowed $198, representing the cost of meals for six people for one day (at $33 per person). Although subparagraph 62(3)(c) allows the deduction of meals and lodging near the Old Residence or New Residence for the taxpayer and members of his or her household for a period of up to 15 days, the Appellant has not produced any evidence substantiating that he actually incurred expenses in the amount claimed. At trial the Appellant asserted that he and his family resided with friends near the New Residence and that he paid these friends for the lodging and ate most meals at restaurants. However, no receipts were produced and in my opinion the amount of $198 for temporary lodging and meals allowed by the Minister is correct.

[21]     The Minister properly allowed the item "Old Residence Selling Fees", to be deducted in the full amount claimed, namely $3,931.94 (ie. $3,416.20 plus $515.74).

[22]     In respect of New Residence Purchase Fees, the Minister has correctly allowed a full deduction.

[23]     The Minister has correctly allowed the Appellant to deduct expenses cited under Item 6, Utilities Connection Fees in full with the exception that the Bell Telephone amount has been reduced (in my opinion correctly) from $95 to $55 owing to a lack of complete and adequate receipts.

[24]     In my opinion the Appellant may deduct Household Travel Expenses, in full. Section 62(3) allows the deduction of "travel costs ... in the course of moving the taxpayer and members of the taxpayer's household from the Old Residence to the New Residence". The Minister allowed the Appellant to deduct $106.25 for household travel expenses (1 car at 42.5 cents x 250 km). The Appellant seeks to deduct $212.50, as his household owns two vehicles. In light of the fact that the Appellant travelled to his New Work Location prior to the rest of his family, he should be allowed to deduct $106.25 in respect of each car. The assumption is that he and his family travelled to the New Work Location in separate cars. Given the evidence, I believe that this is a reasonable assumption to make.

[25]     At trial, the Appellant also mentioned deducting the costs of tree planting, of putting a shed on his new property, and of a driveway apron. None of these expenses are deductible moving expenses.

[26]     In the final result, the Appellant should be allowed to deduct, for the 2001 taxation year, $8,974.79 for moving expenses. Because this amount is less than the income earned by the Appellant at his New Work Location in 2001 ($14,140), there is no amount to carry over to the 2002 taxation year and therefore the Appellant is not entitled to any deductions in respect of moving expenses for the 2002 taxation year.

[27]     Moreover, the Appellant's tax liability with respect to the 2001 taxation year remains undisturbed - it is nil.

[28]     The following subordinate issues were also raised. The Respondent alleges that the Appellant may have been in receipt of an allowance or reimbursement by the employer at the New Work Location, in respect of some or all of the moving expenses claimed. The Respondent did not put forth any evidence on this point. Even if the Appellant did receive an allowance it would not be directly material in this case. Subsection 62(1) simply directs a taxpayer to include a moving allowance in income. It does not affect the deductibility of moving expenses. As for the possibility that the Appellant was reimbursed for some of his moving expenses, there is no evidence before the Court to that effect.

[29]     A point raised by the Appellant was that the Court should order the Minister to pay interest on the late mailing of a tax rebate, unrelated to the moving expenses issue. The Court does not have jurisdiction to order the Minister to pay interest because the Act does not confer such jurisdiction. Therefore any claim by the Appellant in this respect cannot be granted.

[30]     There was also some reference to Ontario Tax Credits and related interest. It is clear that this Court has no jurisdiction to hear an appeal with respect to Ontario Tax Credits and cannot entertain any claim in this respect.

[31]     In conclusion:

1.        The appeal in respect of the 2001 taxation year should not be quashed as a result of it being a nil assessment year.

2.        The Appellant is entitled to deduct moving expenses of $8,975.19 for the 2001 taxation year.

3.        The Appellant is not entitled to deduct moving expenses in respect of the 2002 taxation year.

4.        The Appellant should not be prevented from deducting a certain portion of moving expenses because he purportedly received a moving allowance or reimbursement from the employer at his New Work Location.

5.        This Court cannot order the Minister to pay to the Appellant interest because the Minister was late remitting a tax refund cheque.

6.        This Court has no jurisdiction with respect to Ontario Tax Credits.

Signed at Ottawa, Canada, this 26th day of November, 2004.

"T. O'Connor"

O'Connor, J.

CITATION:

2004TCC757

COURT FILE NO.:

2004-1196(IT)I

STYLE OF CAUSE:	Navin Joshi and H.M.Q.
PLACE OF HEARING:	Toronto, Ontario

DATE OF HEARING:

September 14, 2004

REASONS FOR JUDGMENT BY:

The Honourable Justice T. O'Connor

DATE OF JUDGMENT:

November 26, 2004

APPEARANCES:

For the Appellant:

The Appellant himself

Counsel for the Respondent:

Craig Maw

COUNSEL OF RECORD:

For the Appellant:

Name:

Firm:

For the Respondent:

Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada