Date: 20000912
Docket: 1999-461-IT-I
BETWEEN:
SUSAN DAVIES,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowman, A.C.J.
[1] In November 1996 the appellant separated from her spouse and left the matrimonial home. The youngest child of the marriage remained in the matrimonial home with the appellant's spouse, although the appellant had joint custody of the child with her husband.
[2] In December 1996 she informed Revenue Canada of the changed matrimonial circumstances. Nonetheless she received child benefit cheques for the period December 1996 to June 1997 totalling $234.50.
[3] She telephoned her husband who refused to permit her to take the cheques to him. Evidently the husband is an abusive and potentially dangerous person and she was afraid to go near him. In June 1997 the husband applied for the child tax benefit and received it for the same period for which the appellant had received it. The tax department apparently awakened to the fact that they had been sending the same amount to two persons and asked the appellant for $234.50 back. The appellant asked her husband for the money, since she had already spent it all on the son's needs. The husband's response was "I'll nail you in your coffin first".
[4] The appellant received a further cheque for $170.00 for July 1997. She returned it to Revenue Canada uncashed.
[5] To be an eligible individual for the tax benefit provisions of the Income Tax Act a person must among other things reside with the qualified dependant and be the parent of the qualified dependant who primarily fulfils the responsibility for the care and upbringing of the qualified dependant.
[6] Under subsection 122.62(4) a person who ceases to be a qualified individual must inform the Department of National Revenue of that fact before the end of the first month following the particular month in which he or she ceased to be an eligible individual. On the evidence she did just that. The Minister required no more formal notification. The scheme of the child benefit provision is that the benefit is paid to the eligible individual by means of the creation of a fiction in the form of a deemed overpayment of tax. I presume that the purpose of the somewhat convoluted statutory procedure is to give the Minister the authority to make a payment under section 164 of the Income Tax Act to such a person that the Minister would not otherwise have.
[7] Subsection 160.1(1) provides that where an excessive refund has been made the excess is deemed to be an amount that "became payable by the taxpayer on the day on which the amount was refunded". Where the excess arose as the result of the operation of section 122.61 no interest is chargeable.
[8] Subsection 160.1(3) reads:
The Minister may at any time assess a taxpayer in respect of any amount payable by the taxpayer because of subsection (1) or (1.1) or for which the taxpayer is liable because of subsection (2.1) or (2.2), and this Division applies, with such modifications as the circumstances require, in respect of an assessment made under this section as though it were made under section 152.
[9] The only document in evidence is a Child Tax Benefit Notice, dated October 20, 1997 showing an amount owing by the appellant of $234.50. The reply states that this notice assessed an overpayment of $234.50. The document is not described as a notice of assessment but the Minister of National Revenue seems to have thought that that was what it was because he blithely went ahead and deducted the $234.50 from the appellant's tax refunds for later years.
[10] Subsections 152(3.2) and (3.3) read:
(3.2) A taxpayer may, during any month, request in writing that the Minster determine the amount deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer's liability under this Part for a taxation year that arose during the month or any of the 11 preceding months.
(3.3) On receipt of the request referred to in subsection (3.2), the Minister shall, with all due dispatch, determine the amounts deemed by subsection 122.61(1) to be overpayments on account of the taxpayer's liability under this Part that arose during the months in respect of which the request was made or determine that there is no such amount, and shall send a notice of the determination to the taxpayer.
[11] The Child Tax Benefit Notice seems to be more in the nature of such a notice of determination.
[12] It might be arguable that the Child Tax Benefit Notice is not a notice of assessment, but I think this is an unduly technical position. I shall assume it is a notice of assessment giving rise to a right of objection and appeal.
[13] The appellant has behaved with exemplary propriety. She informed the Department of National Revenue in December 1996 of her changed domestic arrangements. She tried to give the money to her husband but he refused to let her come near him. She then spent the money on her son's needs.
[14] This case need not turn on an assessment of blame or fault. If that were relevant I would find that the Department of National Revenue erred in failing to act upon her informing them in December that she had moved out and that her son was living with her estranged spouse. The husband's conduct of course is reprehensible.
[15] Paragraph 3 of the reply to the notice of appeal reads:
He has no knowledge of and therefore does not admit the allegations of fact stated in the Notice of Appeal that the Appellant informed Revenue Canada of the breakdown of the marriage and that the youngest child, Gordon, would remain in the family home with her spouse.
[16] Whatever the respondent may choose to admit or not admit, I find as a fact that the appellant did so inform Revenue Canada in December 1996.
[17] The Department of National Revenue knew in December of 1996 that she had moved out and that her son was staying with the spouse. They chose nonetheless to send the cheques to her.
[18] I have tried to find some basis upon which I could give the appellant some relief but I cannot overcome the hurdle that after she moved out in November 1996 she ceased to be an eligible individual because she did not reside with the son. There is no room for the principle of estoppel here (Goldstein v. The Queen, 96 DTC 1029).
[19] I am aware that this court has held that the Minister has no right to demand a repayment of excessive child tax benefits (Ford v. R., [1999] 1 C.T.C. 2540). I prefer not to comment on that case because it is, I understand, on its way to the Federal Court of Appeal.
[20] The amount of money involved here is, relatively speaking, not large. There is, nonetheless a certain question of principle involved. An obvious injustice has been done. The appellant has acted blamelessly but she has been penalized because of an error for which she is not responsible. This has redounded to her detriment and to the benefit of her husband who did not deserve it. Whatever discretionary powers may reside in the Governor-in-Council under the Financial Administration Act, I have no power to rectify this unfairness. I must therefore reluctantly dismiss the appeal.
Signed at Ottawa, Canada, this 12th day of September 2000.
"D.G.H. Bowman"
A.C.J.