Date: 19991216
Docket: 98-1898-IT-I
BETWEEN:
DONNA MARIE CAMPBELL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bell, J.T.C.C.
ISSUE:
[1] Whether the Minister of National Revenue ("Minister") properly assessed the Appellant for a penalty pursuant to subsection 163(1) of the Income Tax Act ("Act") for her 1996 taxation year.
FACTS:
[2] The Appellant received social assistance payments for the 1996 and three preceding taxation years. In computing income for her 1996 taxation year return she failed to include the amount of $2,040 ("1996 Amount") received as income from Humber College of Applied Arts & Technology ("Humber"). The Minister reassessed the Appellant for her 1996 taxation year including the 1996 amount in income and imposing a penalty pursuant to subsection 163(1) of the Act.
[3] Similarly, the Appellant had failed to include in computing income for her 1994 taxation year return the amount of $3,300 ("1994 amount") received from Humber. She also had failed to include in computing income for her 1995 taxation year return the amount of $3,620 ("1995 amount") received from Humber. The Minister reassessed her adding such amounts to income for each of those two taxation years.
[4] The Appellant was not taxable for her 1996 taxation year and filed an income tax return for the sole purpose of obtaining a Goods and Services Tax credit under subsection 122.5(3). That abstruse subsection reads in part:
Where a return of income ... is filed under this Part for a taxation year in respect of an individual and the individual applies therefor in writing ...
a formula determined amount shall be deemed to be an amount paid by that individual on account of such individual's tax payable under that Part. [1]
SUBMISSIONS OF THE PARTIES:
[5] The Appellant submitted that she is not subject to the penalty assessed pursuant to subsection 163(1) because she did not file a return under section 150 of the Act. Subsection 163(1) reads as follows:
Every person who
(a) fails to report an amount required to be included in computing the person's income in a return filed under section 150 for a taxation year, and
(b) had failed to report an amount required to be so included in any return filed under section 150 for any of the three preceding taxation years
is liable to a penalty equal to 10% of the amount described in paragraph (a) ...
Section 150 reads, in part, as follows:
A return of income for each taxation year in the case of ... an individual, for each taxation year for which tax is payable by the individual or in which the individual has a taxable capital gain or has disposed of capital property, shall, without notice or demand therefor, be filed with the Minister in prescribed form and containing prescribed information,
[6] The four circumstances outlined in section 150 requiring the filing of a return under that provision do not apply to the Appellant. Specifically,
(1) there was no tax payable for the year,
(2) there was no taxable capital gain,
(3) there was no disposition of capital property, and
(4) no return had been demanded by the Minister.
[7] The Respondent's counsel submitted that the Appellant's return was filed under section 150.[2]
ANALYSIS AND CONCLUSION:
[8] The question becomes, simply, whether the Appellant's return of income for eligibility for the GST credit pursuant to section 122.5 was filed under Part I of the Act. It is clear that the Appellant was not required to file an income tax return under subsection 150(1). She filed a return simply to obtain the credit. The words "where a return of income ... is filed under this Part" found in subsection 122.5(3) appear simply to mean that
(a) a return in the form normally filed under Part I was required to be filed, and
(b) that the return seeking the tax credit would not be a return under any other number of Parts of the Act requiring the filing of returns.
[9] The Appellant was not required to file a return "in prescribed form and containing prescribed information" as required by section 150. Indeed, a document simply described as a return of income or simply referring to the Appellant's circumstances entitling her to a GST credit should have sufficed.
[10] The Minister's action in assessing a penalty in circumstances where the Appellant was in receipt of social assistance payments and a slight amount of income from Humber which did not render her taxable is, to say the least, aggressive. As subsection 122.5(1) requires a return to be filed for entitlement to the credit it seems apparent that the potential of that provision being interpreted to entitle the Minister to impose penalties did not occur to the legislator. An amendment to this section enabling a taxpayer to file a return or some other document without the threat of subjection to penalty is indeed warranted.
[11] As set out in Johns-Manville Canada Inc. v. H.M.Q., 85 DTC 5373 (S.C.C.) at 5384:
Such a determination is, furthermore, consistent with another basic concept in tax law that where the taxing statute is not explicit, reasonable uncertainty or factual ambiguity resulting from lack of explicitness in the statute should be resolved in favour of the taxpayer.
[12] It is difficult to imagine a circumstance more deserving of the application of this principle of interpretation.
[13] The appeal is allowed.
Signed at Ottawa, Canada this 16th day of December, 1999.
J.T.C.C.