Date: 20001128
Dockets: 2000-2268-IT-I, 2000-2388-IT-I,
2000-2490-IT-I
BETWEEN:
KIL CHA PAK,
SOON SUK LEE,
SOON SUK LEE
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Beaubier, J.T.C.C.
[1] These Informal Appeals were heard together on common evidence by consent of the parties at Vancouver, British Columbia, on November 22, 2000. Soon Suk Lee was a witness as was the parties' accountant, Mr. Hun Sunwoo. Sonja Mitchell testified for the Respondent. The issue is essentially one of law. Paragraphs 2 to 14 inclusive of the Reply to the Notice of Appeal of Soon Suk Lee read:
2. With respect to the fourth paragraph under B. of the Notice of Appeal he admits that the income for the period ending 31st December 1995 qualified for a reserve under the provisions of subsection 34.2(4) of Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended (the "Act") but denies that the amount of the claimed reserve was calculated in accordance with subsection 34.2(4) of the Act.
3. He denies that the deduction was lawful.
4. The Minister of National Revenue (the "Minister") initially assessed the Appellant for the 1997 year by Notice dated 8th June 1998.
5. By Notice dated 17th June 1996, for the 1995 taxation year, the Minister assessed the Appellant net business income as filed in the amount of $6,341, which included additional business income in the amount of $1,833 and a reserve in the amount of $1,742. The Appellant's calculation of the reserve is shown in Exhibit "A" to this Reply.
6. By Notice dated 2nd June 1997, for the 1996 taxation year, the Minister assessed the Appellant net business income as filed in the amount of $8,230, which included the reserve of $1,742 deducted in calculating the 1995 income and a reserve of $1,553 for the 1996 taxation year. The Appellant s calculation of the reserve is shown in Exhibit "B" to this Reply.
7. In computing income for the 1997 taxation year the Appellant deducted a reserve calculated as shown in Exhibit "C" to this Reply.
8. In assessing the Appellant, by Notice dated 8th June 1998, for the 1997 taxation year the Minister disallowed the deduction of the reserve.
9. In so assessing the Appellant, the Minister relied on the following assumptions of fact:
a) the Appellant and Soon Suk Lee operated a partnership doing business Dundas Market (the "Partnership");
b) the Partnership commenced before the 1995 calendar year;
c) the Partnership had a fiscal period ending on 30th September;
d) the Partnership converted the fiscal year end to 31st December in 1995;
e) the Partnership had two fiscal periods ending in 1995;
f) the Partnership's income for the fiscal period ending 30th September 1995 was $12,498;
g) the Partnership's income for the period ending 31st December 1995 was $3,667;
(h) the Partnership's cumulative eligible capital expenditures at the fiscal period ending 30th September 1995 was $30,776;
(i) the undepreciated capital costs of the Partnership's assets at the year ending 30th September 1995 were as follows:
class 8 $ 5,480
class 13 $25,646
class 10.1 $10,996;
j) in calculating the reserve for 1995 pursuant to subsection 34.2(4) of the Act the Partnership did not deduct from income any amount with respect to the cumulative eligible capital nor any amount with respect to capital cost allowance as required by 34.2(2) (the "Error"); and
k) as a result of the Error the Partnership's calculation of reserves per subsection 34.2(4) in the 1995 through 1997 taxation years was incorrect.
10. The allowable reserves for 1995, 1996 and 1997 are shown in Exhibits "D", "E" and "F" respectively.
11. The Minister concedes that the Appellant is entitled to deduct a reserve up to $511 in the 1997 taxation year.
B. ISSUES TO BE DECIDED
12. The issue is the amount of the reserve the Appellant may claim under the provisions of subsection 34.2(4) of the Act.
C. STATUTORY PROVISIONS RELIED ON
13. He relies on section 34.2 of the Act.
D. GROUNDS RELIED ON AND RELIEF SOUGHT
14. He respectfully submits that the Appellant is entitled to a reserve for the 1997 taxation year, under the provisions of subsection 34.2(4) of the Act, up to the amount of $551.
Schedules D, E and F in both of the Lees' Replies were amended by consent of the parties in an effort to clarify the calculation.
[2] The assumptions in paragraph 9 are correct.
[3] Mr. Sunwoo filed claims for the Appellants which were based on the optional provision respecting capital cost allowance ("CCA") set out in section 20 of the Income Tax Act (the "Act").
[4] However, in the amendments to the Act contained in section 34.2 which require that CCA be used as stated therein, that option is taken away and the usage of CCA set out is mandatory. In particular, subsection 34.2(2)(c) reads:
(2) Computation of December 31, 1995 income
For the purpose of the definition "December 31, 1995 income" in subsection (1), a taxpayer's income or loss from a business for a qualifying fiscal period shall be computed as if
...
(c) the maximum amount deductible in respect of any reserve, allowance or other amount were deducted; and
(emphasis added)
[5] In essence, this interpretation is merely the application of the rule of statutory interpretation that the expression of the particular overrides the expression of the general.
[6] The same principle was applied by Bowman, A.C.J. in Cho and Shin v. Her Majesty the Queen, 2000 2 C.T.C. 2714.
[7] For these reasons these appeals are dismissed.
Signed at Ottawa, Canada this 28th day of November, 2000.
J.T.C.C.
COURT FILE NO.: 2000-2268(IT)I, 2000-2388(IT)I and
2000-2490(IT)I
STYLE OF CAUSE: Kil Cha Pak v. Her Majesty the Queen
Soon Suk Lee v. Her Majesty the Queen
Sung Sook Lee v. Her Majesty the Queen
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: November 22, 2000
REASONS FOR JUDGMENT BY: The Honourable Judge D.W. Beaubier
DATE OF JUDGMENT: November 28, 2000
APPEARANCES:
Agent for the Appellant: Hun Sunwoo
Counsel for the Respondent: Kristy Foreman Gear
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-2268(IT)I
BETWEEN:
KIL CHA PAK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on common evidence with the appeals of Soon Suk Lee
(2000-2388(IT)I) and Sung Sook Lee (2000-2490(IT)I)
on November 22, 2000 at Vancouver, British Columbia, by
the Honourable Judge D.W.Beaubier
Appearances
Agent for the Appellant: Hun Sunwoo
Counsel for the Respondent: Kristy Foreman Gear
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1997 taxation year is dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 28th day of November, 2000.
J.T.C.C.
2000-2388(IT)I
BETWEEN:
SOON SUK LEE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on common evidence with the appeals of Kil Cha Pak
(2000-2268(IT)I) and Sung Sook Lee (2000-2490(IT)I)
on November 22, 2000 at Vancouver, British Columbia, by
the Honourable Judge D.W.Beaubier
Appearances
Agent for the Appellant: Hun Sunwoo
Counsel for the Respondent: Kristy Foreman Gear
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1997 taxation year is dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 28th day of November, 2000.
J.T.C.C.
2000-2490(IT)I
BETWEEN:
SUNG SOOK LEE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on common evidence with the appeals of Soon Suk Lee
(2000-2388(IT)I) and Kil Cha Pak (2000-2268(IT)I)
on November 22, 2000 at Vancouver, British Columbia, by
the Honourable Judge D.W.Beaubier
Appearances
Agent for the Appellant: Hun Sunwoo
Counsel for the Respondent: Kristy Foreman Gear
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1997 taxation year is dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 28th day of November, 2000.
J.T.C.C.