[OFFICIAL ENGLISH TRANSLATION]
2001-1162(GST)I
2001-1164(GST)I
BETWEEN:
SYLVAIN JANELLE,
SERGE LEMAIRE,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Motion in the above appeals heard by telephone conference call
on April 22, 2002, at Ottawa, Canada, by
the Honourable Judge Alain Tardif
Appearances
Counsel for the Appellants: Richard Généreux
Counsel for the Respondent: Robert Poupart
ORDER
Upon motion brought by the appellants-applicants for a decision by the Court on a question of law respecting the legality of the notices of reassessment sent to persons who were not obligated under the Excise Tax Act to collect the tax and remit it to the Receiver General of Canada;
And upon hearing the parties' representations;
The motion is dismissed.
Signed at Ottawa, Canada, this 24th day of April 2002.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 13th day of August 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020424
Docket: 2001-1162(GST)I
2001-1164(GST)I
BETWEEN:
SYLVAIN JANELLE,
SERGE LEMAIRE,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Tardif, J.T.C.C.
[1] This is a motion to determine whether the respondent could legally assess the appellants-applicants.
[2] In support of the motion, the appellants presented the following facts:
[TRANSLATION]
1. The respondent admits in her replies to the notices of appeal that the appellants are partners in the operation of a partnership called Bar Café O Saint-Fred, as appears in paragraph (1) of the replies to the notices of appeal;
2. Bar Café O Saint-Fred was the subject of a notice of reassessment under the Act respecting the Quebec sales tax for the same periods as those in this case, and the partnership instituted an appeal from that assessment before the Court of Quebec in docket No. 405-02-002491-014, as appears from a copy of the application in appeal attached hereto as Exhibit R-1;
3. The appellants have not been assessed under the Act respecting the Quebec sales tax;
4. The notice of reassessment in issue dated January 9, 2001, is addressed to the appellants, as appears from the Court file;
5. Under subsection 123(1) of the Excise Tax Act, a "person" is defined as "an individual, a partnership . . .");
6. Under the Excise Tax Act, the appellants could not be reassessed without the partnership having been assessed first and without the partnership having been sent a reassessment that was binding;
7. The respondent admitted by letter dated April 2, 2002, that the assessment should have been issued in the name of the partnership, as appears from a copy of the letter from the respondent's counsel dated April 2, 2002, attached hereto as Exhibit R-2;
8. However, the respondent now contends that the notice of reassessment in issue is valid under subsections 272.1(5) and 299(3.1) of the Excise Tax Act;
9. It is in the interests of justice that the Court rule before the hearing as to the validity of the notice of reassessment in issue since that question could settle the matter in full;
[3] In reply, the respondent argued that she was entirely justified in assessing the appellants under subsections 272.1(5) and 299(3.1) of the Excise Tax Act (the "Act").
Analysis
[4] A partnership is included in the definition of "person" stated in section 123 of the Act. The obligation of a person who makes a taxable supply in the course of a commercial activity to be registered for the purposes of the Act is provided for in subsection 240(1) of the Act. Under subsection 221(1) of the Act, every person who makes a taxable supply is obliged to collect the tax payable by the recipient. Subsection 238(1) provides for the registrant's obligation to file a return and subsection 228(1) provides for the obligation to calculate the net tax of the person for the reporting period. Subsection 228(2) imposes an obligation to remit that net tax to the Receiver General of Canada. The date on which every payment must be made is in general the same as the one provided for in subsection 238(1) for the filing of returns.
[5] In Decaire v. The Queen, [1999] T.C.J. No. 699 (Q.L), the point for determination was whether two persons could be assessed for the collection and payment of taxes payable on supplies made by the partnership in which they were partners. Subsection 272.1(5) was not applicable to the period in issue.
[6] Judge Bell concluded that the partnership was obligated to collect and pay the tax to the Receiver General of Canada since the tax arose from supplies made in the course of the partnership's commercial activities.
[7] The partners' assessment was vacated since the partners had no obligation to collect and pay the tax. In Decaire and Her Majesty the Queen, supra, Judge Bell did not have to apply subsection 272.1(5); he referred to that provision in support of his conclusion that the partnership was obligated to pay and that it was therefore the only entity that had to be assessed. Subsection 272.1(5) provides that a partner is liable for "amounts that become payable or remittable by the partnership".
[8] In the instant case, the facts are different in that this is a matter of determining the effect of subsection 272.1(5). The application of subsection 272.1(5) does not alter Judge Bell's conclusion in Decaire, supra, that the partnership, not the partners, is the person liable for collecting and paying the tax on supplies made in the course of its activities.
[9] Subsection 272.1(5) provides that the partners are jointly and severally liable for "the payment or remittance of all amounts that become payable or remittable by the partnership". In this case, it must be determined whether the amounts for which a partner may be held liable under subsection 272.1(5) of the Act must have previously been the subject of an assessment of the partnership.
[10] Subsection 272.1(5) defines a partner's personal liability for the partnership's debts. The Explanatory Notes published by the Minister of Finance, attached to the amendments to the Act in which subsection 272.1(5) is added, read in part as follows:
Subsection 272.1(5) is added to specify the extent of joint and several liability imposed on a person who is a partner or former partner (other than a limited partner who is not a general partner). Such a liability exists for all amounts that become payable or remittable by the partnership before or during the period in which the person is a member of the partnership. . . .
[11] Before subsection 272.1(5) came into force, reference had to be made to the provincial legislation governing partnerships to determine the scope of a partner's liability. Subsection 272.1(5) now renders a partner jointly and severally liable with the partnership for the payment or remittance of amounts payable or remittable by the partnership. The scope of the partner's liability, however, is limited under subparagraph 272.1(5)(a)(i), which reads as follows:
(i) the member is liable for the payment or remittance of amounts that become payable or remittable before the period only to the extent of the property and money that is regarded as property or money of the partnership under the relevant laws of general application in force in a province relating to partnerships, ...
[12] The appellants contend that subsection 299(3.1) shows that the partnership must first have been assessed before a partner may be assessed. The respondent, however, contends that the Minister of National Revenue (the "Minister") may assess a partner under paragraph 296(1)(e) and subsection 272.1(5) without taking subsection 299(3.1) into account.
[13] Paragraph 296(1)(e) allows the Minister to make an assessment to determine an amount that a person is required to pay or remit under subdivision (b.1) of Division VII, thus including any amount payable under subsection 272.1(5).
[14] Under paragraph 299(3.1)(b), every partner is liable for the partnership's obligations and is bound by an assessment of the partnership. The Explanatory Notes published by the Minister of Finance at the time subsection 299(3.1) was added read in part as follows:
. . .
Paragraph 299(3.1)(a) provides that the assessment is valid even where one or more of the persons liable for the obligations of the body do not receive a notice of the assessment.
Paragraph 299(3.1)(b) provides that the assessment of a body is binding on each member of the body that is liable for the body's obligations, subject to a reassessment of the body and the rights of the body to appeal.
Finally, paragraph 299(3.1)(c) provides that the assessment of a member in respect of the same matter as the assessment of the body is binding on the member subject only to a reassessment of the member and to the member's rights of objection and appeal on certain grounds. Those grounds are that the member is not a person who is liable to pay or remit an amount for which the body is assessed, the body has been reassessed, or the assessment of the body has been vacated.
[15] I do not believe that paragraph 299(3.1)(b) requires that the partnership be assessed before liability is imposed on one of its partners.
[16] Paragraph 299(3.1)(b) states that a partner is bound by an assessment of the partnership, subject to a reassessment of the body. If an assessment of the partnership were vacated as a result of an appeal instituted by the partnership, the assessment would then have to be vacated in respect of the partners.
[17] Paragraph 299(3.1)(c) provides that, if a partner is assessed on the same basis as the assessment made in respect of the partnership, the assessment of the partnership is binding on the partner. In that case, the partner's defences appear to be limited to those stated in that paragraph. Paragraph 299(3.1)(c) precludes the possibility of there being contradictory decisions on the same matter. If a partner and a partnership are assessed on the same matter, the partnership alone may raise the ground of defence respecting the obligation to collect and pay the tax.
[18] The provisions of subsection 299(3.1) apply only where the partnership has first been assessed. That provision applies independently of 272.1(5) and from the moment the partnership is required to pay amounts to the Receiver General. The obligation to pay exists before an assessment is even made. Subsection 299(3.1) is essentially complementary to paragraph 296(1)(e).
[19] Under paragraph 296(1)(e) and subsection 272.1(5), a partnership need not be assessed before a partner is assessed. The partner may be assessed to the extent of that which is provided for under subparagraph 272.1(5)(a)(i).
[20] For these reasons, I find that the respondent was entitled to make notices of assessment in respect of the appellants subject to having the assessments varied once the partnership to which they belong has exhausted all remedies reserved therefor. Consequently, the motion is dismissed.
Signed at Ottawa, Canada, this 24th day of April 2002.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 13th day of August 2003.
Sophie Debbané, Revisor