BETWEEN:
and
____________________________________________________________________
Appeal heard on March 7, 2007 at Toronto, Ontario
Before: The Honourable Justice T. O'Connor
Appearances:
____________________________________________________________________
JUDGMENT
The appeal from the reassessments made under the Income Tax Act for the 1998, 1999, 2000, 2001 and 2002 taxation years is allowed and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment to the extent that:
1. The Appellant will be entitled to deduct the additional expenses outlined in the Agreement cited in the attached Reasons for Judgment.
2. Interest, penalties, Canada Pension Plan contributions on self-employment earnings and the non-refundable tax credits contemplated in section 118.7 of the Act will be adjusted to take into consideration the additional expenses allowed to be deducted as aforesaid.
The Appellant is entitled to no further relief.
Signed at Ottawa, Canada this 16th day of March 2007.
BETWEEN:
TOMASZ HRYNKIEWICZ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[1] This appeal was heard at Toronto, Ontario on March 7, 2007.
[2] The Appellant was represented by Costa A. Abinajem, as agent and the Respondent was represented by Laurent Bartleman, a Justice attorney.
[3] The issues relate to the disallowance of certain expenses, the imposition of late filing penalties, the imposition of arrears interest, the assessment of Canada Pension Plan contributions payable on self-employment earnings and the allowance of deductions of non-refundable tax credits under section 118.7 of the Income Tax Act ("Act") in respect of Canada Pension Plan contributions.
[4] At the hearing the parties submitted a written Agreement which reads as follows:
1. The Appellant is entitled to deduct, as additional business expenses, from his income the following amounts in the following taxation years.
1999: $380, 2000: $165, 2001: $157, and 2002: $147
2. The Appellant is entitled to deduct, as a motor vehicle expense, the interest expenses of $609 and $418.52 for his 1998 and 1999 taxation years respectively.
3. The Appellant is entitled to deduct, as a motor vehicle expense, the car wash expenses of $75, $75, $90, $90 and $130 for his 1998, 1999, 2000, 2001 and 2002 taxation years respectively.
4. 90% of the claimed and allowed motor vehicle expenses were incurred for the purpose of earning and producing income from a business.
5. 32% of the Appellant's office-in-home expenses were incurred for the purpose of gaining or producing income from a business.
[5] There was however disagreement between the parties on the issue of the waiver of interest and penalties. The Appellant's agent explained that the Appellant had made a voluntary disclosure. Reference was made to subsection 220(3.1) of the Act and to Information Circular 92-2. The agent had requested the Minister to waive the late filing penalties and interest. The agent argued further that the persons in charge of the review had dismissed it relatively out of hand and requested this Court to reverse that dismissal.
[6] Counsel for the Respondent argued that this Court had no jurisdiction in this matter and referred to the decision of this Court in S. Rosenhek v. Her Majesty the Queen, 2002 DTC 1201 where Judge Beaubier stated:
2. This Court has no jurisdiction to review fairness respecting the decision of the Fairness Committee. Respecting this, the Court adopts the reasoning of McArthur, T.C.J in John Laverne Housser v. Her Majesty the Queen [1994] T.C.J. No. 454 (Informal Procedure case) wherein he stated:
9. This Court derives its powers from enabling statutes and is not a Court of equity.
10. The Tax Court of Canada does not have the jurisdiction to substitute its own opinion for that of the Minister in respect of the Minister's finding pursuant to subsection 220(3.1).
11. The Court was referred to the case of Floyd Estate v. M.N.R. 93 D.T.C. 5499., This was an application under the Federal Court Act for judicial review. The Court stated at page 550:
"At the outset, I should point out that it is not for the Court to decide whether the interest otherwise payable by the taxpayer ought to be waived or cancelled. It is within the discretion of the Minister. The function of the Court in this judicial review, as I understand it, is to determine whether or not the Minister failed to observe procedural fairness or erred in law in making his decision, as outlined under subsection 18.1(4) of the Federal Court Act."
The Court refused to analyze the substantive question of whether or not the decision was fair to the taxpayer.
12. This Court will not second guess the Minister's decision. The decision, on the merits of the Appellant's application under subsection 220(3.1) is at the discretion of the Minister.
[7] In my opinion the decisions of Beaubier, J. and McArthur, J. were correct.
[8] Consequently the following judgment is rendered:
1. This Court has no jurisdiction to alter the decision of the Minister as to interest and penalties because of a perceived lack of fairness.
2. The Appellant will be entitled to deduct the additional expenses outlined in the Agreement cited above.
3. Interest, penalties, Canada Pension Plan contributions on self-employment earnings and the non-refundable tax credits contemplated in section 118.7 of the Act will be adjusted to take into consideration the additional expenses allowed to be deducted as aforesaid.
4. In all other respects the appeal is dismissed.
Signed at Ottawa, Canada this 16th day of March 2007.
"T. O'Connor"
O'Connor, J.
STYLE OF CAUSE: Tomasz Hrynkiewicz v. The Queen
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: March 7, 2007
REASONS FOR JUDGMENT BY: The Honourable Justice T. O'Connor
DATE OF JUDGMENT: March 16, 2007
APPEARANCES:
|
Agent for the Appellant: |
Costa A. Abinajem |
|
Counsel for the Respondent: |
Laurent Bartleman |
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada