D. Nagel in Tax Court of Canada Feb 2018
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Tax Court of Canada Judgments
Nagel v. The Queen
Court (s) Database: Tax Court of Canada Judgments
Date: 2018-02-15
Neutral citation: 2018 TCC 32
File numbers: 2017-401(IT)APP
Judges and Taxing Officers: Dominique Lafleur
Subjects: Income Tax Act
Docket: 2017-401(IT)APP
BETWEEN:
DENISE C. NAGEL,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
Application heard on January 12, 2018, at Halifax, Nova Scotia
Before: The Honourable Justice Dominique Lafleur
Appearances:
For the Applicant: The Applicant herself
Counsel for the Laura Rhodes
Respondent: David I. Besler
JUDGMENT
UPON the application for an order extending the time within which an
appeal from the reassessment made under the Income Tax Act for the 2013
taxation year may be instituted (the “Application”);
AND having heard the submissions of the parties and read the material
filed;
In accordance with the attached Reasons for Judgment, the Application
is dismissed, without costs, and the appeal from the reassessment made under
the Income Tax Act for the 2013
taxation year is quashed.
Signed at Ottawa, Canada, this 15th day of February 2018.
“Dominique Lafleur”
Lafleur J.
Citation: 2018 TCC 32
Date: 20180215
Docket: 2017-401(IT)APP
BETWEEN:
DENISE C. NAGEL,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lafleur J.
I. OVERVIEW
[1] On January 24, 2017, Denise C. Nagel filed with this Court an
application for an order extending the time within which an appeal may be
instituted in respect of a tax reassessment made by the Minister of National
Revenue (the “Minister”) under the Income Tax Act (RSC, 1985, c. 1
(5th supp.), as amended) (the “Act”), for the 2013 taxation year. A notice of
appeal was attached to the application.
[2] Ms. Nagel was the sole witness at the hearing.
II. FACTS
[3] The evidence submitted at the hearing showed the following:
1. On February 26, 2016, the Minister reassessed Ms. Nagel for the
2013 taxation year and issued a notice of reassessment showing a
taxable income and a net federal tax payable of zero (the “First
Reassessment”). It indicated that Ms. Nagel “[has] no amount to pay
as a result of this reassessment”. It also showed that the taxing
that Ms. Nagel had federal unused tuition and education amounts.
2. A copy of the amended T1 General form-income tax and benefit
return-signed by Ms. Nagel and dated May 19, 2016, showed that
she was a resident of Saskatchewan on December 31, 2013, and that
she did not apply for GST/HST credit.
3. Ms. Nagel served a notice of objection to the First Reassessment on
May 24, 2016. By letter dated June 21, 2016, the Canada Revenue
Agency (the “CRA”) informed Ms. Nagel that her objection was
invalid because “[w]hen a client has filed an objection for issues that
are not considered part of the assessment of tax, penalty or interest,
it cannot be accepted as a Notice of Objection”. By letter dated
October 28, 2016, the CRA confirmed to Ms. Nagel that Ms. Nagel’s
province of residence was being changed to Nova Scotia.
4. On November 3, 2016, the Minister further reassessed Ms. Nagel for
the 2013 taxation year and issued a notice of reassessment showing a
taxable income and a net federal tax payable of zero (the “Second
Reassessment”). It indicated that Ms. Nagel “[has] no amount to pay
as a result of this reassessment”. In the Second Reassessment, Nova
Scotia was used as Ms. Nagel’s province of residence. In addition,
the notice of reassessment indicated that Ms. Nagel had federal
unused tuition and education amounts.
III. PARTIES’ POSITIONS
[4] In the course of the hearing, Ms. Nagel indicated that she had issues
with the reassessments in respect of (i) her province of residence, as she would
like to be considered a resident of Saskatchewan, (ii) the federal unused
tuition, textbook and education tax credits (subsection 118.61(2) of the Act) as
she is not entitled to the credit since she never reimbursed the student loans,
and (iii) the goods and services tax (GST) determination.
[5] The Respondent’s position is that this Court has no jurisdiction because
the First Reassessment and the Second Reassessment are nil reassessments.
Consequently, Ms. Nagel can neither object to, nor appeal from, said
reassessments and the Respondent asks that her application be dismissed.
[6] Unless otherwise stated, all provisions that follow refer to the Act.
IV. ANALYSIS
objection to an assessment under section 165, the taxpayer may appeal to this
Court to have the assessment vacated or varied after either: a) the Minister has
confirmed the assessment or reassessed; b) 90 days have elapsed after service
of the notice of objection and the Minister has not notified the taxpayer that the
Minister has vacated or confirmed the assessment or reassessed. However, no
appeal may be instituted after the expiration of 90 days from the day the notice
has been sent to the taxpayer under section 165 that the Minister has confirmed
the assessment or reassessed.
[8] Subsection 169(1) reads as follows:
169(1) Appeal -Where a 169(1) Appel -Lorsqu’un
taxpayer has served notice of contribuable a signifié un avis
objection to an assessment under d’opposition à une cotisation,
section 165, the taxpayer may prévu à l’article 165, il peut
appeal to the Tax Court of Canada interjeter appel auprès de la Cour
to have the assessment vacated or canadienne de l’impôt pour faire
varied after either annuler ou modifier la cotisation:
(a) the Minister has confirmed a) après que le ministre a ratifié
the assessment or reassessed, or la cotisation ou procédé à une
(b) 90 days have elapsed after nouvelle cotisation;
service of the notice of objection b) après l’expiration des
and the Minister has not notified 90 jours qui suivent la
the taxpayer that the Minister signification de l’avis
has vacated or confirmed the d’opposition sans que le
assessment or reassessed, ministre ait notifié au
butmayexpirationnoticenobeappealhasofinstituted 90 beenunderdayssentfromthisaftertothesectiondaythethe contribuableannuléprocédécotisation; ou ratifiéà leunelafaitcotisationnouvellequ’il oua
taxpayer under section 165 that toutefois, nul appel prévu au
the Minister has confirmed the présent article ne peut être
assessment or reassessed. interjeté après l’expiration des
90 jours qui suivent la date où
avis a été envoyé au contribuable,
en vertu de l’article 165, portant
que le ministre a ratifié la
cotisation ou procédé à une
nouvelle cotisation.
[9] Subsection 167(1) provides that where an appeal to this Court has not
section 167 for an order extending the time within which the appeal may be
instituted and the Court may make an order extending the time for appealing.
Subsection 167(5) sets out the relevant requirements.
1. The application:
[10] Initially, Ms. Nagel brought an application for an order extending the
time within which an appeal from the reassessment may be instituted.
However, during the hearing, she stated that as she had indicated in her notice
of objection that she wished to make a “fuller response after new and
additional information has been considered”, she is now also applying to this
Court for an order to extend the time to object to a reassessment.
[11] Before addressing the application, I have to state my disagreement with
the Respondent’s approach in her submission relating to the First
Reassessment. Since it appears that neither reassessment was issued beyond
the “normal reassessment period”, as that phrase is defined in
paragraph 152(3.1)(b), it is my view that the Second Reassessment is the only
reassessment to be considered as it rendered the First Reassessment a nullity.
[12] The nullity principle was confirmed by the Federal Court of Appeal in
Lornport Investments v Canada, [1992] 2 FC 293, 92 DTC 6231 [Lornport],
and recently reiterated in Yarmoloy v The Queen, 2014 TCC 27,
2014 DTC 1058, by former Chief Justice Rip. In Lornport, the Federal Court
of Appeal states:
I have come to the conclusion, in the particular circumstances of this
case, that the second reassessment, which was vacated by the court order of
April 20, 1989, did not supersede and nullify the first reassessment. It seems
to me that the court order amounted to judicial recognition that the second
reassessment, issued as it was beyond the statutory time limit, was not
legally issued. It did not, for that reason, displace and render the first
reassessment a nullity. That reassessment continues to subsist, in my opinion.
[Emphasis added.]
[13] I will now examine the application. In considering an application for an
extension of time-to object or appeal-the Court must have regard to the
statutory time limits as outlined above, provided that there is an assessment or
reassessment of tax, interest or penalties payable by a taxpayer.
[14] The difficulty with Ms. Nagel’s application is that the Second
Reassessment shows that no taxes are payable by her for the 2013 taxation
year.
reads:
152(4) Assessment and 152(4) Cotisation et nouvelle
reassessment -The Minister cotisation -Le ministre peut
may at any time make an établir une cotisation, une
assessment, reassessment or nouvelle cotisation ou une
additional assessment of tax for a cotisation supplémentaire
taxation year, interest or penalties, concernant l’impôt pour une
if any, payable under this Part by année d’imposition, ainsi que les
a taxpayer or notify in writing any intérêts ou les pénalités, qui sont
person by whom a return of payables par un contribuable en
income for a taxation year has vertu de la présente partie ou
been filed that no tax is payable donner avis par écrit qu’aucun
for the year,… impôt n’est payable pour l’année
à toute personne qui a produit une
déclaration de revenu pour une
année d’imposition. […]
[Emphasis added.]
[16] Thus, the Minister may make an assessment or reassessment of tax,
interest or penalties payable by a taxpayer or notify a person that no tax is
payable. Having no tax payable is also referred to as a nil assessment. An
appeal must be directed against an assessment and an assessment which
assesses no tax is not an assessment.
[17] The general principle that no appeal lies from a nil assessment has its
origin in the Okalta Oils decision such that a taxpayer can neither object to,
nor appeal from, a nil assessment (Okalta Oils Ltd v Minister of National
Revenue, [1955] SCR 824, 55 DTC 1176; see also Bormann v The Queen,
2006 FCA 83 at para 8, 2006 DTC 6147, Terek v The Queen, 2008 TCC 665 at
para 3, 2009 DTC 1023 [Terek]).
[18] In Faucher v the Queen, [1994] TCJ No 56 (QL), 94 DTC 1581,
Justice Lamarre Proulx summarized the nil assessment principles and
explained that “there is no right of appeal from an assessment of a nil amount,
or from an assessment of which a reduction is not requested”. That case was
cited by the Federal Court of Appeal in The Queen v Interior Savings Credit
Union, 2007 FCA 151, 2007 DTC 5342 [Interior Savings]: it is stated, at
paragraph 18, that the Court does not have jurisdiction to hear an appeal from a
nil assessment where no tax is payable.
Queen, 2016 TCC 5, 2016 DTC 1035, that:
9 In Interior Savings Credit Union v HMTQ, 2007 FCA 151, the
Federal Court of Appeal applied the principles enunciated in Okalta Oils Ltd,
and held that a taxpayer cannot challenge an assessment where there are no
taxes, penalties or interest assessed for the year. Justice Noël, writing for the
Court, stated as follows at paragraphs 15 to 17:
15 In my respectful view, the Tax Court Judge erred in
dismissing the Crown’s Motion to strike. The Minister’s
power and duty under subsection 152(1) of the Act is to “…
assess the tax for the year, the interest and penalties, if any,
…”. The taxpayer’s right to object (ss 165(1)) and to appeal to
the Tax Court of Canada (ss 169(1)) can only be exercised in
order “… to have the assessment vacated or varied…”. It
follows that unless the taxpayer challenges the taxes interest
or penalties assessed for the year, there is nothing to appeal
and indeed no relief which the Tax Court can provide
(Chagnon v. Normand (1889), 16 S.C.R. 661 (S.C.C.),
at 662).
16 The Tax Court Judge properly notes in his reasons that
the assessment before him was not a nil assessment. However,
he goes on to state that even if it was a nil assessment, he
would nevertheless allow the appeal to continue. The
expression nil assessment does not appear anywhere in the
Act. When dealing with a situation where a person owes no
taxes, the Act authorizes the Minister to issue a notice “that
no tax is payable” (subsection 152(4)).
17 Nonetheless, the term nil assessment is often used in
the case law to identify an assessment which cannot be
appealed. There are two reasons why a so-called nil
assessment cannot be appealed. First, an appeal must be
directed against an assessment and an assessment which
assesses no tax is not an assessment (see Okalta Oils Ltd. v.
Minister of National Revenue (1955), 55 D.T.C. 1176 (S.C.C.)
at p. 1178: “Under these provisions, there is no assessment if
there was not tax claimed”). Second, there is no right of
appeal from a nil assessment since: “Any other objection but
one related to an amount claimed [as taxes] was lacking the
object giving rise to the right of appeal…” (Okalta Oils,
supra, at p. 1178).
[…]
[Emphasis added.]
[20] Justice Pelletier of the Federal Court of Appeal stated in Canada
(Attorney General) v Bruner, 2003 FCA 54 at para 3, [2003] GSTC 28, that:
assessment where the success of the appeal would either make no difference
to the taxpayer’s liability for tax or entitlement to input tax credits or
refunds, or would increase the taxpayer’s liability for tax….
[21] This comment was confirmed by the same court in Interior Savings,
supra, where Justice Noël specified at paragraph 31 that:
31 In Liampat Holdings Ltd., Counsel for the taxpayer relied on
Aallcann Wood Suppliers to argue that a nil assessment could be appealed.
The Federal Court (Cullen J.) held that Counsel had misconstrued Aallcann
Wood Suppliers (at para. 8):
I take Aallcann to mean that this Court has jurisdiction to
consider a nil assessment year where the computations from
the nil assessment year have an actual impact on another
taxation year; it does not give the Court jurisdiction to
consider a nil assessment directly.
[Emphasis added]
This is an accurate statement of the rule set out in Aallcann Wood Suppliers.
[22] All those cases stand for the proposition that a nil assessment issue may
not be heard if the success of the appeal would not make any difference as to
the taxpayer’s liability for tax in the taxation year in issue or a subsequent year.
[23] Over the years, Parliament has legislated some exceptions to the general
principle to allow objections to, and appeals from, loss determinations made at
the taxpayer’s request (subs 152(1.1)), from a determination of disability tax
credit eligibility (subs 152(1.01)), and from a determination that a taxpayer is
entitled to certain types of credits (subs 152(1.2) and para 152(1)(b)).
[24] With respect to a refundable tax credit, it was ruled that a taxpayer had
a right to appeal from a nil assessment in order to contest the Minister’s
determination of the amount of tax deemed by subsection 127.1(1) to have
been paid on account of tax under Part I for the year, as such determination
impacted the potential refund the taxpayer was entitled to (Martens v Minister
of National Revenue (10 May 1988), Winnipeg 86-519(IT) (TCC), online:
TCC <https://scitax.com/pdf/Dckt_NA_10-May-1988.pdf> at paras 8 to
11).
[25] However, none of the exceptions provided for in the Act applies in
Ms. Nagel’s case: they do not include the tuition, textbook and education tax
credits (subs 118.61(2); and see Terek, supra). Furthermore, with respect to the
GST/HST credit, as Ms. Nagel did not apply for an amount under
subsection 122.5(3) (as it read in 2013) by checking the box on the T1 return
did not issue a notice of determination, and, accordingly, none of the
exceptions applies.
[26] As the evidence indicated that the Second Reassessment is a nil
assessment, Ms. Nagel cannot serve a notice of objection or a notice of appeal
to this Court.
[27] For these reasons, the application is therefore dismissed, without costs,
and the appeal for the 2013 taxation year is quashed.
2. Jurisdiction of this Court:
[28] The following comments are, therefore, not necessary. Yet, for the
enlightenment of Ms. Nagel, I will provide a few explanations about the
jurisdiction of this Court. The Tax Court of Canada’s jurisdiction, as a
statutory court, is found in and limited by section 12 of the Tax Court of
Canada Act (RSC, 1985, c. T-2), its enabling statute. As to income tax appeals,
section 12 of the Tax Court of Canada Act provides this Court with exclusive
and original jurisdiction to determine the validity and correctness of the
assessment of income tax under the Act.
[29] The details pertaining to that statutory jurisdiction and a case decided
by the Federal Court of Appeal, Ereiser v The Queen, 2013 FCA 20,
2013 DTC 5036, were specifically brought to the attention of Ms. Nagel
during the hearing. In that decision, the Federal Court of Appeal stated that:
31 Based on these provisions, this Court has held that the role of the Tax
Court of Canada in an appeal of an income tax assessment is to determine the
validity and correctness of the assessment based on the relevant provisions of
the Income Tax Act and the facts giving rise to the taxpayer’s statutory
liability….
[30] Hence, this Court has jurisdiction to hear the case of a taxpayer who has
appealed from an assessment or reassessment of tax pursuant to section 169
(the main right of appeal). The combined effect of subsections 169(1) and
171(1) is that this Court may dispose of an appeal from an assessment by
dismissing the appeal, or allowing the appeal and vacating the assessment,
varying the assessment, or referring the assessment back to the Minister for
reconsideration and reassessment.
[31] Again, since no tax is payable under the Second Reassessment, there is
no reassessment of tax Ms. Nagel can object to or appeal from.
[32] The concerns that Ms. Nagel noted with respect to the reassessments
pertain to: (i) her province of residence, as she would like to be considered a
resident of Saskatchewan, (ii) the federal unused tuition, textbook and
education tax credits (subsection 118.61(2) of the Act) as she is of the view
that she is not entitled to the credit since she never reimbursed the student
loans, and (iii) the GST determination. Having addressed the last two points in
the previous section of these reasons, I will only address the first one
hereunder.
[33] As this Court concluded in Weinberg Family Trust v The Queen,
2016 TCC 37 at para 12, 2016 DTC 1039, “[i]t has jurisdiction with respect to
provincial tax only to the extent that the jurisdiction is conferred on it by the
provinces”.
[34] Under the income tax statutes of both provinces of Nova Scotia (Income
Tax Act, RSNS 1989, c 217, section 2 (definition of “Court”) and
subsection 64(2)) and Saskatchewan (The Income Tax Act, 2000, SS 2000,
c. I ‑ 2.01, section 2 (definition of “court”) and subsection 98(2)), the
jurisdiction to determine residency in a province lies with the Supreme Court
of Nova Scotia and the Court of Queen’s Bench, respectively, and not with this
Court.
Signed at Ottawa, Canada, this 15th day of February 2018.
“Dominique Lafleur”
Lafleur J.
CITATION: 2018 TCC 32
COURT FILE NO.: 2017-401(IT)APP
STYLE OF CAUSE: DENISE C. NAGEL
AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Halifax, Nova Scotia
DATE OF HEARING: January 12, 2018
REASONS FOR JUDGMENT The Honourable Justice Dominique
BY: Lafleur
DATE OF JUDGMENT: February 15, 2018
APPEARANCES:
For the Applicant: The Applicant herself
Counsel for the Respondent: Laura Rhodes
David I. Besler
COUNSEL OF RECORD:
For the Applicant:
Name:
Firm:
For the Respondent: Nathalie G. Drouin
Deputy Attorney General of Canada
Ottawa, Canada
Martens v. Minister of National Revenue
Ben Martens, Appellant, and Minister of National Revenue, Respondent
Tax Court of Canada
Rip, T.C.J.
Judgment: May 10, 1988
Counsel:
J.E. Hershfield for the appellant.
D. Gibson for the respondent.
1 Counsel for the Minister of National Revenue has brought a motion before this Court to dismiss the appeal of Ben
Martens on the basis that the assessment of federal tax of the appellant for 1984 is nil with the consequence that there
is no amount of federal tax in controversy.
2 The appellant Ben Martens is a farmer. In filing his income tax return for 1984 he elected in accordance with
section 119 of the Income Tax Act (“Act”) to average his income from farming for the purposes of determining income
tax payable for 1984. The appellant argued the four immediately preceding years for which he filed income tax returns
were 1979, 1980, 1982 and 1983 and those years only are to be included in the averaging calculation. He was of the
view that since his 1981 tax return had been filed late and no federal tax was payable, 1981 ought not to be included as
one of the four immediately preceding years for averaging purposes. The Minister reassessed on the basis that the 1981
taxation year is to be included, and 1979 omitted, in the averaging claculation pursuant to section 119. As a result of
including income from 1981 and deleting 1979’s income, the resulting tax averaging calculation reduces the appel-
lant’s investment tax credit available for 1984 and subsequent years.
3 The federal tax reassessed by the Minister for 1984 was nil. The appellant does not dispute the assessment of tax.
However he does not agree with the Minister’s calculation of refundable investment tax credit deemed to have been
paid by him on account of his tax liability pursuant to subsection 127.1(1) which resulted in the nil tax assessment. In
the appellant’s view the amount of the refundable investment tax credit was $3,361.71; in the respondent’s view, the
amount is $2,366.24. The appellant has thus appealed the assessment.
4 Counsel for the respondent argued that no appeal lies from a nil assessment. If the Minister and the taxpayer
dispute the determination of the refundable investment tax credit in 1984, then in a future year, when tax is assessed
because the Minister’s determination of the amount of credits being less than that of the taxpayer results in income, the
dispute can be resolved by the Courts. This problem is one of timing in his view.
5 Counsel for the appellant submitted that the subject assessment is a different “category” of assessment from the
nil assessment the Supreme Court of Canada held is not appealable in Okalta Oils Limited v. Minister of National
Revenue, [1955] C.T.C. 271, 55 D.T.C. 1176, followed by the Federal Court of Appeal in The Queen v. Bowater
Mersey Paper Company Limited, [1987] 2 C.T.C. 159, 87 D.T.C. 5382. His alternative argument was that the subject
assessment is not a nil assessment.
6 In my view subsections 152(1) and 152(1.2) support the appellant’s right to appeal the subject assessment.
7 Subsections 152(1) and 152(1.2) reads as follows:
152 (1) The Minister shall, with all due dispatch, examine a taxpayer’s return of income for a taxation year, assess the tax for the year, the
interest and penalties, if any, payable and determine
(a) the amount of refund, if any, to which he may be entitled by virtue of sections 129, 131, 132 or 133 for the year, or
(b) the amount of tax, if any, deemed by subsection 119(2), 120(2), 122.2(1), 127.1(1), 127.2(2), or 144(9) to have been paid
on account of his tax under this Part for the year.
152 (1.2) The provisions of paragraphs 56(1)(I) and 60(o), this Division and Division J, as they relate to an assessment or a reassessment
and to assessing and reassessing tax, are applicable, with such modifications as the circumstances require, to a determination or rede-
termination and to determining and redetermining amounts under this Division, except that subsections (1) and (2) are not applicable to
determinations made under subsection (1.1) and, for greater certainty, an original determination of a taxpayer’s non-capital loss, net
capital loss, restricted farm loss or farm loss for a taxation year may be made by the Minister only at the request of the taxpayer.
8 Subsection 127.1(1) provides the means by which the taxpayer is deemed to pay an amount on account of tax
equal to his refundable investment tax credit for the year. The Minister, in accordance with paragraph 152(1)(b),
determines the amount of tax deemed to be paid for the year.
9 If the taxpayer does not agree with the Minister’s determination of the amount of tax deemed to be paid he has the
right to object to and appeal the determination: subsection 152(1.2) grants the taxpayer the right to apply the provi-
sions of Divisions I and J of the Act, which provide, inter alia, for the rights to object to an assessment of tax and to
appeal such an assessment, or a determination, other than a determination made under subsection 152(1.1). Amounts
to be determined by the Minister include the determination of an amount of tax deemed by subsection 127.1(1) to have
been paid on account of tax under Part I of the Act for the year.
10 In the matter at bar the Minister has determined the amount of the refundable investment tax credit in 1984 to be
$2,366.24 and the appellant wishes to appeal from this determination.
11 The appellant has the right under the provisions of subsection 152(1.2) to contest the determination of the
Minister by filing a notice of objection in the manner provided by section 165 and, if not satisfied with the Minister’s
decision in respect of the objection, file a notice of appeal in the manner provided by section 169. This the appellant
has done. He need not wait for a future taxation year to dispute the determination.
12 The motion is dismissed.