Cheema v. M.N.R.

Cheema v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2003-03-27 Neutral citation 2003 TCC 167 File numbers 2002-2984(EI) Judges and Taxing Officers Leslie M. Little Subjects Employment Insurance Act Decision Content Docket:2002-2984(EI) BETWEEN: SARBJEET CHEEMA, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and WARIA HOLDINGS LTD., Intervener. ____________________________________________________________________ Appeal heard together with the appeal of Sarbjeet Cheema (2002-2986(CPP)) on February 25, 2003 at Kelowna, British Columbia Before: The Honourable Judge L.M. Little Appearances: Agent for the Appellant: Balbir Wariach Counsel for the Respondent: Agent for the Intervener: Jasmine Sidhu Balbir Wariach ____________________________________________________________________ JUDGMENT The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment. Signed at Vancouver, British Columbia, this 27th day of March 2003. "L.M. Little" J.T.C.C. Docket:2002-2986(CPP) BETWEEN: SARBJEET CHEEMA, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and WARIA HOLDINGS LTD., Intervener. ____________________________________________________________________ Appeals heard together with the appeal of Sarbjeet Cheema (2002-2984(EI)) on February 25, 2003 at Kelowna, British Columbia Before: The Honourable Judge L.M. Little Appearances: Agent for the Appellant: Balbir Wariach Counsel for the Respondent: Agent for the Intervener: Jasmine Sidhu Balbir Wariach ____________________________________________________________________ JUDGMENT The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment. Signed at Vancouver, British Columbia, this 27th day of March 2003. J.T.C.C. Citation: 2003TCC167 Date:20030327 Dockets:2002-2984(EI) 2002-2986(CPP) BETWEEN: SARBJEET CHEEMA, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and WARIA HOLDINGS LTD., Intervener. REASONS FOR JUDGMENT Little, J. A. FACTS: [1] The Appellant was born in India. [2] The Appellant married Balbir Wariach ("Balbir") in India in 1982 and they have three children. [3] The Appellant, Balbir and their children immigrated to Canada in 1986. [4] The Appellant and Balbir were divorced in 1989. [5] The Appellant lived at the following locations in Canada: Calgary 1986 - 1995 Penticton 1995 - 1997 Kelowna 1997 - [6] In 1993 Balbir married Preminderjeet Wariach ("Preminderjeet"). [7] Waria Holdings Ltd. ("Waria") was incorporated under the British Columbia Company Act in 1999. The shares of Waria were owned as follows: Balbir 50% Preminderjeet 50% [8] In August 1999 property consisting of 90 acres and located on MacKenzie Avenue in Kelowna (the "MacKenzie Property") was purchased. The MacKenzie Property was owned as follows: Balbir 50% Preminderjeet 50% [9] The MacKenzie Property consisted of approximately two acres of apples and cherries and 88 acres of rolling farm land. The testimony indicated that the apples were grown on 60-70 mature MacIntosh apple trees. [10] In the 1999 year and from January until July 2000 the Appellant lived in a home located at 421 Wigglesworth Crescent in Kelowna. The Appellant testified that the Wigglesworth Crescent property was owned by her former husband, Balbir, and that she lived in a separate, private suite in the home. [11] In July 2000 Waria purchased 10 acres of land located on Webster Road, Kelowna (the "Webster Property"). The Webster Property consisted of 10 acres of land. An orchard of Prune Plums was located on approximately 2½ acres of the Webster Property and approximately 7½ acres of the Webster Property was planted in Alfalfa. [12] The Appellant gave the following evidence: (a) Commencing on March 27, 2000 the Appellant worked six days per week, approximately eight hours per day at a rate of $10.00 per hour, at the MacKenzie Property as a farm labourer; (b) The Appellant said that she carried out the following tasks on the MacKenzie Property: - mending the fence that surrounded the 90-acre MacKenzie Property; - pruning the 60-70 old, large MacIntosh apple trees and disposing of the trimmings; - assisting with the irrigation of the two acres of orchard; - hand fertilizing; - thinning the apples; - picking the cherries and the apples; - cleaning up the property after the harvest. (c) In late July 2000 the Appellant moved to a house located on the Webster Property and lived on the Webster Property throughout the remainder of the year 2000. Commencing at the end of July 2000 the Appellant said that she carried out the following tasks on the Webster Property: (i) irrigating the Alfalfa that was growing on the 7½-acre parcel of land; (ii) hand fertilizing the Alfalfa; (iii) some pruning of the plum trees and disposing of the trimmings; (iv) picking the prune plums; (v) cleaning up after the harvest. [13] The Appellant testified that Balbir gave her instructions on the daily work that she should do either on the MacKenzie Property or on the Webster Property. [14] The Appellant testified that she was paid $14,400.00 for the services that she provided on the MacKenzie Property and the Webster Property in 2000. A T-4 slip was issued (Exhibit A-1). The Appellant filed a tax return showing that she had received $14,400.00 in income in the year 2000. [15] The Appellant applied for benefits under the Employment Insurance Act for the 2000 year and the Minister determined that the Appellant was not entitled to receive any benefits under the Employment Insurance Act. B. ISSUES: [16] Is the Appellant entitled to claim benefits under the Employment Insurance Act for the 2000 period? [17] Was the Appellant employed in pensionable employment within the meaning of subsections 2(1) and 6(1) of the Canada Pension Plan? C. ANALYSIS: [18] In a letter from Ruth Elsworth of the Canada Customs and Revenue Agency ("CCRA") to the Appellant dated November 05, 2001 the following comments are made: Your relationship with Waria Holdings Ltd. during the period under review cannot be considered as insurable employment as you were not an employee performing services under a contract of service. It has been determined that you were not an employee for the following reasons: Waria Holdings Ltd. did not exercise control over you and your work because - You have not provided conclusive evidence that you were an employee under a contract of service with Waria Holdings Ltd. [19] The Appellant filed an appeal to the CCRA. In a letter dated June 26, 2002 from Rodger Mack of the Appeals Division of the CCRA the following comments were made: It has been decided that this employment was not pensionable or insurable for the following reason. Sarbjeet Cheema was not employed under a contract of service and is, therefore, not considered to have been an employee. . . . The decision in this letter is issued pursuant to subsection 27.2(3) of the Canada Pension Plan and subsection 93(3) of the Employment Insurance Act and is based on paragraph 6(1)(a) of the Canada Pension Plan and paragraph 5(1)(a) of the Employment Insurance Act. [20] The Appellant filed Notices of Appeal to the Court. [21] In the Reply issued by the Agent of the Appellant the following statements are made: 4(b) Waria claimed no wage expense deductions in its 2000 income tax return. Comment - Waria filed an Amended Return (Exhibit-9) with the CCRA which indicated that it had paid $7,200.00 as custom contract work in the year 2000. Balbir testified that this expense related to the work performed for Waria by the Appellant. Note: Paul Neustaedter, C.A. testified on behalf of the Appellant. Mr. Neustaedter said that on the 7th day of November 2001 a T-1 Adjustment Request for the 2000 taxation year was delivered to the CCRA. This document stated that the amount of $7,200.00 was for contract work. Mr. Neustaedter said that this adjustment was necessary to show that one-half of the Appellant's wages were charged to the farm owned by Balbir and Preminderjeet and that one-half of the Appellant's wages were charged to Waria. [22] The Reply also contained the following statement: 4(m) Waria has no records indicating the days or hours purportedly worked by the Appellant. Comment - Exhibit A-1 is an amended T-4 slip issued by Waria which stated that Waria paid the Appellant $14,400.00 in 2000. Exhibit I-1 is a copy of 18 forms which contain information on the number of days worked by the Appellant from March 27, 2000 to October 21, 2000. [23] Mr. Brad Novikoff, an official of Human Resources Development Canada, was called as a witness by counsel for the Respondent. Mr. Novikoff produced a Report dated April 19, 2001 (Exhibit R-5) that he had prepared following a meeting with Mr. Wariach. Mr. Novikoff's Report indicates that he asked Mr. Wariach various questions to confirm statements that had been made by the Appellant at a meeting with officials of the CCRA on March 13, 2001. (Note - a Report was also prepared by Narinder Bansel of Human Resources Development Canada on March 13, 2001 (see Exhibit I-2). [24] In Exhibit R-5 and Exhibit I-2 it is stated that the Appellant only worked on the Mackenzie Property. In other words there was no recognition by the CCRA that the Appellant worked on the Webster Property in 2000. However, the evidence of the Appellant and Balbir clearly indicates that the Appellant worked at the MacKenzie Property and the Webster Property in 2000. [25] It should also be noted that Balbir testified that Waria paid $6,042.56 to the CCRA in connection with deductions for the Appellant. Balbir testified that officials of the CCRA objected to Waria paying all of the deductions since one-half of the Appellant's work was done on property owned by Balbir and his wife (the Webster Property) and one-half of the Appellant's work was done on the MacKenzie Property (owned by Waria). Balbir testified that an adjustment to the tax returns was made which removed one-half of the amount paid to the Appellant by Waria and transferred one-half of the wage to Balbir and his wife Preminderjeet in connection with the Webster Property. [26] After considering all of the evidence I have accepted the testimony of the Appellant that she worked for Waria and for Balbir and Preminderjeet in the year 2000. I have also accepted the reported hours for the year 2000. [27] I have therefore concluded that there was a contract of employment between the Appellant and Waria in the 2000 taxation year. [28] This decision applies to the relevant facts for the 2000 taxation year. Balbir stated that the year 2000 was the first year that Waria had filed tax returns. I wish to note that Waria and Balbir must ensure that all information filed with the CCRA for years subsequent to 2000 must be filed in a timely manner and must contain detailed information so the problems that were encountered with this appeal will not happen in the future. [29] Before concluding my remarks, I wish to note that Mr. Novikoff and Ms. Bansel and their colleagues at Human Resources Development Canada perform a very important and difficult job. Their job is made more difficult because many of the employers in the orchard business do not keep proper records. I refer to the decision of my colleague Judge Campbell Miller in Khunkhun v. The Queen, [2002] T.C.J. No. 483 where he comments on the problems that he encountered in reviewing a claim involving the number of hours worked by an employee. If the employers in the orchard business fail to recognize their responsibility to maintain proper records they will only have themselves to blame when officials of Human Resources Development Canada and officials of the CCRA challenge the records that are submitted. [30] The appeal is allowed and the decision of the Minister is vacated. This decision applies to the appeal filed under the Canada Pension Plan and the appeal filed under the Employment Insurance Act. Signed at Vancouver, British Columbia, this 27th day of March 2003. "L.M. Little" J.T.C.C. CITATION: 2003TCC167 COURT FILE NOS.: 2002-2984(EI) 2002-2986(CPP) STYLE OF CAUSE: Sarbjeet Cheema and The Minister of National Revenue and Waria Holdings Ltd. PLACE OF HEARING: Kelowna, British Columbia DATE OF HEARING: February 25, 2003 REASONS FOR JUDGMENT BY: The Honourable Judge L.M. Little DATE OF JUDGMENT: March 27, 2003 APPEARANCES: Agent for the Appellant: Balbir Wariach Counsel for the Respondent: Jasmine Sidhu Agent for the Intervener: Balbir Wariach COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada