Canada Case Law

The Toronto-Dominion Bank (TD Canada Trust) v. Canada

Court

Federal Court of Appeal

Interpreting ss.227(4) and (4.1) of the Income Tax Act textually, contextually and purposively, the court held that Parliament did not clearly preclude the equitable bona fide purchaser for value defence against recovery from an unsecured creditor who in good faith received proceeds of a tax debtor; therefore an unsecured creditor who received proceeds without notice may rely on the bona fide purchaser defence and is not required to forfeit those proceeds to the Crown in the factual circumstances described.

Source excerpt

• Deemed trust
• Source deductions
• Bona fide purchaser defence
• Priority of crown claims
• Tracing
• Deemed statutory trust vs secured creditors

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Astle v. The King

Court

Tax Court of Canada

The Tax Court dismissed Kurtis Astle’s appeals, holding he remained liable as a director for unremitted source deductions and that the reassessments were timely.

• Director liability
• Due diligence (directors)
• Statute of limitations (s.227.1(4))
• Resignation effective date
• Source deductions
• Director-liability

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Laurent c. Canada (Procureur général)

Court

Federal Court

The Federal Court denied Morgan Laurent an extension of time to seek judicial review of CRA collection action, awarding costs to the respondent.

• Extension of time
• Collection action
• Source deductions
• Notices of assessment
• Jurisdiction of tax court
• Extension-of-time

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Bennett v. Canada

Court

Federal Court of Appeal

The Tax Court reasonably found on the evidence that the appellant delegated remittance responsibilities without adequate oversight, that the bookkeeper applied a FIFO payment method and the appellant gave no directions or priority for remittances; his later attempts to obtain funds were attempts to cure not to prevent the failures, and therefore he did not establish the statutory due diligence defence; the Federal Court of Appeal will not disturb those findings absent a palpable and overriding error.

Source excerpt

• Due diligence defence
• Source deductions
• Remittance priority
• Penalties and interest
• Standard of review

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Nemchin v. Green

Court

Court of Appeal for Ontario

Aviva, as assignee, steps into the appellant's position and is entitled to pursue challenges to Sun Life's source deductions and to receive any tax refunds; Aviva must pay the expenses of pursuing those challenges. If Aviva elects not to pursue a refund, the appellant may apply to the CRA in her name and Aviva must reimburse her reasonable expenses for doing so, but any refund obtained in respect of the assignment period belongs to Aviva and must be remitted to Aviva to avoid double recovery.

Source excerpt

• Assignment of benefits
• Source deductions
• Tax refunds
• Insurer rights and obligations
• Insurance act s.267.8(12)

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Bhachu v. Canada

Court

Federal Court of Appeal

The Tax Court correctly applied the principle that it cannot cancel interest that arises under the Income Tax Act and properly concluded that foreign source (Egyptian) tax withholdings do not alter Canadian instalment obligations absent sufficient evidence or legal basis; the appellant's treaty claim failed for lack of evidentiary foundation, therefore the appeal is dismissed.

Source excerpt

• Tax instalments
• Interest on unpaid instalments
• Source deductions
• Tax treaty non-discrimination

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2321184 Ontario Ltd. v. M.N.R.

Court

Tax Court of Canada

The Court found the Appellant failed to keep adequate contemporaneous records and gave inconsistent, unreliable testimony; accordingly the Appellant did not rebut the Minister's factual assumptions concerning pensionable earnings. Pursuant to CPP and Income Tax Act record-keeping and remittance provisions, the Minister's assessments for unremitted CPP contributions for 2015-2017 were correct and were therefore confirmed.

Source excerpt

• Source deductions
• Cpp contributions
• Pensionable earnings
• Assessment

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Polubiec v. The Queen

Court

Tax Court of Canada

The Crown proved on the evidence that the appellant failed to report the specified amounts for 2011 and 2014; the appellant did not prove due diligence because his mistake was one of law (reliance on withholding and payer statement) and was unreasonable and he failed to take reasonable precautions (no adequate system to confirm T slips or obtain professional tax advice), therefore the s.163(1) penalty stands.

Source excerpt

• Subsection 163(1) penalty
• Due diligence defence
• Reassessment
• Taxpayer relief
• Source deductions

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Park Avenue Furniture (MFG.) Corporation v. M.N.R.

Court

Tax Court of Canada

The Court quashed the EI appeal because the assessments showed nil EI; it dismissed the CPP and Income Tax appeals because contemporaneous Ceridian payroll records established the payments were made as employment remuneration and the Appellant did not adducesufficient evidence of a contrary shared intent at the time of payment to negate withholding obligations; the Minister’s audit and assumptions for the 2014 shortfall stood.

Source excerpt

• Source deductions
• Remittance obligations
• Payroll taxes
• Employee v independent contractor
• Appeal validity
• Costs

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Mueller v. The Queen

Court

Tax Court of Canada

Mueller remained an active director when the source deduction liabilities accrued, he did not resign de jure or de facto, and he failed to establish the objective due diligence required by s.227.1(3); accordingly the reassessment for the unremitted amounts is valid and the appeal is dismissed.

Source excerpt

• Director liability
• Source deductions
• Due diligence
• Limitation period
• Laches

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