Tax Court of Canada Judgments

Date: 20001024

Docket: 1999-2787-IT-I

BETWEEN:

B. BOOP PRODUCTIONS INC.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondant

Reasons for Judgment

Hamlyn, J.T.C.C.

[1] This is an appeal in respect of the 1998 taxation year.

[2] The Minister of National Revenue ("Minister") assessed the Appellant for a late remittance penalty in respect of its December 1998 payroll deductions by Notice dated February 3, 1999.

[3] The Appellant's August 1998 payroll deductions were received by the Receiver General for Canada on September 16, 1998 and the December 1998 payroll deductions were received by the Receiver General for Canada on January 14, 1999.

[4] In so assessing the Appellant for the late remittance penalty on the December 1998 payroll deductions of $6,465.00, the Minister relied on the following assumptions:

(a) the Appellant remitted the August 1998 payroll deductions to the Receiver General for Canada on September 16, 1998;

(b) the Appellant remitted the December 1998 payroll deductions of $6,465.00 to the Receiver General for Canada on January 14, 1999;

(c) the Appellant's average monthly payroll withholding amount for the 1996 calendar year was greater than $15,000.00 and less than $50,000.00;

(d) the Appellant's average monthly payroll withholding amount for the 1997 calendar year was less than $15,000.00 and greater than $1,000.00;

(e) the December 1998 payroll deductions were withheld on remuneration paid by the Appellant after December 15, 1998 and before January 1, 1999;

(f) the Appellant was required to remit the payroll deductions withheld in December 1998 on or before January 10, 1999; and

(g) the Appellant did not elect to remit the 1998 calendar year payroll deductions on the 15th day of the month following the month in which the deductions were withheld from the remuneration paid.

FACTS

[5] On November 19, 1997 the Appellant received communication from the Surrey office of the Canada Customs and Revenue Agency indicating that it was required to submit payroll deductions on a bi-monthly basis, depending on which time of the month the salaries were paid. The Appellant's accountant responded to this communication by letter dated December 9, 1997 (exhibit A-1) to Mr. R. Wright, Deputy Minister for the Canada Customs and Revenue Agency, with copies submitted to the Director at the Surrey Tax Centre and to Ms. Barbara Fulton, Deputy Minister at the Pacific Region Office, asking that the Deputy Minister ask the Director at the Surrey Tax Centre to change the records to reflect that the frequency of the Appellant's remittances be twice a year. The Appellant paid out bonuses in December 1998, and the related payroll deductions were remitted on January 14, 1999. By Notice dated February 3, 1999, the Minister assessed the Appellant a late remittance penalty for the December 1998 payroll deductions.

[6] The Appellant's evidence was given by its accountant, Mr. Noordin Madatali.

[7] The Appellant stated it received no communication from either of the persons to whom its letter dated December 9, 1997 (exhibit A-1) was submitted to. As a result of this absence of communication, the Appellant states that it assumed the changes requested in the above-mentioned letter would be brought into effect. The Appellant reasoned that if the instructions requested were not acceptable, then the Deputy Minister or his staff would have communicated with the Appellant. The Appellant contends that it submitted payroll remittances for the December 1998 payroll on January 14, 1999, which was on or before the "normal due date" of January 15, 1999. Moreover, the Appellant contends that the penalty charged by the Minister is not fair and equitable, given that the Deputy Minister failed to respond to its communication requesting remittances be made twice a year.

[8] The Minister's evidence was that the Canada Customs and Revenue Agency did respond to the Appellant's accountant in a prompt and timely manner by telephone on January 26, 1998 and by letter dated January 29, 1998 (exhibit R-1), and that response notified the Appellant of the Appellant's payroll remittance requirements. Specifically, the letter (exhibit R-1) asks "Please advise ... which payment average you wish us to use for the 1998 remitting requirement." No response was received by the Minister to this request.

ISSUES

[9] The issue in this appeal is whether the Appellant has been correctly assessed a late remittance penalty on its December 1998 payroll deduction remittance.

ANALYSIS

[10] Pursuant to paragraph 153(1)(a) of the Act, every person making a payment with regards to salary or wages or other remuneration, must deduct or withhold from such payment a prescribed amount and remit it at a prescribed time. In subsection 248(1) the expression "salary or wages" is defined to mean income of a taxpayer from an office or employment, and includes all fees received for services not rendered in the course of a business. The term "salary or wages or other remuneration" has been interpreted as including bonuses provided as compensation for employment services. The Appellant was required under paragraph 153(1)(a) to deduct or withhold from such payment a prescribed amount and remit it at a prescribed time.

[11] Regulation 108(1) provides the general rule that amounts deducted or withheld under subsection 153(1) of the Act must be remitted to the Receiver General on or before the 15th day of the month following the month in which the payee paid the remuneration. For large employers, however, the more specific rule in regulation 108(1.1) applies. Regulation 108(1.1)(a)(i) provides that, for employers whose average monthly withholding amount for the second calendar year preceding a particular calendar year, is equal to or greater than $15,000.00 and less than $50,000.00, all amounts withheld or deducted in respect of payments made after the 15th day of the month, shall be remitted to the Receiver General on or before the 10th day of the following month.

[12] In this case the Appellant's average monthly payroll withholding amount for the second calendar year preceding a particular calendar year, or for 1996, was greater than $15,000.00 and less than $50,000.00; the December 1998 payroll deductions were made on remuneration paid after the 15th day of December 1998 and before January 1, 1999; and the Appellant did not elect[1] to remit the 1998 calendar year payroll deductions on the 15th of the month following the month in which deductions were withheld, then regulation 108(1.1)(a)(i) applies to require the Appellant to remit any deductions or withholdings required by subsection 153(1) "on or before the 10th of the following month". In the case at hand, the Appellant did not remit its December 1998 source deductions on or before the 10th day of the following month as required by regulation 108(1.1)(a)(i), but rather on the 14th of the following month.

[13] Subsection 227(9) of the Act imposes a penalty upon every person who has failed to remit or pay as and when required by the Act or Regulations. In Electrocan Systems Ltd. v. The Queen,[2] in considering a late remission penalty pursuant to subsection 227(9) and regulation 108, Huggesen J. stated that: "As soon as the Appellant failed to remit on time, it had failed to remit within the meaning of the statute and was liable to the penalty provided." The Appellant has failed to remit or pay as and when required under subsection 153(1) and regulation 108(1.1)(a)(i), and thus, the Minister was correct in assessing the Appellant a penalty under subsections 227(9) and (10.1).

DECISION

[14] The appeal is dismissed.

Signed at Ottawa, Canada, this 24th day of October 2000.

"D. Hamlyn"

J.T.C.C.

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