Date: 20000627
Dockets: 98-982-IT-I, 98-2803-IT-I
BETWEEN:
LAURENT DUGUAY, NEIL FISHER,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Lamarre Proulx, J.T.C.C.
[1] These two appeals were heard on common evidence under the informal procedure.
[2] The first issue is whether the payments received as compensation by the appellants in their respective capacities as president and treasurer of their union for the time they spent on union business are to be included, in computing their income, as income from an office or employment under subsection 5(1) of the Income Tax Act (the "Act"). The Minister of National Revenue (the "Minister") assessed the appellants as employees of the Syndicat National des Employés de l'hôpital Hôtel-Dieu de Montréal (the "Union").
[3] The second issue is whether the appellants are liable to the penalties imposed under subsection 163(2) of the Act.
[4] The Amended Notices of Appeal are more or less identical except with regard to the appellants' duties. Mr. Duguay was president, and Mr. Fisher was treasurer. I cite paragraphs 3, 4 and 5 of Mr. Fisher's Amended Notice:
[TRANSLATION]
3. During the 1994 and 1995 taxation years, I worked, without pay, as treasurer for the Syndicat national des employés généraux de l'Hôtel-Dieu de Montréal (see Annex—Constitution).
4.a) At the objection stage, I provided, in writing and verbally, the agreement entered into in November 1996 between the Union and Hôtel-Dieu de Montréal (see Annex), which explains what was expected as regards the regularizing of union leave. At no time did we acknowledge that the amounts paid by the Union were taxable.
4.b) At the objection stage, I also sent a copy of the agreement entered into between the Union and Hôtel-Dieu de Montréal, signed on March 28, 1995 (see Annex), concerning the payment by Hôtel-Dieu de Montréal for union leave and Hôtel-Dieu did not conclude that such payment was taxable.
5. Furthermore, during a previous term of office, Laurent Duguay, acting as union president, contacted Revenue Canada in 1981 and again in 1990 to inform them that income received from the Union was not taxable by virtue of section 149 and 149K [sic] of the Act. He received no notification from Revenue Canada to the effect that such income was taxable.
[5] The facts relied on by the Minister in assessing the appellant Laurent Duguay are set out in paragraphs 6, 7, 8, 9 and 10 of the Reply to the Notice of Appeal (the "Reply") as follows:
[TRANSLATION]
6. In his income tax returns, the appellant reported as income from employment the amounts of $6,487.82 for the 1994 taxation year, $7,367.62 for the 1995 taxation year and $9,609.23 for the 1996 taxation year, in accordance with the T4 slips issued by the Hôtel-Dieu de Montréal.
7. By notices of reassessment dated November 18, 1997, for each of the 1994 and 1995 taxation years and November 24, 1997, for the 1996 taxation year, the Minister of National Revenue (hereinafter the "Minister") included in the income reported by the appellant the amounts of $16,372 for the 1994 taxation year, $19,882 for the 1995 taxation year and $17,622 for the 1996 taxation year, which were received in the course of his employment with the Syndicat des employés généraux de l'Hôtel-Dieu de Montréal.
8. In reassessing the appellant for the 1994 and 1995 taxation years on November 18, 1997, and for the 1996 taxation year on November 24, 1997, the Minister assumed the following facts, inter alia:
(a) during the 1994, 1995 and 1996 taxation years, the appellant was employed by the Hôtel-Dieu de Montréal hospital;
(b) during the taxation years in question, the appellant looked after union business for the Syndicat des employés généraux de l'Hôtel-Dieu de Montréal (hereinafter the "Union");
(c) during the 1994, 1995 and 1996 taxation years, the Union paid the appellant, as wages, the amounts of $16,372 for the 1994 taxation year, $19,882 for the 1995 taxation year and $17,622 for the 1996 taxation year;
(d) the amounts for Laurent Duguay referred to above in subparagraph (c) were not reported for the 1994, 1995 and 1996 taxation years;
(e) accordingly, the Minister included in the appellant's income the amounts paid by the Union of $16,372 for the 1994 taxation year, $19,882 for the 1995 taxation year and $17,622 for the 1996 taxation year;
(f) in addition to the payment of the amounts referred to in (c) above, expenses were reimbursed to the appellant for the taxation years in issue;
(g) the reimbursements of the appellant's expenses by the Union were not included in the appellant's income for the taxation years in question;
(h) consequently, the Minister did not allow any expenses claimed by the appellant in relation to his income for the 1994, 1995 and 1996 taxation years;
(i) furthermore, by failing to report income of $16,372 for the 1994 taxation year and $19,882 for the 1995 taxation year, the appellant knowingly, or under circumstances amounting to gross negligence, made or participated in, assented to or acquiesced in the making of a false statement or omission in the returns filed in respect of the 1994 and 1995 taxation years, with the result that the tax payable by the appellant according to the information provided in the tax returns filed in respect of those years was less than the amount of tax actually payable in respect of those years;
(j) therefore, as a result of the appellant's failure to report all of his income, penalties of the greater of $100 and 50% of the total difference in tax, i.e., $1,130,08 for the 1994 taxation year and $1,415.53 for the 1995 taxation year, were imposed on the appellant under subsection 163(2) of the Income Tax Act (hereinafter the "Act").
9. At the objection stage, the Minister obtained a copy of the minutes of the Union general meeting, held on April 19, 1993, and attended by Pierre Demers, Lise Fréchette, Charles Demers, Pierre Chalifoux, France Morin, Pierre Daoust, Patrick Barette and Richard Larocque. At this meeting, a motion for the regularization of the method of payment for union leave as of July 1, 1993, was adopted.
10. The Minister also obtained the following information:
(a) during the years in question, the appellant was chairman of the Union executive committee;
(b) during the years in question, at general meetings of the Union and at meetings of its executive committee, which were attended by the appellant, [TRANSLATION] "payment for union leave and regularization" were matters that were always on the agenda and resolutions had been adopted in that regard.
[6] As regards the appellant Neil Fisher, the facts are set out in paragraphs 6, 7, 13 (a) to (e), and (j) of the Reply. Paragraphs 14 and 15 thereof are identical to paragraphs 9 and 10 of the preceding Reply, except that Mr. Fisher was the secretary-treasurer of the Union.
[TRANSLATION]
6. In his income tax returns, the appellant reported as income from employment the amounts of $17,265.01 for the 1994 taxation year and $23,301.46 for the 1995 taxation year, in accordance with the T4 slips issued by the Hôtel-Dieu de Montréal.
7. By notice of reassessment dated October 22, 1996, for each of the 1994 and 1995 taxation years, the Minister of National Revenue (hereinafter the "Minister") included in the income reported by the appellant the amounts of $12,930 for the 1994 taxation year and $10,370 for the 1995 taxation year, which were received in the course of his employment with the Syndicat des employés généraux de l'Hôtel-Dieu de Montréal.
. . .
13. In reassessing the appellant for the 1994 and 1995 taxation years on October 22, 1996, the Minister assumed the following facts, inter alia:
(a) during the 1994 and 1995 taxation years, the appellant was employed by the Hôtel-Dieu de Montréal hospital;
(b) during the taxation years in question, the appellant looked after union business for the Syndicat des employés généraux de l'Hôtel-Dieu de Montréal (hereinafter the "Union");
(c) during the 1994 and 1995 taxation years, the Union paid the appellant, as wages, the amounts of $12,930 for the 1994 taxation year and $10,370 for the 1995 taxation year;
(d) the amounts for Neil Fisher referred to above in subparagraph (c) were not reported for the 1994 and 1995 taxation years;
(e) accordingly, the Minister included in the appellant's income the amounts paid by the Union of $12,930 for the 1994 taxation year and $10,370 for the 1995 taxation year;
. . .
(j) therefore, as a result of the appellant's failure to report all of his income, penalties of the greater of $100 and 50% of the total difference in tax, i.e., $949.82 for the 1994 taxation year and $762.62 for the 1995 taxation year, were imposed on the appellant under subsection 163(2) of the Income Tax Act (hereinafter the "Act").
[7] The witnesses at the hearing included the two appellants and Marie-France Perreault, who testified for the appellants. Guy Lanneville, Johanne Blais, Alain Lacoste and Marcel Martin testified for the respondent.
[8] As Exhibit A-1, Mr. Duguay tendered the Constitution of the Syndicat National des Employés de l'hôpital Hôtel-Dieu de Montréal (the "Constitution"). He referred to Article 26 of the Constitution, which reads as follows:
[TRANSLATION]
Article 26: Leave of absence for union business and remuneration.
26.01: The Union executive shall have a policy for reimbursing expenses incurred by Union officers and stewards in their union activities, as defined in the Minutes.
26.02: In preparing the annual budget, the executive shall take these principles into account.
[9] Under Article 26.01, the Union reimburses an employee for the amount of gross wages lost through time away from the Hôtel-Dieu de Montréal hospital ("Hôtel-Dieu") on union business. Mr. Duguay explained that the Union would rather that union leave were taken at the employer's expense, but where the employer refuses to grant an employee paid leave, the Union will reimburse the union member.
[10] With regard to the circumstances of union leave, Mr. Duguay referred to excerpts from the collective agreement between the employers' bargaining committee in the health and social services sector, the employers' bargaining subcommittee for public hospital centres and the Fédération des affaires sociales inc. (the CSN) (the "collective agreement"), in force from December 25, 1995, to June 30, 1998. Excerpts from Article 9, entitled [TRANSLATION] "Union freedom of action" were tendered as Exhibit I-3. Paragraphs 9.03, 9.06, 9.07 and 9.08 read as follows:
[TRANSLATION]
9.03 Stewards designated by the union may, on written request by the union made ten calendar days in advance, take unpaid leave from their work for union business.
. . .
9.06 On request to the personnel director or his representative, who shall not refuse without valid reason, an external union representative may meet in the establishment during working hours, in a place reserved for that purpose, with any person covered by the certification, and that person shall not lose any wages.
9.07 Union representatives may meet by appointment with the authorities of the establishment. On request to the personnel director or his representative, who shall not refuse without valid reason, they may also meet during working hours with the establishment's employees regarding grievances to be discussed or investigations into working conditions. The union representatives and the employees concerned shall not be subject to any loss of wages in such cases.
9.08 For the purposes of this agreement, the employer shall grant part-time leave without loss of wages to one or more employees designated by all the unions within the same establishment that are affiliated with the Confédération des syndicats nationaux.
The number of days of leave to be allowed is as follows:
1. from 50 to 99 employees affiliated with the Confédération des syndicats nationaux: one-half (1/2) day per week;
2. from 100 to 299 employees affiliated with the Confédération des syndicats nationaux: one (1) day per week;
3. from 300 to 749 employees affiliated with the Confédération des syndicats nationaux: two (2) days per week;
4. 750 or more employees affiliated with the Confédération des syndicats nationaux: three (3) days per week.
[11] As can be seen from the above, union leave under Article 9.03 is not paid by the employer. Leave under Articles 9.06, 9.07 or 9.08 is paid by the employer. The union members generally requested union leave under the latter three paragraphs. Such leave was occasionally granted. At other times, it was refused, which led to the filing of a grievance.
[12] In either case—both where wages were paid by the employer and where wages were not paid by the employer—the employee submitted to the Union an absence sheet listing leave taken for union business and claiming, if appropriate, reimbursement for that leave and whatever expenses he may have incurred. Several such sheets were filed as Exhibit I-12. As indicated above, when no wages were paid by the employer for the leave, the union member received the gross amount of the lost wages from the Union.
[13] It sometimes happened that an employee submitted a sheet indicating Article 9.08 as the basis for his union leave; this was the article under which his wages would be paid by the employer. However, the employer could refuse to accept this and classify the leave as coming under Article 9.03. This would result in the employee's not being paid by the employer and receiving compensation from the Union. When the employer made such a decision, it usually led to the filing of a grievance. A number of grievances filed by the appellants for the years in question in the instant case were introduced in evidence as Exhibits A-5 and A-6. Exhibit A-12 concerns a witness for the respondent, Marcel Martin.
[14] The union members were reimbursed for their gross wages. However, they lost the fringe benefits of their employment with Hôtel-Dieu. Mr. Fisher explained, for example, that he lost almost two years on his retirement plan. There was no evidence that the Union paid any fringe benefits for work performed for the Union by union members.
[15] Exhibit A-3 contains minutes of executive committee meetings, primarily the meeting of January 17, 1994. It reveals that the issue of regularizing union leave was on the agenda. The executive agreed to reconsider the proposal put forward by Neil Fisher at the meeting of January 4, 1994. Among the motions, there is one that I find interesting although it was not commented on at the hearing. It was a [TRANSLATION] "Notice of motion to reconsider the proposal that sick days be paid when an employee is granted leave." That motion was rejected. The Union did not pay for sick leave. Exhibits I-7 and I-8, tendered on cross-examination, also contain excerpts from minutes of meetings. Exhibit I-8 concerns a meeting of the executive on February 14, 1995. The agenda contains an item on payment for union leave. Exhibit I-7 concerns a general meeting held on May 13, 1996. It contains a motion [TRANSLATION] "That the situation be regularized beginning on July 1, 1996," which was adopted. Exhibit I-6 concerns a general meeting on April 19, 1993. It contains a motion [TRANSLATION] "That the method of payment for union leave be regularized beginning on July 1, 1993." This motion was adopted.
[16] The appellants filed as Exhibit A-2 an agreement entered into in October 1996 between Hôtel-Dieu and the Union. According to the appellants, this was the agreement sought by union members when they spoke of regularizing payment by the Union for union business. The purpose of the agreement was to have the employer pay for all union leave. The Union would reimburse the employer for any such leave without pay granted under Article 9.03. I quote from Article 1 of the agreement:
[TRANSLATION]
1. The employer shall continue to pay the wages and fringe benefits of the person on leave of absence without pay for union business under Article 9 of the collective agreement provided that the union reimburse the employer for those wages, fringe benefits, the employer's share of the fringe benefit plans and the administrative costs.
[17] The appellants tendered as Exhibit A-4 a letter from the CSN's legal services department. The letter was introduced to show that legal services lawyers used the term "office" not "employment" and that they thought that even this position could be challenged. In the appellants' view, the letter indicates that there was no consensus within the Union as to whether the amounts in question were taxable, and if they were, on what basis. I reproduce the first part of that letter, which is the part relevant to this discussion:
[TRANSLATION]
. . .
. . . Indeed, we might note that the courts have found in all cases that these amounts are taxable income from an office. However, we believe it would be prudent to explore this avenue.
[18] Exhibit A-8 is a report on the cost of union leave for the period from October 1994 to September 1996 and is addressed to the CSN. The report was prepared by the appellant, Neil Fisher, in his capacity as treasurer, with a view to having the union local reimbursed by the CSN.
[19] Exhibit A-11 was filed by Marie-France Perreault. It is an agreement entered into on March 28, 1995, between Hôtel-Dieu de Montréal and the Union. On page 6, paragraph (l), the employer undertakes to pay $11,000 to the Union as reimbursement for union leave. Ms. Perreault explained that this settled the dispute regarding union leave in respect of which grievances had been filed with the employer. It was the Union that received the payment since it had already reimbursed the employees under Article 26.01 of the Constitution and in accordance with the established procedure relating to the absence sheets referred to in paragraphs 11 and 12 of these Reasons.
[20] Exhibits I-9, I-10 and I-11 are the income tax returns of the appellant Laurent Duguay for the 1994 to 1996 taxation years. They were filed by the respondent to show that this appellant did not file his tax returns in time. The return for 1994 is dated August 4, 1997. It should be noted that for 1994, however, this appellant claimed a refund of $524.09. The returns for 1995 and 1996 were filed on June 20, 1997, according to the Revenue Canada stamp. The appellant Laurent Duguay claimed refunds of $527.20 for 1995 and $672.25 for 1996.
[21] Exhibit I-14 is an excerpt from the income and expenditures book kept by the treasurer.
[22] Johanne Blais, one of the Minister's auditors, tendered as Exhibit I-17 a summary of the amounts received by the appellants in the case at bar for union business for which they were paid by the Union in respect of the years in question. The documents indicate the dates, cheque numbers and amounts received in one year by one union member as payment for union leave. This information was taken from the book kept by the treasurer. The accuracy of the amounts received is not disputed by the appellants.
[23] Alain Lacoste, appeals officer, explained that the appellants had received remuneration for their work, and that this was income from employment. Since this income had not been reported and the appellants knew it should be reported, they were subject to penalties under paragraph 163(2) of the Act. On cross-examination, he confirmed that one of the Minister's auditors had met with the Union in 1995, but he did not have that auditor's report with him.
[24] Exhibit I-2 is the Notice of Objection filed by the appellant Neil Fisher. The notice does not dispute the assessment of the tax, but does object to the penalty assessed under subsection 163(2) of the Act. This document appears to have been prepared by a Union member for members so assessed. It reads as follows:
[TRANSLATION]
. . .
The purpose of this letter is to object to the fact that I am obliged to pay a penalty on taxes owed in 1994 and 1995.
I work at the Hôtel-Dieu de Montréal and was a union representative in 1994, 1995 and 1996. Since that time, the Syndicat national des employés généraux has had to "regularize itself" so that union representatives would be able to be assessed taxes like all workers. Motions to that effect were proposed and adopted at several general meetings (Nov.1992, Sept. 1993, August 1995 and May 1996), which means that the union executive had been given legal authority to go forward with it. It was not done. It should also be noted that the "parent" of the Syndicat national des employés généraux de l'Hôtel-Dieu, the CSN, also had the authority to ensure that all its unions were regularized. The CSN also failed to do this.
I am thus faced with a dispute which has dragged on for a long time and which should have been settled as a matter of priority. Unfortunately, the union executive of the Hôtel-Dieu de Montréal and the CSN have not done their duty and I am left to suffer the consequences.
This letter therefore means that the fine which I have to pay should be imposed on those really responsible, the Syndicat national des employés généraux and the CSN.
Please note that I am prepared to pay my tax assessments for these years. However, I dispute the penalty which has been unfairly imposed on me. I therefore feel I have been unfairly treated in all that I am undergoing and unfortunately it is once again the victim who has to pay . . . .
[25] Mr. Fisher explained that his position has always been that it was up to the employer to pay the union members and this was the regularization that was sought. He referred in this regard to Exhibit A-2, the agreement that regularized the employees' situation.
[26] Guy Lanneville, who was with the employer's human resources department at the time in question, corroborated the testimony regarding the union leave process.
[27] Marcel Martin was one of the appellants in the judgment of this Court in Denis Comptois et al. v. Her Majesty the Queen,[1998] T.C.J. No. 232. He explained that union members wanted to have union leave regularized because employees who did not receive it considered it unfair that those who did get it received their gross wages untaxed. Moreover, in their opinion, those amounts should be subject to tax just as their income from employment was. This is the reason for the repeated calls to regularize the payment of union leave.
Respondent's position and submissions
[28] Counsel for the respondent argued that what was involved was employment income or, if not, income from an office. With regard to employment income, he referred to the 1986 decision of this Court in London Professional Fire Fighters Assn. v. M.N.R., [1986] T.C.J. No. 733, which decision was based on paragraph 12(a) of the Unemployment Insurance Regulations (the "Regulations"). The identical provision is now paragraph 6(a) of the Employment Insurance Regulations. I quote paragraph 12(a):
12. Employment in any of the following employments, unless it is excepted employment under subsection 3(2) of the Act or excepted from insurable employment by any other provision of these Regulations, is included in insurable employment:
(a) employment of a union member by his union in conducting union business, other than picketing in a labour dispute.
[29] In that case, members of the union executive paid unemployment insurance premiums as firefighters in the city of London. The Minister also imposed premiums on the money they received for their duties on the union executive. It was held that the firefighters who were members of the executive were employees of their union.
[30] In the instant case, counsel for the respondent saw that the standard terms and conditions identifying a contract of employment had not been proved. He then fell back on the concept of income from an office. According to section 248 of the Act, "office"
means the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration and includes a judicial office, the office of a minister of the Crown, the office of a member of the Senate or House of Commons of Canada, a member of a legislative assembly or a member of a legislative or executive council and any other office, the incumbent of which is elected by popular vote or is elected or appointed in a representative capacity and also includes the position of a corporation director, and "officer" means a person holding such an office.
[31] Counsel for the respondent submitted that this very aptly describes the duties performed by the appellants as president and treasurer of the Union. The fact that the stipend or remuneration was determined on the basis of their position with Hôtel-Dieu and not in terms of their office does not, in his opinion, prevent that stipend or remuneration from being "ascertainable", which is the term used in the above-cited definition. The income would therefore be taxable under subsection 5(1) of the Act, which reads as follows:
5(1) Income from office or employment — Subject to this Part, a taxpayer's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year.
[32] With respect to the penalties, counsel for the respondent referred to the judgment of this Court in Comptois et al. (supra). In that case, the appellants did not dispute the fact that they knew that it was wrong not to include the amounts received from the union in their income. He referred in particular to paragraphs 53, 54 and 55 of that decision:
[53] In so far as all the persons concerned knew that the union's procedure was incorrect and that the situation had to be regularized, since they had realized that the money paid for "union leave" was income, it is hard to see how they could have been in good faith when they deliberately refrained from reporting the money received on the ground that T-4s had not been issued. Knowing that the union had never issued any and that this situation was irregular does not mean it can still be argued that they thought it was the issuing of the T-4s rather than the receipt of the money that was determinative.
[54] In light of the facts that no one took any action or even sought information from persons unrelated to the union, and that all the appellants acted in the same way, whether out of solidarity or for other reasons, we are certainly entitled to ask whether they were not collectively hoping they could in this way avoid assessments as long as the union did not perform its own obligations relating to source deductions and to the reporting of income by issuing T-4 information slips.
[55] There is no need to refer to a list of precedents on the concept of gross negligence and extenuating circumstances that should be considered for the purposes of s. 163(2) of the Act when the evidence shows that a taxpayer deliberately failed to report money received that he or she knew to be taxable. The fact that the failure results from being too trusting or from a manifestation of union solidarity does not reduce the individual responsibility imposed on every taxpayer. In the circumstances, to fail to act, to wait or to close one's eyes is to commit [a] deliberate act. That is precisely what the word "knowingly" used in s. 163(2) of the Act means when the conditions for imposing a penalty are set out as follows: "Every person who, knowingly . . . has made or has participated in, assented to or acquiesced in the making of, a false statement or omission in a return . . . is liable to a penalty. . . ."
Appellants' position and submissions
[33] Unlike the appellants in Comptois et al. (supra), the appellants disputed the validity of the assessments themselves. At the outset, they argued that what they had received were advances that they had to reimburse when the grievances were settled. The evidence revealed that the various amounts of money paid by the employer in respect of the refused union leave were paid to the Union. The money was not subsequently paid to the employees, and the Union did not ask union members for reimbursement. The appellants then submitted that they were not employees of the Union. They held an office, but did not receive any remuneration for that office. The only thing that was paid to them by the Union was a reimbursement for expenses incurred in their union activities, as required under Article 26.01 of the Constitution, quoted in paragraph 8 of these Reasons. This was compensation or reimbursement for a lost day of work and not remuneration or a stipend. The remuneration mentioned in the definition of "office" is the remuneration that is associated with the office and is a function thereof. In the instant case, there was no remuneration associated with the office.
[34] The appellants said that they had asked Revenue Canada officers who met with them a few years prior to Revenue Canada's audit (from which stemmed the assessments herein) about the tax treatment of the payments in question. There was really no evidence regarding this aspect of their search for information; there were just assertions. Mr. Duguay said that he spoke to one of the Minister's auditors in 1995, but that auditor did not testify, and the content of his report was not submitted in evidence. Mr. Duguay also stated that, in the beginning, he had checked into whether the payments received in compensation were taxable, and the answer had been negative.
Conclusion
[35] The decision inLondon Professional Fire Fighters Assn. (supra), to which counsel for the respondent referred, was decided under paragraph 12(a) of the Regulations. This provision was brought in under paragraph 4(1)(c) of the Unemployment Insurance Act, which provides that regulations may be made with respect to people who, because of their contract, are not in an employment situation although they are in actual fact employees. Paragraph 4(1)c) reads as follows:
4(1) The Commission may, with the approval of the Governor in Council, make regulations for including in insurable employment
. . .
(c) any employment that is not employment under a contract of service if it appears to the Commission that the terms and conditions of service of and the nature of the work performed by persons employed in that employment are similar to the terms and conditions of service of and the nature of the work performed by persons employed under a contract of service.
[36] I have to think that the judge who rendered the decision determined that the work of the members of the executive was analogous to the work of employees. In my view, therefore, that decision is not useful in the instant case since there was no evidence here concerning the presence of the standard terms and conditions of a contract of employment. Since no such evidence was presented, I must conclude that the appellants were not in an employment situation.
[37] There is, however, no doubt that, as president and treasurer, the appellants performed the duties of an office. The only unusual aspect of this case lies in the method of paying the stipend or remuneration for the office held. The appellants were reimbursed for their lost working days. The effect of the compensatory payments was thus that the treasurer was reimbursed for a greater amount than the president. Should these compensatory payments be considered as a fixed or ascertainable stipend or remuneration? There does not seem to be any case law on all fours with the circumstances of this case. However, the case law is clear in establishing that the meaning to be given to the terms "stipend" and "remuneration" is very broad, and any payment received by reason of an office or employment must be included within that meaning. I refer in particular to the decisions of the Supreme Court of Canada in Goldman v. M.N.R., [1953] C.T.C. 95 and The Queen v. Savage, [1983] 2 S.C.R. 428. The appropriate test for whether a payment is remuneration or a stipend is to determine whether the person received the payment for his activities in the performance of his office or whether he received it simply as an individual. The answer in this case is obvious. What is involved here is not reimbursement for expenses incurred by the appellants. Reimbursement of those expenses did not confer an economic benefit on the appellants and was not to be included in computing their income. Nor did the Minister include it, as appears from the Reply. See, in this regard, Ransom v. M.N.R., [1968] 1 Ex. C.R. 293, Canada v. Huffman, [1990] F.C.J. No. 529 and Canada v. Hoefele, [1995] F.C.J. No. 1340. In conclusion, the fact that the stipend was paid on the basis of the remuneration lost for a day of work does not preclude that stipend from being a fixed or ascertainable stipend paid by reason of the office and accordingly taxable under subsection 5(1) of the Act.
[38] What about the penalties imposed under subsection 163(2) of the Act. The evidence before me differed from that before the judge who decided the appeals in Comptois et al. (supra). The evidence before that judge was that the taxpayers knew that the payments were taxable. Such is not the case here. The appellants were uncertain. They apparently tried to find out but did not obtain a satisfactory response. The evidence with respect to the information they possessed is somewhat vague, but it was up to the respondent to make that evidence certain since, under subsection 163(2) of the Act, the burden of proof is on the Minister.
[39] In any event, it is my opinion that the reasons why the payments in question are taxable were not so clear at the outset that failure to report those payments amounted to gross negligence. The Minister assessed on the basis that they were income from employment. However, in the Reply, he did not argue the existence of a relationship of subordination or of other usual conditions associated with the legal status of employment. Nor was any evidence regarding such conditions presented at the hearing. With respect to income from an office, it was also not all that obvious that the payments received in compensation were in the nature of a stipend or remuneration. There were no cases specifically on point. The respondent made much of the fact that the employees asked for the situation to be regularized. That regularization was what was ultimately obtained from the employer, that is, everything would be paid by the employer who would then be reimbursed by the Union. The quest for regularization should rather be viewed as a factor in their favour in a legal situation that was not particularly clear. In conclusion, the penalties assessed under subsection 163(2) of the Act are not justified.
[40] The appeals are allowed with regard to the penalties. Otherwise, in computing the appellants' income, the payments received from the Union must be included as income from an office under subsection 5(1) of the Act.
Signed at Ottawa, Canada, this 27th day of June 2000.
"Louise Lamarre Proulx"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
[OFFICIAL ENGLISH TRANSLATION]
98-982(IT)I
BETWEEN:
LAURENT DUGUAY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the appeals of Neil Fisher (98-2803(IT)I) on March 30 and April 28, 2000, at Montréal, Quebec, by
the Honourable Judge Louise Lamarre Proulx
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Michel Lamarre
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1994, 1995 and 1996 taxation years are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the penalties are to be cancelled, in accordance with the attached Reasons for Judgment.
The appellant is not entitled to any other relief.
Signed at Ottawa, Canada, this 27th day of June 2000.
|
"Louise Lamarre Proulx" |
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
98-2803(IT)I
BETWEEN:
NEIL FISHER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the appeals of Laurent Duguay (98-982(IT)I) on March 30 and April 28, 2000, at Montréal, Quebec, by
the Honourable Judge Louise Lamarre Proulx
Appearances
Agent for the Appellant: Laurent Duguay
Counsel for the Respondent: Michel Lamarre
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1994 and 1995 taxation years are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the penalties are to be cancelled, in accordance with the attached Reasons for Judgment.
The appellant is not entitled to any other relief.
Signed at Ottawa, Canada, this 27th day of June 2000.
|
"Louise Lamarre Proulx" |
J.T.C.C.