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Tax

Income tax

Administration and enforcement

Chief Justice did not have power to remove file from judge

Taxpayer’s appeal was heard by one judge of Tax Court. Nearly two years later, Chief Justice of Tax Court removed file from that judge and reassigned it to another judge of Tax Court to render judgment, on consent of parties. Taxpayer appealed on ground that Chief Justice did not have power to remove file from judge who heard appeal and reassign it to another judge to render decision. Appeal allowed. Even though parties did not raise this issue at trial, it was matter that must be addressed. Chief Justice did not have power to remove file from judge who heard appeal and reassign it to another judge to render judgment, for reasons set out in similar case. Conclusion and reasons in similar case were applicable to this case. Judgment rendered by second judge was nullity and matter was referred to judge who heard tax appeal to render judgment. Findings of fact were to be made by judge who heard tax appeal.
Birchcliff Energy Ltd. v. R. (2017), 2017 CarswellNat 1821, 2017 FCA 89, David Stratas J.A., Wyman W. Webb J.A., and A.F. Scott J.A. (F.C.A.); reversed (2015), 2015 CarswellNat 10756, 2015 CarswellNat 4799, 2015 TCC 232, 2015 CCI 232, Robert J. Hogan J. (T.C.C. [General Procedure]).

Immigration and Citizenship

Appeals to Federal Court of Appeal and Supreme Court of Canada

Powers of court

Appellant’s removal deferred pending redetermination of application for permanent residence

Appellant L was permanent resident of Canada, who held citizenship of his native Guyana. L did not make application for citizenship, despite having resided in Canada since 1966. L had 9-year-old daughter, whose mother was member of First Nations group giving child Indian status. L had custody of child, due to mother’s substance abuse issues. L had criminal record, with most recent offence being 2003 conviction for assault causing bodily harm. Accused was originally subject to deportation order as result of record, with order being stayed in 2005. Order was reactivated, when it was found that L had not complied with order. After daughter was born in 2007, L lived with mother and daughter. L established own residence in 2011, so that he could have custody as awarded by court. L made pre-removal risk assessment (PRRA) application in 2013, which was denied. L was to be removed in 2014. L filed applications to re-open appeal, for permanent resident status on humanitarian and compassionate (H&C) grounds and request to defer removal. L claimed that child would be removed from Aboriginal heritage if forced to live in Guyana with him. Deferral request was denied. L appealed from this decision. Appeal allowed. Short-term best interests of child did include consideration of Aboriginal heritage. Enforcement officer did not take into account short-term impact of L’s deportation on child. Child was vulnerable as child of Aboriginal heritage. Assumption that child would be able to return to Canada at some point was unreasonable. There was no one else available to take care of child on full-time basis in Canada. L was not willing to make child ward of state. There was no opportunity for child to maintain connection to heritage in Guyana. L’s deferral application was remitted to another enforcement officer for redetermination, in accordance with court’s reasons.
Lewis v. Canada (Public Safety and Emergency Preparedness) (2017), 2017 CarswellNat 2764, 2017 FCA 130, David Stratas J.A., Wyman W. Webb J.A., and Mary J.L. Gleason J.A. (F.C.A.); reversed (2015), 2015 CarswellNat 10508, 2015 CarswellNat 6206, 2015 FC 1309, 2015 CF 1309, Annis J. (F.C.).

Tax

Income tax

Employment income

Taxpayer required to report cost of securities using exchange rate on date options exercised

Taxpayer exercised stock options at profit and was deemed to have received employment benefit in taxation years in which they were exercised. Taxpayer exercised option via broker-assisted transaction with effect that shares were delivered to broker and immediately sold on taxpayer’s instructions. For 2010 and 2012 taxation years, taxpayer calculated cost base with reference to Canada/US exchange rate in effect on date options were granted and proceeds of sale on basis of exchange rate in effect on date of exercise. Minister of National Revenue reassessed taxpayer on basis that he was required to report cost of securities acquired and converted into Canadian dollars using exchange rate on date stock options were exercised. Tax Court judge dismissed taxpayer’s appeal and found that under s. 7(1) of Income Tax Act, employment benefits received by taxpayer in US dollars were to be calculated by converting Canadian dollar value of exercise price and fair market value of shares at time of exercise, using exchange rate in effect on date options were exercised. Taxpayer appealed. Appeal dismissed. Judge did not make error in law in upholding Minister’s reassessments and correctly applied relevant legal principles and case law. Tax implications for exercise of stock options, including conversion of foreign denominated amounts, were triggered on their exercise date. No taxable transaction occurred when stock options were granted to taxpayer since he did not acquire taxable benefit at that time. Taxable transactions occurred when taxpayer exercised his stock options in 2010 and 2012. Only when taxpayer exercised stock options was he required under s. 261(2)(b) of Act to calculate his reportable benefits by converting exercise price, along with fair market value of shares at time he exercised his options, using exchange rate applicable on date of exercise.
Ferlaino v. R. (2017), 2017 CarswellNat 2235, 2017 FCA 105, A.F. Scott J.A., Boivin J.A., and de Montogny J.A. (F.C.A.); affirmed (2016), 2016 CarswellNat 1389, 2016 CarswellNat 5249, 2016 TCC 105, 2016 CCI 105, Guy R. Smith J. (T.C.C. [Informal Procedure]).

Tax

Income tax

Administration and enforcement

Minister imposing gross negligence penalties against taxpayer for failing to review tax return

In 2007, two holding companies owned and controlled by taxpayer paid him dividends, resulting in taxable dividends. Accountants failed to include dividends in taxpayer’s 2007 tax return, which taxpayer did not read or review before signing. Minister imposed gross negligence penalties against taxpayer. Tax Court judge dismissed taxpayer’s appeal on ground that penalties were warranted because of wilful blindness to actual content of tax return. Judge held that taxpayer assented to, participated or acquiesced in omission of dividends in his tax return in circumstances amounting to gross negligence. Size of omitted dividends was objectively massive, and related to unique and planned event of retirement. Taxpayer’s failure to review return was departure from his usual practice. Judge found that warning signs of omitted dividends were sufficient to strongly suggest that taxpayer initiate specific inquiry and review of tax return, and yet taxpayer averted his eyes to any warning. Taxpayer appealed. Appeal dismissed. Judge articulated correct legal test for establishing gross negligence. Minister did not need to establish that taxpayer knowingly made omission. Judge did not make any palpable and overriding error with respect to findings, which supported finding of wilful blindness amounting to gross negligence. Taxpayer did not demonstrate any palpable and overriding error in judge’s appreciation of totality of evidence.
Melman v. R. (2017), 2017 CarswellNat 1808, 2017 FCA 83, Eleanor R. Dawson J.A., Webb J.A., and Rennie J.A. (F.C.A.); affirmed (2016), 2016 CarswellNat 3044, 2016 TCC 167, Randall S. Bocock J. (T.C.C. [General Procedure]).

Tax

Income tax

Administration and enforcement

Canada Revenue Agency not requiring taxpayer’s consent to copy records

In April 2014, Canada Revenue Agency (CRA) advised taxpayer, by letter, that his income tax returns for 2006 to 2010 taxation years, which were under objection, and his returns for 2011 and 2012 taxation years, which were not yet assessed, were under review. CRA listed specific records it required to carry out audit. Taxpayer would only allow one auditor to enter premises and no other person. CRA decided not to proceed with audit at that time as it was not confident that taxpayer would allow audit to proceed without interference. CRA then notified taxpayer, by letter that s. 231.1 of Income Tax Act provided it with authority to inspect requested records and that taxpayer failed to comply with CRA’s request to submit records. CRA advised that failure to submit records requested by specified date would result in CRA seeking compliance order pursuant to s. 231.7 of Act. Federal Court Judge ordered taxpayer to provide information and documents pursuant to s. 231.7 of Act. Taxpayer appealed. Appeal dismissed. There was no reviewable error in Judge’s finding that taxpayer did not provide required access, assistance or information sought by CRA under Act. Contrary to taxpayer’s understanding, CRA did not require taxpayer’s consent to copy his records. Taxpayer could not dictate how CRA conducted audit or frustrate CRA’s ability to carry out its statutory duties by refusing entry to second auditor or insisting on videotaping audit process. There were no grounds to set aside compliance order.
Beima v. Minister of National Revenue (2017), 2017 CarswellNat 1805, 2017 FCA 85, Stratas J.A., D.G. Near J.A., and de Montigny J.A. (F.C.A.).

Immigration and Citizenship

Citizenship

Application for grant of or retention of citizenship

Citizenship application placed on hold pending cessation proceedings

Applicant Sri Lankan citizen was granted refugee protection and became permanent resident. Applicant returned to Sri Lanka for extended stays. Minister of Citizenship and Immigration commenced cessation proceedings against applicant under s. 108(2) of Immigration and Refugee Protection Act (IRPA) on basis that applicant had re-availed himself of Sri Lanka’s protection. Applicant applied for Canadian citizenship, but processing of that application was suspended due to ongoing cessation proceedings. Applicant’s application for mandamus order requiring processing of citizenship application was granted with award of costs. Minister appealed. Appeal allowed. If there was final determination that applicant’s refugee protection had ceased, then he would lose permanent residence and become inadmissible under IRPA. Minister had power under s. 13.1 of Citizenship Act to place hold on citizenship applications where there were admissibility concerns under IRPA and both ss. 40.1 and 44 of IRPA labelled cessation as admissibility issue. Minister’s interpretation to effect that s. 13.1 of Citizenship Act allowed him to suspend processing of citizenship application for permanent resident whose refugee status had been challenged for cessation was reasonable and reflected Parliament’s intention. Minister did not have public legal duty to continue processing applicant’s application notwithstanding that cessation proceedings had yet to be determined and so test for mandamus was not met. While costs awards were highly discretionary decisions, intervention was warranted. Fact that conflicting jurisprudence existed at time that application was suspended undermined application judge’s finding that Minister acted in bad faith. Minister acted legally and there was no basis in record for finding of bad faith or subterfuge.
Canada (Minister of Citizenship and Immigration) v. Nilam (2017), 2017 CarswellNat 696, 2017 FCA 44, Near J.A., Richard Boivin J.A., and Rennie J.A. (F.C.A.); reversed (2016), 2016 CarswellNat 3621, 2016 FC 896, James Russell J. (F.C.).

Public Law

Social programs

Employment insurance

Employee entitled to employment insurance benefits during leave of absence

L was employed by bank until October 2013 when she took personal, unpaid leave of absence in order to care for her elderly parents. Written agreement between bank and L provided that during her leave, she would continue to accrue service with bank and receive benefits. Agreement further provided that intended purpose of bank’s leave policy was to provide employees with time away from workplace to address personal needs and that earning income from other sources over period of leave was not permitted. L made arrangements for her parents’ care and began applying for jobs at bank without success and her leave of absence ended when her employment was terminated. L applied for employment insurance benefits and her claim was antedated so that her benefit period was established effective to October 27, 2013. Employment Insurance Commission rejected application for benefits on basis that L had not shown that she was available for work during her benefit period. General Division of Social Security Tribunal concluded that L was entitled to benefits. Decision was confirmed on appeal by Appeal Division. Attorney General applied for judicial review. Application for judicial review dismissed. Appeal Division made findings of facts including that L pursued more than 10 possible positions with bank in one year and did all she could to look for work within bank. Appeal Division found that by limiting her job search to positions at bank, L did not unduly limit her chance of returning to labour market so as to be unavailable. While it may have been open to Appeal Division to make another finding, it did not reach unreasonable conclusion.
Canada (Attorney General) v. Lavita (2017), 2017 CarswellNat 1521, 2017 FCA 82, Eleanor R. Dawson J.A., Wyman W. Webb J.A., and Donald J. Rennie J.A. (F.C.A.).
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