Federal Court


Taxation

INCOME TAX
Decision letter’s conclusion equivocal and inconsistent with evidence

Application for judicial review of decision of Canada Revenue Agency (CRA). Applicant paid president management bonus of $7.09 million on February 28, 2006. President was informed on March 13, 2006 that corporation was obliged to withhold and remit full amount of tax due on payment of bonus on or before March 15, 2006. Applicant remitted payroll taxes of $2.8 million on account of payment of bonus. CRA assessed corporation $284,805 late remitting penalty. CRA determined that applicant ought to have remitted amount on March 3, 2006, and failure to remit proper amount on this date warranted assessment of penalty. Required withholding was later lowered to $1.5 million and penalty was reduced to $150,748. CRA offset penalty with GST refunds owed to applicant. Applicant’s request for cancellation of penalty under taxpayer relief provisions in s. 220(3.1) of Income Tax Act (Can.), was denied. Application granted. Decision was quashed. Applicant made error in failing to remit payroll taxes by March 3, 2006, but corrected error by payment 11 days later. Decision letter from CRA made no indication why applicant’s correction of error was not quick enough to satisfy director, nor did it state how error could have been remedied any quicker. Applicant would not have known correct and final amount owed on penalty until after deduction was made. Decision letter’s conclusion was equivocal and inconsistent with evidence before director. Director’s decision that applicant failed to quickly remedy error was found to be unreasonable as it failed requirements of being justified, transparent and intelligible. Matter was returned for re-determination.

NRT Technology Corp v. Canada (Attorney General) (Feb. 27, 2013, F.C., Leonard S. Mandamin J., File No. T-56-08) 226 A.C.W.S. (3d) 1204.

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