October 07, 2011

942 Holdings Limited (Appellant) v. Her Majesty the Queen (Respondent)

96 DTC 1650
Tax Court of Canada
July 5, 1996

(Court File Nos. 94-2182(T)G, 94-2183(IT)G and 94-2184(IT)G.)

Collection of tax — Corporate taxpayers borrowing substantial sums from a number of related corporations, some of which owing tax — Minister serving ex parte jeopardy collection Order on taxpayers along with Requirements to Pay amounts owing by them to said related tax debtor corporations — Whether Minister also entitled to serve simultaneously on taxpayers assessments for failing to comply with said Requirements to Pay — Income Tax Act, R.S.C. 1985, Chapter 1 (5th Supp.), ss. 224, 225.1, 225.2(2), 225.2(3) and 227(10).

The corporate taxpayers had borrowed substantial sums from a number of related corporations, some of which owed tax. On August 9, 1993 the Minister served on counsel for the taxpayers (a) a letter stating that he had obtained a jeopardy collection Order under section 225.2 of the Act; (b) Requirements to Pay dated August 9, 1993 under subsection 224(1) of the Act; and (c) a Notice of Assessment dated August 9, 1993, delineating the taxpayer’s liability under subsection 224(4) of the Act for failure to comply with the said Requirements to Pay. Alleging that they had had no opportunity to comply with the Requirements to Pay, since these had been delivered to them at the same time as the copy of the jeopardy collection Order and the Notice of Assessment, the taxpayers appealed to the Tax Court of Canada.

Held: The taxpayers’ appeals were dismissed. Subsection 227(10) of the Act permits the Minister to assess an “amount payable” under subsection 224(4). Subsection 225.2(3) deems an “amount payable” for the purposes of section 224. The only plausible explanation for this seems to be to authorize an assessment under subsection 227(10) where the extraordinary collection procedures are pursued. The interaction of subsections 224(4), 225.2(3), and 227(10), however, is so abstruse as to merit legislative surgery. That said, there was no basis for vacating the Minister’s assessment. It was affirmed accordingly.