March 06, 2012

Amarjit Aujla and Harjinder Aujla (Appellants) v. Her Majesty the Queen (Respondent)

2008 GTC 136
Neutral Citation: 2007 TCC 764
Tax Court of Canada
Date: December 21, 2007

Court File Nos. 2004-4534(GST)G, 2004-4535(GST)G (General Procedure)

Director’s liability — Whether taxpayers ceased to be directors on dissolution of corporation — Whether taxpayers were jointly and severally liable for tax debts of corporation — Excise Tax Act, R.S.C. 1985, c. E-15, ss. 323(1), 323(2), 323(3), 323(4), 323(5), 316 — Company Act, R.S.B.C. 1996, c. 62, ss. 130(1), 257(1), 257(3), 257(4), 258, 260, 262(1), 262(2), 262(3), 263.

Facts: The taxpayers (“A and H”) were directors of A Co., a British Columbia corporation, until A Co.’s dissolution on March 5, 1999. By Notice of Assessment dated March 20, 1998, A Co. was assessed for net taxes of approximately $198,000 under the Excise Tax Act (“the Act”) which remained outstanding. A Co. was subsequently struck from the province’s register of companies due to A Co.’s failure to file its annual reports in accordance with the provisions of the province’s Company Act. On March 3, 2003, A Co. was restored to the register of companies under the terms of an Order issued by the British Columbia Supreme Court (“the Court”) on February 20, 2003. The Court’s Order was granted to enable the Minister to assess and collect A Co.’s outstanding tax liability and provided that A. Co. was deemed to have continued in existence as if it had never been dissolved. By Notice of Assessment dated September 4, 2003, A and H were each assessed for net tax in respect of A Co.’s failure to remit tax for the reporting periods from December 31, 1995 to June 30, 1997. A and H appealed to the Tax Court of Canada.

Held: The appeals were allowed. The Minister’s assessments were issued more than two years after A and H had ceased to be directors of A. Co., and, accordingly, they were statute-barred under subsection 323(5) of the Act. A and H had ceased to be directors of A Co. at the time it was dissolved. Under the provincial Company Act and the terms of A Co.’s restoration, A and H could not be deemed to have continued in office as directors of A Co. during the period of A Co.’s dissolution. The Minister’s assessments were vacated accordingly.