Digests

InComE Tax

Practice

Appeal from Federal Court decision (2009 FC 531) granting respondent’s application for compliance order concerning requirements for information (RFIs)—Appellant, former director of corporation, failing to remit to respondent payroll source deductions of employees—Minister issuing notices of assessment to appellant for amount owing on basis jointly, severally liable for tax debt incurred by corporation—Issue whether possible for Minister to collect accrued interest on unpaid debt without issuing separate notice of assessment for that amount—Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1 (ITA), s. 227.1(1) making directors jointly, severally liable for deductions not remitted, plus any related interest, penalties—ITA, s. 227(10) allowing assessment of amount payable under s. 227.1(1) at any time—Also providing that when notice of assessment issued, ITA, s. 161(1) applying to s. 227(10) “with any modifications that the circumstances require”—ITA, s. 161(1) exception to general principle that in absence of provision to the contrary, taxpayers not required to pay amount for which liable under ITA until notice of assessment issued—However, ITA, s. 161(1) not requiring director to pay interest accruing on corporation’s debt after notice of assessment issued under ITA, s. 227(10) because ITA, s. 161(1) applying to “taxes payable”, amount assessed under ITA, s. 227(10) not for “taxes payable”—Whether modifications required for ITA, s. 161(1) to apply to assessment under s. 227(10) permitted by words “with any modifications that the circumstances require”—For ITA, s. 161(1) to apply to s. 227(10), necessary to add words “or any amount for which a director is liable under subsection 227.1(1)” to ITA, ss. 161(1)(a),(b)—When s. 227(10) viewed contextually, purposively, proposed modification to s. 161(1) changing details rather than substance—Modifications not increasing amount for which director liable—No reason of policy, principle why director should not be liable for subsequent accruing interest since corporation liable for accruing interest without need for new assessment by virtue of s. 227(9.2)— Modifications consistent with ITA scheme, enhancing its administration—Federal Court Judge correctly interpreting ITA when concluding combined effects of ss. 227.1(1), 227(10) imposing liability on appellant to pay post-assessment interest, Minister thus authorized to issue RFIs—Appeal dismissed.

M.N.R. v. Zen (A-257-09, 2010 FCA 180, Evans J.A., judgment dated July 7, 2010, 25pp.)