Subsection 171(1) of the Income Tax Act (Canada) (the Act) sets out the jurisdiction of the Tax Court in income tax appeals. In general, the subsection does not permit the Tax Court to review the process by which the Minister arrives at an assessment. Rather, the Tax Court is empowered to determine only whether the amount of tax assessed is correct. It appears that even the Charter of Rights does not change this position: see Burrows v. The Queen, 2005 TCC 761 (not yet available online).
The taxpayer received amounts, including pre-judgment interest, pursuant to a pay equity award. The Minister, in assessing the taxpayer’s 2000 taxation year, relied on paragraph 12(1)(c) of the Act and included in the taxpayer’s income the pre-judgment interest. The taxpayer appealed to the Tax Court on basis that the Minister’s treatment of the pre-judgment interest was discrimination prohibited by the Charter.
The Court noted that the taxpayer was not asking it to vacate or vary the assessment because it was incorrect. In addition, the taxpayer was not claiming that paragraph 12(1)(c) was unconstitutional. Rather, the sole ground relied on by the taxpayer was that the Minister’s administrative policy was discriminatory. The Minister’s policy had been that pre-judgment interest on awards respecting workers’ compensation, wrongful dismissal, personal injury or death was not taxable. Nevertheless, the Minister chose to tax the pre-judgment interest payable to those receiving pay equity awards.
The Court pointed out that its jurisdiction was limited by the Act and the Tax Court of Canada Act (the TCCA). Under both statutes, the Tax Court could only entertain appeals that disputed the correctness of an assessment. The Court’s jurisdiction did not extend to inquiring about the manner in which the amount of tax was determined. Not even section 15 and subsection 24(1) of the Charter authorized such an inquiry. Accordingly, the Court dismissed the taxpayer’s appeal.
