R. v. Castro - FCA: No deduction for the cash purchase price of bogus receipts

R. v. Castro - FCA:  No deduction for the cash purchase price of bogus receipts


Canada v. Castro (October 26, 2015 – 2015 FCA 225, Stratas, Scott (author), Boivin JJ. A.).

Précis:  This is a decision in several consolidated appeals from the Tax Court.  The Tax Court had allowed the taxpayers the cash portion of inflated charitable receipts they had purchased from a registered charity for 20% of their face value.  The Federal Court of Appeal allowed the Crown’s appeals, with costs, holding that the receipts did not accord with the Income Tax Regulations since they did not set out the true cash amounts received by the charity.

Decision:   This appeal involved several Tax Court cases:

[2]               The Minister of National Revenue (the Minister) disallowed the tax credits claimed by each of the respondents for their respective gifts made to CanAfrica International (CanAfrica), a registered charity, in 2006. As each of the respondents was issued an inflated tax receipt by CanAfrica, the Minister took the position that each donation made, in order to be a true gift, must have been made without any benefit in return.

[3]               The respondents appealed the assessments to the Tax Court of Canada. For the reasons set out in David v. The Queen, 2014 TCC 117, Justice J. Woods (the Judge) of the Tax Court allowed their appeals. The Minister now appeals.

[4]               The appeals in files A-249-14 Her Majesty The Queen v. Rubirosa Tiroy, A-251-14 Her Majesty The Queen v. Ronaldo David, A-252-14 Her Majesty The Queen v. Danilo Magarro, A-253-14 Her Majesty The Queen v. Maria S. Grande, and A-254-14 Her Majesty The Queen v. Aris N. Ani were consolidated by order of this Court dated July 23, 2014, the appeal in file A-249-14 Her Majesty The Queen v. Rubirosa Tiroy being designated as the lead appeal.

[5]               This Court, at the beginning of the hearing, noted that no notices of appearance were filed in appeals A-249-14, A-251-14, A-252-14, A-253-14, and A-254-14. Since files A-249-14, A-251-14, A-252-14, A-253-14, and A-254-14 were consolidated, the appeals were heard together. Another file A-255-14 Her Majesty The Queen v. Ray Castro raised the same issues and was heard with the consolidated files. Counsel on all files agreed that they would direct their submissions to Castro alone and that the outcome in Castro would apply mutatis mutandis to all of the appeals. The Court agreed with this approach and has proceeded in that way. I direct that a copy of these reasons for judgment should therefore be placed in each Court file.

While the decision of the Court of Appeal is lengthy it seems to boil down to two paragraphs:

[77]           In the present case, the amount of the cash donations does not appear on the receipts as prescribed by paragraph 3501(1)(h)(i) of the Regulations. The amounts that appear on the receipts are not the amount the respondent actually gave in cash according to the Judge’s determination. Unlike Mitchell and Chabot, the information is not readily available to the Minister. More importantly, in view of the language used in the Regulations, it is apparent that the receipts filed by Mr. Castro do not contain the prescribed information. More precisely, the amount of his respective cash donations do not appear, as prescribed by subparagraph  3501(1)(h)(i). The same can be said for the receipts filed by the respondents in the other appeals.

[78]           I must also point out that subsection 3501(6) of the Regulations is unambiguous; it states that every official receipt form on which any of the following is incorrectly or illegibly entered is deemed to be spoiled. Paragraph (b) of subsection 3501(6) clearly mentions the amount of the gift in the case of a cash gift.

Since the receipts did not accord with the requirements of the Regulations the Crown’s appeals were allowed, with costs.