Allison Murray Banerjee

The appellant corporation appealed reassessments and assessments for failure to withhold and remit income tax and CPP deductions on cheques paid to its two shareholders.

The Minister argued the cheques were salary from employment.

The Tax Court of Canada allowed the appeals, finding that the shared intention of the corporation and the shareholders at the time the payments were made was that the cheques were shareholder draws, not salary.

The Court held that the initial remittances made for the first two months were a mistake by the inexperienced bookkeeper, and the subsequent correction aligned with the parties' true intent.

The reassessments and assessments were returned to the Minister for reconsideration on the basis that the shareholders did not receive salary, and the related penalties were vacated.

The Appellant appealed a determination by the Minister of National Revenue that the Intervenor was in insurable employment.

The issue was whether the Intervenor and the Appellant were dealing at arm's length under paragraph 5(2)(i) of the Employment Insurance Act.

The Court found that the Intervenor, a shareholder and senior employee, participated in collective decision-making regarding remuneration and accepted terms not typical of an arm's length relationship, such as varying remuneration based on business performance and automatic termination upon ceasing to be a shareholder.

The Court concluded they were not dealing at arm's length, allowed the appeal, and varied the Minister's decision to reflect that the Intervenor was not in insurable employment.