Decision Date: March 18, 2014
Link: Case Summary Document
Citation: [2014]TCC 84(Tax Court of Canada, Miller J, )
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.


This appeal in the Tax Court of Canada related to the 2002 and 2003 taxation years in which the appellant claimed non-refundable tax credits for charitable donations he allegedly made to Canadian Foundation for Child Development (CFCD) in the amounts of $18,550 and $15,500 respectively.

The appellant’s evidence was that he donated about $350 to CFCD in cash every two weeks or so. He had no records of his own to support this contention, but tendered in evidence two alleged receipts from CFCD for the amounts of $18,550 (for 2002) and $15,500 (for 2003). The appellant said that he had previously donated $15,400 in 2001 and claimed this amount on his 2001 income tax return. In July 2002, the Canada Revenue Agency (CRA) requested that he provide proof of his 2001 donation. He sent a charitable donation receipt to the CRA which was accepted. No adjustment was made to his return for that year. He believed that his charitable donations for 2002 and 2003 were also accepted because he was not reassessed for these years until 7 December 2009. It was his contention that he was misled by the CRA.

The appellant claimed at different times that his sister prepared his 2002 return, that he paper-filed at least one of them, and that one was prepared by ADD Accounting services (ADD). The CRA records showed that both relevant returns were efiled by ADD. The CRA was already investigating ADD and its connection with a charity also being investigated, CanAfrica.

It emerged that Ambrose Danso-Dapaah was the president of CanAfrica and the sole proprietor of ADD. He was also the director of CFCD. In its investigation of Danso-Dapaah, the CRA seized his computer hard drives which contained the appellant’s returns for 2002 and 2003 with the amounts of $18,500 and $15,000 shown as being donated to CanAfrica.  There was also a receipt for an actual charitable donation of $1550. Subsequently Danso-Dapaah was charged with one count of fraud over $5,000. He entered a guilty plea to selling false charitable donation receipts. He charged his clients a fee of 10% of the false donation for the charitable receipts. The total amount of false donation receipts provided to taxpayers by Danso-Dapaah was $21,400,000, which equated to $6,200,000 in false non-refundable tax credits.

The issues in this appeal therefore became:

(1) whether the Appellant made a donation to a charity in 2002 and 2003 which would entitle him to claim non-refundable tax credits pursuant to section 118.1 of the Income Tax Act (the Act);

(2) whether the receipts issued by CFCD were in the prescribed form in accordance with subsection 118.1(2) of the Act and sections 3500 and 3501 of the Income Tax Regulations (the Regulations); and

(3) whether the Minister of National Revenue (the Minister) was entitled to reassess the appellant after the normal reassessment period.

Her Honour held that the appellant did not make any donations at all to CFCD in 2002 or 2003. Rather he purchased the charitable donation receipts for 10% of their face value from Danso-Dapaah through ADD. Her Honour said that the appellant’s evidence was not credible. He changed his evidence several times as to how the returns were filed, how he heard about the alleged charity, how he paid the donations to the charity, and even as to the rent he paid (or rather did not pay), to his parents, though the rent was claimed on this tax returns. Moreover, his earnings in the relevant years were only $39,336.88 and $32,412.24 respectively. This made his claimed donations totally implausible.

Her Honour also held that the alleged receipts did not conform to the requirements of the relevant Act section or with the Regulations, and that the Minister was entitled to reassess the appellant after the normal period for reassessment had passed.

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Implications of this case

This case is part of series of investigations and convictions arising from charitable donation fraud in Canada. Apart from the false claim issue, this case also dealt with the proper form of charitable recepts in Canada. Subsection 118.1(2) of the Income Tax Act provides that proof of a charitable gift shall be made by filing an official receipt which contains prescribed information. Section 3501 of the Income Tax Regulations sets out the prescribed information, which is detailed, that is required. As Her Honour said (at [[27]):

‘The requirements in section 3501 are not frivolous but are absolutely necessary for ensuring that a gift was actually made. The purpose of the requirements is to prevent abuses of any kind…’