Date:
20100602
Docket:
A-448-09
Citation: 2010 FCA 145
CORAM: LÉTOURNEAU
J.A.
PELLETIER
J.A.
STRATAS J.A.
BETWEEN:
FRANK J.
BURCHILL
Appellant
and
HER MAJESTY
THE QUEEN
Respondent
REASONS FOR
JUDGMENT
STRATAS J.A.
[1]
This
is an appeal from the judgment of Justice Little of
the Tax Court of Canada: 2009 TCC 492.
[2]
The
issue before the Tax Court of Canada and this Court concerns the tax treatment
of certain pension income received by the appellant.
[3]
The
appellant was entitled to receive pension income from Public Works and
Government Services Canada (“Public Works”) starting in 1992. He asked Public
Works not to pay him any pension income until he directed it to do so. Public
Works complied. Only in 2005 did the appellant opt to receive pension income.
In that year, the appellant received a lump sum payment consisting of current pension
amounts and pension amounts that accrued in 1992-2004.
[4]
Under
the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the
“Act”), a lump sum pension payment that consists of current and prior years’
accrued pension amounts – such as the payment made to the appellant in 2005 –
can be allocated notionally to earlier tax years. In such a situation, various
provisions of the Act apply.
[5]
These
provisions operate by adding into the taxpayer’s income the entire payment when
it is received by the taxpayer, but then adjust that figure to reflect a
notional allocation of the amounts in earlier tax years. Specifically, these
provisions do two things:
(1) Inclusion
of the whole amount in income under subparagraph 56(1)(a)(i). All of the
pension payment is added into the taxpayer’s income in the year it is received.
This is seen by the words of subparagraph 56(1)(a)(i): “any amount received by
the taxpayer in the year as…a…pension benefit” is to be “included in computing
the income of a taxpayer for a taxation year.”
(2) Provision
for deductions and adjustments. Parliament recognized that amounts included
in income under subparagraph 56(1)(a)(i) may have accrued during prior years. Therefore,
it enacted other provisions to reduce the resulting tax in the year of
inclusion:
(i)
Section
110.2 allows a deduction for the prior years’ accruals.
(ii)
Subsection
120.31(2) imposes a “notional tax payable,” based on notional receipt in those
prior years. There are two elements to that “notional tax.” First, paragraph
120.31(3)(a) calculates tax on those prior years’ notional amounts at the prior
years’ rates of tax. Second, paragraph 120.31(3)(b) adds a tax to compensate
the government for the delay in paying the prior years’ notional tax.
[6]
In
the Tax Court of Canada, the appellant argued that the payment attributable to
the period 1992-2004 should be included in those prior years’ incomes, rather
than all being included in his 2005 income, and that the additional amount
imposed by paragraph 120.31(3)(b) of the Act should not apply to him. In his
view, because he was entitled to the pension amounts in earlier years, the
amounts should be included in his income for those earlier years, even though
he actually received the amounts in 2005.
[7]
The
Tax Court of Canada dismissed Mr. Burchill’s appeal, relying upon the ordinary
meaning of the Act. In particular, that court held that subparagraph
56(1)(a)(i) explicitly requires that the pension amounts received be included in
the taxpayer’s income in the year that they were received.
[8]
In
this Court, the appellant made submissions similar to those that he made in the
Tax Court of Canada. In particular, he submitted that while pension amounts
“received” are to be included in his income in the year of receipt, “received”
in subparagraph 56(1)(a)(i) can include “constructive receipt.” The appellant
submitted that he “constructively received” pension amounts in earlier years,
in the sense that he was legally entitled to them in those years. From this,
the appellant says that those amounts that he “constructively received” in
earlier years should be added into his income for those earlier years.
[9]
We
do not accept the appellant’s submissions. In our view, the Tax Court of Canada
did not err. We agree with its conclusion that the relevant provisions of the
Act do not support the appellant’s submissions.
[10]
Our
starting point in interpreting the relevant provisions of the Act is the
Supreme Court of Canada’s decision in Canada Trustco Mortgage Co. v. Canada, [2005] 2
S.C.R. 601, 2005 SCC 54, especially at paragraphs 10 and 13. The provisions of
the Act are
to be interpreted in a “textual, contextual and purposive” way. The
ordinary meaning of words that are “precise and unequivocal” plays a “dominant
role in their interpretive process.” In all cases, “the court must seek to read
the provisions of an Act as a harmonious whole.” The Act “remains an instrument
dominated by explicit provisions dictating specific consequences, inviting a
largely textual interpretation.”
[11]
The
ordinary meaning of subsection 56(1)(a)(i) is that all of the pension payments
are added into income in the year it is “received.” This ordinary meaning is
well supported by the existence of other provisions in the Act. Subsection
56(1)(a)(i) does not stand in splendid isolation in the Act; rather, it is part
of an interconnected, harmonious web of provisions.
[12]
As
described in paragraph 5, above, subsections 56(1)(a)(i), section 110.2 and
section 120.31 together create a coherent, harmonious scheme. If the appellant
were correct and subsection 56(1)(a)(i) permits the inclusion into the income
of earlier years amounts that were “constructively received” in those earlier
years, then there would have been no need for Parliament to enact sections
110.2 and 120.31,
discussed above. In my view, the appellant’s position runs contrary to the
evident and coherent scheme in the Act.
[13]
Therefore,
I would dismiss the appeal. I would make no order as to costs.
"David
Stratas"
“I agree
Gilles Létourneau J.A.”
“I
agree
J.D. Denis Pelletier J.A.”
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND
SOLICITORS OF RECORD
DOCKET: A-448-09
APPEAL FROM THE JUDGMENT RENDERED BY THE
HONOURABLE MR. JUSTICE LITTLE OF THE TAX COURT OF CANADA, DATED SEPTEMBER 30,
2009, DOCKET NO. 2008-3786(IT)I
STYLE OF CAUSE: Frank
J. Burchill v. The Queen
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: May 31, 2010
REASONS FOR JUDGMENT BY: STRATAS J.A.
CONCURRED IN BY: LÉTOURNEAU J.A.
PELLETIER J.A.
DATED: June 2, 2010
APPEARANCES:
|
The Appellant
|
ON HIS OWN BEHALF
|
|
Ron D.F. Wilhelm
Laura
Zumpano
|
FOR
THE RESPONDENT
|
SOLICITORS OF RECORD:
|
|
|
|
Myles J. Kirvan
Deputy
Attorney General of Canada
|
FOR
THE RESPONDENT
|
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