Doyle v. The Queen, 89 DTC 5030, [1989] 1 CTC 113 (FCTD)

Collier, J. [orally]:—This is an appeal from a decision of the Tax Review Board. The plaintiff claimed, among other things, to deduct from her 1976 tax payable an amount of $1,100 contributed to a federally-registered political party. (See Sections 2 and 13 of the Canada Elections Act, then in force, as to registered political parties). The taxpayer also claimed an Ontario tax credit of $550 contributed to an Ontario political party.

The Minister of National Revenue apparently disallowed those claims. The plaintiff unsuccessfully appealed to the Tax Review Board. The Board decision was based on grounds neither relevant, nor in issue, before this Court.

There are, here, two factual backgrounds. One is as to whether the plaintiff, herself, did indeed make the payments to the two political parties, or whether some other taxpayer did. The other is as to how the plaintiff's claims for deduction and credit got before the Minister of National Revenue, and ultimately, this Court.

The latter background is of some relevance, because the jurisdiction of this Court, in respect of the contribution to the Ontario political party, was challenged by the defendant.

I was advised, a few moments ago, as I was about to deliver these reasons, that the jurisdictional challenge was no longer in issue. The plaintiff has agreed to withdraw her appeal in respect of the $550 contributed to the Ontario political party in 1976.

That part of this appeal will therefore be dismissed, as abandoned.

I go, then, to what I termed the first factual background.

Jack Doyle is the plaintiff's husband. They were married in 1964. In 1980, they separated. Mr. Doyle described himself as an executive. He has been involved, over the years, as an officer and director of various companies.

From 1964 on, Mr. Doyle prepared his wife’s income tax returns, for those years in which she earned income.

In the year 1976, Mr. Doyle was involved with two companies, relevant to this background: Adept Maintenance Services Ltd., and Weram (1975) Inc. His wife was an employee of the former. She reported earnings of approximately $27,000 from Adept. She may have been an officer or director, or both. She may have been an officer of Weram. She was not an employee.

The plaintiff testified she paid, in late 1976, the two amounts in question to the two political parties. Receipts were issued to her, in her name (Exhibits 1 and 2).

At this point, I say I accept completely the evidence of the plaintiff and her husband. I found them to be honest, credible witnesses.

The Court file indicated the plaintiff was examined for discovery in January of 1986; it also appears she was then acting on her own behalf. I was told she did not, on her discovery, produce two bank books and cheque records, which eventually became Exhibits 3-6 inclusive at trial. At a later stage she retained solicitors; they instructed her to search for bank records, she eventually found them.

These documents, particularly Exhibits 3 and 4, clearly, in my opinion, establish the political contributions came out of the plaintiff's own funds.

The plaintiff filed a tax return for the year 1976. She estimated her taxable income as a loss of over $1,200. She claimed an Ontario property sales and tax credit of $327.74. She asserted no federal or provincial income tax was payable. The political contributions were not claimed because there was nothing to claim against.

The books of Weram were done, when necessary, by an independent accountant. He prepared the company's tax return for its fiscal year, May 1, 1976 to April 30, 1977. The company claimed a net income loss, for tax purposes, of approximately $26,000, with consequently no tax payable.

In the financial statements submitted with the return, donations of $4,190 were set out as expenses. Charitable donations amounted to $900. The remaining sum of $3,290 was listed as political donations. The net loss for tax purposes was, accordingly, decreased by $4,190. Attached to the Weram return were the official receipts (Exhibits 1 and 2) issued to the plaintiff for 1976. Similar official receipts, issued to Mr. Doyle for 1976 political contributions, were attached: $1,100 and $540.

Mr. Doyle said this was an error. The amounts should not have been shown as expenses; the receipts should not have accompanied the company return. He further testified the company never, at any time, paid political contributions itself, or in any way provided the funds for he and his wife to make the 1976 contributions.

As I have earlier said, I accept his evidence.

I now turn to another point.

The main defence raised by the defendant was that Weram, and not the plaintiff, had paid the plaintiff's 1976 political contributions; the plaintiff, therefore, did not make any political contributions during 1976.

I find, for the reasons already given, the plaintiff has successfully demolished, by a sufficiency of evidence, the “findings of fact" relied upon by the Minister.

Counsel for the defendant submitted that if I found the plaintiff had, in fact, made the contributions, then the plaintiff still had not complied with the statute. The argument ran this way: the official receipts were not filed with the first return, nor the amended return, they had been filed with Weram's return; the statute, on a proper interpretation, requires the receipts must be filed with the Minister in the particular taxpayer's return.

I do not accept that submission.

I see nothing in the wording of subsection 127(3) that requires a taxpayer to file the receipt with his return. It can be done at any time, presumably, before the Minister assesses. Nor do I see any requirement, in words, that the taxpayer himself must file the receipt with the Minister. The essential words here are, ” . . . if payment of each amount contributed . . . is proven by filing a receipt with the Minister ..." Similar wording, for example, can be found in 1976, in respect of charitable donations (paragraph 110(1 )(a), and medical expenses, paragraph 110(1)(c) ).

Here, the receipts were technically filed with the Minister, albeit attached to another taxpayer's return.

I agree a taxpayer, claiming a deduction or credit for political contributions, should, from a practical point of view, file them with his own return, or file them under his own name.

If I gave the construction, in respect to filing, as suggested by the defendant, I would, in my view, improperly be adding words to subsection 127(3).

In any event, on the peculiar facts of this case, I find the plaintiff has complied with the statute. There was no reason to file the receipts with her 1976 return, nor the amended one. When, after reassessment, the plaintiff was put in a tax due position, the claim was asserted. The receipts, however, had already found their way to the Minister. That was because of an error, for which an explanation was given. I accept that explanation.

In respect of the $1,100 item, the appeal is allowed, and the matter referred back to the Minister to calculate and allow the proper deduction from the plaintiff's 1976 tax.

That's all at the moment, Madam Reporter.

(Submissions re costs follow)

— Short Recess

— On Resuming

Collier, J.: —I heard a lengthy submission on behalf of counsel for the defendant, that in the circumstances of this case the plaintiff should not be awarded costs.

That submission hinged about the production by her counsel, apparently, very shortly before the trial commenced on September 13, 1988, of Exhibits 3 and 4, certain banking documents.

It is suggested that if those had been produced some time before, this case would likely not have gone to trial. I do not accept that submission.

There was another point dealing with the Ontario tax credit, in which a jurisdictional argument was going to be raised. Apparently a letter was written by the defendant to plaintiff's counsel over a year ago indicating a jurisdictional point might be raised in respect of the Ontario Provincial tax credit. No attempt was made to amend the pleadings to raise the point. Technically it is not necessary, perhaps, to amend pleadings. As a matter of practice most counsel do so so that the Court is aware, before it comes on the bench, that there is going to be an argument about jurisdiction.

In all the circumstances of this case I am not persuaded there was any wilful attempt to not produce these documents at a reasonable time.

They were produced very late. I repeat, I do not think that this case would never have gone ahead; that is a matter of speculation.

I think the plaintiff and her advisers could have been a little more diligent in unearthing these two exhibits sooner than they did. I propose to take the same course as I did in the Collins versus Rosenthal case, and I will award the plaintiff the cost of this appeal and I will award the defendants one-fifth of their cost of this appeal. The costs will be set off against each other and the balance paid by the party who is found to owe.

Appeal allowed.