The Queen v. Diaz, 81 DTC 5112, [1981] CTC 138 (FCTD)

Marceau, J:—The taxpayer-defendant, an economist, comes from Argentina by has been for some years residing and working in Montreal, PQ. In computing his taxable income for the year 1976, the defendant claimed a special deduction of $2,965.38, being an amount allegedly expended by him during the taxation year for the support of relatives in Argentina, namely his father ($823), his mother ($650) his father-in-law ($720.75), and his mother- in-law ($771.63). The Minister disallowed the deduction and issued a reassessment accordingly. The reassessment was set aside by the Tax Review Board. It is this decision of the Board which is here under appeal.

The provision of the Income Tax Act (SC 1970-71-72, c 63 as amended) on which the defendant relies to support his claim for the exemption is that of paragraph 109(1 )(f) which reads as follows:

109. (1) For the purpose of computing the taxable income of an individual for a taxation year, there may be deducted from his income for the year such of the following amounts as are applicable:

(f) an amount expended by the individual during the year for the support of a person who, during the year, was dependent upon the individual for support and was

(i) his parent or grandparent and dependent by reason of mental or physical infirmity,

(ii) his brother or sister

(A) under 21 years of age,

(B) 21 years of age or over and dependent by reason of mental or physical infirmity, or

not exceeding an amount equal to,

(iii) if the person has not attained the age of 16 years before the end of the year, $300 less /2 of the amount, if any, by which the income for the year of the person exceeds $1,000 and

(iv) in any other case, $550 less the amount, if any, by which the income for the year of the person exceeds $1,150;

The question of course is whether the defendant was entitled in the circumstances revealed by the evidence to invoke this provision of the law, or, put another way, whether the constituent elements of this exempting provision had in his case been complied with. This is what must be examined, bearing in mind that the burden of proof is on the defendant since the assumptions made by the Minister have to be left undisturbed unless and until found to be wrong.

When one reads paragraph 109(1 )(f), one is immediately confronted with what appears to be major difficulties of construction and implementation. What is the exact import of the phrases “amount expended for the support of a person”, “dependent upon the individual for support” and “by reason of mental or physical infirmity”. The member who wrote the judgment for the Tax Review Board, after having noted that the provision had been in effect for quite a long time since “paragraph 109(1 )(f) of the new Act for all practical purposes is analogous to paragraph 26(1 )(d) of the old Act”, expressed his surprise that an enactment which poses such “extreme difficulty” could have been so little challenged or argued over the years. And in fact there is, to my knowledge, no decision of the Court with respect thereto. It appears to me, however, that the practical difficulties raised by the enactment, at least since the coming into force of the new Act, are not as great as one might expect.

It is not accurate to say that paragraph 26(1 )(d) of the old Act has simply been carried forward in the new Act. Indeed, the limitation contained in the last sentence of the new subparagraph was an addition. From then on the deduction could not exceed an amount equal to $550 “less the amount, if any, by which the income for the year of the person exceeds $1,050”, (the two figures being subject to adjustment as indicated above). The exemption could therefore come into play only if the dependant's income, for the year, had been less than $1,600. I don’t suppose the need for support of someone whose annual net income from all sources is so meagre could ever be contested, whatever be the country in which he lives. As a result and for all practical purposes, the exact meaning of the words “for the support” became irrelevant in 1970. On the other hand, another difficulty, that raised by the undefined words “dependent upon the individual” seems to me to be somewhat lessened by the fact that the expense must have been made for the support of a parent (including a father-in-law and mother-in-law, pursuant to paragraph 252(2)(c) of the Act) or a brother or sister. The requirement of “dependency” can hardly become an issue when dealing with individuals tied together by such a close family relationship. There remains here, it is true, the question of whether the taxpayer must have been the only person to whom the parent in need could look for support; and the question Is, I agree, an uneasy one, since the French version of the text, by using the expression ‘était à la charge de”, appears to favour a positive answer, while the English version, taken literally, and the intent that may be attributed to the provision as a whole, does not support such a narrow view. The practical advantage of having a clear answer to that question appears however quite minimal and that it never became an issue for the Court is to me under- Standable. In any event, there is no need for me to take a stand on this point in order to deal with the case here.

That leaves us with one mafor difficulty. What is the import of the phrase “dependent by reason of mental or physical infirmity”, and what evidence will be required of the taxpayer to satisfy the onus cast upon him to show that this condition in his case is properly fulfilled. The Board took the view that because the condition could not be dealt with objectively nor could it lend itself to any “reasonable criteria”, its existence in a particular case should be left to the appreciation of the taxpayer. I definitely disagree. The duty of the Court is to apply the law as it is, however delicate it may be to do so in a particular case. I believe, however, that the “infirmity”, especially the “moral infirmity” contemplated by the provision is not the state of being incompetent, “mentally in competent”. In my view, the word “infirmity” implies more than mere retirement age (see Fouad Zaki v MNR, [1978] CTC 2843; 78 DTC 1584, but it must be taken in its general sense, ie the state of being of poor or deteriorated vitality (see Webster, New Collegiate Dictionary). As to the manner in which such “infirmity” may be proven, I do not see why a clear, unequivocal, detailed and uncontradicted statement or testimony of the taxpayer should not be accepted if it is convincing.

If my understanding of paragraph 109(1 )(f) is correct, the disposition of this appeal is very simple.

First, with respect to the father. I would have had no difficulty in finding that the defendant has actually expended the amount he sought to deduct for the support of his father who, because of his age (68 years) and his eyesight problems (he was operated on both eyes in 1976) was infirm within the meaning of the Act. However, the defendant himself adduced documentary evidence that his father in 1976 was in receipt of a pension from the Argentinian government amounting to the sum of $2,489.96. No deduction can therefore be claimed.

Second, with respect to the mother. The mother had no income in 1976. She had suffered from high blood pressure since the late sixties and her general physical condition was poor: she was infirm within the meaning of the subparagraph. The money claimed as a deduction was expended for her support. The defendant was entitled to the deduction.

Finally, with respect to the father-in-law and the mother-in-law. The defendent did not adduce evidence that the amounts claimed were in fact paid by him to his in-laws. The money orders produced tend to show that the money was actually furnished by his wife who was a regular employee earning a full salary in 1976. Besides, nothing in the defendant’s testimony can lead to the conclusion that either of them, then aged 65, could have been in a weak state of physical or mental health in 1976. Moreover, it was established that the father-in-law was in receipt of a pension, the amount of which was close to that of the father. It is clear to me that the defendant is not entitled to the deductions claimed with respect to either his father-in- law, or his mother-in-law.

As a result of the foregoing, I am of the view that the appeal must be sustained in part, and the decision of the Board set aside insofar as it relates to the deductions claimed with respect to the father, the father-in-law and the mother-in-law. The appeal as it relates to the deduction claimed with respect to the mother is denied.

Although the action was for the most part successful, in compliance with the provision of subsection 178(2) of the Act, the Minister shall pay all reasonable and proper costs of the defendant in connection therewith.