Lamarre
Proulx,
T.C.J.
[Translation]:—This
is
an
appeal
against
a
reassessment
by
the
respondent,
the
Minister
of
National
Revenue,
with
respect
to
the
1985
taxation
year.
The
issue
is
whether
the
child
care
expenses
incurred
during
a
period
of
maternity
leave
are
deductible
under
clause
63(3)(a)(i)(A)
of
the
Income
Tax
Act
(the
'Act").
As
it
applied
to
1985
this
provision
read
as
follows:
63.
(3)
(a)
“child
care
expense"
means
an
expense
incurred
for
the
purpose
of
providing
in
Canada,
for
any
eligible
child
of
a
taxpayer,
child
care
services
including
baby
sitting
services,
day
nursery
services
or
lodging
at
a
boarding
school
or
camp
if
the
services
were
provided
(i)
to
enable
the
taxpayer,
or
the
supporting
person
of
the
child
for
the
year,
who
resided
with
the
child
at
the
time
the
expense
was
incurred,
(A)
to
perform
the
duties
of
an
office
or
employment.
The
appellant's
husband
acted
as
her
agent
in
this
case
and
the
facts
were
not
in
dispute.
The
appellant
is
a
dental
hygienist
employed
by
the
CLSC
in
Paspébiac.
In
late
October
1984,
when
she
was
pregnant
with
her
fourth
child,
she
was
allowed
to
leave
her
work
as
a
preventive
measure.
The
child
was
born
on
November
29,
1984.
Under
the
collective
agreement
that
applied
to
her
the
appellant
continued
to
receive
95
per
cent
of
her
salary
in
accordance
with
the
following
formula:
the
employee
received
the
benefits
to
which
she
was
entitled
under
the
unemployment
insurance
scheme
and
the
employer
made
up
the
difference.
The
appellant
employed
a
babysitter
in
1984
and
kept
this
babysitter
in
her
employ
in
the
first
four
months
of
1985.
Between
May
and
August
the
babysitter
agreed
temporarily
to
stop
working
for
the
appellant
and
began
again
in
September,
at
which
time
the
appellant
returned
to
the
duties
of
her
employment.
It
is
the
expenses
incurred
for
the
services
performed
by
this
babysitter
in
the
first
four
months
of
1985
that
are
the
subject
of
the
dispute.
The
respondent
refused
the
deduction
on
the
ground
that
the
expenses
were
not
incurred
to
enable
the
appellant
to
perform
the
duties
of
an
office
or
employment,
as
required
by
the
provision
quoted
earlier.
The
appellant's
agent
argued
that
the
appellant
was
not
unemployed
or
looking
for
work,
that
maternity
leave
was
a
benefit
relating
to
employment
and
that
the
child
care
expenses
were
to
be
set
off
against
earned
income
as
defined
in
paragraph
63(3)(b)
of
the
Act,
which
does
not
include
benefits
received
under
the
Unemployment
Insurance
Act,
1971
but
includes
such
benefits
as
those
described
in
paragraph
6(1)(f)
of
the
Act
that
are
paid
pursuant
to
a
sickness
or
accident
insurance
plan,
a
disability
insurance
plan
or
an
income
maintenance
insurance
plan.
(The
evidence
did
not
show
whether
the
payments
made
by
the
employer
came
from
such
a
scheme.
In
any
event,
they
were
treated
as
earned
income.)
Paragraph
63(3)(b)
of
the
Act
reads
as
follows:
63.
(3)
(b)
"earned
income"
of
a
taxpayer
means
the
aggregate
of
(i)
all
salaries,
wages
and
other
remuneration,
including
gratuities
received
by
him
in
respect
of,
in
the
course
of,
or
by
virtue
of
offices
and
employments,
and
all
amounts
included
in
computing
his
income
by
virtue
of
sections
6
and
7,
(ii)
amounts
included
in
computing
his
income
by
virtue
of
paragraph
56(1)(m),
(n)
or
(o),
and
(iii)
his
incomes
from
all
businesses
carried
on
either
alone
or
as
a
partner
actively
engaged
in
the
business.
After
mature
reflection
I
feel
that
the
appellant's
argument
is
correct
in
law
for
the
following
reasons:
(1)
the
babysitter
was
employed
by
the
appellant
prior
to
the
maternity
leave,
(2)
during
the
period
in
dispute
the
appellant
kept
her
employment,
and
(3)
the
definition
of
earned
income
includes
the
sums
received
by
the
appellant
from
her
employer
during
her
maternity
leave.
I
shall
consider
each
point
in
turn:
(1)
Since
the
babysitter
was
employed
prior
to
the
maternity
leave,
I
accept
the
argument
that
she
was
employed
for
the
purpose
of
enabling
the
appellant
to
perform
her
duties
and
not
for
strictly
personal
reasons.
These
were
costs
that
the
appellant
had
to
continue
to
pay
during
her
leave
in
order
to
ensure
that
the
babysitter
was
still
available
when
she
returned
to
work.
My
decision
would
have
been
different
if,
for
example,
the
services
paid
for
were
those
of
a
casual
employee
who
did
not
have
to
be
kept
in
the
appellant's
employ
during
the
maternity
leave
to
ensure
that
she
would
be
available
when
the
appellant
returned
to
work.
In
my
judgment,
these
expenses
would
not
then
be
covered
by
clause
63(3)(a)(i)(A)
but
would
be
expenses
incurred
for
strictly
personal
reasons.
(2)
The
appellant
kept
her
employment;
it
is
a
requirement
of
the
provision
in
question
that
the
taxpayer
have
an
office
or
employment.
The
cost
of
child
care
must
be
incurred
to
enable
the
taxpayer
to
perform
the
duties
of
an
office
or
employment.
(3)
If
Parliament
had
wished
to
limit
the
application
of
this
right
to
the
period
in
which
the
person
is
physically
at
work,
why
would
it
have
included
in
the
definition
of
earned
income
certain
sources
of
income
other
than
earnings
and
gratuities
such
as,
for
example,
the
benefits
described
in
paragraph
6(1)(f)?
Parliament
could
have
limited
the
definition
of
earned
income
to
wages,
salaries
and
other
remuneration,
including
gratuities,
received
by
the
person
in
respect
of,
in
the
course
of
or
by
virtue
of
offices
and
employments.
If
the
respondent's
reasoning
is
taken
to
the
limit,
Parliament
could
even
have
excluded
income
earned
during
vacations
from
the
definition
of
earned
income.
I
am
forced
to
conclude,
therefore,
that
Parliament
did
not
rule
out
situations
where
the
person
receives
benefits
in
respect
of,
in
the
course
of
or
by
virtue
of
employment
that
he
still
holds,
without
being
physically
present
at
the
work
place,
to
the
extent
that
the
expenses
claimed
were
incurred
to
perform
the
duties
of
the
employment.
In
a
case
such
as
this
we
must
analyze
the
child
care
expenses
claimed
and
determine
whether
they
were
related
to
the
employment.
I
have
concluded
that
the
expenses
claimed
in
this
appeal
were
incurred
to
enable
the
appellant
to
perform
the
duties
of
her
employment.
Counsel
for
the
respondent
raised
the
question
of
the
interpretation
to
be
given
to
the
provisions
of
the
Act.
In
this
regard
I
should
quote
from
the
decision
of
Dickson,
C.J.
of
the
Supreme
Court
of
Canada
in
Bronfman
Trust
v.
The
Queen,
[1987]
1
S.C.R.
32;
[1987]
1
C.T.C.
117;
87
D.T.C.
5059,
at
page
128
(D.T.C.
5066-67;
S.C.R.
52-53)?
I
acknowledge,
however,
that
just
as
there
has
been
a
recent
trend
away
from
strict
construction
of
taxation
statutes
.
.
.,
so
too
has
the
recent
trend
in
tax
cases
been
towards
attempting
to
ascertain
the
true
commercial
and
practical
nature
of
the
taxpayer's
transactions.
This
is,
I
believe,
a
laudable
trend
provided
it
is
consistent
with
the
text
and
purposes
of
the
taxation
statute.
Assessment
of
taxpayers'
transactions
with
an
eye
to
commercial
and
economic
realities,
rather
than
juristic
classification
of
form,
may
help
to
avoid
the
inequity
of
tax
liability
being
dependent
upon
the
taxpayer's
sophistication
at
manipulating
a
sequence
of
events
to
achieve
a
patina
of
compliance
with
the
apparent
prerequisites
for
a
tax
deduction.
I
believe
that
if
I
allow
the
deduction
claimed
by
the
appellant,
I
am
taking
into
account
the
economic
realities
facing
a
parent
who
employs
a
babysitter,
and
I
feel
that
my
interpretation
is
consistent
with
both
the
wording
and
the
object
of
the
tax
legislation.
The
object
of
this
legislation
is,
without
any
doubt,
to
enable
parents
who
work
to
deduct
child
care
expenses.
It
may
happen
that
parents
are
unable
to
dismiss
a
babysitter
or
interrupt
day
care
services
not
merely
for
personal
reasons
but
because
of
economic
reality.
If
a
babysitter
is
dismissed,
there
may
be
little
chance
that
she
can
be
rehired
at
the
end
of
the
maternity
leave.
If
a
child
is
removed
from
day
care,
it
may
lose
its
priority
on
the
waiting
list
and
it
may
not
be
possible
to
have
it
re-admitted
to
the
day
care
at
the
desired
time.
This
does
not
create
the
desirable
permanence
and
quality
of
care
for
children
that
working
parents
need
to
enable
them
to
perform
their
own
jobs.
In
the
circumstances,
these
expenses
were
not
incurred
for
personal
purposes
but
for
purposes
of
employment.
The
appeal
is
allowed
without
costs.
Appeal
allowed.