Date: 19980119
Docket: 97-927-IT-I
BETWEEN:
ÉMILE POULIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Lamarre Proulx, J.T.C.C.
[1] The appellant is appealing an assessment by the Minister
of National Revenue (“the Minister”) for the 1995
taxation year.
[2] The issue is whether the appellant is entitled to backward
average a $101,415 income replacement indemnity. For reasons we
shall see below, the inclusion of that amount in computing the
appellant’s income has no effect on his taxable income but
does require him to repay all of his old age security
benefits.
[3] In making the assessment under appeal, the Minister relied
on the facts described as follows in paragraph 8 of the Reply to
the Notice of Appeal:
[TRANSLATION]
(a) according to the T5007 slip issued by the Commission de la
santé et de la sécurité du travail du
Québec (hereinafter “the CSST”), the appellant
received a $101,415 income replacement indemnity in 1995;
(b) that $101,415 was included in computing the
appellant’s income for the 1995 taxation year, the year it
was received;
(c) the appellant repaid the Régie des rentes du
Québec $20,667 in 1995;
(d) that $20,667 is deductible in computing the
appellant’s net income for the 1995 taxation year, the year
it was repaid;
(e) during the 1995 taxation year, the appellant received a
$4,690 old age pension;
(f) the appellant’s net income before adjustments for
the 1995 taxation year was $107,399 for the purposes of
calculating the old age security benefits repayment;
(g) for the 1995 taxation year, $4,690 was added as a social
benefits repayment in computing the appellant’s total tax
payable and was deducted as a social benefits repayment in
computing his net income, as follows:
(i) net income before adjustments $107,399
minus: base amount 53,215
54,184
(ii) the repayment is equal to the lesser of the following
amounts:
old age security benefits $4,690
or
54,184 x 15% $8,128
[4] The appellant denied subparagraph 8(a) of the Reply. He
admitted subparagraphs 8(b), (c) and (e) thereof. Although he
denied said subparagraph 8(a), we shall see that the evidence
shows it to be accurate.
[5] Exhibit A-3 is a letter from the Commission de la
santé et de la sécurité du travail
(“the CSST”) dated January 21, 1997, which explains
the amounts paid and the reasons they were paid:
[TRANSLATION]
Cheque for $61,263.03 issued on June 27, 1995
Income replacement indemnity
·
$2,013.30 for the period from December 2 to 31, 1991
·
$24,704.01 for the period from January 1 to December 31, 1992
·
$25,693.50 for the period from January 1 to December 31, 1993
·
$21,383.76 for the period from January 1 to December 31, 1994
·
$7,629.76 for the period from January 1 to June 8, 1995
* or a total of $81,424.33 for the overall period from
December 2, 1991, to June 8, 1995
·
Out of that amount, $20,161.30 was repaid directly to the
Régie des rentes du Québec for the period from
March 1, 1992, to April 14, 1994.
·
The worker therefore received the difference: i.e.
$81,424.33 - $20,161.30 = $61,263.03
Cheque for $12,539.35 issued on June 27, 1995
Interest on income replacement indemnity
covering the period from November 22, 1991, to June 29,
1995.
[6] Exhibit A-2 contains, inter alia, Form T5007,
the statement of benefits issued by the CSST. According to that
statement, $101,415.79 in workers’ compensation was paid to
the appellant.
[7] Since Exhibit A-3 referred to amounts of $81,424.33
and $12,539.35 rather than the $101,415.79 stated on the
above-mentioned T5007 slip, the Court asked the agent for
the respondent to seek an explanation of the difference from the
CSST. The CSST wrote to the appellant on November 14, 1997, and
provided the following explanation:
[TRANSLATION]
As stated in Paul Dussault’s letter of January 21, 1997,
you received $81,424.33 for the period from December 2, 1991, to
June 8, 1995.
To that amount must be added the amounts you received from
June 9 to December 31, 1995, which total approximately
$7,448.96. Thus, you received $101,415.79 in all, as stated on
your T5007 slip issued by the CSST for 1995.
[8] The Minister included the amount of $101,415 in computing
the appellant’s 1995 income under paragraph 56(1)(v)
of the Income Tax Act (“the Act”) and
deducted that amount in computing his taxable income under
subparagraph 110(1)(f)(ii) of the Act. The $20,667
that the appellant repaid the Régie des rentes du
Québec in 1995, as stated in Exhibit A-3 above, was
deducted in computing the appellant’s income in accordance
with paragraph 60(n) of the Act.
[9] The Minister determined that the tax payable on the old
age security benefits under subsections 180.2(1) and (2) of Part
I.2 of the Act was $4,690, the amount received by the
appellant as old age security benefits. That old age security
benefits repayment was deducted in computing the
appellant’s income under paragraph 60(w) of the
Act. This last fact has no bearing on the outcome of the
issue and is being added solely to give a complete picture of the
assessment.
[10] The appellant took offence at the fact that the
workers’ compensation deducted in computing his taxable
income was nevertheless included in computing his income for the
purposes of the old age security benefits calculation. He argued
that such compensation is based on the employer’s net wages
and not the employer’s gross wages. Moreover, and this was
what he argued most strongly, the amounts in question correspond
to amounts owed for previous years and should be included in
computing his income for those years.
[11] Subsection 180.2(1) of the Act reads as
follows:
(1) Every individual (other than a trust) shall pay a tax
under this Part for each taxation year that is equal to the
lesser of
(a) the total of all amounts each of which is the
amount of any pension, supplement or spouse’s allowance
under the Old Age Security Act included in computing the
individual’s income under Part I for the year, to the
extent that no deduction is allowed under paragraph 60(n)
for the year or any subsequent taxation year in respect of that
amount, and
(b) 15% of the amount, if any, by which
(i) the amount that would be the individual’s income
under Part I for the year if no amount were
(A) deductible under paragraph 60(w), or
(B) included in respect of a gain from a disposition of
property to which section 79 applies
in computing that income
exceeds
(ii) $50,000.
[12] For 1995, the $50,000 threshold referred to in paragraph
180.2(1)(b) of the Act (cited above) was indexed to
$53,215. According to that paragraph, the individual’s
income which is taken into account is his “income”,
not his “taxable income”. Under the Act,
income and taxable income are different concepts and are governed
by specific legislative provisions. “Income” is
computed under Division B of Part I of the Act, while
“taxable income” is computed under Division C of the
Act, entitled “Computation of Taxable Income”.
Paragraph 110(1)(f) is in Division C of Part I of the
Act. Although the Act does not say why
workers’ compensation paid is not included in computing
taxable income, one may think that this is partly so in order to
take account of the fact that an income replacement indemnity is
normally computed on the basis of the employee’s income
after source deductions.
[13] The same reasons would therefore not exist for excluding
workers’ compensation in computing income for the purposes
of old age security benefits, since such benefits are based on
need, determined on the basis of an income threshold, and since
such compensation really is part of the appellant’s
income.
[14] In any event, it is the statute as written that must be
interpreted. Paragraph 56(1)(v) of the Act
reads as follows:
56: Amounts to be included in income for year — (1)
Without restricting the generality of section 3, there shall
be included in computing the income of a taxpayer for a taxation
year,
. . .
(v) Worker’s compensation — compensation
received under an employees’ or workers’ compensation
law of Canada or a province in respect of an injury, a
disability or death;
(emphasis added)
[15] The concept of the receipt of an amount and the relevant
taxation year has already been considered by the courts; I am
referring, inter alia, to Vegso v. M.N.R., 56 DTC
173, M.N.R. v. Claude Rousseau, 60 DTC 1236, and the
decision cited by the agent for the respondent, Archambault v.
M.N.R., 88 DTC 1722. The courts have been consistent on this
point. When the legislation provides that an amount received must
be included in computing income for the year, the amount must be
included in the year it is received, not the years for which it
was paid.
[16] In conclusion, the Minister correctly computed the
appellant’s 1995 income by including the $101,415 therein
and correctly assessed the appellant under Part I.2 of the
Act when he determined that the appellant should pay a tax
equal to the benefits received in 1995 under the Old Age
Security Act.
[17] Accordingly, the appeal is dismissed.
Signed at Ottawa, Canada, January 19, 1998.
“Louise Lamarre Proulx”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
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