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Citation: 2003TCC189
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Date: 20030403
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Docket: 2002-2983(IT)I
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BETWEEN:
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MABEL J. NICHOLAS,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Little, J.
A. FACTS
[1] The Appellant's former husband
died in 1966 in an airplane crash while he was working for his
employer.
[2] For a short while the Appellant
received a "survivor" pension from the Workers'
Compensation Board of British Columbia ("WCB").
[3] After the Appellant married her
current husband the survivor pension that was being paid to her
by the WCB was discontinued.
[4] In 1995-96 the Supreme Court of
British Columbia heard an appeal from a person who had been
denied survivor pension benefits from the WCB. In the
"other" case the British Columbia Supreme Court held
that the denial of survivor pension benefits because of
remarriage was discriminatory and in violation of the Charter
of Rights and Freedoms. As a result of this court decision
the Appellant was advised that she was entitled to receive the
unpaid portion of the survivor pension benefits from the WCB that
had been discontinued at the time of the Appellant's
remarriage.
[5] The Appellant received a lump sum
payment from the WCB in 1997.
[6] The lump sum payment of
$129,526.00 was included in the Appellant's net income for
the 1997 taxation year pursuant to section 56 of the Income
Tax Act (the "Act").
[7] For the purpose of determining
taxable income the Appellant was allowed to deduct the lump sum
payment of $129,526.00 pursuant to section 110 of the
Act.
[8] Although the lump sum payment of
$129,526.00 was deducted in determining the Appellant's
taxable income the net effect of the original inclusion of the
lump sum payment was to reduce the benefit payable to the
Appellant under the Old Age Security Act and the age
credit provided under subsection 118(2) of the Income Tax
Act.
[9] The Appellant attempted to file a
Notice of Appeal to the Notice of Reassessment issued for the
1997 taxation year.
[10] The Minister of National Revenue (the
"Minister") maintains that the Notice of Appeal filed
for the 1997 taxation year is invalid because the Appellant did
not file a Notice of Objection to the final Notice of
Reassessment issued for the 1997 taxation year.
[11] In the year 2001 the Appellant received
a payment in the amount of $12,644.04 from the WCB.
[12] In reporting her income for the 2001
taxation year the Appellant did not report the amount of
$12,644.04 received from the WCB.
[13] The Minister issued a Notice of
Assessment for the 2001 taxation year on the 8th day of April
2002. In the Notice of Assessment the Minister included the
benefit of $12,644.04 received from the WCB in determining the
Appellant's net income and allowed a deduction of $12,644.04
in determining the Appellant's taxable income.
B. ISSUES TO BE
DECIDED
1. Is the Notice of Appeal
that was filed by the Appellant for the 1997 taxation year a
valid Notice of Appeal?
2. Is the Notice of
Assessment that was issued for the 2001 taxation year
correct?
C. ANALYSIS
(i) Re: 1997 Taxation
Year
[14] The evidence shows that there were four
Notices of Assessment or Notices of Reassessment issued by the
Minister for the Appellant's 1997 taxation year. The last
Notice of Reassessment for the 1997 taxation year was issued on
the 5th day of October 1998. The Act provides that if
the Appellant wishes to dispute a Reassessment the Appellant must
file a Notice of Objection within 90 days of the date of the
Notice of Reassessment. In this situation the Appellant should
have filed a Notice of Objection within 90 days of October 05,
1998, i.e. sometime prior to January 03, 1999.
[15] The Act also provides that the
Appellant could have applied for an extension of time within
which to file a Notice of Objection if the application to extend
the time is made within one year plus the 90 days from the date
the Notice of Reassessment is issued (i.e. one year plus 90 days
from October 05, 1999 or prior to January 03, 2000).
[16] The Appellant did not file a Notice of
Objection to the Reassessment issued for the 1997 taxation year,
nor did she apply for an extension of time.
[17] The only document filed by the
Appellant in connection with the Notice of Reassessment issued on
October 05, 1998 for the 1997 taxation year was the Notice of
Appeal that was filed with the Court on July 30, 2002.
[18] Counsel for the Respondent filed a
Motion asking that the Notice of Appeal filed for the 1997
taxation year be dismissed because a Notice of Objection was not
filed by the Appellant within the time specified in the
Act.
[19] Since the Appellant did not comply with
the specific provisions in the Act for filing a Notice of
Objection, the Motion of the Respondent is granted and the Notice
of Appeal purportedly filed for the 1997 taxation year is
quashed.
(ii) The Validity of the Notice
of Assessment
Issued for the 2001 Taxation Year
[20] The agent for the Appellant argued that
since the amount of $12,644.04 received from the WCB was excluded
from the Appellant's income the Appellant should not suffer a
reduction in the benefits received under the Old Age Security
Act or a reduction of the age credit in the 2001 taxation
year.
[21] Subparagraph 56(1)(v) of the
Act provides as follows:
56. (1) Without restricting the generality of section 3,
there shall be included in computing the income of a taxpayer for
a taxation year
. . .
(v)
Compensation received under an employees' or workers'
compensation law of Canada or a province in respect of an injury,
a disability or death;
[22] This provision specifies that the
payment of $12,644.04 received by the Appellant from the WCB must
be included in income.
[23] Subparagraph 110(1)(f)(ii) of
the Act provides as follows:
110. (1) For the purpose of computing the taxable income
of a taxpayer for a taxation year, there may be deducted such of
the following amounts as are applicable:
. . .
(ii) compensation received under an employees' or
workers' compensation law of Canada or a province in respect
of an injury, disability or death, . . .
[24] In summary, compensation received under
a workers' compensation law of Canada or a province is
included in determining income and when income is refined into
taxable income compensation of this type is removed.
[25] In this case we are talking about two
types of entitlement - payments under the Old Age Security
Act and the age credit.
[26] Tax on Old Age Security is imposed
under Part 1.2 of the Act. The tax on Old Age Security is
triggered on a person's income, not their taxable income.
Because of these provisions the inclusion of the compensation
from WCB in the Appellant's income results in the
"clawback" of the Old Age Security payments received by
the Appellant.
[27] I believe that the Notice of
Reassessment issued for the 2001 year is correct on this issue
with respect to Old Age Security payments.
[28] The other entitlement that has been
questioned by the Appellant for the 2001 taxation year is the age
credit provided for in subsection 118(2) of the
Act.
[29] Subsection 118(2) provides that an
individual who is 65 years of age or older in the taxation year
(the Appellant is 76 years old) may claim the appropriate
percentage of $3,236.00 as an age credit.
[30] In determining whether a taxpayer is
entitled to receive an age credit the Act refers to net
income as opposed to taxable income.
[31] In Eric John v. The Queen, 98
DTC 1324 my colleague, the Honourable Judge Sarchuk issued a
decision involving the application of subsection 118(2). In
that case, Judge Sarchuk said at page 1327:
Subsection 118(2) was further amended by S.C.
1995, c. 3, s. 33(1) applicable to the 1994 and subsequent
taxation years to incorporate what was effectively a clawback of
a portion of the age credit. The amendment was specifically
enacted to reduce the age credit as a taxpayer's income
increases to the point where at a certain level of income, a
taxpayer would no longer be entitled to the credit although he
might be 65 years of age in that particular taxation year. As
counsel for the Respondent observed, the intent of Parliament in
amending this provision was based on the obvious fact that not
each person who attained the age of 65 necessarily required
relief from tax otherwise payable by way of a tax credit and that
therefore, relief would only be granted where the financial
circumstances required. With that intent in mind, it is
reasonable to calculate the age credit on total income as opposed
to taxable income.
In my view, although the effect of the
calculation might appear as though the foreign pension were being
taxed, the Act does not impose tax by virtue of the
provisions in subsection 118(2). It does no more than realize the
reduction of a social benefit, i.e. the age tax credit, for those
taxpayers "who, because of their higher incomes, have a
lesser need of them". . . .
[32] The Notice of Assessment "clawed
back" the age credit claimed by the Appellant. In my
opinion, the Notice of Assessment for the 2001 taxation year is
correct on this point.
[33] I regret that I cannot grant any relief
to the Appellant. However, it is my responsibility to interpret
the law. I do not have the authority to amend the law.
[34] The appeal is dismissed, without
costs.
Signed at Vancouver, British Columbia, this 3rd day of April
2003.
J.T.C.C.
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