Date: 20010207
Docket: 2000-2231-IT-I
BETWEEN:
ANNA C. WHALEN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Campbell, J.
[1]
The Appellant appeals from an assessment for her 1998 taxation
year. In computing income for the 1998 taxation year, the
Appellant deducted the amount of $5,542.00 as childcare expenses.
The Minister of National Revenue disallowed the deduction on the
basis that the Appellant was the common law spouse of and resided
with Dan Welsh, that Mr. Welsh was a supporting person as defined
in subsection 63(3) of the Income Tax Act (the
"Act") and that Mr. Welsh's income in
1998 was deemed to be zero pursuant to paragraph 3(f) of
the Act. Because of subsection 3(f), the
Appellant's income exceeded that of her common law spouse.
Dan Welsh did not fall within any of the provisions enumerated in
subsection 63(2), which might have otherwise eliminated the
effect of the Appellant's greater income in respect to
eligibility for claiming the deduction.
[2]
The issue here is whether the Appellant is entitled to deduct the
childcare expenses of $5,542.00 pursuant to section 63 of the
Act when her earned income exceeded that of her common
spouse and when none of subsection 63(2) provisions applied to
the common law spouse, Mr. Welsh.
[3]
The Appellant and Dan Welsh are the parents of one child born in
1997. The Appellant and Mr. Welsh resided together during the
relevant period. The Appellant's net income in 1998 exceeded
that of Mr. Welsh, who was self-employed in a newer business and
unable to draw an income from his business. The Appellant was the
sole financial support for the family. It was from the
Appellant's income that childcare expenses were paid and yet
she was denied the deduction.
[4]
Section 63 of the Act is designed to provide relief for
taxpayers that incur childcare expenses in order to work, carry
on a business or undertake training activities. Subsection 63(1)
permits a deduction for childcare expenses paid by a taxpayer in
the year on account of an eligible child or a deduction by a
supporting spouse of an eligible child. The definition of
"supporting person" which is relevant to this case is
contained in subsection 63(3). Mr. Welsh is quite clearly the
"supporting person" here. That being the case, the
Appellant would be permitted the deduction for childcare expenses
if the supporting person falls within the scope of subsection
63(2) of the Act. Mr. Welsh, however, does not fall within
any of the provisions of this subsection. This means that the
Appellant cannot claim the deduction and it follows that neither
parent, in this instance, can claim the benefit of the deduction.
Section 63 does not specifically define income and therefore
paragraph 3(f) of the Act applies. Paragraph
3(f) specifically deems negative total income for the year
to be an amount equal to zero. The case law has treated such an
amount as positive income in an amount equal to zero. Subsection
3(f) deems the negative total income reported by Mr. Welsh
to be an amount equal to zero and case law has treated this
amount as positive income. This means that Mr. Welsh's income
is lower than the income of the taxpayer, the Appellant. It is
the supporting person with the lower income who is entitled to
the deduction in computing income. As a result under subsection
63(2) the supporting person, Mr. Welsh, is entitled to the
deduction but it is of no use to him.
[5]
The Appellant quoted the cases of The Queen v McLaren, 90
DTC 6566 (Fed. T.D.) & Fiset v. M.N.R., 88 DTC 1226
(T.C.C.). The cases, decided in 1990 and 1988, respectively, held
that the word "income" meant a positive amount and not
zero or no income. To overcome the decisions of these cases,
section 3 of the Act was amended by the addition of
subsection 3(f). This amendment ensured that the
person with the lower income, whether it be zero or an actual
negative amount, when calculated according to section 3, is
deemed to have income for that year in an amount equal to zero.
And of course under subsection 63(2), the other spouse's
positive income is then clearly greater than that of the spouse
with income deemed at zero.
[6]
Subsection 3(f) is clear -- the supporting person with the
income of nil is the one who must claim the deduction. While I
agree with the Appellant that this creates an unfair result, the
provisions of the Act are clear, as is the case law, and
unfortunately the Appellant is bound by the strict wording of the
legislation. The result is not only unfair but also unreasonable.
Due to the Appellant's circumstances she is denied the
benefit contemplated by section 63 despite the family unit having
two working parents.
[7]
During the proceedings, the Appellant, for the first time, raised
section 15 of the Canadian Charter of Rights and Freedoms. She
alleged that subsections 3(f) and 63(2) violated section
15 of the Charter. The Appellant's Notice of Appeal had not
raised this issue and of course she had not complied with the
notice requirements of section 57 of the Federal Court Rules.
Counsel for the Respondent objected to the jurisdiction of the
Court to hear the Charter issue on the grounds that it was not
properly before the Court due to the lack of compliance with the
notice requirements of section 57. Counsel did not object on the
basis that the Notice of Appeal had never raised this issue.
[8]
The practice of this Court has been to hear argument when a
constitutional issue is raised and there has been no compliance
with section 57. If this Court were to find some merit in the
argument, then the matter would be adjourned for section 57
compliance. The case, Langlois v. R., 1999 CarswellNat
1695, a Federal Court of Appeal decision, is authority in support
of this practice. I overruled the Respondent's objections and
permitted the Appellant to raise the Charter issue at the
hearing. Counsel for the Respondent requested and was given an
opportunity to respond to the Charter argument by written
submission.
[9]
After reviewing the Appellants' arguments raised at the
hearing together with the further written submissions of both the
Appellant and the Respondent, I must conclude that the
Appellant's constitutional argument must fail. Surprisingly,
counsel for the Respondent in his written submission did not
address Appellant's Charter argument. Instead, he quoted
section 57 and reiterated that I had no jurisdiction to hear such
a constitutional issue where there is non-compliance with section
57. He referred to R. v. Fisher [1996]
2 C.T.C. 103 (FCA) and Nelson v. R.,
2000 CarswellNat 2038 (FCA). My only comment is that there are
obviously two lines of thinking in the Federal Court and my own
preference, in terms of a common sense approach, is the
Langlois case. I believe the decision of the Federal Court
in Nelson is quite clearly incorrect and could only result
in longer delays in hearing Appellants' cases. Counsel's
argument that this Court lacks jurisdiction to hear the
constitutional argument displays a remarkable misunderstanding of
the meaning of the word jurisdiction. The Nelson decision
ignores the plain meaning of subsection 57(1) of the Federal
Court Act. That subsection provides only that an Act
or regulation shall not be adjudged to be invalid,
inapplicable or inoperable unless the requisite notice is given.
It does not prevent this Court from hearing the argument. In
permitting the request of Respondent's counsel to file
submissions on the Appellant's charter argument, I expected
more than a mere reiteration of his argument of section 57 notice
requirements. However of far greater concern to me is the
omission by Counsel to refer me to the alternate practice as
confirmed in Langlois. It is highly improper for counsel,
as an officer of the Court, to refrain from referring the Court
to relevant authorities that do not support his or her
position.
[10] The
Appellant's argument is that subsection 3(f) and
section 63, in denying her the childcare expense deduction,
resulted in a disadvantage to her that amounts to a breach of her
rights under subsection 15(1) of the Charter. She argued that
these provisions created a situation where she, the income
earner, and her common law spouse who was attempting to succeed
in a business, that did not yield income, were treated unfairly.
In being denied this deduction she argued they were treated
differently than a family unit where both parents were
productively engaged in profitable employment. It is my view that
the differential treatment created by subsection 3(f) of
the Act is not based on one of the enumerated grounds set
out in subsection 15 of the Charter or grounds analogous thereto.
Subsection 3(f) does not create distinctions on personal
characteristics, and does not offend the Appellant's dignity,
intrinsic worthiness or self-respect. Nor does it bring into play
the purpose of subsection 15(1) in respect to remedying certain
societal problems such as prejudice, stereotyping and historical
disadvantage. The section in the Act is designed to
provide a benefit to working parents for amounts expended on
childcare expenses. The fact that some members of the group
derive a greater benefit from the legislation than others, does
not itself trigger a violation of section 15 of the Charter.
Judge Bowman summarized it best in Hover v. M.N.R., 93 DTC
98 at page 100, when he stated:
... There is a world of difference between persons who are
accorded unequal treatment under the law because of personal
characteristics over which they have no control such as race,
colour, sex, age, citizenship or mental or physical disability
and persons who voluntarily choose a form of economic activity
which carries with it a mix of fiscal advantages and
disadvantages. The latter do not, in my view, form a discrete or
insular minority ... It is not open to such persons to invoke the
Charter ...
While the application of subsection 3(f) creates a
deplorable financial effect where one parent earns income but the
other's business does not, the remedy cannot be advanced
through a subsection 15(1) argument. It is through Parliament
that a remedy must be found. I am not persuaded that subsection
3(f) and section 63 of the Act violate the
Appellant's equality rights guaranteed in section 15 of the
Charter.
[11] With
regret, I must dismiss the appeal.
Signed at Ottawa, Canada, this 7th day of February 2001.
"Diane Campbell"
J.T.C.C.
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