Date: 20020529
Dockets: A-654-99, A-655-99
Neutral citation: 2002 FCA 241
CORAM: DÉCARY J.A.
ROTHSTEIN J.A.
MALONE J.A.
Docket A-654-99
BETWEEN:
KICHIRO TSUKADA
Applicant
and
HER MAJESTY THE QUEEN
Respondent
Docket A-655-99
BETWEEN:
KICHIRO TSUKADA
Applicant
and
HER MAJESTY THE QUEEN
Respondent
Heard at Calgary, Alberta, on May 29, 2002.
Judgment delivered from the Bench at Calgary, Alberta, on May 29, 2002.
REASONS FOR JUDGMENT BY: ROTHSTEIN J.A.
REASONS FOR JUDGMENT
(Delivered from the Bench at Calgary, Alberta,
on May 29, 2002)
ROTHSTEIN J.A.
[1] This is a judicial review of a decision of Bell T.C.J. which dismissed the applicant's appeal in the Tax Court. The issue involves the interpretation of the Canada-Japan Income Tax Convention 1986.
[2] The applicant, a resident of Canada, received pension income from Japan. He paid tax on that pension income in Japan. He says that under the Convention, he should not be taxed on that
pension income in Canada.
[3] Bell T.C.J. rejected that argument and we must do so as well.
[4] Article 20.1 of the Convention provides that income of a resident of Canada, wherever arising, shall be taxable only in Canada. Article 20.3 provides that, notwithstanding Article 20.1, Japanese income of a Canadian resident may be taxed in Japan. Article 21.1(a) provides that, in order to avoid double taxation, the tax payable in Japan shall be deducted from any Canadian tax payable on that income.
20.1 Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that Contracting State.
20.3 Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Convention and arising in the other Contracting State may be taxed in that other Contracting State.
21.1(a) Subject to the existing provisions of the laws of Canada regarding the deduction from tax payable in Canada of foreign tax paid and to any subsequent modification of those provisions which shall not affect the general principle hereof, and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Japan on profits, income or gains arising in Japan shall be deducted from any Canadian tax payable in respect of such profits, income or gains.
[5] The applicant concedes that on the words of Article 20 alone, it is apparent that all income of a Canadian resident shall be taxable in Canada while income arising in Japan may be taxed by Japan. However, by reference to other provisions of Convention which use the word "also" when tax is to be payable in more than one country, he argues that Article 20, which does not use the word "also", should not be read to provide for tax to be payable in more than one country.
[6] We cannot agree with this interpretation. Having regard to context and the object and purpose of the Convention (see Article 31 of Vienna Convention on the Law of Treaties, 23 May 1969, [1980] Can T.S. No. 37), the provision here cannot be interpreted as the applicant wishes. As the applicant concedes, Article 20, on its face, is clear. Tax shall be payable in Canada. It may be payable in Japan. That the word "also" was not used in Article 20.3 is of no consequence. Even without it, there is no possible way in which to interpret Article 20 as precluding tax on worldwide income of a Canadian resident in Canada when tax may also be payable in another country.
[7] The applicant's second argument is with respect to Article 21.1(a). He says that because the tax credit for Japanese tax paid on Japanese income is referable only to Canadian tax payable on that same income, that income must be treated separately from the applicant's other Canadian income. In effect, he is arguing that the applicant should be entitled to avoid higher tax rates under the progressive basis of the Canadian income tax structure by treating his Japanese pension income separately and calculating Canadian tax payable on it as if that was the applicant's only income in Canada. The basis for this argument is the phrase in Article 21.1(a), "tax payable in Japan on profits, income or gains arising in Japan shall be deducted from any Canadian tax payable in respect of such profits, income or gains". The applicant says that the concluding words "in respect of such profits, income or gains" requires the separate treatment of the Japanese income for Canadian tax payers. Otherwise, they would be unnecessary.
[8] With respect, the applicant has misinterpreted Article 21.1(a). The words "in respect of such profits, income or gains" are necessary to ensure that the tax credit for taxes payable on Japanese income in Japan is referable only to Canadian taxes on that Japanese income. In other words, the Japanese tax credit is not to be used to offset taxes payable in Canada on non-Japanese income.
[9] The applicant does not contend that the Convention alters domestic Canadian tax laws. That being the case, his Japanese income is to be treated as any other income under Canadian tax law, subject only to a credit being applicable for any taxes paid on that income in Japan. There is no basis for treating the Japanese income as if it were the applicant's only income so as to treat the applicant as two persons; one, as a person in receipt of Canadian income, and another, as a person in receipt of Japanese income.
[10] The application will be dismissed with one set of costs.
"Marshall Rothstein"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKETS: A-654-99 and A-655-99
STYLE OF CAUSE: Kichiro Tsukada and Her Majesty the Queen
PLACE OF HEARING: Calgary, Alberta
DATE OF HEARING: May 29, 2002
REASONS FOR
JUDGMENT: ROTHSTEIN J.A.
DATED: May 29, 2002
APPEARANCES:
Mr. Guy Lacourciere FOR THE APPELLANT
Mr. John O'Callaghan FOR THE RESPONDENT
SOLICITORS OF RECORD:
Lacourciere Cervini FOR THE APPELLANT
Barristers & Solicitors
Mr. Morris Rosenberg FOR THE RESPONDENT
Deputy Attorney General of Canada
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKETS: A-654-99 and A-655-99
STYLE OF CAUSE: Kichiro Tsukada v. Her Majesty the Queen
PLACE OF HEARING: Calgary, Alberta
DATE OF HEARING: May 29, 2002
REASONS FOR JUDGMENT OF THE COURT: (Décary, Rothstein & Malone JJ.A.)
RENDERED FROM THE BENCH BY: Rothstein J.A.
APPEARANCES:
Mr. Guy Lacourcière FOR THE APPELLANT
Mr. John O'Callaghan FOR THE RESPONDENT
SOLICITORS OF RECORD:
Lacourcière Cervini FOR THE APPELLANT
Calgary, Alberta
Mr. Morris Rosenberg
Deputy Attorney General of Canada FOR THE RESPONDENT
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