Cooper v. R., [1996] 1 CTC 2075, [1995] 1 CTC 2928

Rowe D.J.T.C.C.:— The appellant appeals from an assessment of income tax for his 1991 taxation year.

The appellant retired in July 1990 from his employment with Canadian Airlines International Ltd. In 1990 he was employed by his employer for seven months. The appellant was a contributing member of the Canadian Airlines International Ltd. pension plan for pilots in the 1990 taxation year. Thereafter contained in the reply were certain other assumptions of fact with which the appellant had no quarrel, specifically the paragraphs (f), (g), (h), (o) and (p), while certain other conclusions drawn in those paragraphs of the reply were not agreed upon by the appellant.

The appellant in his evidence explained his calculation of the ultimate RRSP entitlement for that particular taxation year and filed certain exhibits relating to his method of calculation, and also filed certain correspondence flowing between himself and Revenue Canada back and forth on this particular point. Suffice it to say that the mechanism that must be utilized here is incredibly complex and involves particular application of the Income Tax Regulations dealing with matters such as a calculation of the appellant’s normalized pension, relationship to remuneration, another calculation that must be gone through ultimately resulting in a determination as to what was the appellant’s RRSP dollar limit for 1991 in relation to a contribution that could be made.

The Minister’s position is that he correctly calculated the appellant’s pension adjustment pursuant to sections 8301 and 8302 of the Regulations and section 146 of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the “Act”) and therefore properly restricted the appellant’s deduction of RRSP contributions pursuant to paragraph 60(i) in subsection 146(5) of the Act to $3,497 for the 1991 taxation year.

It appears from the reply and also from correspondence that was filed as Exhibit A-l that the Minister’s calculation was predicated on the fact that paragraph 8302(3)(g) of the Regulations did not apply to an amount of $1,715, which is an amount that was based on the pension plan to which the appellant belonged and is an amount which comes into play as a consequence of the application of the relevant regulations when it comes to calculating the amount of the pension entitlement.

Despite the complexity of the calculations and the mechanisms used by the respondent and by the appellant in the course of his evidence, it appears as though the dispute can be narrowed down to the different interpretations by the appellant and the Minister as it relates to this particular paragraph 8302(3)(g) of the Regulations. The view taken by the Minister as expressed by a Mr. Asher of Revenue Canada, writing to the appellant on July 29, 1994, this letter having been filed as Exhibit A-l, was expressed as follows:

It appears that the difference between your calculation and ours revolves around the interpretation specifically of paragraph 8302(3)(g) of the Regulations. In your calculation you have reduced the $1,715 amount by two per cent of ($86,111 minus $63,889) whereas in our calculation we did not. We interpret the words “where the amount of the individual’s lifetime retirement benefits depends on the individual’s remuneration to the extent that they can reasonably be considered to be in respect of the following range of annual remuneration where excluded” to not apply to the $1,715 as this amount is not based upon remuneration. In calculating your pension under your pension plan two amounts must be determined. One amount is based upon remuneration, that is two per cent of earnings, and the other amount is an arbitrary amount of $1,715. Therefore, our interpretation is that the first amount fits into paragraph 8302(3)(g) whereas the second does not. The $1,715 amount fits into subsection 8302(3) by way of the wording at the start of that subsection, i.e.,

The normalized pension of an individual under a defined benefit provision of a registered pension plan at the end of a particular calendar year is the amount (expressed on an annualized basis) of lifetime retirement benefits that would be payable under the provision to the individual immediately after the end of the particular year.

Thus paragraph 8302(3)(g) does not apply to the $1,715 amount.

So it can be seen then that the difference between the appellant’s and the respondent’s position and the complex calculations that are required stem from this different view of whether or not that particular portion of the Regulations is or is not operative.

The appellant in his evidence explained that under the particular pension plan to which the pilots belonged, there, in effect, was a cap built into the scheme whereby at $94,420 a year annual salary, the $1,715 figure for pension purposes was reached. The effect of this is that, notwithstanding salaries substantially in excess of $94,420, the pension plan was predicated on that maximum amount, being the sum of $1,715. As a consequence, it seems therefore, the Minister then took the position that that particular amount was not therefore an amount upon which the appellant’s lifetime retirement benefits depended on the basis of remuneration.

I have difficulty with that concept because, merely because it has a limiting effect, did not mean within the wording of that particular portion of the Regulations, that the individual’s lifetime retirement benefits didn’t, in fact, depend upon the individual’s remuneration. His annual remuneration, being the amount actually received in income by him for that particular year — that comes into play in these calculations - was an amount which fit within the ranges set forth in the particular Regulation 8302(3)(g), expressed on an annualized basis for the purpose of this particular section would of course lead to the figure otherwise referred to in the reply and in the notice of appeal of somewhat in excess of $152,000.

It seems to me that on a plain reading and applying the appropriate rules of construction to 8302(3)(g) of the Regulations supports the approach taken by the appellant in undertaking the particular calculations that he did and in explaining the mechanism utilized by him in the course of his evidence. I’ve attempted in the course of listening to this appeal to get away from the complex mathematical calculations involving fractions and formulas and certain other indicia that have to be plugged in and have attempted to resolve it on the basis of what I identify to be the focal point of the dispute.

Accordingly, therefore, I’m allowing the appeal and the Minister is directed to reassess the appellant for his 1991 taxation year on the basis that the appellant’s RRSP deduction for that taxation year will be increased to an amount of $5,830. The appellant also would be entitled to his costs.

Now Mr. Cooper, on these informal matters the costs when they are awarded basically revolve around and are designed toward the payment for a counsel fee and one thing and another. Now, you’re entitled to your costs within the rules. They are going to be probably extremely little but if you want them you’re entitled to them and you’ve got to figure them out and calculate them and file them and, you know, you’ll probably get your bus fare or something. So it’s up to you; if you want them you’re entitled under the rules in view of your success to have your costs.

MR. COOPER: Yes, My Lord. Thank you. In fact other than the time I’ve expended the costs are limited to the costs of photocopying various documents.

HIS HONOUR: That’s right.

MR. COOPER: It runs maybe to ten dollars total. I really don’t think it’s worth pursuing and I’ll waive the right.

HIS HONOUR: Okay. Appellant waives costs. Now, were you on the pension committee or something at Canadian Airlines, or what?

MR. COOPER: No, My Lord.

HIS HONOUR: So you went through all this —

MR. COOPER: Yes, I’ve spent a lot of time at it. I suppose I just have a picky mind, but I do object to being overtaxed and that’s what this was all about.

HIS HONOUR: But, I mean, the complexity from the standpoint of everybody who’s involved in the, not just the administration of your plan but in taking that and plugging it into certain entitlements and then plugging it in somewhere else, I mean, it’s a wonder in one sense that, from the Revenue Canada standpoint at least, they were able to focus in specifically as to where they didn’t agree with you —

MR. COOPER: Well, that wasn’t the case for a while.

HIS HONOUR: Because if you gave this stuff to 150 people I would suspect that if you, I don’t think you’d have more than three people that would be able to follow their way through the arcane calculations that are required. It’s horrendous.

MR. COOPER: I can see how it probably arose in the first place, with computer -

HIS HONOUR: And I can understand very easily if the majority of the population in the world thinks that I’m wrong, but at least I made a decision.

MR. COOPER: Thank you.

HIS HONOUR: Thank you.

Appeal allowed.