Alan Layton v. Her Majesty the Queen (Informal Procedure), [1995] 2 CTC 2408

Beaubier, J.T.C.C.:-These matters were heard together on common evidence by the consent of the parties at Vancouver, British Columbia, on February 1, 1995. They are appeals pursuant to the Informal Procedure of this Court. Alan Layton was the only witness.

The facts in Mr. Layton’s case adequately describe matters respecting the appeal in the Buchanan case. The Minister’s assumptions respecting Mr. Layton read:

8. In so assessing the appellant, the Minister made the following assumptions of fact:

(a) the appellant was an employee of Versatile shipyards;

(b) the appellant was one of the workers who were made redundant by Versatile shipyards;

(c) SWAP was set up in order to assist older workers who were unlikely to find alternative employment;

(d) during the 1993 taxation year the appellant received payments under SWAP for the period covering 1990, 1991, 1992 and 1993.

The appellant and Mr. Buchanan are men of modest means and had originally been led to believe, by promises of Canadian Government officials, that the money would be paid annually in 1990, 1991, 1992 and 1993. In fact all of it was paid in 1993. They appealed on the basis that the money should have been allocated over four years.

In 1993, Mr. Layton received $52,840.47 under the provisions of the Shipbuilders’ Workers Adjustment Program ("SWAP"). This was assessed by the Minister of National Revenue as taxable income in 1993. This amount also caused the appellant to repay a portion of his Old Age Security Pension and disentitled him to the Goods and Services Tax Credit from July 1, 1994 to June 30, 1995 under section 122.5 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the "Act").

The Minister included the SWAP payment as "other income" under subparagraph 56(l)(a)(vi) of the Income Tax Act which reads:

56(1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,

(a) any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,

(vi) except to the extent otherwiserequired to be included in computing the taxpayer’s income, a prescribed benefit under a government assistance program;

For these purposes, "prescribed" is defined in subsection 248(1) as meaning:

(b) in any other case, prescribed by regulation or determined in accordance with rules prescribed by regulation.

Neither Crown counsel nor the Court was able to find any regulations under the Income Tax Act, or any other regulations, respecting the SWAP payments. Thus the payment or benefit was not "prescribed" and so does not fall within subparagraph 56(l)(a)(vi).

The payment is not income from an office, employment, business or property. According to the evidence, it is a grant from the government which was paid to the taxpayer after Versatile shipyards was closed. While it is alleged that government officials made a promise, the workers did not give any reciprocal promise or undertaking. They were simply laid off when Versatile shipyards closed. No agreement was made with them to pay them for that, nor did any regulations specify the nature of the payment in question.

The Court adopts the decision of the Supreme Court of Canada in Fries v. The Queen, [1990] 2 C.T.C. 439, 90 D.T.C. 6662, which states:

LAMER, C.J. (Orally): The judgment of the Court will be delivered by Mr. Justice Sopinka.

SOPINKA, J. (Orally, for the Court): We are not satisfied that the payments by way of strike pay in this case come within the definition of “income...from a source" within the meaning of section 3 of the Income Tax Act. In these circumstances the benefit of the doubt must go to the taxpayers. The appeal is therefore allowed and the decision of the Tax Review Board is restored. The appellants are to have their costs throughout.

The appeals are allowed.

These matters are referred to the Minister of National Revenue for reconsideration and reassessment on the basis that the payment of $52,840.47 to Alan Layton in 1993 is not income and that the payment of $39,110.72 to Charles Buchanan in 1993 is not income.

Each appellant is awarded costs which are fixed at $50.00 apiece respecting out of pocket expenses for conducting the appeal.

Appeals allowed.