Gene Keyes v. Minister of National Revenue, [1989] 1 CTC 2157, 89 DTC 91

Bonner, T.C.J.: —This is an appeal from an assessment of income tax for the 1986 taxation year. In 1984 the appellant was divorced from his former wife, the mother of his two children. Custody of the children was awarded to the mother by court order which permitted visits by the children to their father on 26 weekends per year, on alternate Wednesdays and during one month each summer. The appellant calculated that the children visited him on approximately 28 per cent of the days during 1986. He maintained a home about three blocks from that of his wife. He did so, he said, with a view to providing a home life for his children. The situation just described led the appellant to assert certain claims in the calculation of his 1986 income tax liability, three of which are in issue in this appeal.

Firstly, the appellant claimed a child tax credit of $227. He arrived at that figure by taking 25 per cent of the $908 maximum amount allowable in respect of two children. In his return, the appellant explained, "under sections 15 and 28 of the Charter of Rights and Freedoms (Equality Rights), I claim 25 per cent of the child tax credit because my two children dwell with me 25 per cent of the time”. The respondent disallowed that claim on assessment. In the notice of assessment the respondent explained ”. . . as the 'child tax credit' may only be claimed by the person receiving family allowance payments, your claim for this credit has been disallowed”.

Next, the appellant claimed a deduction in the computation of taxable income under subparagraph 109(1 )(d)(ii) of the Income Tax Act ("Act") in the amount of $177.50 for each of his children. The respondent dismissed the claim on the basis that the children were not dependent on the appellant for support within the meaning of paragraph 109(1)(d) of the Act.

Finally, the appellant claimed 25 per cent of the sales tax credit in respect of each of two "qualified relations", namely the two children. An explanatory note added by the appellant to the relevant part of his tax return reads “under sections 15 and 25 of the Charter of Rights and Freedoms, I claim 25 per cent for my 2 children, who dwell with me 25 per cent of the time”. The respondent denied the claim on the basis that neither child was a “qualified relation" as defined by subsection 122.4(1) of the Income Tax Act.

It may be helpful at this point to set forth excerpts from the relevant provisions of the Income Tax Act.

(a) Child Tax Credit:

122.2(1) Where an individual who has an eligible child files with his return of income (other than a return of income filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4) under this Part for a taxation year a prescribed form, containing prescribed information, completed by the individual or, where the individual resided at the end of the year with a supporting person of that child, jointly by the individual and that supporting person, the amount, if any, by which

(a) the product obtained when $454 is multiplied by the number of children each of whom was an eligible child of the individual for the year

exceeds

(b) 5% of the amount, if any, by which

(i) the aggregate of all amounts each of which is the income for the year of the individual or a supporting person of an eligible child of the individual for the year

exceeds

(ii) $23,500.

shall be deemed to be an amount paid by the individual, in prescribed manner and on prescribed dates, on account of his tax under this Part for the year.

122.2(2) In this section,

(a) . . . eligible child" of an individual for a taxation year means a child in respect of whom the individual was entitled to receive in January of the following year a family allowance under the Family Allowances Act, 1973.

It will be observed that paragraph 122.2(2)(a) incorporates by reference the portions of the Family Allowances Act, 1973 which identify the person entitled to receive the allowance. Subsection 7(1) of that Act provides:

Where payment of a family allowance is approved, the allowance shall, in such manner and at such times as are prescribed, be paid to the female parent, if any, or to such parent or other person or such agency as is authorized by or pursuant to the regulations to receive it.

Also incorporated by reference are the provisions of the Family Allowances Regulations, c. 642 of the Consolidated Regulations of Canada, 1978, which perform the same function. Subsections 9(1) and (3) provide:

(1) Where payment of a family allowance is approved, the allowance shall be paid to the male parent where

(a) there is no female parent; or

(b) the female parent and male parent are living separate and apart and the male parent has, in fact, custody of the child.

(3) Notwithstanding subsections (1) and (2), payment of any allowance under this Act may be made to any parent or other suitable person or agency in any case where the Minister, on the basis of information received by him,

(a) considers it necessary to do so by reason of infirmity, ill health, improvidence or other reasonable cause of disqualification of the person to whom the allowance is otherwise payable; or

(b) considers that other special circumstances or reasonable cause of any kind renders payments to such a person or agency necessary.

(b) Returning to the Income Tax Act, the exemption for dependent children arises under section 109:

109(1) For the purpose of computing the taxable income of an individual for a taxation year, there may be deducted such of the following amounts as are applicable:

(d) Dependants, —for each dependant of the individual for the year, an amount equal to,

(i) if the dependant has not attained the age of 18 years before the end of the year, the amount, if any, by which

(A) 12 times the family allowance payable for a month in the year under subsection 3(1) of the Family Allowances Act, 1973 in respect of a child

exceeds

(B) '/2 of the amount, if any, by which the income for the year of the dependant exceeds the amount by which $1,600 exceeds twice the amount determined under clause (A) for the year, and . . .

(6) For the purposes of paragraph (1)(d) and subsection (5), "dependant" of an individual for a taxation year means a person who, during the year, was

(a) dependent upon the individual for support.

(c) The sales tax credit arises under section 122.4 of the Income Tax Act:

122.4(1) Subject to subsection (2), in this section . . .

“qualified relation” of an individual for a taxation year means . . .

(b) a person, other than an eligible individual . . . who is . . .

(ii) a person . . . who is a child of the individual and who was living with the individual at the end of the year.

122.4(3) Where an eligible individual for a taxation year files with his return of income . . . a prescribed form . . . the amount, if any, by which the aggregate of

(a) $50 for the eligible individual himself,

(c) the product obtained when $25 is multiplied by the number of other qualified relations of the individual for the year,

exceeds 5% of the amount, if any, by which . . .

The relevant provisions of the Canadian Charter of Rights and Freedoms and subsection 52(1) of the Constitution Act, 1982, now follow:

15(1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

24(1) Anyone whose right or freedoms, as guaranteed by this Charter, have been infringed or denied may apply to a court of competent jurisdiction to obtain such remedy as the court considers appropriate and just in the circumstances.

28 Notwithstanding anything in this Charter, the rights and freedoms referred to in it are guaranteed equally to male and female persons.

52(1) The Constitution of Canada is the supreme law of Canada, and any law that is inconsistent with the provisions of the Constitution is, to the extent of the inconsistency, of no force or effect.

I will deal first with the exemption for dependent children. The assessment was made on the basis that the children were not "dependants" of the appellant within the meaning of section 109 of the Act. There was evidence that the children were fed and housed by the appellant during their visits with the appellant. There was no evidence that the appellant's former spouse who had custody of the children as a result of the court order failed in any way to provide adequately for the needs of the children. As I see it the children could not be said to be dependant upon the appellant for support within the meaning of subsection 109(6). A state of dependency does not arise simply because of the existence of the relationship of parent and child. That relationship may point to dependency but is not conclusive of the existence of such a state. In this case the children, in relation to their father, appear to be persons in respect of whom a right of access was being exercised. Such persons are not, by reason only of the fact that food and shelter are provided during access, dependant on the parent who, in effect, acts as a host. It was not suggested that dependency flows from the custody order. That order was not put in evidence. Finally, I will note that no assertion was made that any Charter issue arises from this branch of the assessment. This part of the appeal fails.

Next I! turn to the question of the sales tax credit. No basis exists for the suggestion that a Charter issue arises from this aspect of the assessment. Furthermore, section 122.4 appears to have been properly applied. The children were not shown to be “qualified relations" of the appellant within paragraph 122.4(1)(b). There was no evidence supporting a conclusion that they were “living with” the appellant at the end of 1986 as required by paragraph 122.4(1)(b). This branch of the appeal therefore fails.

As to the child tax credit, the appellant contends that paragraph 122.2(2)(a) of the Income Tax Act is inconsistent with the provisions of section 15 of the Charter in that paragraph 122.2(2)(a) incorporates by reference subsection 7(1) of the Family Allowances Act. Thus he argues that by virtue of subsection 52(1) of the Constitution Act, 1982, the word “female” should be regarded as of no force and effect.

The respondent, on the other hand, submits that this Court is not the proper forum in which to examine the constitutional validity of a provision of the Family Allowances Act, either in relation to the Charter or any other provision of the constitution of Canada and further that this Court is not empowered to make a decision relating to the Family Allowances Act. It follows, so the submission goes, that this Court is not empowered to make a decision as to the constitutional validity of a provision of that Act.

This Court has jurisdiction under section 12 of the Tax Court of Canada Act ”. . . to hear and determine appeals to the Court on matters arising under the Income Tax Act. . .”. The present appeal arises under section 169 of the Income Tax Act which provides that:

Where a taxpayer has served notice of objection to an assessment under section 165, he may appeal to the Tax Court of Canada to have the assessment vacated or varied . . .

The relief which this Court is empowered to give in disposing of such an appeal is laid down in subsection 171(1) of the Income Tax Act as follows:

The Tax Court of Canada may dispose of an appeal by

(a) dismissing it, or

(b) allowing it and

(i) vacating the assessment,

(ii) varying the assessment, or

(iii) referring the assessment back to the Minister for reconsideration and reassessment.

I cannot see any justification at all for a suggestion that in exercising that jurisdiction this Court should ignore any law of Canada much less section 15 of the Charter, a provision which, after all, is declared by section 52 of the Constitution Act to form part of the "supreme law of Canada”. In R. v. Big M Drug Mart Ltd., [1985] 1 S.C.R. 295; 18 C.C.C. (3d) 385, Dickson, C.J.C. wrote at 353 (C.C.C. 431):

If a court or tribunal finds any statute to be inconsistent with the Constitution, the overriding effect of the Constitution Act, 1982, s. 52(1), is to give the Court not only the power, but the duty, to regard the inconsistent statute, to the extent of the inconsistency, as being no longer "of force or effect”.

In Zwarich and Attorney General of Canada, [1987] 3 F.C. 253, Pratte, J. speaking for the Federal Court of Appeal said at page 255:

It is clear that neither a board of referees nor an umpire have the right to pronounce declarations as to the constitutional validity of statutes and regulations. That is a privilege reserved to the superior courts. However, like all tribunals, an umpire and a board of referees must apply the law. They must, therefore, determine what the law is. And this implies that they must not only construe the relevant statutes and regulations but also find whether they have been validly enacted. If they reach the conclusion that a relevant statutory provision violates the Charter, they must decide the case that is before them as if that provision had never been enacted.

The question what is a court of competent jurisdiction within the meaning of subsection 24(1) of the Charter was considered in Mills v. R., [1986] 1 S.C.R. 863; 26 C.C.C. (3d) 481. Although in that case the court was considering the position of preliminary hearing judges, the following passage at page 952 (C.C.C. 491) of the reasons of McIntyre, J. is relevant to the present case:

To begin with, it must be recognized that the jurisdiction of the various courts of Canada is fixed by the Legislatures of the various provinces and by the Parliament of Canada. It is not for the judge to assign jurisdiction in respect of any matters to one court or another. This is wholly beyond the judicial reach. In fact, the jurisdictional boundaries created by Parliament and the Legislatures are for the very purpose of restraining the courts by confining their actions to their alloted spheres. In s. 24(1) of the Charter the right has been given, upon the alleged infringement or denial of a Charter right, to apply to a court of competent jurisdiction to obtain such remedy as the court considers appropriate and just in the circumstances. The Charter has made no attempt to fix or limit the jurisdiction to hear such applications. It merely gives a right to apply in a court which has jurisdiction. It will be seen as well that it prescribes no remedy but leaves it to the court to find what is appropriate and just in the circumstances.

The questions then arise as to which of the courts are courts of competent jurisdiction within the meaning of s. 24(1) of the Charter and what is the nature of the remedy or remedies which may be given. In attacking these problems, that of jurisdiction and that of remedy, the courts are embarking on a novel exercise. There is little, if any, assistance to be found in decided cases. The task of the court will simply be to fit the application into the existing jurisdictional scheme of the courts in an effort to provide a direct remedy, as contemplated in s. 24(1). It is important, in my view, that this be borne in mind. The absence of jurisdictional provisions and directions in the Charter confirms the view that the Charter was not intended to turn the Canadian legal system upside down. What is required rather is that it be fitted into the existing scheme of Canadian legal procedure. There is no need for special procedures and rules to give it full and adequate effect.

It is clear therefore that this Court, in the exercise of its jurisdiction to dispose of an appeal as laid down in section 171 of the Income Tax Act, is entitled and obliged to consider the constitutional validity of relevant statutes. The Family Allowances Act is not, as the respondent seems to suggest, in some strange way exempt from review.

However, in my view it is not necessary in the circumstances of this case to decide whether subsection 122.2(2) of the Income Tax Act and the provisions of the Family Allowances Act and Regulations incorporated therein by reference are, by reason of section 15 of the Charter, invalid. If it is assumed for present purposes that they are, the appellant is not entitled to have his appeal allowed under section 171 of the Income Tax Act because a finding of invalidity does not lead to a conclusion that the appellant's assessment of tax is too high.

In Harris v. M.N.R., [1965] 2 Ex. C.R. 653; [1964] C.T.C. 562, Thurlow, J. said at page 662 (C.T.C. 571):

On a taxpayer's appeal to the Court the matter for determination is basically whether the assessment is too high. This may depend on what deductions are allowable in computing income and what are not but as I see it the determination of these questions is involved only for the purpose of reaching a conclusion on the basic question.

The appellant in argument proceeded from the assertion that the term “female parent" is a "direct violation” of section 15 of the Charter to a conclusion that the extent of the inconsistency between section 15 and subsection 122.2(2) together with the provisions incorporated therein by reference is such as to require that the word “female” be struck out. He submitted that the phrase "each parent" would be consistent with sections 15 and 28 of the Charter and should be substituted. As I see it, the solution is not quite that simple. By taking the position that he is entitled to 25 per cent of the credit on the basis that he had custody of his children at least 25 per cent of the time, the appellant seeks to divide the allowance between himself and his wife. Striking out gender references would not lead to that result. Rather it would eliminate any means of identifying the parent entitled to the credit. Whether the further consequence of that elimination is that each parent would be entitled to a full credit or that neither parent would be entitled to a credit is a question which the appellant did not deal with. In either case, subsection 24(1) of the Charter does not empower the Courts to amend or rewrite invalid legislation in the manner sought by the appellant. [1] If paragraph 122.2(2)(a) is invalid it fails, and in the absence of legislative action to fill the void it cannot be said the appellant is, within the meaning of subsection 122.2(1), ”. . . an individual who has an eligible child . . ." and is therefore entitled to the credit. In short, the Charter argument, if successful, would not lead to a conclusion that the assessment under appeal is too high. This branch of the appeal therefore fails as well. The appeal will be dismissed.

Appeal dismissed.