Yvon Bell v. Minister of National Revenue, [1988] 2 CTC 2313, 88 DTC 1704

Couture, C.J.T.C. [Translation]:—The taxpayer appealed from an assessment dated May 22, 1986, for the 1985 taxation year, according to which the respondent rejected the appellant's arguments that the amount of $21,099.62 which he received on cancellation of a pension plan designated as the Pilot's Retirement Equity Plan instituted by Air Canada was a capital gain, and as a result that only half of that amount was taxable.

The appellant's testimony showed that he had been employed by Air Canada as a pilot since 1974, and as such he had participated in a pension plan instituted by his employer, under which the company had contributed an amount equal to five per cent of the appellant's salary. Participation in this plan was compulsory by virtue of being an employee, and the pension plan was supplementary to the company's basic plan. This supplementary plan had been accepted and registered by Revenue Canada for purposes of the Income Tax Act (the Act) on July 3, 1959.

For reasons that were not mentioned at the hearing, this supplementary plan was cancelled by Air Canada and the contributions that had been made to a trust that was responsible for administering the plan were distributed to the beneficiaries, and accordingly the appellant received the sum of $40,546.23.

The appellant argued that this money came from two sources: the first part was his employer's contributions during the period from 1974 to 1984 inclusive, which amounted to $19,446.61, and the $21,099.62 balance was, if I have understood his argument, profits earned by the plan from investing the employer's contributions.

In his income tax return for the year under appeal, the appellant reported the $19,446.61 as income, but dealt with the $21,099.62 as capital gains and reported half of that amount, or $10,549.81.

The appellant argued that since 1977 the Pilot’s Retirement Equity Fund was no longer operating under the provisions of the Act and the Regulations, and that accordingly it could not be considered to be a registered pension plan. The amount that he received in 1985 could therefore not be considered as retirement benefits or pension within the meaning of paragraph 56(1)(a). That section reads as follows:

56. Amounts to be included in income for year

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

(a) Pension benefits, unemployment insurance benefits, etc. — any amount received by the taxpayer in the year as, on account of or in lieu of payment of, or in satisfaction of,

(i) a superannuation or pension benefit (other than the portion thereof received out of or under an employee benefit plan that is required by paragraph 6(1)(g) to be included in computing his income for the year, or would be required to be so included if that paragraph were read without reference to subparagraph (ii) thereof), including, without limiting the generality of the foregoing. . . .

The expressions “superannuation or pension benefit” are defined in section 248 as follows:

“Superannuation or pension benefit". — "superannuation or pension benefit” includes any amount received out of or under a superannuation or pension fund or plan and without restricting the generality of the foregoing includes any payment made to a beneficiary under the fund or plan or to an employer or former employer of the beneficiary thereunder,

(a) in accordance with the terms of the fund or plan;

(b) resulting from an amendment to or modification of the fund or plan, or

(c) resulting from the termination of the fund or plan. . . .

In his submission, however, he did not indicate to the Court on what provisions of the Act he was relying in reaching this conclusion.

He argued that under the Act since 1977 an employer pension plan could not give beneficiaries of such a plan an annual pension in excess of $60,000. He stated that when the pensions that would be payable out of the basic Air Canada pension plan were added to the pensions from the Pilot's Retirement Equity Fund they would for some time have exceeded this $60,000 maximum. In support of this statement, he entered a list of the salaries of pilots with the company for the 1979 year.

His simple statement with reference to the salaries paid to some pilots with the company is not evidence that the benefits payable under the Air Canada superannuation program would in fact exceed $60,000 per year, and further, even were this the case, there is no legislative provision which prohibits such payments.

What the appellant relies on as a legislative provision is Information Circular No. 72-13, dated May 31, 1972 and subsequently amended, which dealt with employee pension plans.

Paragraph 9(g) of this Circular is entitled “Maximum Pension”. Plans which provide for definite pension benefits and plans funded in whole or in part under paragraph 20(1)(s) or paragraph 20(1)(r) of the Act must expressly provide that the annual benefits payable to the employee on retirement or on termination of employment or of the plan shall not exceed the lesser of:

(i) $1,143 times the number of years of pensionable service not exceeding 35 years, and

(ii) N/a

Where the appellant errs is when he considers Circular 72-13 as a legislative provision concerning the establishment of pension plans. It has been said, and repeated on many occasions, that an Information Circular has no legal effect and simply expresses the respondent's administrative policy concerning the application of the Act to the situation covered by the Circular.

I am satisfied that the Air Canada Pilot's Retirement Equity Plan is a pension plan for purposes of the Act and that the amount of $40,546 received by the appellant in 1985 was an amount received as a pension benefit within the meaning of paragraph 56(1)(a) and was accordingly taxable in full for the 1985 taxation year.

For these reasons the appeal is dismissed.

Appeal dismissed.