George James Carroll v. Minister of National Revenue, [1984] CTC 2612, 84 DTC 1614

Cardin, TCJ:—The appeal of George James Carroll is from a reassessment of tax with respect to the 1981 taxation year. The issue is the taxability of all income withdrawn from a Registered Retirement Savings Plan (RRSP).

The facts which are not in issue are as follows: The appellant in 1981 received income from an RRSP in the amount of $9,333. However, in his 1981 tax return, the appellant reported having received only $6,333. In his pleading, the appellant stated that he reported having received only $6,333 since he had not deducted from his income in the 1971, 1973, 1974 and 1975 taxation years, amounts of $1,000, $500, $500 and $1,000 paid as premiums into the said RRSP.

In reassessing the appellant, the Minister added to the appellant’s 1981 income the amount of $3,000 and assessed him for the full amount of $9,333 received from the RRSP in 1981, on the ground that the appellant is compelled to report any and all income withdrawn by him from an RRSP in 1981, by virtue of subsection 146(8) and paragraph 56(l)(h) of the Income Tax Act, RSC 1952, c. 148.

The appellant appealed the assessment, holding that by including the $3,000 in his 1981 taxable income, the taxpayer was being subjected to double taxation. It is common ground that the appellant did not deduct the premiums in those years and that the amount of $9,333.38 which he received was from an RRSP as opposed to an annuity.

The issue is a question of law and several decisions, some of which appear to be contradictory, were cited by counsel, The problem, as I see it, is whether the legislators in instituting the Registered Retirement Savings Plan program intended that any and all amounts withdrawn from the plan whether or not the premiums paid into the plan had been previously deducted from the appellant’s income [sic]. Since the premiums into this plan are paid with money that has already been subjected to income tax, it would appear that taxing amounts for which no deduction had been claimed by the appellant would, on their withdrawal from the plan, constitute double taxation.

One of the decisions on the taxibility of moneys received from a Registered Retirement Savings Plan referred to by counsel was that of the Tax Review Board in Cecil M Langille v MNR, [1975] CTC 2367; 75 DTC 280, which was published on October 16, 1975.

In that case the taxpayer purchased a Registered Retirement Savings Plan on the understanding that if the premiums paid into the plan were not deducted by him from his income, he would not have to pay tax on the refund of capital but only on the interest element. The Board allowed the appeal on the ground that the taxpayer not having deducted from his income the premiums paid into the plan, he could not be said to have purchased or to have entered into a Registered Retirement Savings Plan as defined in section 146 of the Act. The Minister of National Revenue appealed the Board’s decision.

On June 9, 1976, another decision of the Tax Review Board was published. The case of Stephanie and Lloyd Herman [1976] CTC 2220; 76 DTC 1157, does not deal specifically with a registered Retirement Savings Plan and was not referred to by counsel but it does, in my opinion, provide useful consideration on the general subject of taxability of Pension benefits.

In this case, the taxpayer and his wife, former employees of the United Nations in New York, had contributed to a United Nations Joint Staff Pension fund without having been allowed to deduct from their income the premiums paid into the fund. On their return to Canada, they received in 1971 and 1972 certain amounts from the United Nations Pension fund which the Minister of National Revenue assessed as taxable benefits by virtue of subparagraph 6(l)(a)(iv) of the Act.

The Board held that that portion of the moneys received from the fund, representing the taxpayers’ contributions to the United Nations Pension fund which had already been taxed, should not be taxable a second time. The Board’s decision in this case was also appealed by the Minister.

On February 22, 1977, the Federal Court — Trial Division rendered its judgment in The Queen v Cecil M Langille, [1977] CTC 144; 77 DTC 5086, and dismissed the Minister’s appeal. Mr Justice Grant agreed with the Tax Review Board’s decision and added in his reasons, very useful comments on other points of that case. I will refer here particularly to statements made with respect to benefits received under a Registered Retirement Savings Plan. The learned judge, in holding that there exists a presumption against double taxation cited, among other references, Maxwell on the Interpretation of Statutes, 10th edition, page 288, where it stated:

A construction, for example, which would have the effect of making a person liable to pay the same tax twice in respect of the same subject matter must not be adopted unless the words were very clear and precise to that effect. In a case of reasonable doubt, the construction most acceptable to the subject is to be adopted.

Paragraph 56(l)(h) of the Act was referred to:

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

(h) amounts in respect of a registered retirement savings plan required by section 146 to be included in computing the taxpayer’s income for the year;

Judge Grant then included in his comments the definition of benefit in paragraph 146(l)(b) which, at that time, read as follows:

In this section

(b) “Benefit”. — “benefit” includes any amount received out of or under a retirement savings plan otherwise than as a premium and without restricting the generality of the . . . [Emphasis added]

Mr Justice Grant then referred to subsection 146(8) which states:

(8) There shall be included in computing the income of a taxpayer for a taxation year all amounts received by him in a year as a benefit under a registered retirement savings plan. [Emphasis added]

The learned Justice found that the word “benefit” in subsection 146(8) was ambiguous particularly when read with paragraph 146(l)(b) which refers to benefits as “otherwise than a premium”.

In his decision in Langille, (supra), at 149, Mr Justice Grant stated:

Such definition would indicate that in arriving at the portion to be treated as income in the case of a retirement savings plan, the premium paid by the taxpayer is to be deducted from the full amount of the annuity paid to him in that year. Such definition does not mention a registered retirement savings plan but paragraph 56(l)(h) does .. .

There can be no benefit to him if he does not so reduce his taxable income if he is obliged to pay tax on the full amount of the annuity received back after maturity. The word “benefit” is defined in The Shorter Oxford English Dictionary in the following terms:

“A kind deed; a favour, gift, advantage, profit, pecuniary profit, a pecuniary assistance to which an insured person is entitled.”

The word connotes something in addition to what a recipient already has. The return of that portion of the annuity in any year which is equal to premium paid is not an advantage to the annuitant for he will be no better off than he was before he paid the premium. Consequently, the return of the premium is not a benefit.

As stated by counsel for the respondent, paragraph 146(l)(b) was subsequently amended and the words “otherwise than as a premium” were deleted, the remainder of the paragraph being substantially the same as the original version.

The Tax Review Board’s decision in Robert P Grimson v MNR, [1977] CTC 2095; 77 DTC 101, was published on May 18, 1977. Although the facts were somewhat different from those of Langille, (supra), the issue was the same and the Board allowed the appeal largely on the basis of the decision of the Federal Court — Trial Division in Langille, (supra).

On May 18, 1978, the Federal Court — Trial Division rendered its decision on the Minister’s appeal in the Herman case The Queen v Lloyd Herman, [1978] CTC 442; 78 DTC 6311. As stated earlier, the facts and the issue in the Herman case differ from those in Langille and Grimson, but Mr Justice Walsh’s comments are indeed pertinent to the issue presently before the Court.

At 446 [6315], Mr Justice Walsh stated:

In taxing superannuation or pension income the Act appears to make no distinction as to origin of it. It merely taxes all of it when received by a taxpayer in Canada and liable to Canadian income tax.

Further at 447 [6315], Mr Justice Walsh concluded as follows:

In the absence of any provision of Canadian Tax Law or any Convention between Canada and the United Nations which would allow the deduction claimed, I must regretfully maintain the appeals even though in the result both Defendants Lloyd Herman and Stephanie Herman are required to pay income tax on the full pension benefits received by them from the United Nations without having previously benefited by any tax deductions resulting from the amounts contributed by them towards these pensions.

The general principle enunciated by the learned Justice in Herman to the effect that all income from a superannuation or pension fund is taxable irrespective of its origin is, in my opinion, also applicable to income received from a Registered Retirement Savings Plan, even though the contributions to the plan had not been previously deducted from income.

It is only after the Federal Court had rendered its decision in Herman and after the wording of paragraph 146(l)(b) had been amended, that the decision of the Tax Review Board in Lucien Lisiecki v MNR, [1982] CTC 2445; 82 DTC 1428, was rendered and published on June 3, 1982. In that case, the taxpayer had also received an amount from an RRSP without having deducted the premiums from his income. The Board held that even though there may exist the possibility of double taxation, there is no provision in the Act by which an amount withdrawn or received from an RRSP could be free of income tax. The appeal was therefore dismissed. Unfortunately, however, in my reasons in Lisiecki, (supra), I wrongly referred to the Federal Court decision in Langille, (supra), as the basis for my decision. What I had in mind was the Federal Court decision in Lloyd Herman, (supra), which was indeed the basis of my decision.

For these reasons, I must conclude that the legislators did intend that any and all amounts received or withdrawn from a superannuation or pension plan, including Registered Retirement Savings Plans, are taxable whether or not premiums paid into the plan or fund had been previously deducted from the appellant’s income. The amendment to paragraph 146(l)(b) in 1978 deleting the words “otherwise than as a premium’’ clarifies and confirms, in my view, that the general principle set out by Mr Justice Walsh in Herman, (supra), applies equally to income received from RRSPs.

The appeal is dismissed.

Appeal dismissed.