William H C Milner v. Minister of National Revenue, [1981] CTC 2437, 81 DTC 387

The Chairman:—The appeal of Mr William H C Milner is from an assessment with respect to the 1977 taxation year.

In filing his income tax return for 1977, the appellant reported investment income from a foreign source in the amount of $7,392.54. By letter dated April 27, 1978, however, the appellant requested a postponement of tax attributable to the said investment income from foreign source, pursuant to the provisions of subsection 161(6) of the Income Tax Act, SC 1970-71-72, c 63 as amended.

In assessing the appellant, the Minister of National Revenue assumed that the investment income of $7,392.54 was paid or credited to the appellant’s account with the Canadian Bank of Commerce Trust Company (Caribbean) Limited (Caribbean Bank) and considered that the appellant could have dealt with his Caribbean income as he wished, with the exception of transferring it to Canada. The Minister of National Revenue, in the discretion given him under subsection 161(6) of the Act, did not grant the postponement of tax attributable to the appellant’s said income on the ground that the payment of the tax on the appellant’s Caribbean income would not impose extreme hardship on him.

In his notice of objection, his notice of appeal and at the hearing, the appellant presented two issues to the Board:

1. whether income from a foreign source which cannot be transferred to Canada and over which the appellant allegedly has no control, owing to the foreign country’s “blocked currency” legislation, should be included in computing the appellant’s Canadian income tax for 1977;

2. whether the Minister of National Revenue was justified in not granting a postponement of tax on income from a foreign source which was not received in Canada.

Summary of Facts

The appellant, an insurance agent, was born in Kingston, Jamaica. In 1973, he moved to Vancouver, BC and became a resident of Canada. At that time, it is my understanding that the appellant was allowed to bring to Canada some $10,000 in Jamaican currency but the rest of the appellant’s funds, amounting to $115,000 to $120,000, remained in Jamaica. In the 1977 taxation year, the appellant reported investment income in the amount of $7,392.54 arising from his Jamaican funds.

The Government of Jamaica, after publishing pertinent guidelines in 1975 (Exhibits A-1 and A-3), amended its exchange control regulations in January of 1977, thereby prohibiting capital or income remittances to emigrants from Jamaica. The regulations provided that all assets in Jamaica were to be held in a blocked account by a local authorized depository which, for the appellant, was The Canadian Bank of Commerce Trust Company (Caribbean) Limited (Caribbean Bank) (Exhibit A-1, Clause 7).

The appellant’s situation is set out in a letter from the Manager of the Caribbean Bank, dated March 11, 1980 which reads as follows:

The Canadian Bank of Commerce Trust Company (Caribbean) Limited 121 Harbour Street P.O. Box 43

Kingston, Jamaica, West Indies

Cable Address:

“Canbanktrust”

our ref: ImMcC/pp 11th March, 1980

Mr W H C Milner,

6771 Williams Road,

Richmond,

British Columbia,

Canada V7E 1K6

Dear Mr Milner,

Re: Canadian Income Tax

As you are aware, the local exchange control regulations were amended in January 1977 (all foreign-trading having earlier been suspended in December 1976), prohibiting all remittances, whether capital or income, to emigrants from Jamaica. The regulations provide for all assets or other funds in Jamaica to be held on a blocked account by a local authorised depository (eg Commercial Bank, Trust Company, or Attorneys-at-Law), with transactions, whether local or foreign, only permitted with exchange control approval. As a special exception, an account holder is allowed an amount not exceeding $1,000 for expenditure in Jamaica in any calendar year without the requirement of prior approval from the Bank of Jamaica.

In general terms, however, the account holder is unable to dispose of or otherwise deal with his assets or funds without approval from the Bank of Jamaica.

Yours faithfully,

(Signed) I McCulloch,

Manager.

In considering the issue, there is no dispute as to the facts that the appellant is a resident of Canada, that he is the legal owner of substantial funds in Jamaica which generate investment income and which are administered by the appellant’s agent, Mr I McCulloch, the manager of the Canadian Bank of Commerce Trust Company (Caribbean) Limited where the funds are deposited (see letter dated August 29, 1979, attached to notice of appeal) and that neither the appellant’s Jamaican capital nor investment income can be transferred to him in Canada because of the exchange control regulations. The existence of exchange control regulations in Jamaica, although they may prohibit the transfer of moneys out of the country, cannot, in my opinion, change the nature of the moneys earned by the appellant from his investments there. On the basis of all the facts, the amounts earned by the appellant in Jamaica in 1977 can only be income to the appellant and taxable, pursuant to sections 3 and 9 of the Income Tax Act.

The appellant cited in support of his submissions the decision in Arichan- dra M Coomaraswamy v MNR, [1979] CTC 2407; 79 DTC 355. The evidence was and my learned colleague, Mr D E Taylor, in his decision, took considerable pains to point out that the appellant in that case “does not have and cannot have any access (on the amounts of money which the Minister sought to impose) unless and until he should re-establish himself as a resident of Sri Lanka”. At 2410 and 358 respectively, Mr Taylor states:

Were the appellant in this matter able to spend the funds for improvements, even maintenance, on the rental property, invest it, use it to support his relatives, or even I suppose just give it away, all in Sri Lanka, but could not transfer it to Canada, it would be difficult to hold that the funds in question did not represent income, and the Minister’s discretion might be in order.

In the instant appeal, the appellant had access to his investment income and had the right to transact these amounts at will which he, in fact, exercised regularly through his agent, Mr I McCulloch. That there may have been frustrations and delays in obtaining necessary exchange control approval for certain transactions, as suggested in Mr McCulloch’s letter of August 29, 1979, does not in any way abrogate the appellant’s legal right to carry out whatever transactions he may wish with his funds, except to transfer them out of the country.

I conclude therefore that the amount of $7,392.54 was investment income to the appellant from foreign sources and taxable, pursuant to sections 3 and 9 of the Income Tax Act.

As to the appellant’s second point, the Tax Review Board’s jurisdiction by statute is to hear and adjudicate appeals arising from the Minister’s assessment of income tax but does not include the payment or the collection of taxes found to be payable by the taxpayer. The power given to the Minister of postponing the payment of taxes under the conditions set out in subsection 161(6) of the Act is discretionary and his decision in this matter is administrative and not subject to revision by this Board.

For these reasons, the appeal must be dismissed.

Appeal dismissed.