Guy
Tremblay:—This
case
was
heard
in
Toronto,
Ontario,
on
April
1,
1980.
1.
The
Point
at
Issue
The
point
is
whether
an
amount
of
$128
paid
by
the
appellant
to
his
wife
following
a
clause
of
a
written
agreement
of
separation
is
deductible
in
the
computation
of
the
appellant’s
income
for
the
taxation
year
1976.
The
said
amount
represented
one-half
of
the
increase
in
mortgage
payments
after
September
1976.
2.
Burden
of
Proof
The
burden
is
on
the
appellant
to
show
that
the
respondent’s
assessment
is
incorrect.
This
burden
of
proof
results
particularly
from
several
judicial
decisions,
including
the
judgment
delivered
by
the
Supreme
Court
of
Canada
in
R
W
S
Johnston
v
MNR,
[1948]
CTC
195;
3
DTC
1182.
3.
Facts
3.01
The
facts
are
not
in
dispute.
They
are
well
summarized
in
the
reply
to
notice
of
appeal,
paragraphs
3
and
4,
which
read
as
follows:
3.
In
filing
his
return
of
income
for
the
1976
taxation
year,
the
appellant
sought
to
deduct
as
an
alimony
deduction
the
sum
of
$6,728.
4.
By
notice
of
reassessment
the
respondent
disallowed
the
aforesaid
deduction
to
the
extent
of
$128.
In
assessing
tax
as
aforesaid,
the
respondent
relied
upon
the
following
findings
or
assumptions
of
fact:
(a)
the
appellant
and
his
spouse,
Margaret
Brooke,
have
lived
separate
and
apart
from
about
May
1,
1974;
and
(b)
on
May
3,
1975,
the
appellant
and
his
spouse
executed
a
written
separation
agreement;
one
of
the
clauses
of
the
said
agreement
stipulated
that:
“the
wife
would
be
entitled
to
remain
in
full
occupancy
of
the
former
matrimonial
home”,
and
further
‘‘so
long
as
the
wife
was
in
occupancy
of
the
home,
she
would
be
entirely
responsible
for
payments
of
mortgage,
principal
and
interest..
.
provided
however
that
the
husband
would
pay
to
the
wife
one-half
of
any
increase
in
mortgage
payments
after
September,
1976.
3.02
The
written
separation
agreement
was
filed
as
Exhibit
A-1.
Paragraphs
3,
5
and
6
read
as
follows:
3.
During
their
joint
(sic)
lives
the
husband
will
pay
to
the
wife
for
her
maintenance
as
periodic
payments
within
the
meaning
of
the
Income
Tax
Act
(Canada)
the
bimonthly
sum
of
$125
on
the
10th
and
25th
days
of
each
month
commencing
on
the
10th
day
of
May,
1974.
These
payments
shall
continue
so
long
as
the
parties
live
separate
and
apart
and
so
long
as
the
wife
is
not
remarried
and
so
long
as
the
wife
is
not
living
with
an
adult
male
person
in
a
husband-and-wife
type
of
relationship.
5.
The
amount
of
the
maintenance
payments
required
to
be
made
by
the
husband
for
the
children
pursuant
to
this
agreement
shall
be
increased
or
decreased
at
one-year
intervals,
the
first
of
such
increases
or
decreases
to
be
made
on
the
10th
day
of
May,
1976,
and
the
payments
in
the
increased
or
decreased
amount
shall
continue
to
be
made
by
the
husband
subject
to
the
terms
of
this
agreement,
for
the
next
succeeding
one
year,
and
so
on
from
time
to
time
at
each
succeeding
one-year
interval,
provided
that:
(i)
The
amount
of
increase
or
decrease
in
payments
shall
be
pro
rated
to
the
direct
proportionate
increase
or
decrease
for
each
one-year
interval
in
the
Annual
Average
of
the
Consumer
Price
Index
published
by
Statistics
Canada
for
“ALL
ITEMS’’
for
the
City
of
Toronto.
(ii)
If
the
Consumer
Price
Index
at
any
time
in
the
future
is
no
longer
published
by
Statistics
Canada
or
any
other
ministry,
branch,
department,
bureau
or
agency
of
the
Federal
Government
of
Canada,
then
for
the
purposes
of
this
Agreement,
the
increase
or
decrease
in
payments
as
provided
herein
shall
be
based
on
whichever
set
of
statistics
the
Federal
Government
may
then
use
for
official
purposes.
(iii)
If
the
Consumer
Price
Index
is
at
any
time
in
the
future
calculated
and
published
on
any
basis
other
than
is
presently
employed
then
the
amount
of
increase
or
decrease
in
payments
as
provided
herein
shall
be
based
upon
the
then
existing
published
figures
with
an
appropriate
adjustment
for
the
alteration
in
the
method
of
calculation.
(iv)
In
any
event
there
shall
be
no
increase
or
decrease
in
payments
as
provided
herein
in
excess
of
10%
in
any
one
year
from
the
preceding
year.
6.
The
wife
will
be
entitled
to
remain
in
sole
occupancy
of
the
former
matrimonial
home
at
14
Linwood
Avenue,
Agincourt,
Ontario,
presently
registered
in
the
name
of
the
husband
alone
so
long
as
the
wife
is
entitled
to
maintenance
or
until
the
youngest
child
attains
the
age
of
eighteen
years
whichever
may
occur
first.
When
the
wife
is
no
longer
entitled
to
occupy
the
home,
it
will
be
sold
by
the
husband,
and
he
will
pay
to
the
wife
one-half
of
the
net
proceeds
of
the
sale.
So
long
as
the
wife
is
in
occupany
of
the
home,
she
will
be
entirely
responsible
for
payments
of
mortgage
principal
and
interest,
municipal
realty
taxes
and
routine
maintenance,
that
the
husband
will
be
responsible
for
any
major
repairs,
provided
that
no
such
repairs
will
be
undertaken
without
his
prior
approval
provided
however
that
the
husband
will
pay
to
the
wife
one-half
of
any
increase
in
mortgage
payments
after
September,
1976.
3.03
At
the
time
the
agreement
was
signed
the
mortgage
payment
amounted
to
$293
per
month.
Upon
renewal
of
the
mortgage
effective
September
1,1976,
interest
rates
had
increased
and
the
mortgage
payment
became
$357
per
month.
3.04
The
appellant
fulfilled
his
obligation
under
the
separation
agreement
and
paid
to
his
wife
one-half
of
the
increase,
$32,
amounting
to
a
total
of
$128
for
the
balance
of
1976.
4.
Law—Precedent
Cases—Comments
4.1
Law
The
section
of
the
Income
Tax
Act
involved
in
this
case
is
paragraph
60(b)
which
reads
as
follows:
There
may
be
deducted
in
computing
a
taxpayer’s
income
for
a
taxation
year
such
of
the
following
amounts
as
are
applicable:
(b)
an
amount
paid
by
the
taxpayer
in
the
year,
pursuant
to
a
decree,
order
or
judgment
of
a
competent
tribunal
or
pursuant
to
a
written
agreement,
as
alimony
or
other
allowance
payable
on
a
periodic
basis
for
the
maintenance
of
the
recipient
thereof,
children
of
the
marriage,
or
both
the
recipient
and
children
of
the
marriage,
if
he
was
living
apart
from,
and
was
separated
pursuant
to
a
divorce,
judicial
separation
or
written
separation
agreement
from,
his
spouse
or
former
spouse
to
whom
he
was
required
to
make
the
payment
at
the
time
the
payment
was
made
and
throughout
the
remainder
of
the
year;
4.2
Precedent
Cases
The
parties
referred
to
the
following
cases;
1.
Richard
A
Hastie
v
MNR,
[1972]
CTC
2383;
72
DTC
1335;
2.
The
Queen
v
Morton
Pascoe,
[1975]
CTC
656;
75
DTC
5427;
3.
The
Attorney
General
of
Canada
v
James
C
Weaver
and
Freda
J
Weaver,
[1975]
CTC
646;
75
DTC
5462;
The
appellant
referred
to:
4.
Alimony
and
Maintenance,
Interpretation
Bulletin
IT-118R,
August
1976.
4.3
Comments
4.3.1
The
crux
of
the
matter
is
whether
the
payment
of
$128
(in
four
instalments
of
$32
during
the
months
of
September,
October,
November
and
December
of
1976)
made
by
the
appellant
to
his
wife
meets
the
requirements
of
paragraph
60(b)
of
the
Income
Tax
Act
quoted
above.
4.3.2
First,
it
is
admitted
that
the
amount
of
$32
is
payable
on
a
periodic
basis,
Thurlow,
J,
in
the
case
of
Weaver
referred
to
above,
quotes
Pratte,
J,
in
Pascoe:
First,
we
are
of
opinion
that
the
payment
of
those
sums
did
not
constitute
the
payment
of
an
allowance
within
the
meaning
of
section
11(1)(l).
An
allowance
is,
in
our
view,
a
limited
predetermined
sum
of
money
paid
to
enable
the
recipient
to
provide
for
certain
kinds
of
expense;
its
amount
is
determined
in
advance
and,
once
paid,
it
is
at
the
complete
disposition
of
the
recipient
who
is
not
required
to
account
for
it.
A
payment
in
satisfaction
of
an
obligation
to
indemnify
or
reimburse
someone
or
to
defray
his
or
her
actual
expenses
is
not
an
allowance;
it
is
not
a
sum
allowed
to
the
recipient
to
be
applied
in
his
or
her
discretion
to
certain
kinds
of
expense.
4.3.3
According
to
the
respondent
the
amount
of
$32
per
month
is
not
predetermined
in
the
agreement.
It
is
true
that
the
“quantum”
of
$32
per
month
is
not
written
in
the
agreement,
but
it
provided
and
predetermined
that
one-half
of
any
increase
in
mortgage
payments
after
September
of
1976
shall
have
to
be
paid
by
the
appellant
to
his
spouse.
It
was
not
possible
for
the
spouses
to
fix
the
quantum
in
the
May
1975,
agreement
because
it
depended
on
the
interest
rate
which
would
be
in
effect
in
September
1976.
The
basis
of
the
quantum,
however,
was
predetermined
in
the
May
1975,
agreement
by
the
statement
.
.
.
“one-half
of
any
increase
in
mortgage
payment”.
In
the
Board’s
opinion
in
determining
the
basis
it
is
sufficient
to
say
that
the
amount
was
“limited
and
predetermined”
in
September
of
1976.
It
was
in
that
month
that
the
appellant
started
to
pay.
4.3.4
There
is
another
point
which
must
be
settled.
Can
it
be
said
that
the
$32
per
month
was
paid
in
“satisfaction
of
an
obligation
to
indemnify
or
reimburse
someone
or
to
defray
her
or
his
actual
expenses’’,
or
was
the
increase
of
the
mortgage
payment
only
a
means
to
fix
the
quantum
of
a
payment?
It
seems,
at
first
glance,
that
it
is
in
satisfaction
of
an
obligation
to
reimburse
someone.
The
evidence,
however,
showed
that
the
wife
did
not
have
to
account
for
it.
Is
it
sufficient
to
say
that
the
increase
of
the
mortgage
is
only
a
measure
and
not
an
obligation
to
reimburse
someone?
The
Board
is
inclined
to
answer
in
the
affirmative.
This
is
confirmed
by
another
consideration.
4.3.5
Let
us
not
forget
that
the
appellant’s
wife
had
the
obligation
to
pay
the
mortgage.
If
the
appellant
had
paid
directly
to
the
creditor
in
lieu
of
paying
his
wife
the
payment
would
be
a
payment
“for
the
benefit
of
the
spouse”
in
the
sense
of
section
60.1
of
the
Act.
Hence,
it
would
be
deductible
in
the
computation
of
the
appellant’s
income.
Why
would
it
not
be
deductible
if
the
amount
is
paid
directly
to
the
wife?
Section
60.1
reads
as
follows:
Where,
after
May
6,
1974,
a
decree,
order,
judgment
or
written
agreement
described
in
paragraph
60(b)
or
(c),
or
any
variation
thereof,
has
been
made
providing
for
the
periodic
payment
of
an
amount
by
the
taxpayer
to
or
for
the
benefit
of
his
spouse,
former
spouse
or
children
of
the
marriage
in
the
custody
of
the
spouse
or
former
spouse,
the
amount
or
any
part
thereof,
when
paid,
shall
be
deemed
to
have
been
paid
to
and
received
by
the
spouse
or
former
spouse
if
the
taxpayer
was
living
apart
from
the
spouse
or
former
spouse
at
the
time
the
payment
was
received
and
throughout
the
remainder
of
the
year
in
which
the
payment
was
received.
It
is
a
basic
principle
of
interpretation
that
all
sections
of
an
act
are
interpreted
one
by
the
other,
giving
to
each
the
meaning
derived
from
the
entire
act.
Based
on
that
principle
the
Board
concludes
that
the
amount
of
$128
is
deductible.
4.3.6
It
was
argued
that
the
payment
of
$128
made
by
the
appellant
was
on
account
of
a
capital
asset,
and
it
was
a
personal
expense,
hence
it
is
not
deductible.
In
a
general
sense
it
is
true
that
this
payment
is
on
account
of
a
capital
asset
and
is
a
personal
expense,
and
ordinarily
it
is
not
deductible
because
it
goes
against
a
general
basis
principle
of
accounting
or
against
a
specific
section
of
the
Act
such
as
18(1)(a).
However,
in
the
present
case
the
sections
involved
are
60(b)
and
60.1
and
part
of
Subdivision
e
of
Part
I
of
the
Act,
which
is
entitled
“Deductions
in
computing
income”.
The
legislator,
stating
this
subdivision,
did
not
base
it
on
a
general
principle
of
accounting,
but
rather
on
a
social
principle.
For
instance,
how
can
one
explain
the
deduction
of
tuition
fees
by
a
student
according
to
the
general
principles
of
accounting
(paragraphs
60(e)
and
(f))?
It
is
a
personal
expense.
It
is
exactly
the
same
principle
with
the
alimony
payments.
In
fact,
general
accounting
principles
are
admitted
in
constructing
the
Act
inasmuch
as
it
is
not
specified
by
the
Act,
The
Royal
Trust
Company
v
MNR,
[1957]
CTC
32;
57
DTC
1055.
The
deductions
provided
in
Subdivision
e
of
Part
I
of
the
Act
are
deductions
of
that
kind.
5.
Conclusion
The
appeal
is
allowed
and
the
matter
is
referred
back
to
the
respondent
for
reassessment
in
accordance
with
the
above
reasons
for
judgment.
Appeal
allowed.
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