Jain v. R., [1997] 1 CTC 2136 (Informal Procedure)

McArthur J.T.C.C.: - This appeal was heard in Ottawa under the Informal Procedures of this Court. The issue is whether the Appellant is entitled to deduct $2,305 in contributions to his Registered Retirement Savings Plan (“RRSP”) in the 1992 taxation year.

The relevant facts are not in dispute. They include the following which for the most part are taken from the Reply to Notice of Appeal.

From 1990 to 1993 the Appellant was on temporary unpaid leave of absence from his employment with Customs & Excise.

For purposes of calculating the benefit entitlement under the Public Service Superannuation Plan (“PSSP”), which is a component of the computation of the pension adjustment (“PA”), the Appellant was deemed by the Public Service Superannuation Act and the Public Service Superannuation Regulations to have received the salary that would have been paid to him had he not been on temporary leave without pay.

The Appellant’s pensionable earnings for the 1991 taxation year amounted to $51,703.00 and his earned income for 1991 was $12,810.00. His unused RRSP deduction room at the end of the 1991 taxation year and the RRSP dollar limit for the 1992 were $12,500.00.

The Appellant’s PA for 1991 is $6,385.00 and is calculated as follows: His “RRSP deduction limit” for the 1992 taxation year is calculated as follows:

The Appellant acknowledged that the amounts and calculations were completed in accordance with the Income Tax Act (the “Act”) and its regulations.

The Appellant returned to work in August of 1993. He then elected that his leave period not be a pensionable period. This cancelled any pension benefits that accrued to him during this period. The Appellant belongs to the P.S.S.P. created by legislation. The Appellant’s employer is obligated to report the PA’s through the T-4 process to reflect the accruing PA. The PA amount is subtracted from the plan member’s comprehensive contribution limit in order to determine the maximum RRSP contribution that the PSSP member may make for the following year. This calculation was not disputed.

Position of the Appellant

The Appellant objects to the PA being used to reduce his RRSP deduction limit to nil because the PA amount has a direct impact on his limit for RRSP contributions. While he had no earnings from February 1990 to August 1993 from Customs & Excise, he had earnings from other sources. He states that because he elected that his leave without pay period not be a pensionable period, the Minister should amend his T4 for 1992 to reflect the true picture. He made no pension contribution and therefore his RRSP should not be credited with any pension amount. Having elected to have no pension benefits, he should also have no PA added as RRSP contributions. He does admit that the legislation, as it exists, was properly followed by the Minister.

The Appellant agrees that the legislation does not permit the Minister to reverse a PA. He states that this is unfair and asks this Court to correct an inequity. He referred the Court to Income Tax Regulations 8401(1) which he states permits Revenue Canada to amend a PA by increasing it but does not permit the Minister to decrease it. He states this is clearly unfair. The Appellant stated on several occasions that he was “talking fairness this is the only basis of my appeal”.

Position of Respondent

The Respondent presented two witnesses including Kevin Smith a technical advisor to Revenue Canada with respect to the Public Service Superannuation Act and Regulations. He was extremely knowledgeable in his field and of assistance to the Court. The Appellant’s pension plan is a legislated one under the Public Service Superannuation Act and its Regulations together with the Act and its Regulations. He stated that amendments to the relevant legislation in September of 1993 permitted a plan participant to opt out of the plan for the period while on leave without pay retroactively but did not permit the reversal of PA retroactively. He explained that provision in the regulations was provided to compensate plan members for this restriction. He added stated that a PA can only be reversed if there was a mathematical error or similar type of error.

Counsel for the Minister referred the Court to several decisions including Elliot v. R., (sub nom. Elliott v. Canada) [1994] 2 C.T.C. 2134 (T.C.C.). The relevant facts and issue in Elliott are similar to those in the present case. The Court held that the Minister correctly decided that Mr. Elliott was deemed to have received the salary that would have been paid to him had he not been on a temporary leave without pay. The Minister’s calculations were done in accordance with the Act and regulations.

Analysis

In the present case, the Appellant does not dispute the method by which the PA has been calculated by the Minister under the Act and its regulations. He agrees that the PA was correctly calculated and properly deducted from the otherwise allowable amount of his RRSP contributions pursuant to the existing legislation. What he does question is the fairness of the legislation that does not permit the Minister to reverse the PA retroactively.

Counsel for the Respondent very ably outlined in detail the interconnecting regulations to the Act in arriving at the conclusion that a PA is to be added as an RRSP contribution under present fact situation. The Appellant does not dispute this conclusion and nor does this Court. For the purposes of this decision, it does not serve a useful purpose to review the very complex governing legislation. I do not intend this judgment to be a study of the legislation but will deal with the only issue the Appellant has raised.

The Appellant belonged to a Pension Plan created by Federal Legislation. The Appellant’s PA amount, in a year when he was on leave and made no pension contribution, was subtracted from his comprehensive RRSP contribution limit. He therefore could not make the total amount of RRSP contributions he wished to. The Appellant argued that regulations 8401(1) permits the Minister to increase the PA retroactively but does not permit the taxpayer to have it reduced or waived. This, he states, is unfair.

Judges are not legislators. This Court must apply the law as it is written. The Act has numerous provisions the application of which may result in an inequity. It is inevitable that the application of the law may have unfair results in some fact situations. I do not know if the application of the Income Tax Regulations in the present circumstances results in an unfair- ness to the Appellant. A witness for the Respondent, indicated that the regulations provide some financial relief for taxpayers in circumstances similar to those in the present case. Be that as it may, any changes in legislation concerning PA must be effected by Parliament and not by this Court.

I find that the Respondent properly determined that the Appellant’s RRSP deduction limit for 1992 taxation year is nil. The Appellant is not entitled to deduct any amount in respect of RRSP premiums pursuant to subsections 146(5) and 60(i) of the Act for his 1992 taxation year.

The appeal is dismissed.

Appeal dismissed.