Mackenzie v. R., [1997] 1 CTC 2506, 96 DTC 3305 (Informal Procedure)

Bowie J.T.C.C.: — Mr. MacKenzie was originally assessed under the Income Tax Act (the Act) for the year 1993 on August 5, 1994. He was reassessed on September 29, 1994. When filing his return for that year he had computed his income on the basis that he was entitled to deduct premiums in respect of a Registered Retirement Savings Plan (RRSP) in the amount of $8,663.00; the Minister’s reassessment reduced this amount to $3,501.00. The substantive issue in this appeal is which of them is correct, and it depends on whether or not the Appellant is entitled to include a lump-sum payment received from his employer in 1992 as part of his “earned income” under subparagraph 146( 1 )(c)(i) for that year. Before getting to that, however, I must consider a procedural point raised by the Appellant at the outset of his appeal.

The Appellant, having received the September Notice of Reassessment, duly filed his Notice of Objection under section 165 of the Act on December 6, within the 90-day period limited by that section. This was acknowledged by Revenue Canada on December 14. It was not until July 10, 1995 that Revenue Canada responded to his Objection with a Notice of Confirmation. Mr. MacKenzie makes two objections with respect to this document. First, he says, it is out of time, because the Minister is required to respond to his objection within 120 days; second, he says that the Notice of Confirmation is defective because it confirms the assessment, but does not deal with his objection, which was to the reassessment. Neither of these arguments has any merit. Dealing with the second one first, it is clear from the face of the Notice of Confirmation that it is confirming the reassessment of September 29; it confirms the RRSP deduction of $3,501.00, which was the amount allowed by the September reassessment. While it may be confusing to the Appellant, the Minister’s Notice correctly refers to the reassessment as an assessment. Subsection 248(1) of the Act defines the word “assessment” as including “a reassessment”.

In support of his first point the Appellant referred to an article appearing in the Toronto Star, which describes the processes of filing, assessment, objection and appeal under the Act. It is stated there that the Minister must respond to an objection within 120 days. There is no such provision in the Act. The subject is dealt with in subsection 165(3), which reads as follows:

165(3) On receipt of a notice of objection under this section, the Minister shall, with all due dispatch, reconsider the assessment and vacate, confirm or vary the assessment or reassess, and shall thereupon notify the taxpayer in writing of the Minister’s action.

The Toronto Star notwithstanding, there is no specific time period fixed within which the Minister is obliged to deal with this or any other Notice of Objection filed with him. To this the Appellant responds that from December 6 to July 10 is too long to qualify as satisfying the governing words “with all due dispatch” which do appear in subsection 165(3). He claims that this delay entitled him to have his objection given effect to, and that failing that he is entitled to succeed in this appeal, regardless of the provisions of the Act governing the merits of his case. This argument was recently considered and rejected by the Federal Court of Appeal in Bolton v. R., (sub nom. Bolton v. The Queen)? [1] The Court there referred to its earlier judgment in Ginsberg v. R., (sub nom. The Queen v. Ginsberg) [2] where it had considered a similar argument in the context of subsection 152(1), which requires the Minister to examine a taxpayer’s income tax return “... with all due dispatch...”, and concluded that delay in doing so by the Minister could not lead to the result that he lost the jurisdiction to assess, with the further result that the taxpayer would enjoy a holiday from taxation for the year in question. The Court concluded that the same logic dictates that failure by the Minister to consider an objection with all due dispatch cannot have the result of vacating the assessment objected to. The taxpayer’s remedy lies in section 169 of the Act, which provides a right of appeal after the Minister has dealt with the objection, or after 90 days have elapsed from the service of the notice of objection if the Minister has failed to deal with it within those 90 days. Section 169 reads as follows:

169(1) Where a taxpayer has served notice of objection to an assessment under section 165, he may appeal to the Tax Court of Canada to have the assessment vacated or varied after either

(a) the Minister has confirmed the assessment or reassessed, or

(b) 90 days have elapsed after service of the notice of objection and the Minister has not notified the taxpayer that he has vacated or confirmed the assessment or reassessed;

but no appeal under this section may be instituted after the expiration of 90 days from the day notice has been mailed to the taxpayer under section 165 that the Minister has confirmed the assessment or reassessed.

I therefore cannot give effect to this ground of appeal. The Appellant’s remedy for the delay in considering his objection was to launch his appeal to this Court, which he could have done at any time after February 4, 1995.

I turn now to the substantive point raised by the Appellant in this appeal, which is the amount of the RRSP contribution which he is permitted to deduct for the year 1993. The Appellant was employed by the Iron Ore Company of Canada for twenty-five years. In the fall of 1991 he was told, as were many other employees, that his job was being abolished, effective November 1 that year. As a consequence of the loss of his job the Appellant received a lump-sum payment from the company. He also received a pension as a result of his twenty-five years of service. The lump-sum amount, according to the Appellant’s evidence, was calculated on the basis of two weeks pay for every year of service with the company. The Appellant received his lump-sum payment in early 1992, and the amount of it was $25,641.54. The two issues that arise with respect to the calculation of his allowable RRSP contribution for 1993 are whether all, or any part, of this amount is a retiring allowance, and if so whether the part that is may be included in the calculation of his “earned income”, which in turn forms the basis of the calculation of his allowable contribution.

As to the first issue, the Appellant’s evidence was that he thought that some part of the lump-sum amount was for vacation pay and performance pay. However he was not able to say how much of it he thought fell into these categories, and on cross-examination it became clear that he really had no basis for this supposition. The T4A slip furnished to him by the company characterizes all of the payment as “retiring allowance”, and I find that to be the best evidence on the issue. Mr. Mackenzie argued that even if all of this lump sum payment is attributable to the loss of his job, as opposed to vacation pay and performance pay, it is wrong to call it a retiring allowance; according to him it is “severance pay”. The definition of the expression “retiring allowance” in subsection 248(1) of the Act, however, specifically includes within it an amount received:

(b) in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal It follows that the Appellant’s lump sum payment, for purposes of the Act, must be treated as a retiring allowance.

The remaining issue is whether a “retiring allowance” can be included as part of the “earned income” which forms the base for calculation of the allowable RRSP contribution. Paragraph 146(l)(c) of the Act defines “earned income” for this purpose. The list there is exhaustive of the subject, and it does not include a “retiring allowance”, either by specific words, or by reference to subparagraph 56(l)(a)(ii) of the Act, the provision which requires a retiring allowance to be included in computing income. This is significant, because numerous other items which are included in a taxpayer’s income by reason of specific provisions in paragraphs 56(l)(b), (c), (c.1), (c.2), (g) and (0) are included, by reference, within the definition of “earned income”. It is notable, too, that for the 1987 and prior taxation years subparagraph 146(l)(c)(i) by its specific words included within “earned income”

(i) salary or wages, superannuating or pension benefits, retiring allowances....

The amendments made in 1990, [3] applicable to the 1988 and subsequent taxation years, deleted the reference to retiring allowances from the provision. I conclude, therefore, that in calculating the allowable deduction for the 1993 taxation year it is not permissible to include the retiring allowance paid in 1992 as part of the Appellant’s “earned income”, and that the Minister’s reassessment was correctly made.

The Appellant clearly was upset that his lump-sum payment was treated differently for income tax purposes than it was for unemployment insurance purposes. The Income Tax Act and the Unemployment Insurance Act are, of course, separate statutory regimes which serve different purposes and operate in different ways. Confusing though it may be, Parliament has created differing rules for each of them, as it is entitled to do. Mr. MacKenzie also expressed considerable anger that the reassessment was not in accordance with information that had been given to him by his employer at the time of his lay-off. This mis-information, like the Toronto Star article, is unfortunate, but it cannot be the foundation for a successful appeal. The provisions of the Act must govern liability to tax, no matter what incorrect statements may have been made to the taxpayer.

Finally, the Appellant stated that if he had known of the limit on his RRSP contribution in 1992, when he received the payment, he would have used it to make a contribution of $6,000.00 to his spouse’s RRSP at that time, an option which is no longer open to him, [4] and he asked that he now be permitted to make that contribution. The authority of the Court does not extend to this; I can only deal with the subject matter of the appeal before me, on the basis of the law established by Parliament.

The appeal is dismissed.

Appeal dismissed.