Kennedy v. R., [1999] 4 CTC 2277 (Informal Procedure)

Watson D.J.T.C.:

This appeal was heard in Sudbury, Ontario, on June 24, 1999 under the Informal Procedure.

In computing his income for the 1995 taxation year, the Appellant reported income from employment as follows:

By Notice of Reassessment dated August 22, 1997, the Minister of National Revenue (the “Minister”) reassessed the Appellant’s income tax return for the 1995 taxation year disallowing the reduction from employment income in the amount of $4,794.00 thereby increasing his income from employment from $49,388.39 to $54,182.39.

In reassessing the Appellant’s income tax return for the 1995 taxation year, the Minister made the following assumptions of fact:

(a) at all relevant times, the Appellant was employed by The Government of the Province of Ontario, (the “Employer”);

(b) between January I, 1986 and August I, 1993, the Appellant had filed a classification grievance with the Employer;

(c) on July 8, 1993, Bill 48, which was introduced by the Honourable F. Laughren the then Minister of Finance of the Employer, received Royal Assent;

(d) Part IV of the said Bill referred to paragraph 7(c) above stated, among other things, that the Minister of Finance may designate, as a sectoral framework, a plan that relates to a sector, but not after August 1, 1993;

(e) the sectoral framework referred to paragraph 7(d) above stated that, among other things, there will be no wage or salary increases before April 1, 1996 for any employee of the Employer;

(f) on or about August I, 1993, the Employer and the Ontario Public Service Employees Union agreed that, among other things, all employees classification grievances that have not been rendered by August 1, 1993 are Withdrawn effective August 1, 1993, and an amount of $20 million has been allocated for the purpose of compensating employees with respect to the said classification grievances;

(g) on or about August I, 1993, the Appellant’s said grievance referred to in paragraph 7(b) above was effectively withdrawn or rendered void by agreement;

(h) on September 2, 1995, the Appellant was issued a payment, in the taxable gross amount of $4,794.00, less income tax withheld in the amount of $672.36, for a net amount of $4,121.64, by the Employer, as a result of an agreement between the Appellant’s union and the Employer;

(i) the said $4,794.00 amount referred to in subparagraph 7(h) above was received by the Appellant in the 1995 taxation year;

(j) the said $4,794.00 amount referred to in subparagraph 7(h) above was an income from office or employment within the meaning of sections 3, 4, 5 and 6, and subsection 248(1) of the Income Tax Act, (the “Act”);

and

(k) the said $4,794.00 amount referred to in subparagraph 7(h) above was required to be included in the computation of the Appellant’s income for the 1995 taxation year.

The facts are not contested by the Appellant. The only issue before the Court is whether the amount of $4,794.00 received by the Appellant from his employer in the 1995 taxation year was income from an office or employment and as such required to be included in the computation of his income for that year.

In September 1988, the Appellant filed a grievance through his union for reclassification of his position. Before the arbitrator could render his decision, the social contract was entered into by the employer and his union rendering null and void the reclassification grievance and an amount of $20 million was allocated for the purpose of compensating employees with respect to their classification grievances. In his grievance, the Appellant requested a possible reduction in his work load and an increase in his remuneration.

The Respondent relied on sections 3 and 4, subsections 5(1) and 248(1) and paragraph 6(1)(a) of the Income Tax Act. The Appellant relied on Interpretation Bulletins IT-196R2, IT-202R2 and IT-365R2.

I have reviewed the case law provided to me at the hearing.

Section 3 of the Income Tax Act indicates what needs to be included as income for a taxation year; subsection 3(a) gives examples of taxable income, however the list is not exhaustive and includes “Income from office or employment”.

In describing what consists of “income from office or employment”, paragraph 6(1)(a) of the Income Tax Act, the expression “other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment” is used.

In the case of R. v. Savage, [1983] C.T.C. 393 (S.C.C.) at page 399, Dickson J. stated:

Our Act contains the stipulation, not found in the English statutes referred to, “benefits of any kind whatever ... in respect of, in the course of, or by virtue of an office or employment”. The meaning of “benefit of whatever kind” is clearly quite broad...

Furthermore, Dickson J. states:

1 agree with what was said by Evans, J A in R v Poynton, [1972] 3 O.R. 727 at 738, speaking of benefits received or enjoyed in respect of, in the course of, or by virtue of an office or employment:

I do not believe the language to be restricted to benefits that are related to the office or employment in the sense that they represent a form of remuneration for services rendered. If it is a material acquisition which confers an economic benefit on the taxpayer and does not constitute an exemption, eg, loan or gift, then it is within the all-embracing definition of s 3.

In the case of Nowegijick v. R., [1983] C.T.C. 20 (S.C.C.) at page 25, Dickson J. stated:

... The phrase “in respect of” is probably the widest of any expression intended to convey some connection between two related subject matters.

The Appellant has the onus of establishing, on a balance of probabilities, that the Minister’s reassessment was ill-founded in fact and in law. Taking into consideration all of the circumstances of this appeal, including the testimony of the Appellant, the admissions and the documentary evidence in the light of the case law, I am satisfied that the Appellant has failed in this onus.

Accordingly, the appeal is dismissed.

Appeal dismissed.