Rosin v. R., [1999] 4 CTC 2351 (Informal Procedure)

Bowie T . C.J.:

These appeals under the Income Tax Act (the Act) concern the Appellant’s claims for the deduction of payments made in the taxation years 1993 and 1994 for the support of his former spouse and the children of their marriage. The Appellant, in filing his income tax returns, claimed amounts of $21,200.00 in 1993 and $26,200.00 in 1994. Of these amounts, $900.00 was disallowed in the 1993 taxation year, and $6,000.00 in 1994. During the hearing of the appeals it became clear from the evidence that the $900.00 which the Minister of National Revenue (the Minister) disallowed in 1993 had in fact been paid by Mr. Rosin in that year, and Ms. McCabe very properly conceded that the appeal for 1993 should be allowed.

At the relevant time, paragraph 60(b) of the Act, under which the Appellant claims the deduction, read as follows:

60 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 as alimony or other allowance payable on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and the children, if the taxpayer, because of the breakdown of the taxpayer’s marriage, was living separate and apart from the spouse or former spouse to whom the taxpayer was required to make the payment at the time the payment was made and throughout the remainder of the year and the amount was paid under a decree, order or judgment of a competent tribunal or under a written agreement;

The issue in the appeal for the 1994 taxation year is a narrow one. On March 12, 1993, the Court of Queen’s Bench of Alberta made an Order requiring the Appellant to pay support in the amount of $750.00 per month for each of the two children of the marriage, and a further $250.00 for the support of his former spouse. In October 1994, the Court of Appeal for Alberta increased the support payment to be made in respect of the former spouse to $500.00 per month, effective from May 1, 1993, until March 1, 1995. In part as a result of this retroactive Order, the Appellant found himself in December, 1994 owing very substantial arrears to his former spouse. On December 21, 1994, the solicitors for his former spouse served a Garnishee Summons in the amount of $72,742.87 upon the Appellant’s solicitors. At that time, the solicitors had in their possession funds of the Appellant amounting to considerably more than the $6,000.00 now in issue. They took no steps to dispute the Garnishee Summons, but did, in February 1995, pay into the Court an amount in excess of $6,000.00 pursuant to it. The delay in making the payment into Court is apparently attributable to the solicitors’ caution in examining the legal position of the Appellant, and their own legal position, before making the payment. The Appellant argued that this payment was made by him in 1994, as he was deprived of access to and any use of these funds from the time at which his solicitors received the Garnishee Summons. The Respondent takes the position that, for purposes of paragraph 60(b) of the Act, the Appellant did not make payment of the funds remitted to the Court by his lawyers until February 1995, when the funds were sent by the solicitors to the Court. The question, then, is whether an amount held to the Appellant’s credit by his solicitors in their trust account, and subject to a Garnishee Summons served on behalf of his former spouse, can be said to be “an amount paid”.

The word “paid” is the past participle of the verb “to pay”. In its ordinary meaning, the verb “to pay” requires that there be a giving or a handing over of the amount said to be paid. [1] It cannot be said that the service of a Garnishee Summons, without more, brings this about. Garnishee proceedings involve two stages. In the first, the summons is served on the garnishee; in the second the garnishee either pays the amount owing into Court, or else disputes the liability to do so. Paying the funds into Court acts as a discharge of the garnishee debtor’s obligation. [2] Between the service of the summons and the payment into Court, or the filing and resolution of a dispute, the garnishee is not free to pay the funds attached to the debtor, or to otherwise dispose of them. However, it cannot be said that the debt has been paid during this period. [3]

In this case, it is clear that the Garnishee Summons was served on the Appellant’s solicitors on December 21, 1994, and that they made no response to it before the end of the calendar year. The Appellant argues that he was deprived of the use of the funds from that date forward. That may be so, but it was not until sometime in February of the following year that the payment was in fact made to the Court. Then, for the first time, the Appellant’s obligation to his former spouse was discharged. The payment of the $6,000.00 amount was therefore not made in 1994, but in 1995, and it is in that year that the Appellant was entitled to the deduction. The appeal for the taxation year 1994 must therefore be dismissed.

Appeal dismissed.