Elizabeth Joan Savage v. Minister of National Revenue, [1979] CTC 2301, 79 DTC 338

Delmer E Taylor:—This is an appeal heard at the City of Toronto, Ontario, on February 27, 1979, from an income tax assessment in which the Minister of National Revenue increased the reported taxable income of the appellant for the year 1976 by an amount of $300 received from her employer as a result of her performance in certain examinations. In his reply to notice of appeal, the respondent relied, inter alia, upon subsection 5(1), paragraphs 6(1 )(a) and 56(1)(n) of the Income Tax Act, SC 1970-71-72, c 63, as amended.

Facts

In the year in question the appellant was employed as an actuarial assistant by the Excelsior Life Insurance Company (hereinafter referred to as “Excelsior”). She received the sum of $300 during the taxation year 1976 from her employer for success in the Life Office Management Association series of examinations. Excelsior reported this payment to the taxpayer and to the Department of National Revenue (using the form T4A) as a prize under paragraph 56(1)(n) of the Income Tax Act.

Contentions

The position of the appellant, as indicated in the notice of appeal, was that:

—this payment qualifies for paragraph 56(1)(n) treatment being a “prize for achievement in a field of endeavour ordinarily carried on by the taxpayer”.

— Division B, Subdivision D of the Act deals with specific sources of income, and . . . specific types of receipts are applicable to all taxpayers, and provided that amounts can be categorized as falling within the specific subsections of section 56, such an amount is taxed thereunder and not under the general “charging” provisions of the Act.

— In order to determine whether a given amount should be treated under paragraph 56(1)(n), it is necessary to interpret that section in light of the facts of the payment.

— In Webster’s New World Dictionary, The College Edition, published in 1970, at 461 the word “endeavor” is defined as “duty as in . . . to make an earnest attempt; to try to achieve; to try (to do something)”, and as a noun, ‘‘an earnest attempt or effort”.

— In undertaking the course of studies leading to the examinations which the taxpayer wrote successfully during the taxation year ending December 31, 1976, she was successful in the field of effort or “field of endeavor” ordinarily carried on by her in her daily work as an employee of Excelsior.

The contention of the respondent was that:

—the amount of $300 received by the appellant from her employer in the 1976 taxation year as a result of her performance on the Life Office Management Association Series of examinations is not a prize for achievement in the field of endeavour ordinarily carried on by the taxpayer pursuant to paragraph 56(1)(n) of the Income Tax Act but is income from an office or employment pursuant to subsection 5(1) and paragraph 6(1)(a) of the Income Tax Act.

Evidence and Jurisprudence

The evidence of the taxpayer related to her work with Excelsior, the subjects covered in the course of study leading to the examinations, and the fact she was aware that if successful she would receive the $300 “prize” from the employer.

The Board was referred to the case of George Fl McLaughlin v MNR, [1978] CTC 2191; 78 DTC 1164, and [1978] CTC 602; 78 DTC 6406, (FCTD) by both parties.

Findings

It is my view that there are several areas of distinction between the instant case and that of McLaughlin (supra) and therefore it does little to serve the interests of either side.

During the hearing, counsel for the appellant agreed that paragraph 6(1)(a) of the Act would apply in taxing the amount in question in this appeal unless the appellant could (a) place herself squarely within the framework of paragraphs 56(1 )(n) and (b) such inclusion (in that paragraph (56(1)(n)) excluded taxation under any other section.

With respect to the exclusive nature of section 56(1)(n), I agree with counsel for the appellant, and I would rely on the comments in James P Campbell v MNR (not yet reported), a case in which the Minister was asserting virtually the opposite position to that taken in this appeal. In Campbell, there was no doubt that the amount in question was caught for taxation purposes under paragraph 56(1)(h) of the Act as proceeds from a Registered Retirement Savings Plan. The taxpayer argued that it also qualified as “interest” under section 110.1 of the Act. The Minister disagreed and the Board sustained the Minister’s position.

The major point, however—whether the amount is covered under paragraph 56(1)(n)—requires a substantive review of the legislation and the facts of this case. In my view, the most telling contrast of opinions between counsel came with respect to the hypothetical situation wherein an employer could inform his employees that if certain production quotas or sales figures were reached during a year, a prize of $500 would be awarded to each one. The position of counsel for the respondent was that to hold such a receipt non-taxable by virtue of paragraph 56(1)(n) would be ludicrous, whereas counsel for the appellant contended it would be appropriate and legal. Counsel for the appellant is virtually holding out that any employee could receive, in fact should receive, as non taxable, an amount designated as a “prize” up to the limit of $500 in a year, and that the rules relating to any such prize could be very broad and easily fill the requirements of paragraph 56(1)(n).

It has often been said by the Courts that where no particular meaning has been attributed to a word or phrase in a taxing statute, it (the word or phrase) should be given its ordinary meaning, and Courts have shown a great reluctance to distort that ordinary meaning. I can think of no more appropriate definition for the $300 amount in issue here than “a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer”. It is beyond the requirements of this appeal to examine the fundamental proposition of counsel for the appellant—that up to $500 would be allowable under almost any reasonable set of circumstances to any taxpayer—and I understand the dismay such a prospect evokes in counsel for the respondent. I am not prepared to comment further on any such general rule in giving this decision, but I am satisfied that this particular taxpayer should not be denied the relief she claims, based upon the circumstances described to the Board.

Decision

The appeal is allowed and the matter referred back to the respondent for reassessment accordingly.

Appeal allowed.