Colin J Gillespie v. Minister of National Revenue, [1979] CTC 2798, 79 DTC 665

The Assistant Chairman:—When the appellant filed his income tax return for the 1976 taxation year, he claimed child care expenses in the sum of $170. On assessment the respondent disallowed the claim, and the accompanying explanation of the disallowance reads as follows:

Your claim for child care expenses has been disallowed as the child is deemed to be in the custody of the mother and child care expenses are only claimable by her.

The appellant disagreed with the respondent’s position and filed a notice of objection. Following confirmation of the assessment, the appellant appealed to this Board. The appellant, who acted on his own behalf and prepared his own notice of appeal in this appeal, contended as follows:

(i) I am entitled to deduct child care expenses pursuant to section 63(1)(b) of the Income Tax Act:

(ii) The expenses claimed are allowable under section 63(3)(a) in that I incurred them to provide day nursery services in Canada for my daughter who was under 14 years of age and ordinarily in my custody during the year and they were provided to enable me to carry on a business; and

(iii) Section 63(4) does not operate to strike down this claim in that it speaks to an assumption as distinct from a conclusive presumption and the assumption cannot be maintained in the face of the contrary fact.

The respondent’s reply to that notice of appeal reads in part as follows:

2. In reassessing the Appellant, the Respondent made the following assumptions of fact, inter alia,

(a) That during 1967 the Appellant lived togther with a woman without being married to her.

(b) That Caitlin Angharad Gillespie, born August 1, 1974 is the child of the Appellant and the woman referred to in paragraph (a).

(c) That the said child was ordinarily in the custody of the mother during the relevant time.

4. He submits that by virtue of s 63(4) of the Income Tax Act, the Appellant is not allowed to claim a deduction for child care expenses, as he had not custody of the child within the section 63(4) of the Income Tax Act.

The evidence presented to the Board was contained in an agreed statement of facts which statement reads as follows:

1. During 1976 the Appellant was not married.

2. In 1976, the Appellant paid $170.00 on account of child care expenses for his daughter, and these payments were duly proven by filing appropriate receipts with the Minister.

3. The Appellant’s earned income in 1976 exceeded 150% of the aggregate of said payments ($170.00).

4. The said expenses were incurred by the Appellant for the purpose of providing in Canada for his child, child care services to enable him to carry on a business, subject to paragraph 63(4).

5. The services were provided by a resident of Canada other than a person described in paragraphs 63(3)(a)(iii)(A) or (B) and the expenses did not come within the exceptions in paragraphs 63(3) (a)(iv) or (v).

6. During 1976, the Appellant was living with the mother of the child, and the arrangement of duties agreed between them and the facts as to the manner in which those duties were carried out, was such that the child was, during the year, ordinarily in the custody of the Appellant as well as ordinarily in the custody of the child’s mother, subject to the issue as to paragraph 63(4).

7. The degree to which the child was ordinarily in the custody of the Appellant was sufficient to satisfy the requirements of paragraph 63(3)(a)(i), subject to the issue as to paragraph 63(4).

Other than the agreed statement of facts, no facts were presented to the Board. Before argument commenced, the following discussion took place between the Board member and the counsel for the Crown:

THE CHAIRMAN: ... it would appear to me that Mr Gillespie is going to show or prove in fact that he had custody.

MR VAN IPEREN: That is what I am conceding.

THE CHAIRMAN: You are conceding he has custody?

MR VAN IPEREN: I am conceding that he had effective joint custody. In other words, if 63(4) wasn’t there he would win. All I am saying is 63(4) makes the fact of custody irrelevant. That is the argument.

Shortly thereafter, the following three-way discussion took place:

MR GILLESPIE: The issue then Mr Chairman, is whether by reason of Paragraph 63(4) the Minister is directed to have no regard for the facts and whether or not the child was in my custody . The question is whether that paragraph creates an irrebuttable or a rebuttable presumption.

If it is irrebuttable, as I think I have indicated it is common ground, then the assessment must stand. If it is rebuttable, then it is common ground that the facts do rebut it.

THE CHAIRMAN: Do you agree with that statement?

MR VAN IPEREN: My argument is that the assumption, the parliamentary assumption here, cannot be rebutted.

THE CHAIRMAN: OK. The Crown contends an irrebuttable presumption. Right?

MR VAN IPEREN: Yes.

The argument then proceeded on the basis that I must determine whether or not there was an irrebuttable presumption in section 63(4) and, if there were, the appeal was to be dismissed. If there was not, the appeal was to be allowed. Subsection 63(4) reads as follows:

For the purposes of this section, it shall be assumed that a child of a woman and a man who were living together without being married to each other was ordinarily in the custody of the woman and not in the custody of the man.

The appellant pointed out that the word “deemed” is not used in subsection 63(4), but it was used by the Minister in the notice (supra) sent with the notice of assessment which disallowed the claim. It was also pointed out that in the immediately following section (which does not refer to child care expenses) Parliament used the word “deemed” and not “assumed”. Section 63.1 in part reads as follows:

Where a taxpayer is deemed by section 250 to be resident in Canada throughout a taxation year or during a part of a taxation year, in applying sections 60, 62 and 63 in respect of him during the period when he is so deemed to be resident in Canada, the following rules apply: . . .

The appellant also pointed out that counsel for the Minister, in his reply to the notice of appeal “made the following assumptions of fact. .. that the said child was ordinarily in the custody of the mother during the relevant time.” His submission continued that what the subsection really means, in the circumstances of this case, is that the Minister is going to conclude that the mother of the child has custody of the child unless the father establishes to the contrary. In reality the subsection is only restating what the general law in taxation is—the appellant must destroy the assumptions of fact or law on which the assessment is based. Reference was made to Luis Ayala v Her Majesty the Queen, [1979] CTC 111; 79 DTC 5083, which I understand is now under appeal to the Federal Court of Appeal. Mr Ayala made a similar claim for child care expenses. He was not only the father of the child in question but was also married to and living with the child’s mother. His claim was disallowed by the Minister, which disallowance was upheld by this Board and the Federal Court, Trial Division. When asked, assuming the Ayala decision as it now stands is correct, why he should be in a better position than the appellant in that case, the appellant replied that that was a matter for Parliament. His submission continued that it is obvious that Parliament intended in this section to make a distinction between a married man and the man who was not married, and then to decide what that distinction is, a strong position was taken by the appellant with reference to another word and a phrase in the subsection, namely, “ordinarily” and “not in the custody of the man”. The Living Webster Encyclopedic Dictionary of the English Language gives several meanings for “ordinarily”, namely: “In the customary or usual way; in ordinary cases; usually; in an ordinary degree or to the usual extent.” It does not say exclusively. He continued that, if the word “assumed” means “deemed”, what need is there not only to have the word “ordinarily” in the subsection, but also the phrase “and not in the custody of the man”. If the child, for the purposes of that section, is deemed to be in the custody of the mother, then that child clearly cannot be, regardless of the facts of the case, in the custody of the father.

The Crown submitted, in effect, that all subsection 63(4) does is put the so-called common-law marriage on the same status as a legal marriage and, if such is the case, then, in the circumstances of this appeal, the appellant cannot succeed. The Crown took the position that in subsection 63(4) the word “assumed”, if it doesn’t mean “deemed”, is the equivalent of “deemed”. If a couple are living together as man and wife, as with a married couple, there is joint custody of the child living with them. The question of custody would only rise when the couple separated and one of the parties took the child. The party who took the child had custody of that child even though that custody may only be temporary. The purpose of the section is to allow mothers and certain fathers who have children in their custody to work and have, in effect, the expense of having someone take care of the child a deductible expense. If the wife and mother does not work, the expenses are not deductible by the father as presumably the mother can take care of the child. The submission was that subsection 63(4) puts the common-law relationship on the same footing as the legally married relationship in that there is joint custody of a child. As the appellant pointed out, if we interpret the word “assumed” to mean “deemed”, which latter word according to many decisions of the Tax Review Board means “conclusively considered”, then several words of the subsection are redundant. There would be no need in the subsection for the word “ordinarily” or the phrase “and not in the custody of the man”.

As I view section 63, excluding subsection (4) thereof, the appellant clearly would be able to deduct the child care expenses he incurred as the Crown says only that subsection (4) precludes him from doing so. It precludes him from doing so as that subsection shall be interpreted as “deeming” the child of this relationship to be in the custody of the mother. It is conclusively presumed that that mother has custody of that child and that the father, regardless of the facts he can adduce, cannot show, nor can one in my position find, that he does for this subsection have custody.

With respect, I disagree. I cannot interpret that subsection, especially when one considers the words “assumed” and “ordinarily” and the phrase “and not in the custody of the man” as all adding up to mean deemed. As I read the subsection, it is advising a man who is living with a woman and their child that the Minister of National Revenue, when he assesses that man’s income tax return with reference to a claim under section 63, is going to assess on the basis that that mother and not that man has custody of that child and it is up to that man to show that he has custody. To conclude that “assumed” means “deemed” has the effect of making the word “ordinarily” and the phrase “and not in the custody of the man” meaningless. I am sure Parliament did not put words in that subsection intending that they have no meaning.

In light of the agreement as to the facts, especially paragraphs 6 and 7 of the agreed statement of facts and the portions of the submissions I have quoted, having found that subsection 63(4) is only a rebuttable presumption, judgment will go allowing the appellant’s appeal and remitting the assessment to the respondent for reassessment to allow child care expenses in the amount of $170.

Appeal allowed.