Jean Guay v. Minister of National Revenue, [1979] CTC 2981, 79 DTC 587

The Chairman [TRANSLATION]:—This is an appeal by Mr Jean Guay from income tax assessments for the 1971 and 1972 taxation years. By a notice of appeal dated February 17, 1977 the appellant, relying on paragraphs 11 (1)(l), 11 (1)(la), 139(1)(b) and section 5 of the Income Tax Act, RSC 1952, c 148, as amended, maintains that he is entitled to the deductions claimed in his tax returns for each of the years 1971 and 1972.

On April 18, 1977, the respondent moved to dismiss the appeal with respect to the 1971 taxation year, on the ground that the notice of objection had been filled beyond the 90 day time limit prescribed for doing so by the Income Tax Act. The assessment was issued by the respondent on December 27, 1972, and the notice of objection was not filed until February 18, 1974. Although the taxpayer could, in the time period of one year and 90 days, have applied to the Board for an extension of time so that he could file his notice of objection late, he did not do so. The result was that, as the taxpayer had not first duly filed a notice of objection, his notice of appeal was not valid and, in my opinion, the Board lacked jurisdiction to hear the appeal. As the statutory time limit of one year and ninety days from the date the notice of assessment was sent, provided for in section 165 and subsection 167(5), had already expired, the Board lacked jurisdiction in the circumstances, and could not have granted an application for an extension of time if it had been made.

At the hearing counsel for the respondent indicated that he had received from his client instructions to withdraw his motion to dismiss the appeal and stated that he was ready to proceed on the merits in this appeal for 1971. However, the question of procedure and of jurisdiction still remained, and the Board had to decide the question presented. Although the Board has a certain flexibility regarding procedure in the hearing of cases before it, this flexibility is necessarily limited and must in no way contravene the provisions clearly established in sections of the Income Tax Act.

In order to dispose of the taxpayer’s appeal for the 1971 taxation year, it is necessary to include the reasons for judgment which I gave at the hearing:

The Board had before it the appeal of Mr Jean Guay from an assessment for the 1971 taxation year. There is also in the record a motion to dismiss the appeal and an affidavit that the notice of objection of the appellant, the taxpayer, was made beyond the time limit prescribed for filing a notice of objection.

During the hearing counsel for the respondent withdrew the motion to dismiss the appeal. The fact remains that when the Board considers the dates on which the notice of re-assessment was made, December 27, 1972, and the notice of objection, which was made on February 18, 1974, it clearly appears that the taxpayer filed his notice of objection late and that no application for an extension of time was made to or granted by the Board. The question is whether, although the respondent withdrew his motion to dismiss the appeal, the Board can hear the case. The section concerned is section 165, which I feel in the circumstances I must include in my reasons for decision; section 165 states:

A taxpayer who objects to an assessment under this part may, within 90 days from the day of mailing of the notice of assessment, serve on the Minister a notice of objection in duplicate in prescribed form setting out the reasons for the objection and all relevant facts.

It is clear, and this is admitted by the taxpayer, that the notice of objection was filed long after the 90 days prescribed by the Act. In addition section 167 states:

Where no objection to an assessment under section 165 or appeal to the Tax Review Board under section 169 has been made or instituted within the time limited by sections 165 or 169, as the case may be, for doing so, an application may be made to the Tax Review Board for an order extending the time within which a notice of objection may be served or an appeal instituted and the Board may, if in its opinion the circumstances of the case are such that it would be just and equitable to do so, make an order extending the time for objecting or appealing and may impose such terms as it deems just.

In the case at bar, no application whatever for an extension of time was made, and it is clear from section 169 that the notice of objection must be made before an appeal can be submitted to the Board.

I accordingly consider that the Board—although anomalies or problems may have occurred to explain why the taxpayer was unable to or did not file his notice of objection at the proper time—I do not consider that the Board can ignore the applicable section of the Act, and even though the respondent withdrew his motion to dismiss the appeal, and there may have been agreements between the respondent and the taxpayer to proceed, these facts could never confer on the Board jurisdiction which is not given by the Act. I must conclude that in the case at bar, in particular for the 1971 taxation year, the Board has no jurisdiction to hear the appeal before it, and this decision—since the respondent has withdrawn his motion to dismiss the appeal—this decision must necessarily be an ex officio decision of the Board.

As a result of this decision the appellant had to amend the wording of his notice of appeal as follows:

I consider that the amount of $7,914.50 which I am claiming as a deduction in calculating my income for the 1972 taxation year represented the payment of alimony or other periodic allowance.

In his reply to the notice of appeal the respondent included the following calculation, which was not disputed by the appellant:

Monthly payments

$55 x 27 weeks
$50 x 25 weeks	$2,735.00
Other items
Rental	750.00
Dentist	24.00
Heating	111.20
Electricity	129.70
Fraction of the selling cost of property
located at 554 rue Vachon in Ville Lasalle	4,165.00
Total	$7,914.50

In support of the assessment the respondent stated in his reply to the notice of appeal:

The respondent granted restrictively a deduction of $2,735, representing the total monthly payments of alimony made by the appellant during the 1972 taxation year, and disallowed the excess totalling $5,179.50, on the ground that it did not constitute the payment of alimony or other periodic allowance to provide for the needs of the appellant’s wife and children.

The Board gathered from the testimony that in accordance with a decision of the Superior Court of Montreal, dated July 31, 1970, the wife was receiving alimony of $55 a week. In accordance with the same decision, the appellant had to defray monthly charges for capital and interest, insurance, heating and electricity incurred by the appellant’s wife while she was living in the marital residence at 554 rue Vachon. The decision further required the appellant to pay the medical costs of the children of the marriage for whom the wife was responsible, and the wife’s medical costs. The amounts of these expenses were not specified in the decision.

On July 6, 1972 an agreement was concluded and signed by the parties, the terms of which were as follows:

1. The rue Vachon house where Mrs Quay lives at present, which belonged to her husband, and sold to Mrs Lorion, the latter selling, conveying and transferring the property directly to Mrs Guay, the whole for the amount of $12,500 and on condition that Mrs Guay assumes the existing hypothec to the Prudential Insurance Company, this debt being less that the sum of $7,000 and as it stands at present.

The deed of sale will be concluded before the notary Pierre Duchesne, and Mrs Guay will be responsible for legal costs.

2. Mr Guay intervenes in the deed and agrees to pay Mrs Lorion the sum of $12,500 on behalf of Mrs Guay, and a release is given by the latter.

3. Alimony of $50 a week payable to Mrs Guay, either for herself and the two children or the two children alone, for a maximum period of three years from July 1, 1972, and to be paid in advance on Saturday of each week from July 1, 1972, so long as their daughter Francine shall live with Mrs Guay and be without regular full-time employment, and so long as the said Francine Guay remains unmarried. As soon as one of these three conditions shall cease to be applicable to Francine, the alimony of $50 shall be immediately reduced to $25 a week.

4. At the end of three years, the said alimony shall be completely terminated and replaced by alimony of $25 a week, payable to Mrs Guay but solely for the child Bernard, and until the latter has attained the legal age of majority, as now determined, that is 18 years of age. However, notwithstanding the foregoing, the said alimony may also terminate before the majority of the child Bernard, in the event that he latter obtains regular full-time employment.

5. Further, Mrs Guay intends to submit forthwith a divorce petition against her husband on grounds of physical and mental cruelty, so that in the any decree ab- solute an order must be made giving full effect to this agreement, with regard to a complete and scheduled payment of alimony, represented as aforesaid by this equity on a property conveyed to Mrs Guay, the said alimony for periods of three years and one year as stated above, with the reservations contained therein regarding Bernard and Francine.

6. After this transfer of property and payment of the two aforementioned subsequent alimony payments, Mr Guay shall be released from any future obligations to his wife and two children, Francine and Bernard, and Mrs Guay will act as surety for any actions by the children against Mr Guay for support.

7. A deed of sale shall be immediately concluded between Mrs Guay and Mrs Lorion to convey ownership in the property.

8. However, this sale shall take effect as of July 1, and Mrs Guay shall be responsible for the payment of all obligations associated with the property, namely instalments of capital and interest payable to the mortgage creditor, real estate taxes, school taxes and any other levies affecting the said property, and shall also maintain the same and make any repairs necessary as owner of the property.

I think it is clear that the appellant was attempting by this agreement to relieve himself of the obligations imposed on him by the decision of July 1970. How and why Mrs Lorion became involved in this transaction was not clearly explained, and I find it hard to understand the relevance of her involvement in the case now before the Board.

The terms of the agreement were performed and the appellant paid alimony of $50 a week for the second half of 1972. The sum of $12,500 which the appellant paid Mrs Lorion was designed as a means of claiming alimony payments, and in order to do this, he distributed the amount over a three-year period during which he paid $50 a week as alimony, as indicated above. The appellant further claimed a deduction of $750 for the first half of 1972 for municipal taxes and maintenance of the marital residence, which he classified as “rental”.

The two points for decision in the case relating to the 1972 taxation years are the following.

(a) Do the sums of $750, $24, $111.20 and $129.70, claimed as expenses for rental, dentist, heating and electricity respectively, constitute the payment of alimony within the meaning of paragraphs 60(b) and (c) of the Income Tax Act, SC 1970-71-72, c 63, as amended?

According to the evidence presented, which was not disputed, the appellant himself paid these amounts to the creditors, not to his wife for her to use at her discretion as required by the Income Tax Act, and I quote:

60. Other deductions. There may be deducted in computing a taxpayer's income for a taxation year such of the following amounts as are applicable:

(b) Alimony payments.—an amount paid by the taxpayer in the year, pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written agreement, as alimony or other allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the marriage, or both the recipient and children of the marriage, if he was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year;

(c) Maintenance payments.—an amount paid by the taxpayer in the year, pursuant to an order of a competent tribunal, as an allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the marriage, or both the recipient and children of the marriage, if he was living apart from his spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year.

The Federal Court has affirmed this principal in several of its decisions:

1. Her Majesty the Queen v Morton Pascoe, [1975] CTC 656; 75 DTC 5427;

2. Peter D L Roper v MNR, [1977] CTC 602; 77 DTC 5408;

3. Her Majesty the Queen v Gerald G Fisch, [1978] CTC 438; 78 DTC 6332;

4. Her Majesty the Queen v Jean Guay, [1977] CTC 266; 77 DTC 266.

(b) Can the amount of $4,165, representing a third of the purchase price of the residence located at 554 rue Vachon, Ville Lasalle, claimed by the appellant as an alimony payment, be accepted as a period payment within the meaning of the Income Tax Act?

Here again there is no indication the payment was made by the appellant to his wife. In fact, title to the marital residence was transferred to the wife by a third party. Even if it is assumed that, by intervening in the transaction, the appellant by this means honoured his alimony obligations toward his wife, these were not periodic payments as required by the Act: rather, a total payment was made in a single amount. This payment therefore lacks the characteristic of periodicity which led, in similar cases in the Federal Court, to the rejection of total payments claimed as payments of alimony (see MNR v John James Armstrong, [1956] CTC 93; 56 DTC 1044; T P Veliotis v Her Majesty the Queen, [1974] CTC 237; 74 DTC 6190.

For these reasons, the appeal for the 1971 taxation year, and for the 1972 taxation year, must be dismissed.

Appeal dismissed.