Donalde Hamacha v. Minister of National Revenue, [1976] CTC 2327, 76 DTC 1249

Guy Tremblay:—This case was heard on January 23, 1976 at Quebec City.

Summary

Appellant claimed exemption for the 1973 taxation year for her son Bruno, 4 years of age, as being wholly dependent, and with a status equivalent to married status under paragraph 109(1)(b) of the Income Tax Act. Respondent refused this exemption.

Burden of Proof

Appellant has the burden of showing that respondent's assessment is incorrect. This burden of proof is not based on a particular section of the Act but on a decision of the Supreme Court of Canada in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

Facts

(1) On September 8, 1972 appellant married Abdel Kader Hamacha.

(2) In November 1972 the husband left Canada to complete his military service in Algeria, his country of origin, with the intention of subsequently returning to Canada.

(3) Mr Hamacha did return to Canada on August 6, 1973 to cohabit with appellant, his wife, for the rest of the year.

(4) During 1973 appellant and ner son Bruno, the natural son of appellant, lived with her mother. The husband is not the natural father of Bruno.

(5) Appellant paid for food, heating, electricity and paid the taxes for all of them, in addition to the ordinary expenses involved in Bruno’s maintenance.

(6) During his four months in Canada from September to December 1973 the husband earned $1,700.

(7) While cohabiting with his wife, the husband paid $50 a month for board and lodging.

(8) Appellant worked as an office clerk at the Unemployment Insurance Commission. For the year 1973 she declared a gross income of $6,874.32, and net income of $5,731.55.

(9) In calculating her taxable income she claimed, inter alia, $1,600 for herself and $1,400 for her son Bruno. She claimed no exemption for her husband.

(10) Respondent, in a preliminary assessment made on June 17, 1974 refused the exemption of $1,400 for the son Bruno, and granted one of $300. He also added one of $148 for the husband.

(11) Following a notice of objection filed on September 11, 1974, respondent issued a new notice of assessment dated March 25, 1975 altering the taxable income by $0.90, but not really altering any of the personal exemptions, except that of the husband, namely from $148 to $148.45.

(12) Appellant filed an appeal against the assessment on June 12, 1974.

Point at Issue

It is necessary to decide whether appellant is entitled to claim the exemption of $1,400 for her son Bruno as a wholly dependent person with a status equivalent to married status, according to paragraph 109(1)(b) of the Act (SC 1970-71-72, c 63 as amended).

Appellant’s Arguments

(1) The husband did not reside in Canada for more than 183 days, since he was absent from January 1, 1973 to August 6, 1973. According to appellant, he thus cannot be considered as a resident. As a consequence, she claims that he was not legally present in Canada in 1973. Appellant thus cannot claim the exemption for her husband, but she can claim $1,400 for her son Bruno, with status equivalent to married status.

The question of the 183 days provided for in paragraph 250(1)(a) of the Act applies to a de facto non-resident who sojourned in Canada for one or more periods, the aggregate of which is 183 days or more. In this case the person is presumed to be resident in Canada. This section does not apply, however, to a person who is ordinarily resident in Canada but who leaves the country for a period so that he was not in Canada for more than 183 days. Appellant’s husband was a person ordinarily resident in Canada. He had in fact left Canada only temporarily, and he had done so with a particular aim, namely, to do his military service in his country of origin and to return to Canada, which in fact is what he did. He had left his wife and his assets here and he returned to them. It has long been held that the place where the taxpayer and his family ordinarily reside constitutes his ordinary residence. Similarly, a temporary absence from the country of residence does not cause a person to lose this ordinary residence for the purposes of subsection 2(1) of the Act. Since Mr Harnacha had his ordinary residence in Canada for the whole of 1973, it is not possible to make him a non-resident on the basis of an argument e contra of paragraph 250(1 )(a) of the Act.

(2) Appellant, citing subsection 109(3) to the effect that, unless the contrary is estblished, an illegitimate child is dependent on his mother, maintained that this section applies to all deductions provided for in subsection 109(1), and thus also in paragraph 109(1)(b).

Unfortunately, however, subsection 109(3) states “For the purpose of the deduction for a child under paragraph (1)(d)”.

Since the Act must be interpreted restrictively, I may not apply it to a different paragraph unless the Act is changed, which is the duty of the legislator. In this case, paragraph 109(1)(d) provides for exemptions of $300 and $550, and not an exemption of $1,400.

(3) According to appellant, the conditions contemplated by paragraph 109(1)(b) were fulfilled, and enable her to claim an exemption of $1,400 for her son Bruno.

Paragraph 109(1)(b) states:

109. (1) For the purpose of computing the taxable income of an individual for a taxation year, there may be deducted from his income for the year such of the following amounts as are applicable:

Wholly dependent persons

(b) in the case of an individual not entitled to a deduction under paragraph (a) who, during the year,

(I) was an unmarried person or a married person who did not support

or live with his spouse and was not supported by his spouse, and

(ii) whether by himself or jointly with one or more other persons, maintained a self-contained domestic establishment (in which the individual lived) and actually supported therein a person who, during the year,. was

(A) wholly dependant for support upon, and

(B) connected by blood relationship, marriage or adoption, with

the taxpayer, or the taxpayer and such one or more other persons, as the case may be,

an amount equal to the aggregate of

(iii) $1,600 and

(iv) $1,400 less the amount, if any, by which the income for the year of the dependent exceeds $300.

Subject to paragraph (5) below, let us assume that the appellant is not entitled to a deduction for her husband under paragraph 109(1)(a), and let us examine the other conditions.

Was not appellant a married person who lived with her spouse during the year? This must be answered in the affirmative. Her husband in fact lived with her for almost five months. According to the Supreme Court (P W Thomson v MNR, [1946] CTC 51; 2 DTC 812) the expression “during the year” means “in the course of the year’, and not “from the beginning to the end of the year”. Moreover, in her written submission appellant seems to give the same meaning to the expression “during the year”.

Thus the condition that appellant must not have lived with her husband during the year is not met. Accordingly, she may not claim another person, as having status equivalent to married status.

Appellant stresses in her submission that the presumption which existed in section 26 of the former Act, namely that when two spouses lived together, the husband was deemed to have supported his wife, does not exist in the new Act. Though the presumption no longer exists, the condition of non-cohabitation of the spouses during the year still exists in paragraph 109(1)(b) to allow an exemption to another person as having status equivalent to married status. According to the evidence submitted, this condition is not met in this case.

(4) Citing the beginninig of subsection 109(1),

. . . there may be deducted from his income for the year such of the following amounts as are applicable:

appellant maintains that she may choose the exemption which is to her advantage.

The word “applicable” does not give the taxpayer a choice. It simply means that the amounts to be deducted are those which the facts allow him to deduct according to the conditions set out in the section. Moreover, appellant seems to have had some idea of this condition, because she added “provided that I fulfilled the conditions laid down”.

As explained above, all the conditions of paragraph 109(1)(b) were not fulfilled and the exemption provided for there cannot be granted.

(5) Appellant complained that it was respondent and not she herself who chose the exemption of $148.45 for her husband. According to her, she has never supported her husband and cannot seek an exemption. Appellant can always refuse an exemption, which will increase her income by that amount, but it will not give her any right to claim $1,400 for her son. The conditions of paragraph 109(1)(b) were in effect not fulfilled.

Furthermore, it is not so clear that she did not support her husband. The husband contributed $50 per month for his board and lodging. At the cost of living in 1973, I doubt very much that a man could feed and house himself at that price, unless he lived with his wife who contributed the rest. It should be remembered that since section 26 of the former Act has disappeared, it is not presumed that the husband supports his wife. Rather, the evidence shows the contrary.

In the matter of exemption granted to the husband, appellant complains that:

Department calculated his net income for tax purposes rather than his gross income. Section 109(1)(a)(i) refers simply to income. I believe that they should have calculated the gross income instead of the net income.

First, the word “income” in the Act means “net income”. When the legislator means “gross income” he says so specifically. This interpretation is based on the expression “gross income” in section 248. The expression “taxable income” is also defined. The expression “net income” is not defined but it becomes clear from the use of the word “income” in the Act, and especially in section 3, that “income” means “net income”.

Finally, if respondent had mistakenly used the gross income of appellant’s husband, namely $1,700, appellant would not even have been able to claim the exemption of $148.45 because she would have had nothing at all. In fact, since the difference between $1,700 and $300 (subpara 109(1 )(a)(ii)) is $1,400, it would have cancelled out the total permitted exemption of $1,400.

Appeal Dismissed

Following the hearing of evidence, consideration of the Act and the case law, the appeal must be dismissed and the assessment of respondent upheld.

Appeal dismissed.