Thurlow,
J
(concurred
in
by
Ryan,
J):—This
appeal
is
from
a
judgment
of
the
Trial
Division
which
dismissed
the
appellant’s
appeal
from
reassessments
of
income
tax
for
the
years
1964,
1965,
1966
and
1967.
The
question
at
issue
with
respect
to
all
four
years
is
whether
the
appellant
was
entitled
to
a
deduction
of
the
amount
of
a
payment
of
$309,414
which
was
made
on
April
15,
1965
to
the
trustees
of
a
pension
plan
established
on
April
1,
1965
for
the
executives
of
the
appellant
company.
The
particular
payment
was
made
as
a
contribution
to
provide
pensions
for
the
executives
in
respect
of
their
past
service
to
the
appellant.
With
respect
to
such
plans,
section
76
of
the
Income
Tax
Act
provided
as
follows:
76.
(1)
Where
a
taxpayer
is
an
employer
and
has
made
a
special
payment
in
a
taxation
year
on
account
of
an
employees’
superannuation
or
pension
fund
or
plan
in
respect
of
past
services
of
employees
pursuant
to
a
recommendation
by
a
qualified
actuary
in
whose
opinion
the
resources
of
the
fund
or
plan
required
to
be
augmented
by
an
amount
not
less
than
the
amount
of
the
special
payment
to
ensure
that
all
the
obligations
of
the
fund
or
plan
to
the
employees
may
be
discharged
in
full
and
has
made
the
payment
so
that
It
is
irrevocably
vested
in
or
for
the
fund
or
plan
and
the
payment
has
been
approved
by
the
Minister
on
the
advice
of
the
Superintendent
of
Insurance,
there
may
be
deducted
in
computing
the
income
of
the
taxpayer
for
the
taxation
year
the
amount
of
the
special
payment.
(2)
For
greater
certainty,
and
without
restricting
the
generality
of
subsection
(1),
it
is
hereby
declared
that
subsection
(1)
is
applicable
where
the
resources
of
a
fund
or
plan
required
to
be
augmented
by
reason
of
an
increase
in
the
superannuation
or
pension
benefits
payable
out
of
or
under
the
fund
or
plan.
The
appeal
to
the
Trial
Division
was
dealt
with
on
an
agreed
statement
of
the
facts
and
of
the
issues
to
be
determined.
The
statement
is
set
out
in
full
in
the
reasons
for
judgment
of
the
learned
trial
judge
and
need
not
be
repeated.
lt
is
sufficient
for
present
purposes
to
say
that
it
was
common
ground
that
the
conditions
imposed
by
subsection
76(1)
in
respect
of
the
deductibility
of
the
payment
of
$309,414
were
met,
save
that
there
was
issue
as
to
whether
at
the
material
time
there
were
any
“obligations
of
the
fund
or
plan
to
the
employees”
in
respect
of
which
the
fund
required
to
be
augmented.
On
this
point
the
plan
provided
as
follows:
Section
IX—Contributions
(a)
Members’
Required
Contributions
The
Members
of
this
plan
shall
not
be
required
nor
permitted
to
make
contributions
to
this
Plan,
the
said
Plan
being
completely
non-contributory
by
the
Members.
(b)
Contributions
by
the
Company
The
Company
shall
contribute
on
behalf
of
each
Member
an
amount
equal
to
the
maximum
permitted
under
the
Income
Tax
Act
of
Canada
being
$1,500.00
per
year
per
Member
as
hereinafter
set
forth.
The
Company
intends
to
contribute,
subject
to
the
funds
for
such
purpose
being
available,
such
amounts
as
may
be
required
in
accordance
with
the
certification
of
an
Actuary
to
provide
the
Past
Service
Pensions
mentioned
in
Section
X
(a)
hereof.
SECTION
X—AMOUNT
OF
RETIREMENT
INCOME
(a)
For
Past
Service
The
Company*
expects
to
purchase,
subject
to
the
funds
for
such
purposes
being
available,
a
Past
Service
Pension
for
each
designated
Executive,
and
more
particularly,
the
President
and
the
Secretary,
who
enter
the
Plan
at
the
effective
date.
The
Past
Service
Pension,
shall
be
related
in
each
case
to
the
Member’s
completed
years
of
service
with
the
Company,
prior
to
the
effective
date,
and
shall
be
a
monthly
amount
of
Past
Service
Pension,
commencing
at
normal
retirement
age,
for
each
completed
year
of
prior
service,
as
indicated
below.
President—$180.90
per
month
Secretary—$285.85
per
month
In
determining
the
number
of
years
under
this
section,
any
fractional
years
will
be
treated
as
completed
years.
In
determining
the
number
of
years
of
accredited
past
service
that
shall
be
allowed
and
taken
into
account
in
calculating
the
said
Past
Service
Benefit,
the
decision
of
the
Board
of
Directors
of
the
Company
shall
be
final
and
binding
on
all
parties,
but
in
no
event
shall
such
number
of
years
exceed
the
actual
number
of
years
the
Employee
has
been
in
the
service
of
the
Company
or
its
predecessors
at
such
time.
In
calculating
or
determining
the
amount
of
Past
Service
Pension
Benefits
which
may
be
paid
hereunder,
any
pension
benefits
received
by
the
Employee
in
respect
of
any
contributions
to
any
general
fund
of
the
Company
made
prior
to
his
enrollment
in
this
Plan,
shall
be
taken
into
account
and
be
deemed
to
form
part
of
the
Past
Service
Pension
Benefit
herein
described.
The
learned
trial
judge
held
that
under
these
provisions
there
was
no
obligation
on
the
appellant
to
make
payments
to
the
fund
and
that
in
consequence
there
were
at
the
material
time
no
obligations
of
the
fund
or
plan
to
the
employees
who
were
members
of
the
plan.
In
his
view
prior
to
the
making
of
the
payment
there
was
no
obligation
within
the
meaning
of
subsection
76(1)
and
after
the
payment
had
been
made
there
was
no
longer
any
need
to
augment
the
resources
of
the
fund.
He,
therefore,
concluded
that
the
appellant
was
not
entitled
to
a
deduction
in
respect
of
the
$309,414
which
it
had
paid.
I
agree
with
the
view
of
the
learned
trial
judge
that
the
case
is
governed
by
the
reasoning
of
the
Supreme
Court
of
Canada
in
MNR
v
Inland
Industries
Limited,
[1972]
CTC
27;
72
DTC
6013,
and
with
his
conclusion
and
I
am
also
in
substantial
agreement
with
his
reasons
therefor.
In
my
opinion,
the
material
time,
so
far
as
the
application
of
subsection
76(1)
is
concerned,
was
immediately
before
the
payment
was
made.
At
that
time
there
was
no
financial
obligation
of
the
appellant
to
the
fund
or
plan
or
of
the
fund
or
plan
or
its
trustees
to
the
members
of
the
plan.
An
essential
prerequisite
of
the
applicability
of
subsection
76(1)
was
therefore
lacking
because
the
payment
cannot
be
regarded
as
having
been
made
“to
ensure
that
obligations
of
the
fund
or
plan
to
the
employees
(might)
be
discharged
in
full”
within
the
meaning
of
subsection
76(1)
where
there
were
in
fact
no
such
obligations.
Vide
MNR
v
Inland
Industries
Limited
(supra).
The
fact
that
obligations
of
the
fund
and
its
trustees
to
the
employees
may
have
arisen
upon
the
payment
being
made,
in
my
opinion,
is
not
material.
It
was
submitted
on
behalf
of
the
appellant
that
this
case
differed
from
the
Inland
Industries
case
in
that
if
the
language
of
section
IX(b)
of
the
Plan
was
inept
and
did
not
give
rise
to
an
enforceable
obligation
on
the
part
of
the
appellant
company
to
make
payments
to
the
fund
or
plan
the
shortcomings
of
the
language
used
were
cured
by
the
actual
payment
to
the
trustees
of
the
plan
upon
the
recommendation
of
the
actuary
and
before
application
was
made
to
the
minister
for
registration
of
the
plan
and
for
his
approval
of
the
payment
under
subsection
76(1).
In
this
connection
it
was
contended
that
had
the
appellant
an
hour
before
making
the
payment
exercised
its
right
under
Article
IX
of
the
trust
agreement
to
amend
the
plan
by
changing
the
wording
of
sections
IX
and
X
thereof
so
as
to
impose
enforceable
obligations
on
the
appellant
to
make
the
payment
and
on
the
trustees
to
purchase
past
service
pensions,
the
payment
subsequently
made
would
have
qualified
for
deduction.
Assuming
that
article
IX
of
the
trust
agreement
authorized
such
an
amendment
of
the
plan
and
that
such
an
amendment
would
have
served
to
make
the
payment
deductible,
it
is
unfortunate
for
the
appellant
that
the
amendment
was
not
made,
but
I
know
of
no
principle
upon
which
this
Court
may
change
the
actual
facts
to
what
they
might
have
been,
and
it
appears
to
me
that
there
is
no
basis
for
deciding
the
case
otherwise
than
on
the
basis
of
the
language
of
the
documents
as
it
existed
at
the
material
time.
Nor,
in
my
opinion,
can
it
be
taken
that
the
making
of
the
payment
by
the
appellant
obviated
or
served
to
satisfy
the
statutory
requirement
of
an
obligation
of
the
fund
to
the
employees
as
a
condition
of
the
deductibility
of
the
payment.
The
statutory
provision
must,
as
I
see
it,
be
limited
to
what
fairly
falls
within
the
meaning
of
the
language
used
and
there
is
no
room
for
extending
it
by
supposed
intendment
to
situations
which
do
not
meet
that
language.
The
appellant
also
submitted
that
the
Minister’s
approval
once
given
could
not
be
withdrawn
but
in
my
opinion
this
point
as
well
is
covered
by
the
judgment
in
the
Inland
Industries
case
and
is
not
sustainable.
Where
a
statutory
requirement
for
the
deduction
has
not
been
met,
the
deduction
for
that
reason
must
be
disallowed
and
it
does
not
matter
that
the
approval
of
the
payment,
which
is
another
of
the
essential
conditions
of
deductibility,
had
been
given.
In
my
opinion,
the
appeal
should
be
dismissed
with
costs.
Bastin,
DJ:—This
is
an
appeal
from
a
judgment
of
the
Trial
Division
delivered
on
February
22,
1973,
dismissing
an
appeal
by
the
appellant
of
its
assessments
under
Part
I
of
the
Income
Tax
Act
for
the
1964-1967
taxation
years.
The
sequence
of
events
leading
to
the
appeal
is
as
follows:
1.
The
appellant
established
what
is
commonly
known
as
an
executive
pension
plan.
That
is,
a
pension
arrangement
for
the
benefit
of
the
principal
shareholders
and
employees
of
the
appellant
corporation.
Pursuant
to
same,
the
appellant:
(i)
on
April
1,
1965
passed
and
enacted
by-law
No
13
of
the
company,
authorizing
the
pension
plan;
(ii)
on
April
1,
1965
entered
into
a
pension
trust
agreement
with
trustees
for
the
purpose
of
holding
and
administering
funds
on
behalf
of
the
pension
plan.
2.
The
pension
plan
was
attached
to
the
pension
trust
and
formed
a
part
thereof.
3.
The
pension
plan
provided
for
two
kinds
of
retirement
income:
(i)
a
past
service
pension
based
upon
a
member’s
years
of
service
up
to
the
“effective
date”;
the
“effective
date”
was
April
1,
1965;
(ii)
a
future
service
pension.
4.
In
order
to
provide
funds
for
the
purposes
of
pension
payments,
the
appellant
was
to
contribute:
(i)
$1,500
per
year
per
member
in
respect
of
future
service
pensions;
(ii)
an
actuarially
determined
amount
in
respect
of
past
service
pensions.
5.
The
appellant
engaged
an
actuary
who
determined
the
past
service
requirements
of
the
pension
plan
as
of
April
1,
1965
at
$309,414.
6.
On
April
15,
1965
the
appellant
paid
to
the
trustees
of
the
pension
plan
the
said
sum
of
$309,414
in
respect
of
past
service.
7.
On
April
15,
1965
the
appellant
forwarded
to
the
respondent
an
application
for
registration
of
the
pension
plan
and
being
Form
T510,
together
with
attached
documents.
8.
The
respondent:
(i)
on
May
31,
1965
accepted
the
trusteed
pension
plan
for
registration
under
the
Income
Tax
Act;
(ii)
on
July
28,
1965,
advised
that
the
actuarial
calculations
had
been
confirmed
and
that
“special
past
service
payments
to
the
plan”
may
be
claimed
as
deductions
under
the
Income
Tax
Act.
9.
The
appellant
did
deduct
the
aforementioned
payment
of
$309,414
in
calculating
income
for
its
1965
taxation
year
and
the
respondent
subsequently
in
1969,
reassessed,
denying
the
deduction
so
claimed.
The
issues
in
this
appeal
are
as
follows:
1.
Upon
the
agreed
assumption
that
the
other
requisites
of
subsection
76(1)
of
the
Income
Tax
Act
have
been
satisfied,
was
the
payment
of
$309,414
within
the
provisions
of
subsection
76(1)
in
so
far
as
the
same
relates
to
the
obligations
of
the
fund
or
plan
to
the
employees?
2.
Is
the
respondent
functus
officio,
and
estopped
from
making
the
reassessment
in
question?
Counsel
for
the
appellant
did
not
abandon
the
second
issue
but
did
not
argue
it.
In
view
of
my
decision
on
the
first
issue,
it
is
not
necessary
for
me
to
consider
it.
The
learned
trial
judge
in
his
reasons
for
judgment
relied
on
the
decision
of
the
Supreme
Court
of
Canada
in
the
case
of
MNR
v
Inland
Industries
Limited
(supra).
In
my
opinion
the
case
at
bar
is
clearly
distinguishable
on
its
facts
from
the
Inland
Industries
judgment.
Furthermore,
the
learned
trial
judge
has
given
to
the
word
“obligations”
in
section
76
a
different
interpretation
from
that
given
to
the
word
in
the
Supreme
Court
of
Canada
judgment
in
the
Inland
Industries
case.
Section
76
reads
as
follows:
76.
(1)
Where
a
taxpayer
is
an
employer
and
has
made
a
special
payment
in
a
taxation
year
on
account
of
an
employees’
superannuation
or
pension
fund
or
plan
in
respect
of
past
services
of
employees
pursuant
to
a
recommendation
by
a
qualified
actuary
in
whose
opinion
the
resources
of
the
fund
or
plan
required
to
be
augmented
by
an
amount
not
less
than
the
amount
of
the
special
payment
to
ensure
that
all
the
obligations
of
the
fund
or
plan
to
the
employees
may
be
discharged
in
full
and
has
made
the
payment
so
that
it
is
irrevocably
vested
in
or
for
the
fund
or
plan
and
the
payment
has
been
approved
by
the
Minister
on
the
advice
of
the
Superintendent
of
Insurance,
there
may
be
deducted
in
computing
the
income
of
the
taxpayer
for
the
taxation
year
the
amount
of
the
special
payment.
(2)
For
greater
certainty,
and
without
restricting
the
generality
of
subsection
(1),
it
is
hereby
declared
that
subsection
(1)
is
applicable
where
the
resources
of
a
fund
or
plan
required
to
be
augmented
by
reason
of
an
Increase
in
the
superannuation
or
pension
benefits
payable
out
of
or
under
the
fund
or
plan.
I
would
paraphrase
this
section
as
follows:
A
taxpayer
employer
may
deduct
from
his
income,
when
computing
his
income
tax,
the
amount
of
a
special
payment
made
in
that
year
to
the
trustees
of
an
employees’
pension
fund
for
past
services
provided
that:
(1)
the
special
payment,
in
the
opinion
of
a
qualified
actuary,
is
necessary
to
provide
the
funds
to
carry
out
the
obligations
of
the
fund
io
the
employees,
that
is,
the
amount
required
to
enable
the
trustees
of
the
fund
to
pay
the
pensions
in
accordance
with
the
specific
scale
of
benefits
provided
by
the
terms
of
the
plan;
(2)
the
company
has
made
the
special
payment
to
the
fund
so
that
it
is
irrevocably
vested
in
the
trust
fund;
(3)
the
special
payment
has
been
approved
by
the
Minister
of
National
Revenue
on
the
advice
of
the
Superintendent
of
Insurance.
In
my
opinion
the
word
“obligations”
in
section
76
means
the
specific
scale
of
benefits
recited
in
the
pension
plan.
That
this
is
the
meaning
given
to
the
word
by
Mr
Justice
Pigeon
in
the
Inland
Industries
judgment
is
indicated
by
the
following
quotation
from
his
judgment
at
page
32
[6017]:
Furthermore,
subsection
(2)
of
section
76
clearly
shows
that
“obligations
of
the
Fund
or
Plan
to
the
employees”
means
‘‘superannuation
or
pension
benefits
payable”.
It
is
apparent
that
the
situation
intended
to
be
met
by
the
special
payments
provided
for
is
that
which
arises
when
a
pension
plan
specifies
a
scale
of
benefits
payable.
The
learned
trial
judge
held
the
word
“obligations”
to
mean
legally,
presently
enforceable
liabilities
which
in
my
opinion
is
not
the
meaning
intended
by
Parliament.
It
is
not
necessary
to
recite
all
the
facts
relating
to
the
pension
plan
in
the
Inland
Industries
case.
It
appears
probable
that
on
the
strength
of
many
of
them
the
Minister
of
National
Revenue
came
to
the
conclusion
that
the
plan
was
not
a
genuine
employees’
pension
plan
and
on
that
ground
disallowed
the
income
tax
deduction
for
the
amount
paid
by
the
company
into
the
fund.
However,
Mr
Justice
Pigeon
held
that
it
was
not
necessary
or
desirable
to
express
an
opinion
on
any
matter
other
than
the
legal
point
which
he
then
proceeds
to
discuss.
I
quote
from
his
reasons
on
pages
31-2
[6016-17]:
This
is
that
the
deduction
claimed
was
not
allowable
because
there
were
no
“obligations”
of
the
fund
or
plan
to
Mr
Lloyd
Parker
that
required
any
special
payment
to
ensure
that
they
might
be
discharged
in
full,
as
section
76
of
the
Income
Tax
Act
expressly
requires:
.
.
.
That
there
was
no
“obligation”
of
the
pension
fund
to
Mr
Parker
that
“required”
the
special
payments
is
readily
apparent
from
the
terms
of
the
plan.
The
only
obligations
to
a
member
were
to
use
in
the
prescribed
manner
the
funds
that
became
available.
In
fact,
it
was
not
contended
at
the
hearing
that
an
obligation
had
been
created,
either
on
the
fund
or
on
the
company
to
provide
to
Mr
Parker
the
benefits
which
were
intended
to
be
provided
by
the
special
payments.
The
contention
was
that
“obligation”
was
to
be
taken
to
mean
what
the
actuary
making
a
recommendation
understood
it
to
mean.
It
is
to
be
noted
first
that
in
the
memorandum
from
the
Department
of
Insurance,
the
statement
is
not,
as
in
the
actuarial
certificate,
that
the
fund
requires
to
be
augmented
“to
ensure
that
all
obligations
of
the
Fund
in
respect
of
past
services
may
be
discharged
in
full”
but
that
“the
Fund
requires
to
be
augmented
by
an
amount
not
less
than
the
amount
quoted
above
to
ensure
that
the
maximum
possible
benefits
under
the
Plan
may
be
provided”.
This
follows
the
Statement
that
“the
Plan
does
not
provide
a
specific
amount
of
pension”.
The
difference
between
the
wording
of
this
memorandum
and
the
wording
of
the
actuarial
certificate
is
quite
substantial
and
it
is
somewhat
surprising
that,
notwithstanding
such
advice,
departmental
approval
was
given
to
the
payments
on
behalf
of
the
Minister.
However,
it
seems
clear
to
me
that
the
Minister
cannot
be
bound
by
an
approval
given
when
the
conditions
prescribed
by
the
law
were
not
met.
..
.
Furthermore,
subsection
(2)
of
section
76
clearly
shows
that
“obligations
of
the
Fund
or
Plan
to
the
employees”
means
“superannuation
or
pension
benefits
payable”.
It
is
apparent
that
the
situation
intended
to
be
met
by
the
special
payments
provided
for
is
that
which
arises
when
a
pension
plan
specifies
a
scale
of
benefits
payable”.
...
It
cannot
be
said
that
because
the
intention
of
making,
at
some
future
time,
payments
in
the
amount
now
claimed
was
disclosed
to
the
department
in
the
application
for
registration
of
the
plan,
an
obligation
to
make
the
payments
was
created.
On
the
contrary,
the
terms
of
the
plan
were
perfectly
clear
to
the
effect
that
no
obligation
towards
Mr
Parker
would
arise
in
respect
of
those
sums
unless
and
until
the
company
chose
to,
and
actually
did,
make
the
contemplated
payments
into
the
fund.
My
conclusion
is
that
the
plan
submitted
by
Inland
Industries
Ltd
was
held
defective
for
the
following
reasons:
(1)
the
plan
did
not
specify
a
scale
of
benefits
payable,
so
the
terms
of
the
plan
were
not
defined;
(2)
on
the
date
the
plan
was
submitted
for
approval
to
the
Minister
of
National
Revenue,
no
special
payment
had
been
made
by
the
company
to
the
trustees
of
the
fund,
so
neither
by
its
covenant
nor
by
the
irrevocable
payment
of
money
to
the
fund,
had
the
company
committed
itself
to
carry
out
the
plan,
so
what
was
submitted
was
merely
a
proposal.
In
the
case
at
bar,
the
terms
of
the
plan
established
an
obligation
on
the
trustees
to
pay
specific
benefits.
These
are
recited
on
page
8
of
the
plan
as
follows:
The
Past
Service
Pension
shall
be
related
in
each
case
to
the
Member’s
completed
years
of
service
with
the
Company,
prior
to
the
effective
date,
and
shall
be
a
monthly
amount
of
Past
Service
Pension,
commencing
at
normal
retirement
age,
for
each
completed
year
of
prior
service,
as
indicated
below:
President—$180.90
per
month
Secretary—$285.85
per
month.
In
determining
the
number
of
years
under
this
section,
any
fractional
years
will
be
treated
as
completed
years.
Furthermore,
on
the
date
the
application
for
approval
was
made
by
the
appellant,
the
amount
which
the
actuary
had
calculated
was
required
to
be
paid
into
the
fund
to
ensure
that
all
the
obligations
of
the
fund
or
plan
to
the
employees
could
be
discharged
in
full,
namely,
$309,414,
had
been
irrevocably
paid
by
the
appellant
to
the
trustees
of
the
fund.
In
my
opinion
words
in
the
agreement
indicating
that
the
plan
was
conditional
upon
the
ability
of
the
company
to
make
the
special
payment
are
not
a
defect
or
unreasonable
in
the
case
of
a
small
company.
A
plan
might
well
be
abandoned
after
the
drafting
and
passing
of
the
by-law
and
the
execution
of
the
agreement,
due
to
the
size
of
the
special
payment
in
relation
to
its
resources
and
the
attitude
of
its
bank
and
creditors.
Section
76
does
not
mention
the
obligation
of
the
company.
lt
requires
that
the
company
should
commit
itself
to
the
plan,
not
by
its
covenant,
but
by
the
irrevocable
payment
to
the
trustees
of
the
amount
of
the
special
payment.
For
these
reasons
I
consider
that
the
appellant
had
complied
in
every
respect
with
the
requirements
of
section
76
of
the
Income
Tax
Act
and
was
entitled
to
make
the
deduction
claimed.
I
would
allow
the
appeal
with
costs
here
and
below
against
the
respondent.
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