George W Offley v. Minister of National Revenue, [1974] CTC 2139, 74 DTC 1101

A J Frost:—This is an appeal from an income tax assessment in respect of the appellant’s taxation year ended December 31, 1971.

In his notice of appeal the appellant has stated:

In 1971 I was given an award by the Public Service Commission (Federal) in recognition of a service I had extended to a friend employed by the Alberta Provincial Government. The service was given in 1970. The award was unsolicited and presented to me by the Government of Alberta “don manuel”. It was stated to be a gift for the assistance rendered to the Provincial Government in redrafting the Alberta Livestock Inspection Act. This is the first time an award of this nature has been given, accounting for the lack of guidance from Court interpretation.

I am a serving member of the RCM Police and the drafting of laws is not part of my regular work.

It is not payment from my employer, and therefore, does not fall into section 5(1) of the Act.

It is not income from a business or profession.

The gift is not excessive.

In his reply the respondent has stated in substance: that indeed, the appellant received in 1971 $1,500 from the Public Service Commission, Ottawa for services rendered by the appellant in 1970 to the Government of Alberta, and that he was, at all material times, a member of the Royal Canadian Mounted Police; that the said $1,500 was a fee for services which appellant had rendered to the Government of Alberta; that the Public Service Commission treated this $1,500 payment as compensation or remuneration for services rendered and had deducted from it Canada Pension Plan contributions and income tax.

The respondent concluded that the said amount constituted income from employment within the meaning of subsection 5(1) of the Income Tax Act; or a fee for services rendered within the meaning of para- graph 6(1)(a); or an isolated contract for services and, as such, a “business” within the meaning of paragraph 139(1)(e) of the Act as applicable at the time.

On September 25, 1973 this appeal was heard at the City of Edmonton. Having heard the presentation of the parties and having considered the evidence adduced, I would like to restate the facts of this case as they were established at the hearing, viva voce as well as by documentary evidence, especially the Incentive Award Regulations of the Treasury Board dated March 20, 1969, as amended under date of April 29, 1971.

In or about 1970 the appellant successfully assisted in the drafting of a revised statute of the Province of Alberta concerning The Livestock Inspection Act. This work, which had no direct connection with his official duties as an RCMP officer, was brought to the attention of the Royal Canadian Mounted Police, which considered this extraordinary performance “beyond what could normally be expected by management” sufficient reason to recommend the appellant for a special award under the Federal Merit Award Programme. A recommendation of this kind is made, by a deputy head of the department which employs the public servant concerned, to the Incentive Award Board of the Public Service of Canada which may make awards in an amount or of a value of $5,000 or less on the ground that a meritorious contribution has been made. The words “meritorious contribution” comprise, according to paragraph (g) of section 8 of the Incentive Award Regulations:

(i) performance at an unusually high level over an extended period of time;

(ii) the successful completion, in a manner beyond what could normally be expected by management, of a major project, special assignment or research study;

(iii) the performance of duties under abnormal circumstances in a manner which constitutes a contribution of unusual merit to the Public Service;

The minutes of the Incentive Award Board refer to “the successful completion, in a manner beyond what could normally be expected by management, of a major project”.

One may ask what is meant by “management”. The award is normally given for a special service rendered to the department which employs the employee. It does not seem necessary that the service be directly rendered to that department. It is possible that the performance served the department in an indirect way, eg, by improving the public image of that department or of the Federal Public Service Commission as a whole, but there is, in my opinion, no doubt that the word “management” refers to the head of the department under which the employee serves.

In other words, there should be some relationship between the meritorious behaviour and the interest of the department for which the employee works. If an employee of National Revenue while on holiday in France holds a burglar at bay in his hotel so that the police can arrest him, or if he somewhere on a beach saves a child from drowning, it is unlikely that the Deputy Minister of that Department would recommend him for an award under the said provisions.

In the present case, the interest of the Royal Canadian Mounted Police could therefore be considered implied when the department head recommended an award for the appellant. If this had not been so, why should the federal government and not the Province of Alberta have paid $1,500 to the appellant?

Having said all this about the apparent scope and purpose of the merit award system, it is obvious that it is an opportunity which only exists in and through the Public Service for those who are members thereof. The award can only be received on the recommendation of the department for which one works. As such, it falls, in my opinion, clearly within the concept of “benefits of any kind whatsoever” under subsection 5(1) of the old Act.

The appellant has referred to the Exchequer Court decision in MNR v Laurent Gagnon, [1966] Ex CR 114; [1965] CTC 423; 65 DTC 5268, with particular reference to the decision of the Tax Appeal Board (38 Tax ABC 79; 65 DTC 253) allowing the appeal, but has overlooked the fact that the Exchequer Court, on appeal, reversed the Board’s decision.

That case dealt with a “suggestion award” but as to taxability I cannot see much difference between this kind of award and a merit award. In both cases, there is an undeniable relationship between the interest of the employer, the general concern he represents and the granting of the award. In this case, the public relations benefit for the RCMP was obviously, in the opinion of this employer, adequate reason to grant the appellant as an employee a reward over and above his ordinary salary. As such, the award was a benefit within the meaning of paragraph 5(1 )(a) of the Income Tax Act, earned by the appellant as an RCMP officer for a special effort which reflected favourably on the corps to which he belonged. Moreover, all provincial statutes in the Province of Alberta are enforced by the Royal Canadian Mounted Police as the appellant testified, and the better a Statute is worded the easier it is to enforce, as the appellant explained in his testimony.

For the above reasons, the appeal should be and is hereby dismissed.

Appeal dismissed.