A J Frost:
1 This is an income tax appeal in respect of the appellant's 1971 taxation year wherein the Minister of National Revenue disallowed the deduction claimed in respect of additional medical expenses of $104 paid in August 1972 on the ground that the appellant had not paid the said expenses “within a period of 12 months ending in the year”, as required according to the provisions of paragraph 27(1)(c) of the Income Tax Act.
2 The appellant's notice of appeal stated the following facts which were admitted by counsel for the respondent:
1. In 1970 and 1971 the Alberta Health Care Insurance Commission paid on my behalf certain sums to Dr. L. E. Beauchamp for services to my children.
2. In October of 1971 and March 1972 the Commission's Internal Audit people decided to reduce some of these previously paid claims; the reductions totalling $104.
3. After months of fruitless protest, Dr. Beauchamp passed this demand over to me. I said that if I could not change the Commission's mind, I would make good this reduction; in fact I paid almost the whole of it in August 1972, the remainder in December 1972 (in addition to some more nearly current bills).
4. Between the taxation years 1971 and 1972 the basis for medical expense deductions from taxable income was changed: expenses reimbursed by private insurance plans were no longer deductible, though their premiums would be. Partly in consequence, the payments to Dr. Beauchamp were useless to me for the year 1972.
5. I asked the Regional Appeal Board to adjust my 1971 income tax return to include this new medical expense deduction, but they rejected this request on the ground that the Income Tax Act clearly states that the taxpayer must have paid any claimed expense by the end of the taxation year.
3 The said paragraph grants a special right of deduction to any taxpayer who is subject to heavy medical costs with respect to medical expenses that exceed 3% of his income in any year and are paid “within a period of 12 months ending in the year”.
4 The appellant requested the respondent to adjust his 1971 tax return to include $104 but the request was refused. The appellant, who ably argued his own case, contended that he is entitled to claim under subsection 27(4) of the Act which reads as follows:
27. (4) For the purpose of paragraph (c) of subsection (1), where medical expenses became payable by a taxpayer or his legal representatives during a period of 12 months referred to in subparagraph (i) or (ii) thereof and were paid after that period on behalf of the taxpayer or his legal representatives pursuant to a contract of insurance in respect of medical expenses for which insurance the taxpayer had paid premiums or other consideration, the expenses may be deemed to have been paid when they became payable.
5 The appellant submitted that the Alberta Health Care Insurance Commission is the agent for its subscribers and did in fact pay to the doctor the $104 of medical costs in question. He further contended that the fact that the Plan did not provide for, or in the alternative that the said Commission changed its mind or altered its policy for, the payment of $104 in 1971, should not alter the fact that the amount in question was already paid in the 1971 taxation year. The subsequent adjustment should be regarded as an issue between the appellant and the Commission which carried the risk, and the fact that the adjustment was made by reducing future payments to Dr Beauchamp should not affect the appellant's legal position for 1971. As there was a contract of insurance, the amount in question must be deemed to have been paid when it became payable, that is, prior to December 31, 1971.
6 In my opinion, it is not possible for the appellant to deduct in 1971 the $104 of medical expenses paid in 1972, and I reject the appellant's contention that this expense could be deemed to have been paid when it became payable in 1971. The reason for this rejection is that the amount was paid erroneously by the Commission. The $104 was in excess of the benefits payable under the insurance contract and the Commission could not be regarded as the agent of the appellant when it acted outside the scope of its agency authority. The fact that, as the appellant has stated, the $104 was not deductible in 1972 due to a change in the applicable rules, is understandably disappointing for the appellant, but the Board has no alternative but to dismiss his appeal for 1971, for which year the 1972 payment did not qualify under the specific terms of the Income Tax Act applicable at that time.
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