Minister of National Revenue v. Glenn 8. Woolley, [1956] CTC 264

THORSON, P.:—This is an appeal from the decision of the Income Tax Appeal Board (1956), 15 Tax A.B.C. 381, dated August 31, 1956, allowing the respondent’s appeal against his income tax assessment for 1954.

The issue is a narrow one, namely, whether the respondent, for the purpose of computing his taxable income for 1954, is entitled to deduct $400 from his income for the year in respect of his dependent child Christina Dianne Woolley who was born on November 27, 1954, or whether his right is limited to a deduction of only $150.

The right of deduction is conferred by Section 26(1) (c) of the Income Tax Act, R.S.C. 1952, ce. 148, which, so far as relevant, provides:

“26. (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:

(e) for each child or grandchild of the taxpayer who, during the year, was wholly dependent upon him for Support and was

(i) under 21 years of age,

$150 if the child or grandchild was a child qualified for family allowance and $400 if the child or grandchild was not so qualified ;’’

The issue turns on whether Section 85C of the Income Tax Act, which was enacted by Section 23 of the Statutes of Canada, 1953-54, 3. 57, is applicable to the facts of the present case. It reads as follows:

“85C. Where any child not previously qualified for family allowance, in respect of whom a taxpayer is entitled to a deduction under section 26, becomes a child qualified for family allowance during a taxation year by reason of having become qualified for family allowance during a taxation year by reason of having become during the year a child as described in subparagraph (ii) or (iii) of paragraph (b) of section 2 of the Family Allowances Act, the following rules are, if the taxpayer so elects, applicable:

(a) the child shall be deemed not to have been a child qualified for family allowance during the year; and

(b) there shall be added to the tax otherwise payable by the taxpayer under this Part upon his taxable income for the year an amount equal to the aggregate of all amounts that were payable during the year as family allowance in respect of that child or that would have been so payable if that child had been registered under the Family Allowances Act.’’

There is agreement on the facts. The respondent’s child Christina Dianne Woolley, hereinafter called simply the respon- dent’s child, was born in Canada on November 27, 1954, and has been resident in Canada continuously since her birth. The child has always been wholly dependent upon the respondent for support. He was domiciled in Canada on November 27, 1954, and had been so domiciled continuously for three years prior thereto and continued to be so domiciled thereafter. It also appears, not from the notice of appeal but from his income tax return, that he was resident in Canada during 1954. His child was registered under the Family Allowances Act, R.S.C. 1952, e. 109, on December 6, 1954, and, if she had been registered thereunder immediately after her birth, a family allowance of $5 would have been payable in respect of her during 1954.

In his income tax return for 1954 the respondent claimed a deduction of $400 from his taxable income in respect of his child and added to the tax payable by him on his taxable income so computed the sum of $5, which he described as “December baby bonus’’. In assessing the respondent the Minister reduced the deduction from $400 to $150 and added $250 to the amount of the taxable income reported by him. The respondent objected to the assessment on the ground, in effect, that Section 89C of the Income Tax Act applied to the facts, that he had elected under it and that he was, therefore, entitled to a deduction of $400. The Minister confirmed the assessment on the ground that the child was ‘‘not a child described in Section 85C of the Act.’’ Thereupon the respondent appealed to the Income Tax Appeal Board which allowed his appeal. It is from this decision that the Minister now appeals.

The appeal was launched by a notice of appeal, dated November 23, 1956, and filed in this Court on November 27, 1956. It was heard before me on December 14, 1956, and on the conclusion of the argument I stated that the appeal would be allowed and the Minister’s assessment restored and that the reasons for my decision would be delivered in a few days.

In my opinion, this case is free from doubt and I have no hesitation in finding that Section 85 C of the Income Tax Act does not apply to the facts of the case and that the respondent is not entitled to the deduction of $400 claimed by him.

There are two statutory definitions to be considered. Section 2(b) of the Family Allowances Act, R.S.C. 1952, c. 109, for the purposes of that Act, defines a ‘‘child’’ as follows:

“2. In this Act,

(b) ‘‘child’’ means any person under the age of sixteen years who is a resident of Canada at the date of registration, and

(i) who was born in Canada and has been a resident of Canada since birth,

(ii) who has been a resident of Canada for one year immediately prior to the date of registration,

(iii) whose father’s or mother’s domicile at the time of such person’s birth and for three years prior thereto was in Canada and has continued to be in Canada up to the date of registration, or

(iv) who was born while his father or mother was a member of the naval, army or air forces of Canada or within twelve months after his father or mother had ceased to be a member of such forces; but does not mean any person who is in Canada contrary to the provisions of the Immigration Act.” Act.’’

It is beyond dispute that the respondent’s child is a “child” within the meaning of subparagraph (i) of this statutory definition. I am also of the opinion that the subparagraphs are disjunctive in their effect so that since the child comes within the ambit of subparagraph (i) it does not come within the ambit of either of the subparagraphs (ii) or (iii).

Here I should also refer to Section 4(1) of the Family Allowances Act which provides:

“4. (1) The allowance shall be payable only after registration of the child, and shall commence in the first month after registration, and shall be payable to a parent in accordance with the regulations or to such other person as is authorized by or pursuant to the regulations to receive the same.”

The other statutory definition to which I refer appears in the Income Tax Act. Section 139 1) (f) of that Act, for the purposes of such Act, defines the expression ‘‘child qualified for family allowance’’ as follows:

“139. (1) In this Act,

(f) ‘child qualified for family allowance’ means a child who, in the last month of the taxation year in respect of which the expression is being applied, was or might have been qualified by registration under the Family Allowances Act, so that an allowance under the said Act was or might have been payable in respect of that child for the immediately following month;”’

Thus the tests of whether an allowance under the Family Allowances Act is payable in respect of a child and whether such child is a ‘‘child qualified for family allowance’’ within the meaning of Section 139(1) (f) of the Income Tax Act are not necessarily the same. I need not elaborate this statement further.

It is, I think, clear that the amount of the deduction for income to which a taxpayer is entitled in respect of his dependent child is fixed at the end of the taxation year. Under Section 26(1)(c) it is $150 if his child was a ‘‘child qualified for family allowance’’ and $400 if it was not so qualified. The amount to which he is entitled is either $150 or $400. In order to determine whether a taxpayer is entitled to deduct $400 or whether his right is restricted to a deduction of only $150 it is necessary to determine whether his dependent child was, at the end of the taxation year, a ‘‘child qualified for family allowance’’ within the meaning of the expression as used in Section 26(1) (c) and resort must be had to its statutory definition by Section 139(1) (f). According to this definition it is the situation in the last month of the taxation year in respect of which the expression is being applied that must be considered. In the present case this means the status of the respondent’s child in the month of December of 1954. In that month she was qualified by registration under the Family Allowances Act, that is to say, the registration on December 6, 1954, so that an allowance was payable in respect of her for the immediately following month. It is, therefore, clear, that the respondent’s child was, at the end of 1954, a ‘‘child qualified for family allowance’’ within the meaning of the statutory definition of the expression and, therefore, within its meaning as used in Section 26(1) (c). Consequently, it follows, as a matter of course, in the absence of a provision to the contrary, that the only deduction to which the respondent is entitled under Section 26(1) (c) in respect of his child for the taxation year 1954 is a deduction of $150.

It was contended for the respondent that Section 85C of the Income Tax Act was applicable in his case, that under it he had a right to elect that his child should be deemed not to have been a child qualified for family allowance during 1954, that he had exercised his right of election by claiming in his income tax return a deduction of $400 in respect of his child and that he was entitled to such deduction.

Counsel for the respondent realized, of course, that Section 85C contemplated the case of a child that up to a certain time in the taxation year was not qualified for family allowance and then became a child qualified for family allowance. In such a case the child, prior to becoming a child qualified for family allowance in the manner specified, was a ‘‘child not previously qualified for family allowance’’ and counsel sought to bring the respondent’s child within that category. He drew attention to Section 4(2) of the Family Allowances Act which provides :

“4. (2) The allowance shall cease to be payable with the payment for the month when the child

(a) ceases to be maintained by a parent;

(b) ceases to be resident in Canada;

(c) attains the age of sixteen years:

(d) dies; or

(e) in the case of a female child, marries.’

and contended that since, under Section 4(2), the family allowance would cease to be payable, for example, if the child should die before the end of the year it could not be determined whether the child was a 44 child qualified for family allowance’’ within the meaning of the statutory definition until the very last moment of 1954 and his submission was that up to such moment the child was ‘‘not previously qualified for family allowance.” This submission led counsel into an impasse, for, if the child was ‘‘not previously qualified for family allowance’’ up to the very last moment of 1954, there would not be any time in that year at which the child could become a ‘‘child qualified for family allowance’’, in which case the conditions contemplated by the section as precedent to its operative effect would not exist and the section could not apply.

The confusion that has arisen regarding the scope of Section 85C may partly be due to failure to appreciate that the term “qualified for family allowance’’ in the opening words of the section, namely, “Where any child not previously qualified for family allowance’’ does not have the same meaning as the similar term in the expression “child qualified for family allowance” that appears later in the section. It is obvious that the two terms could not have the same meaning. In its later use in the section it is part of an expression that has a special statutory meaning whereas its use in the opening words of the section is not so limited. As I have pointed out, the determination of whether a child is ‘‘a child qualified for family allowance ’ ’ within the meaning of the statutory definition depends on the status of the child in the last month of the taxation year in which the expression is sought to be applied, but it is obvious that the determination of whether a child was a ‘‘child not previously qualified for family allowance’’ within the meaning of the opening words of the section cannot depend on a similar test. That must depend on a situation prior to that which was necessary to make a child a ‘‘child qualified for family allowance” within the meaning of the statutory definition. What was, no doubt, meant by the expression ‘‘a child not previously qualified for family allowance’’ in the opening words of the section was a child which, at the time referred to, was not qualified by its status to entitle its parent to be paid any allowance under the Family Allowances Act. The respondent’s child was not such a child. According to the agreed facts a family allowance of $5 would have been payable in respect of the child if she had been registered immediately after her birth. It could not, therefore, be said that the child was ever ‘‘not previously qualified for family allowance’’ within the meaning of the opening words of the section.

But the real cause of the confusion regarding the application of Section 85C was the failure to read it carefully and appreciate the limitation of its application in accordance with its express terms and their necessary implication. In my opinion, it is clear from the terms of the section that it does not apply in the case of a child ‘‘under the age of sixteen years who is a resident of Canada at the date of registration, and who was born in Canada and has been a resident of Canada since birth’’ within the meaning of subparagraph (i) of paragraph (b) of Section 2 of the Family Allowances Act and does not, therefore, apply in the case of the respondent’s child. In my judgment, the section applies only in the case of a child, ‘‘not previously qualified for family allowance’’, in the sense I have ascribed to the expression as used in the opening words of the section, who has become a ‘‘child qualified for family allowance’’, within the meaning of the statutory definition by reason of having become during the year a child as described in subparagraph (ii) or (iii) of paragraph (b) of Section 2 of the Family Allowances Act, that is to say, only to a child “under the age of sixteen years who is a resident of Canada at the date of registration, and who has become a resident of Canada for one year immediately prior to the date of registration, or whose father’s or mother’s domicile at the time of such person’s birth and for three years prior thereto was in Canada and has continued to be in Canada up to the date of registration.” The express reference in the section to a child as described in subparagraph (ii) or

(iii) of paragraph (b) of Section 2 of the Family Allowances Act shows by necessary implication that it was not intended that the section should apply to a child as described in subparagraph (i) : expressio unius est exclusio alterius, and I so find.

It was submitted on behalf of the respondent that his child, admittedly a child as described in subparagraph (i) of paragraph (b) of Section 2 of the Act, was also a child as described in subparagraph (iii) but that cannot be so. Subparagraph (iii), by necessary implication, in view of its context, describes a child born outside of Canada, whose father’s or mother’s domicile, not residence, at the time of the child’s birth was as set out in the subparagraph and does not extend to a child who was born in Canada and has been a resident of Canada since birth.

Consequently, I find that Section 85C of the Income Tax Act does not apply to the facts of this case. It follows that the Minister was right in reducing the amount of the deduction claimed by the respondent from $400 to $150 and adding $250 to the amount of taxable income reported by him.

The appeal herein must, therefore, be allowed and the Minister’s assessment restored. Ordinarily, the Minister would be entitled to costs but the parties have agreed that neither party would ask for costs. The allowance of the appeal and the restoration of the assessment will, therefore, be without costs to either party.

Judgment accordingly.