Guy
Tremblay:—The
present
case
was
heard
at
Montreal,
Quebec,
on
May
12,
1978.
1.
Point
at
Issue
The
point
at
issue
is
whether
section
110.1
of
the
new
Act
allowing
a
deduction
up
to
$1,000
in
the
computation
of
the
taxable
income
may
be
applied
for
an
amount
received
in
1975
following
the
annulment
of
the
Shell
Savings
Fund.
The
respondent
has
refused
such
a
deduction.
2.
Burden
of
Proof
The
burden
is
on
the
appellant
to
show
that
the
respondent’s
assessment
is
incorrect.
This
burden
of
proof
derives
not
from
one
particular
section
of
the
Income
Tax
Act,
but
from
a
number
of
judicial
decisions,
including
the
judgment
delivered
by
the
Supreme
Court
of
Canada
in
R
W
S
Johnston
v
MNR,
[1948]
CTC
195;
3
DTC
1182.
3.
The
Facts
3.1
The
appellant
worked
for
the
Shell
Company
for
ten
years.
3.2
From
1966
to
1975,
he
participated
in
a
savings
plan
officially
named
“Shell
Savings
Fund’’.
3.3
According
to
a
letter
(Exhibit
R-1)
dated
February
3,
1977
sent
by
Shell
Savings
Fund
to
the
respondent,
this
plan
is
a
Deferred
Profit
Sharing
Plan.
It
was
approved
as
such
by
the
Department
of
National
Revenue
and
registered
under
number
10209.
3.4
During
the
year
1975,
the
plan
was
withdrawn.
3.5
For
the
period
1966
to
1975,
the
appellant
paid
the
capital
amount
of
$3,522.08.
At
the
date
of
the
withdrawal,
the
total
amount
of
capital
and
interest
was
$7,206.58.
3.6
According
to
form
T4A
issued
by
the
Shell
Company
following
the
withdrawal
of
the
plan,
the
appellant
had
a
gained
income
of
$3,684.50
which
was,
in
fact,
the
amount
of
interest
accumulated
during
the
years
1966
to
1975.
3.7
From
the
amount
of
$3,684.50
of
interest,
the
sum
of
$453.81
represents
the
interest
for
1975
as
computed
in
October
1975.
3.8
The
capital
paid
during
the
above
period
was
not
deductible
by
virtue
of
the
Income
Tax
Act
in
the
computation
of
the
annual
income.
3.9
The
interests
gained
every
year
were
not
included
(and
could
not
be
included)
in
the
computation
of
the
income
of
the
appellant.
3.10
In
his
1975
return,
the
appellant,
in
the
computation
of
the
taxable
income,
deducted
the
amount
of
$1,000
because
of
the
interest
income
received
from
the
Shell
Savings
Fund
following
its
withdrawal.
3.11
On
May
17,
1976
the
respondent,
by
issuing
the
assessment,
refused
the
above
deduction.
3.12
Following
the
Notice
of
Objection
and
the
decision
of
the
respondent
to
maintain
the
above
assessment,
an
appeal
was
lodged
before
the
Tax
Review
Board
on
April
18,
1977.
4.
Law—Jurisprudence—Comments
4.1
Law
The
main
sections
of
the
new
Act
implied
in
the
case
at
bar
are
110.1
and
paragraph
110.1
(2)(b)
which
read
as
follows.
110.1
Interest
and
dividend
income
deductible.
(1)
For
the
purpose
of
computing
the
taxable
income
for
a
taxation
year
of
an
individual
(other
than
a
trust
that
is
not
a
testamentary
trust
within
the
meaning
assigned
by
paragraph
108(1
)(i)),
there
may
be
deducted
from
his
income
for
the
year
an
amount
equal
to
the
lesser
of
(a)
$1,000,
and
(b)
the
aggregate
of
(i)
the
amount
of
interest
included
in
computing
the
taxpayer’s
income
for
the
year,
and
(ii)
the
taxpayer’s
grossed-up
dividends
for
the
year.
110.1(2)
Interest
income.
For
the
purposes
of
this
section,
interest
shall
not
include
any
amount
that
is
(b)
an
annuity
payment
(i)
under
a
registered
retirement
savings
plan
or
under
a
plan
referred
to
in
subsection
146(12)
as
an
“amended
plan”,
or
(ii)
under
a
deferred
profit
sharing
plan
or
under
a
plan
referred
to
in
subsection
147(15)
as
a
“revoked
plan”.
4.2
Comments
(a)
During
his
pleading,
the
counsel
for
the
respondent
made
an
admission
to
the
effect
that
the
interest
computed
for
the
year
1975
($453.81)
(see
paragraph
3.7
of
the
Facts)
was
deductible
according
to
section
110.1.
The
Board
considers
it
is
bound
for
the
purposes
of
the
present
case.
(b)
Interests
computed
for
the
years
1966
to
1974
One
of
the
main
arguments
of
the
appellant
is
that
when
he
invested
in
the
Shell
Savings
Fund,
it
was
not
a
deferred
profit
sharing
plan
even
if
it
was
registered
and
approved
as
such
by
the
Department
of
National
Revenue.
Unfortunately,
the
appellant
has
not
proven
that
affirmation.
Nevertheless,
he
had
the
burden
of
proof
as
explained
above.
Also,
unfortunately
subparagraph
110.1
(2)(b)(ii)
cited
above
applied
in
the
case
at
bar
for
the
interest
received.
The
Board
must
disallow
the
appeal
concerning
the
interest
computed
for
the
years
1966
to
1974.
5.
Conclusion
The
appeal
is
allowed
in
part
and
the
matter
is
referred
back
to
the
respondent
for
reassessment
in
accordance
with
the
above
Reasons
for
Judgment.
Appeal
allowed
in
part.
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