27 March 2002 External T.I. 2002-0127405 - PAY EQUITY SALARY ADJUSTMENTS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Follow-up inquiry to 2001-010064, 2001-010174, 2001-008535 and 2001-010749 regarding the interpretation of the definition of "qualifying amount" in subsection 110.2(1) of the Act. Specifically, whether the process in this case is arbitration.

Position: Question of fact.

Reasons: XXXXXXXXXX the determination of whether a process is arbitration, and hence the award is an "arbitration award", must be made based on the ordinary meaning of the words in section 110.2, since they are not defined in the Act - XXXXXXXXXX , this is how the courts would make the legal determination. The court would rely upon the dictionary definition of the word "arbitration" and may consult, among others, Blacks Law Dictionary or the Canadian Law Dictionary.

XXXXXXXXXX 2002-012740

R. Hewlett, B.Comm.

March 27, 2002

Dear XXXXXXXXXX:

Re: Pay Equity Salary Adjustments - Lump Sum Deduction
Section 110.2 of the Income Tax Act

We are writing in response to your letter of March 6, 2002 concerning the above-noted matter, which was addressed to our Deputy Assistant Commissioner, Mr. Roy Shultis. After reviewing the subject issue with him, we offer the following comments.

We understand from your letter that your client would like confirmation directly from us that each payment to "500 or so employees" for certain pay equity salary adjustments, will constitute a "qualifying amount" for the purposes of section 110.2 of the Income Tax Act (the Act). As well, you inquire what we meant in our November 7, 2001 letter to you, wherein we stated that an arbitration award had to be made pursuant to a bona fide arbitration process in order to be a "qualifying amount" under subsection 110.2(1) of the Act.

In our letter of November 7, 2001 we expressed the view that an "arbitration award" is a "qualifying amount" under subsection 110.2(1) of the Act. However, we cannot confirm whether or not each payment to be made to "500 or so employees" that are related to pay equity salary adjustments will be pursuant to an arbitration process, and hence be an "arbitration award". The determination of whether or not a process is arbitration can only be made after reviewing all the facts of a particular situation. This is the responsibility of the Verification and Enforcement Division of the local tax services office.

Since the terms "arbitration" and "arbitration award" are not defined in the Act, we would refer to their ordinary meaning in sources such as Blacks Law Dictionary or the Canadian Law Dictionary. Further, we agree with your comment that, when we referred to a "bona fide arbitration process", we simply meant that the process must be a "genuine" arbitration process for the award to be a "qualifying amount" under subsection 110.2(1) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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