Date: 19980609
Docket: 98-47-IT-I
BETWEEN:
CHRISTIAN ROUX,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Guy Tremblay, J.T.C.C.
Point at issue
[1] According to the Notice of Appeal and the Reply to the
Notice of Appeal, the question is whether the appellant was
correct, in calculating his income for the 1996 taxation year, to
claim a sum of $6,089 paid to Denise Brosseau for the
benefit of three minor children.
[2] The respondent disallowed the deduction because the
written agreement to which effect was given at the time of the
court proceeding specified that the money paid to
Denise Brosseau by the appellant was not deductible by him
or taxable in the hands of Denise Brosseau. The appellant
argued that these were payments for the benefit of his three
minor children.
[3] The respondent maintained that there was no agreement on
this matter. For the amounts to be deductible there had to be a
written agreement.
Burden of proof
[4] The appellant has the burden of showing that the
respondent's assessment is incorrect. This burden of proof
derives from a number of judicial decisions, including that of
the Supreme Court of Canada in Johnston v. Minister of
National Revenue.[1]
[5] In Johnston, the Supreme Court held that the facts
assumed by the respondent in support of assessments or
reassessments are presumed to be true until the contrary is
shown. The facts assumed by the respondent in the instant case
are set out in subparagraphs (a) to (g) of paragraph 8
of the Reply to the Notice of Appeal. Paragraph 8 reads as
follows:
[TRANSLATION]
8. In arriving at the reassessment dated July 28, 1997
the Minister took into account inter alia the following
facts:
(a) the appellant married Denise Brosseau on
August 8, 1987 at Saint-Lambert, province of Quebec;
[admitted]
(b) three minor children were born of the union of the
appellant and Denise Brosseau:
(i) Geneviève, born on March 24, 1990;
(ii) Alexandra, born on March 24, 1990;
(iii) Charles-Olivier, born on March 22, 1993;
[admitted]
(c) the appellant and Denise Brosseau ceased living
together on December 28, 1995; [admitted]
(d) in accordance with an agreement on interim and corollary
relief dated September 25, 1996, the parties agreed inter
alia on the following measures:
(i) Denise Brosseau obtained custody of the three minor
children; [admitted]
(ii) the appellant undertook to pay Denise Brosseau
$11,220 a year as a financial contribution, payable in
24 equal and consecutive instalments of $467.50 on the
fifteenth and thirtieth day of each month; [admitted]
(iii) the financial contribution would be payable as of
September 30, 1996 and, in accordance with the wishes of the
parties, the amounts paid by the appellant would not be
deductible by him or taxable in the hands of
Denise Brosseau; [admitted]
(e) according to the proofs of payment submitted, a total of
$6,089 was paid to Denise Brosseau by the appellant for the
benefit of the three minor children during the period between
January 7 and September 23, 1996; [admitted]
(f) Mr. Justice Gilles Mercure of the Superior Court
granted a divorce decree to the appellant and
Denise Brosseau on February 26, 1997, and in it effect
was given to the agreement on interim and corollary relief dated
September 25, 1996; [admitted] and
(g) the payments made to Denise Brosseau by the appellant
for the benefit of the minor children in the period between
January 7 and September 23, 1996 are not deductible as
alimony or other allowance payable on a periodic basis because
the agreement between the parties signed on September 25,
1996 did not provide for this. [denied]
Evidence of facts
[6] Pursuant to the foregoing admissions the appellant filed,
as Exhibit A-1, 20 cheques made out to
Denise Brosseau between January 7 and May 24, 1996
for a total of $6,089:
1 - the first cheque, dated January 7, 1996, is
for $50, without further notation;
2 – one dated January 14, 1996 is for
$839, with the notation [TRANSLATION] "support ($225) for
children and household fittings ($614)";
3 – one dated January 21, 1996 is for
$300, with the notation [TRANSLATION] "support ($225) +
electricity (exception)".
The other six cheques dated January 28 to March 2,
1996 are all for $150, with the notation [TRANSLATION]
"support - children" or [TRANSLATION] "child
support". The other 11 cheques dated March 10 to
May 24, 1996 are also all for $150, but bear no notation
regarding support.
[7] Denise Brosseau's signature appears on the back
of the cheques. In addition, [TRANSLATION] "without
prejudice" can be seen on the third cheque.
[8] The appellant admitted that he did not have a written
agreement within the meaning of ss. 56(1)(b) and
60.1(3) of the Income Tax Act ("the Act"), which
read as follows:
56. (1)(b) Alimony. — any amount
received by the taxpayer in the year, pursuant to a decree, order
or judgment of a competent tribunal or pursuant to a written
agreement, as alimony or other allowance payable on a periodic
basis for the maintenance of the recipient thereof, children of
the marriage, or both the recipient and children of the marriage,
if the recipient was living apart from, and was separated
pursuant to a divorce, judicial separation or written separation
agreement from, the spouse or former spouse required to make the
payment at the time the payment was received and throughout the
remainder of the year . . . .
. . .
60.1 (3) Prior payments. For the purposes of
this section and section 60, where a decree, order or
judgment of a competent tribunal or a written agreement made at
any time in a taxation year provides that an amount paid before
that time and in the year or the immediately preceding taxation
year is to be considered as having been paid and received
pursuant thereto, the following rules apply:
(a) the amount shall be deemed to have been paid
pursuant thereto; and
(b) the person who made the payment shall be
deemed to have been separated pursuant to a divorce, judicial
separation or written separation agreement from his spouse or
former spouse at the time the payment was made and throughout the
remainder of the year.
[9] The appellant submitted that he was represented by counsel
in the divorce proceedings in the Superior Court of Quebec on
February 26, 1997 and that his counsel promised him that the
amounts paid previously would be deductible but did not act
accordingly.
[10] The appellant referred to two judgments of the Quebec
Court of Appeal: Langis Bilodeau v. Sous-ministre du
Revenu du Québec, a judgment rendered in
June 1985, [1985] R.D.F.Q. 209-217, and
Sous-ministre du Revenu du Québec v.
Louise Letarte, a judgment rendered on June 9,
1997, J.E. 97-1323, D.F.Q.E. 97F-79.
[11] In Letarte, the question was whether the total of
$8,660 claimed by the taxpayer for services rendered by one
Ms. Caron was paid for child care expenses. Revenu
Québec allowed $4,000 but disallowed the balance because
Ms. Caron refused to issue a receipt for anything more. In
addition to child care she provided housekeeping services. Revenu
Québec told her she should not issue a receipt for the
housekeeping work.
The evidence at trial was that the household work was done at
the same time as she sat the children:
[TRANSLATION]
In the Court of Québec the Department relied on the
requirement that a receipt be produced in accordance with
s. 353 of the Taxation Act ("the Act"),
from which the following is taken:
S. 353. An individual may deduct, in computing
his income for a taxation year, the aggregate of each of amount
paid in the year as child care expenses regarding any eligible
child of the individual for the year, if the amount is paid
either
(a) . . .
(b) . . . .
In no case may an individual deduct any amount under the
first paragraph unless proof of payment of the amount is given by
filing with the Minister one or several receipts issued by the
payee, including, where the payee is an individual, the social
insurance number of the latter individual. (appellant's
factum, pp. 6-7)
. . . Noting that the proof of payment was made other than by
means of receipts, he observed that in the instant case, and for
the same taxation year, the Department had accepted an endorsed
cheque in place of a receipt as proof of payment. This
alternative form of evidence was expressly admitted twice in the
Minister's Defence:
13. In the assessment of June 15, 1990 the
respondent assumed that:
(a) . . .
(b) the respondent allowed an additional deduction of $206
since the proof of payment by cheque with an endorsement amounted
to the filing of receipts; and
(c) the respondent disallowed the additional deduction of
$4,660 as there was no proof in the form of receipts or endorsed
cheques. (appellant's factum, pp. 94-95)
The judge added the following:
It should be added that, at the close of the hearing, the
Court asked Ms. Caron whether in the circumstances she was
then prepared to issue the applicant a receipt for $4,660, simply
acknowledging that she had received this amount without
characterizing it: Ms. Caron said she was. No one was in any
hurry to request it, and in any case this does not change
anything in our decision.
What is at issue here is the scope of s. 353. The point
at issue is stated as follows in the appellant's factum:
"The question is whether, under the Taxation Act
(R.S.Q., c. I-3), the respondent is entitled to deduct
the money paid to Carmelle Pelletier Caron for which no receipt
was issued as child care expenses for the 1988 taxation
year". (appellant's factum, p. 4)
According to the appellant [Revenu Québec], the
requirement of a receipt is clear and no substitution is
possible. It fully recognized the validity of this Court's
judgment in Langis Bilodeau v. Sous-ministre du Revenu du
Québec, but submitted that despite that case a receipt
is required and nothing else will do, as the legislature by
s. 353 has provided a simple means of verification in the
case of child care expenses, the only case apart from certain
construction work where this type of receipt is required.
I respect the appellant's point of view, but I do not
share it.
. . .
The rules in Bilodeau are still valid and support the
dismissal of this appeal. In that case Bilodeau, a pharmacist,
had not kept the record of prescriptions and renewals as required
by the applicable Act and regulations. In court, appealing from
an objection which had been dismissed, he submitted expert
accounting evidence as well as his own testimony and that of his
employees. A majority of this Court found that the evidence was
such as to rebut the presumption that the assessment was valid
and that it was persuasive.
L'Heureux-Dubé J.A., as she then was,
dissenting because the evidence submitted did not persuade her,
nonetheless considered that in the absence of proper records the
taxpayer did not lose his right to present a valid defence to the
assessment. I also refer to the comments of Nichols and
Vallerand JJ.A. on the possibility of presenting evidence
where there is no documentation consistent with the legal or
regulatory requirements.
The Court dismissed Revenu Québec's appeal with
costs.
[12] In this Court's opinion, the problem in the instant
case is different. Section 56(1)(b), supra,
has a counterpart in the Quebec Taxation Act, namely
s. 312, which reads as follows:
312. The taxpayer must also include:
(a) an amount received under a decree, order or
judgment of a competent tribunal or under a written agreement, as
alimony or other allowance payable on a periodic basis for the
maintenance of the recipient thereof, a child of the recipient or
both the recipient and child, if the recipient, because of the
breakdown of the recipient's marriage occurring before
1 January 1993, was separated pursuant to a divorce,
judicial separation or written separation agreement and was
living apart from his spouse or former spouse who was required to
make the payment at the time the payment was received and
throughout the remainder of the
year . . . .
The same is true of s. 60.1(3), the counterpart of which
is s. 336.4. It reads as follows:
336.4 For the purposes of this chapter, where a
decree, order or judgment of a competent tribunal or a written
agreement made at any time in a taxation year provides that an
amount paid before that time and in the year or the preceding
taxation year is to be considered as having been paid and
received thereunder,
(a) the amount is deemed to have been paid
thereunder; and
(b) the person who made the payment is deemed to
have been separated pursuant to a divorce, judicial separation or
written separation agreement from his spouse or former spouse to
whom he was required to make the payment at the time the payment
was made and throughout the remainder of the year.
[13] In both statutes a decree, order or judgment of a
competent tribunal or a written agreement is necessary for
support payments to be deducted.
[14] Sections 60.1(3) and 336.4 were added by the
legislatures so that payments made previously will be deductible,
although provided at all times that there is a decree, order,
judgment or written agreement to that effect. This is a condition
sine qua non.
Conclusion
[15] The appeal is dismissed.
Signed at Québec, Quebec, June 9, 1998.
"Guy Tremblay"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 19th day of October
1998.
Stephen Balogh, revisor
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