Mintzer v. The Queen, docket 97-1485-IT-I (Informal Procedure)

Date: 19980428

Docket: 97-1485-IT-I

BETWEEN:

NORMAN A. MINTZER,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

O'Connor, J.T.C.C.

[1] This appeal was heard at Toronto, Ontario on February 19, 1998 pursuant to the Informal Procedure of this Court. The appeal relates to the Appellant's 1995 taxation year.

Issue

[2] The issue is whether a Canada Pension Plan benefit in the amount of $4,575 should have been included in the Appellant's taxable income in that year notwithstanding the fact that he did not actually receive it because the said amount had been set off against taxes allegedly owing by the Appellant in previous years.

Facts

[3] On March 30, 1993 and on March 6, 1995 the Minister of National Revenue ("Minister") issued to the Appellant Notices of Retention of his Canada Pension Plan benefits ("CPP") pursuant to section 224.1 of the Income Tax Act ("Act") for taxes owing by the Appellant from the 1970's. In assessing the Appellant for the 1995 taxation year the Minister included in his taxable income amounts that were payable to the Appellant under the CPP which were set off against the Appellant's unpaid taxes owing. The Appellant appeals on the basis that the CPP benefits were not "received" by him in the taxation year and therefore should not be included.

Law

[4] The basic provisions of the Act are the following:

56(1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,

(a) any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of

(i) a superannuation or pension benefit including, without limiting the generality of the foregoing,

...

(B) the amount of any benefit under the Canada Pension Plan ...,

...

224.1 Where a person is indebted to Her Majesty under this Act or ... the Minister may require the retention by way of deduction or set-off of such amount as the Minister may specify out of any amount that may be or become payable to the person by Her Majesty in right of Canada.

Analysis and Decision

[5] Subsubparagraph 56(1)(a)(i)(B) includes in a taxpayer's income for the year the amount of any CPP benefits which were "received" by the taxpayer in a given year. The Appellant argued that because this amount, namely the amount in question was set-off against his alleged tax owing from previous years, it was never received by him in the year.

[6] Certain dictionary definitions of "receive" or "receipt" might leave one with the impression that something is not received unless it is actually taken into one's hands or possession. However the case law is clear that an amount may be included in income even where it is only notionally or constructively received.

[7] In Morin v. The Queen, 75 DTC 5061, Lacroix J. of the Federal Court, Trial Division, stated as follows at page 5064:

In the case at bar the provincial and federal statutes state that income tax is payable on the salary, wages or remuneration that an employee receives during a taxation year. In this case the plaintiff was recorded in his employer's books as being entitled to a salary of $16,268.84. He contends that since the government deducted the amount of tax, he did not receive his full salary, given the fact that the amount of the tax was deducted at source. In other words, the plaintiff puts forward as a proposition of law that in order to receive his salary in the legal sense, he must actually touch or feel it, or have it in his bank account.

We regret to say that this proposition seems to us absolutely inadmissible, because the word "receive" obviously means to get or to derive benefit from something, to enjoy its advantages without necessarily having it in one's hands. In other words, the plaintiff can, and must, say, "what is left of my salary or income, after taxes, is $14,639.85"; it is not correct to say "My income is only $14,639.85".

[8] In The Queen v. Hoffman, 85 DTC 5508, Rouleau J. of the Federal Court, Trial Division, stated as follows at 5510:

If the proposition that income must be in the actual possession of the employee before it can be taxed is correct, then I would have to conclude that an employee's contributions to Canadian or provincial pension plans, deducted at source by the employer, are not income in the hands of the employee. Jurisprudence does not support this proposition.

In Lucien Gingras v. M.N.R. [unreported decision dated March 26, 1973] the Tax Review Board noted (at page 4):

The expression "touché" (received) does not necessarily mean that the full amount of the salary must be physically received by the payee or be deposited in full in his bank account.

According to the interpretation of s. 5 it is sufficient to say that the amount of the salary was paid by the employer either to the employee himself or to his benefit, or that it was handed over to a third party under a federal or provincial statute.

The fact that the defendant's employer deducted at source employee's social security contributions in the 1978 and 1979 taxation years does not support the proposition that he received income net of the withheld amounts. The amounts deducted and forwarded were for his eventual benefit.

[9] Finally, in The Queen v. Fairey, 91 DTC 5230, Muldoon J. of the Federal Court, Trial Division found that money which was automatically deducted from a government employee's salary and deposited into a pension fund was in effect received by the taxpayer in the sense that it accrued to his credit and his entitlement to it could not be disputed.

[10] The Appellant points out that an amendment was made to section 56(1)(a) by 1980-81-82-83 Statutes of Canada, Chap. 140, Section 26(1) by adding after the words "received" the words "by the taxpayer" applicable to the 1982 and subsequent taxation years. He argues that the amendment must be given some meaning, namely that the amount must be actually received by the taxpayer. I do not believe this argument can succeed. The previous version of the section in question which did not contain the words "by the taxpayer" I believe can only be interpreted as referring to amounts received by the taxpayer. In other words, the words "by the taxpayer" were added for clarification rather than to substantively change the meaning of the provision. In any event, the decisions in Hoffman and Fairey referred to above, were made after the amendment in question and I believe those decisions accurately reflect the state of the law.

[11] For all of the above reasons the appeal is dismissed.

Signed at Ottawa, Canada this 28th day of April 1998.

"T. P. O'Connor"

J.T.C.C.