Date: 19980910
Docket: 97-1235(IT)I
BETWEEN:
JAMES YOUNG,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Teskey, J.T.C.C.
[1] The Appellant in his Notice of
Appeal herein, appealed his reassessment of income tax for the
year 1994 and elected the Informal Procedure.
Issues
[2] The three issues herein are:
(a) whether the Appellant is
entitled to a non-refundable tax credit for mental or
physical impairment pursuant to subsection 118.3(1) of the
Income Tax Act (the "Act"), in the
computation of his tax payable for the 1994 taxation year;
(b) whether the amount of $25,548.00
received by the Appellant is to be included in computing his
income from an office or employment pursuant to
subsection 5(1) of the Act for the 1994 taxation
year; and
(c) whether the amount of $11,293.00
received by the Appellant during the 1994 taxation year was
payment with respect to a pension benefit and was properly
included in computing the Appellant's income for the 1994
taxation year pursuant to paragraph 56(1)(a) of the
Act.
Facts
[3] The Appellant gave evidence at his
trial. From his testimony, I am satisfied that all of the facts
assumed by the Minister of National Revenue
(the "Minister") when he confirmed the
reassessment, which were reproduced in the Reply to the Notice of
Appeal, were true. These are:
(a) the Appellant
suffers from cerebral palsy;
(b) the Appellant
was not suffering from a severe and prolonged mental or physical
impairment, which markedly restricted his ability to perform a
basic activity of daily living during the 1994 taxation year;
(c) the Appellant is
not entitled to a credit for a mental or physical impairment in
the computation of his non-refundable tax credits and tax payable
for the 1994 taxation year;
(d) pursuant to a
Memorandum of Settlement signed by the Appellant on
February 21, 1993, the Appellant's employer, namely
Revenue Canada Taxation (the "Employer"), authorized
leave with pay in respect of the Appellant, at the
Appellant's annual salary of $33,547.00 subject to the
statutory source deductions, for the period of April 22,
1993 to July 22, 1994;
(e) the Appellant
received from the Employer the amount of $25,548.00 during the
1994 taxation year;
(f) the amount
of $25,548.00 referred to in subparagraph 9(e) above was in
respect of wages for the period of January 1, 1994 to
July 22, 1994 as well as for payment of vacation leave
credits of 275.25 hours accumulated by the Appellant up to
July 22, 1994;
(g) the amount of
$25,548.00 referred to in subparagraph 9(e) above was income
from an office or employment of the Appellant with respect to the
1994 taxation year and was properly included by the Appellant in
computing his income for the 1994 taxation year;
(h) pursuant to the
said Memorandum of Settlement referred to in
subparagraph 9(d) above, the Appellant's employment with
the Employer was terminated on July 22, 1994;
(i) during the
1994 taxation year, the Appellant received a lump sum payment
with respect to a refund of premiums paid into the Employer's
registered pension plan in the amount of $11,293.00 and
subsequently, the Employer issued to the Appellant the
form T4A Supplementary - Statement of Pension, Retirement,
Annuity and Other Income for the said amount;
(j) the said
amount of $11,293.00 was received by the Appellant in the 1994
taxation year on account or in lieu of payment of, or in
satisfaction of pension benefit and was determined to be a
taxable benefit pursuant to paragraph 56(1)(a) of the
Act;
(k) in computing his
income for the 1994 taxation year, the Appellant did not include
the amount of $11,293.00 received by the Employer, and
(l) the
Appellant's income for the 1994 taxation year was understated
by the amount of $11,293.00 which represents the amount paid by
the Employer to the Appellant for a refund of pension benefit and
not reported by the Appellant in computing his income for the
1994 taxation year.
[4] The Appellant was requested on
several occasions to obtain and submit the required medical
certificate concerning the year 1994, which he refused to obtain.
Besides not producing a certificate, his evidence of his
impairment and his attendance at the trial demonstrate that he is
not entitled to the disability tax credit.
[5] Exhibit A-1 is the
written Memorandum of Settlement between the Appellant and
Revenue Canada, his former employer. Paragraph 1(a)
reads:
1. The
employer will:
a) authorize
leave with pay for the period April 22, 1993 to
July 22, 1994, at Mr. Young's current salary rate
($33,547.00) subject to the statutory source deductions. The
salary of $33,547.00 and all benefits entitlements will be paid
to Mr. Young on the regularly scheduled pay periods as
determined by the employer. On April 22, 1993,
Mr. Young's sick leave credits will total
77.25 hours and his vacation leave credits
134.625 hours or 18 days. The employee will continue to
earn sick leave and vacation leave credits at the rate of one and
one-quarter (1 1/4) days for each calendar month so
that by July 22, 1994, he will have accumulated a total of
217.875 hours sick leave or 29 days and
275.25 hours or 37 days vacation leave. The sick leave
credits will be taken before July 22, 1994. Vacation leave
credits will be paid to the employee on July 22, 1994;
[6] Exhibit R-2 is the
Public Works and Government Services cheque stub for the
$11,293.00, which states that $10,636.66 was return of premiums
paid by the Appellant to his employee's pension fund and
$657.29 being interest thereon.
[7] The Appellant's position on
issues (b) and (c) are as follows.
[8] First, the Appellant claims he
entered into the agreement under "duress" by his
union.
[9] He claims that the union
negotiated for him the settlement (Exhibit A-1) and
advised him if he did not accept it, he was on his own. The union
was his agent not his employer's agent. I am sure many agents
have advised their client to accept a monetary deal or they would
no longer act. The client either accepts the advice or retains
another agent. This would never void the contract once signed.
Duress has to come from the other party to a contract to render
it void or voidable.
[10] Secondly, the Appellant argues that on
February 12, 1993, Ruby J. McCuish, an Assistant
Deputy Minister for Revenue Canada did not have the authority to
re-instate him from his suspension and therefore not
withstanding he received the money since he was still suspended
the money was not taxable but was a gift. His argument being that
an employee of the Government of Canada cannot be paid wages
while under suspension.
[11] Thirdly, the Appellant further argues
that because the obligations on him were illegal, the agreement
was void and therefore, again the money is not taxable.
[12] Whether the lifting of the suspension
was proper or not is immaterial and whether certain obligations
on him are contrary to the law is also immaterial.
[13] The Appellant and Revenue Canada
entered into an agreement (Exhibit A-1). Revenue
Canada lived up to its obligation thereunder in full in regards
to all payments required of it. The Appellant received all the
payment thereto and has used the funds to his benefit.
[14] No action has been taken by the
Appellant to set aside the agreement nor has he tendered the
return of the monies.
[15] Whether the memorandum of agreement is
void or voidable is just not an issue. The money was paid and
received and is taxable. I believe that the Supreme Court of
Canada decision of Continental Bank Leasing Corporation v. The
Queen, released September 3, 1998, is authority for
this. Paraphrasing, and inserting the government of Canada into
Madam Justice McLachlin words, she in essence said: "I
find that public policy requires that breaching of Federal
Statutes should not lead to invalidation of contracts and other
transactions. There is good reason for this; to unravel
commercial transactions on the basis the Government of Canada
breached a statute is to introduce uncertainty into the affairs
of individuals and the Government."
[16] The appeal is dismissed.
Signed at Ottawa, Canada, this 10th day of September,
1998.
J.T.C.C.
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