Watanabe v. The Queen, docket 98-1049-IT-I (Informal Procedure)

Date: 19990325

Docket: 98-1049-IT-I

BETWEEN:

JOYCE I. WATANABE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for judgment

Bowman, J.T.C.C.

[1] This appeal is from an assessment for the 1996 taxation year. It involves the deductibility of an amount paid by the appellant for past-service registered pension plan ("RPP") contributions.

[2] The facts are straightforward. The appellant has taught at Langara College in Vancouver since September 1990.

[3] From September 1965 to June 30, 1967 she taught in the Vancouver Public School System. In 1967, she resigned and took up another employment. In November 1967, she applied for and received her pension entitlement from the Teachers' Pension Plan in the amount of about $499, which apparently consisted substantially of the contributions she had made to the plan.

[4] In 1994 or 1995, when she was teaching at Langara College she decided that she should, in effect, "buy-back" the RPP past-service contribution for the pension from September 1965 to June 30, 1967 and for the period January 2, 3 and 4, 1978, when she was teaching at Vancouver Community College. These three days had not previously been included in the calculation of her eligible contributory period.

[5] Therefore she contributed $5,206.88 to the Teachers' Pension Fund on April 9, 1996 in respect of the period from September 1965 to June 1967 and $11.49 on June 20, 1996 in respect of the three days in 1978. The mathematical correctness of these amounts is not in dispute.

[6] Ms. Watanabe, an intelligent and careful person, communicated on several occasions with the Department of National Revenue to confirm her entitlement to make these contributions. She informed them that she had in 1996 also made a current contribution to the college's RPP of $3,696.72 as well as a contribution of $2,986.00 to her registered retirement savings plan. This was not a casual enquiry. She was given and relied upon the guide published by the Department of National Revenue and IT-167R6.

[7] Ms. Watanabe had every reason to rely upon the advice she received and she did so in good faith. Her understanding was that she could deduct $3,500 in 1996 and the remainder of $1,718.37 in 1997, notwithstanding the amount of her current contribution to the college's RPP.

[8] The advice that she received was wrong.

[9] Paragraph 60(j.03) provides that there may be deducted in computing a taxpayer's income the following amount:

(j.03) — an amount equal to the lesser of

(i) the total of all amounts each of which is an amount paid in the year or a preceding taxation year by the taxpayer to a registered pension plan that was not deductible in computing the taxpayer's income for a preceding taxation year and that was paid as

(A) a repayment under a prescribed statutory provision of an amount received from the plan that was included under subsection 56(1) in computing the taxpayer's income for a taxation year ending before 1990, or

(B) interest in respect of a repayment referred to in clause (A), and

(ii) the amount, if any, by which $3,500 exceeds the amount deducted under paragraph 8(1)(m) in computing the taxpayer's income for the year.

[10] Subparagraph (i) would be the amount of her two contributions, totalling $5,218.37. She is, however, entitled to deduct only the lesser of the total of the amounts in subparagraph (i) and the amount in subparagraph (ii).

[11] The amount in subparagraph (ii) works out to nil because the amount of her current contribution deducted under paragraph 8(1)(m) exceeds $3,500.

[12] The Minister in the initial assessment for 1996 allowed the additional deduction but on reassessment disallowed it and charged the appellant interest. He has since agreed to waive the interest and this must of course be done. I take this as an acknowledgement that her reliance upon the advice of the officials of the Department of National Revenue would render it unfair to levy interest.

[13] Obviously, there can be no estoppel against the words of a statutory provision; Taylor v. R., [1997] 2 C.T.C. 201; S. Goldstein v. Canada, [1995] 2 C.T.C. 2036 at 2045.

[14] Notwithstanding the waiver of interest, the situation remains highly unsatisfactory for a number of reasons. In the first place, if she is not entitled to deduct the past-service payments that she made to the RPP, she will nonetheless be required to include the same amount in income under paragraph 56(1)(a) when it is paid to her out of the RPP as a pension benefit. Her apprehension of double taxation is well founded. Moreover, while it is true that she may, assuming no further change in the legislation, be able to deduct the payments in future years, this cannot happen until her current contributions to her RPP are less than $3,500. As a practical matter this will not happen until she retires in a number of years and at that time she will presumably be in a lower income tax bracket.

[15] It is obviously beyond my jurisdiction to order the Minister to obtain a remission under the Financial Administration Act. However, I can express the view that this would be a very appropriate case for him to do so. Otherwise, I cannot assist the appellant. I presume there is no need for me to refer the matter back to permit the Minister to implement his agreement to cancel the interest assessed.

[16] The appeal is dismissed.

Signed at Toronto, Canada, this 25th day of March 1999.

"D.G.H. Bowman"

J.T.C.C.