A-52-97
MONTRÉAL, QUEBEC, THE 15TH DAY OF SEPTEMBER, 1997
| CORAM: THE HONOURABLE MR. JUSTICE MARCEAU |
| THE HONOURABLE MR JUSTICE MacGUIGAN |
| THE HONOURABLE MADAM JUSTICE DESJARDINS |
| BETWEEN: THE ATTORNEY GENERAL OF CANADA |
Respondent
J U D G M E N T
The application for judicial review is allowed, the impugned decision of the Tax Court of Canada is vacated and the assessment established by the Minister of National Revenue for the respondent"s 1991 taxation year is restored.
Certified true translation
Christiane Delon
A-52-97
THE ATTORNEY GENERAL OF CANADA
Applicant
AND:
MARC SÉGUIN
Respondent
Hearing held in Montréal,
Monday, September 15, 1997
Judgment pronounced in Montréál,
Monday, September 15, 1997
REASONS FOR JUDGMENT OF THE COURT BY: DESJARDINS, J.A.
A-52-97
THE ATTORNEY GENERAL OF CANADA
Applicant
- and -
MARC SÉGUIN
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Pronounced at the hearing in Montréal,
Monday, September 15, 1997)
DESJARDINS, J.A.
This application for judicial review raises the issue of whether the mortgage interest charges on the respondent"s old residence constitute moving expenses within the meaning of section 62 of the Income Tax Act ("the Act").1
In early 1990, the respondent, who was living in Montréal, accepted a job in the Outaouais region. He immediately put his residence in Montreal up for sale and, on July 1, 1990, purchased a second one in Hull. His Montréal residence was not rented and remained vacant until it was sold in March 1992, twenty-two months later.
During the 1991 taxation year, the respondent paid $9,321 in interest on the mortgage on his Montréal residence. The Minister refused the deduction of this amount claimed under section 62 of the Act. The Tax Court of Canada later overturned the Minister"s decision.
The Tax Court of Canada judge concluded, first, that Parliament, in enacting section 62 of the Act, intended to encourage employment mobility and that section 62 should be construed in light of that purpose. Having then noted that the enumeration in subsection 62(3) was not exhaustive, the tax court judge found that, since paragraph 62(3)(d) allows a taxpayer who moves his or her cost of cancelling the lease, it was logical, in his opinion, to hold that the costs incurred by the taxpayer for the payment of the mortgage interest on his old residence were also included in this paragraph, as any ambiguity should be resolved in favour of the taxpayer.
We are all of the opinion that the tax court judge was unable to reach this conclusion.
Although the purpose of the provision is no doubt to encourage mobility of employment, and the enumeration in subsection 62(3) of the Act is not exhaustive, as is indicated by the use of the verb "includes" ("comprend") in that section, since its purpose is not to cover all possible moving expenses, we do not think section 62 as a whole can be read as it was by the tax court judge.
What section 62 allows, within its first subsection, is a deduction by the taxpayer of the amounts
| 62(1) ...paid by him as or on account of moving exprenses incurred in the course of moving from his old residence to his new residence
|
62(1) ... payées à titre ou au titre des frais de déménagement engagés pour déménager de son ancienne résidence pour venir occuper sa nouvelle résidence ...
|
According to the ordinary meaning of the words used, the provision includes those expenses incurred for physically moving, changing one"s residence, and certain other expenses directly related to the actual move and resettlement, and not some amount intended to compensate for accessory damages that are unrelated to the actual move to and resettlement in the new residence.2 Thus, it excludes the interest expenses on the old residence that do not pertain directly to the physical move of the taxpayer and his family, but instead pertain to the bank loan he took out on his old residence.
In our opinion, Stubart Investments Ltd. v. The Queen3 and Québec (Urban Community) v. Corp. Notre-Dame de Bon-Secours4 do not prompt us in any way to alter the principles laid down in Gold v. The Queen,5 Storrow v. The Queen6 and Rath v. The Queen,7 the latter judgment being upheld by this Court.8
Furthermore, contrary to the conclusion reached by the tax court judge, the costs of cancelling the lease are not comparable to the interest expenses on the old residence. The costs of cancelling the lease are a penalty imposed on a tenant for breaking the lease agreement. The amount of such a penalty is expressly provided in the lease and is a direct consequence of the change in residence imposed by the change in employment. The mortgage interest resulting from the loan on a house that the taxpayer is no longer inhabiting has more to do with his desire to keep the house until he has his price, instead of selling it.
The application for judicial review will be allowed, the decision of the Tax Court of Canada will be vacated, and the Minister"s reassessment for the 1991 taxation year will be restored.
Certified true translation
Christiane Delon
FEDERAL COURT OF APPEAL
A-52-97
THE ATTORNEY GENERAL OF CANADA
Applicant
AND:
MARC SÉGUIN
Respondent
REASONS FOR JUDGMENT OF THE COURT
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
| STYLE: THE ATTORNEY GENERAL OF CANADA |
Applicant
Respondent
| PLACE OF HEARING: Montréal, Quebec |
| DATE OF HEARING: September 15, 1997 |
REASONS FOR JUDGMENT OF THE COURT (MARCEAU, MacGUIGAN AND DESJARDINS JJ.A.)
| READ AT THE HEARING BY: Madam Justice Desjardins |
APPEARANCES:
| Paul Plourde for the applicant |
| Serge Gloutnay for the respondent |
SOLICITORS OF RECORD:
| Ottawa, Ontario for the applicant |
| Montréal, Quebec for the respondent |
__________________
1 S.C. 1970-71-72 c. 63.
62(1) Moving expenses - Where a taxpayer has, at any time, commenced
(a) to carry on a business or to be employed at a location in Canada (in this subsection referred to as "the new work location"), or
... |
62(1) Lorsqu'un contribuable a, à une date quelconque, commencé
a) à exploiter une entreprise ou à être employé dans un lieu au Canada (dans le présent paragraphe appelé son nouveau lieu de travail), ou
[...] |
and by reason thereof has moved from the residence in Canada at which, before the move, the taxpayer ordinarily resided (in this section referred to as "the old residence") to a residence in Canada at which, after the move, the taxpayer ordinarily resided (in this section referred to as "the new residence"), so that the distance between the old residence and the new work location is not less than 40 kilometres greater than the distance between the new residence and the new work location, in computing the taxpayer's income for the taxation year in which the taxpayer moved from the old residence to the new residence or for the immediately following taxation year, there may be deducted amounts paid by the taxpayer as or on account of moving expenses incurred in the course of moving from the old residence to the new residence , to the extent that
... |
et a, de ce fait, déménagé d'une résidence au Canada où, avant le déménagement, il résidait habituellement (dans le présent article appelée son "ancienne résidence") pour venir occuper une autre résidence sise au Canada où, après le déménagement, il a résidé habituellement (dans le présent article appelée sa "nouvelle résidence"), de sorte que la distance entre son ancienne résidence et son nouveau lieu de travail soit supérieure d'au moins 40 kilomètres à la distance entre sa nouvelle résidence et son nouveau lieu de travail, il peut déduire, dans le calcul de son revenu pour l'année d'imposition dans laquelle il a déménagé de son ancienne résidence pour venir occuper sa nouvelle résidence, ou pour l'année d'imposition suivante, les sommes qu'il a payées à titre ou au titre des frais de déménagement engagés pour déménager de son ancienne résidence pour venir occuper sa nouvelle résidence , dans la mesure où |
(3) Definition of "moving expenses"- In subsection (1), "moving expenses" includes any expense incurred as or on account of
... |
(3) Définition de "frais de déménagement". Dans le paragraphe (1), "frais de déménagement" comprend toutes dépenses engagées à titre ou au titre
[...] |
(d) the cost to the taxpayer of cancelling the lease by virtue of which the taxpayer was the lessee of the old residence
[Emphasis added] |
d) de frais de résiliation du bail, si bail il y a, en vertu duquel il était le locataire de son ancienne résidence
[Je souligne] |
2 Gold v. The Queen, 77 DTC 5430, at 5431.
3 [1984] 1 S.C.R. 536">[1984] 1 S.C.R. 536.
4 [1994] 3 S.C.R. 3.
5 77 DTC 5430.
6 [1979] 1 F.C. 595.
7 [1979] 2 F.C. 387.
8 [1983] 1 F.C. 42.
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