Marcel Piché v. Her Majesty the Queen (Informal Procedure), [1993] 2 CTC 2438

Garon, T.C.C.J. (orally):— This appeal is governed by the informal procedure established by the Tax Court of Canada Act and the Rules of this Court.

It concerns an appeal from an assessment by the Minister of National Revenue dated July 29,1991 for the 1990 taxation year. By that assessment the Minister of National Revenue added $34,042.82 to the appellant's income as interest.

I must determine in this appeal whether the $34,042.82 should be included in the appellant's income for the 1990 taxation year, as the respondent main- tains, or whether on the contrary, as the appellant maintains, it should be added to his income for the 1991 taxation year.

The facts are straightforward. On December 27, 1990 the appellant received a cheque for $152,151.78 from the firm of management consultants Piché, Charron & Associés Inc. This sum of $152,151.78 included $34,042.82 of interest, and according to Exhibit A-4, was the final payment under a transaction dated October 18, 1988 concerning in particular the purchase by the firm in question of shares held by the appellant.

The cheque for $152,151.78 received by the appellant on December 27, 1990 was dated December 31, 1990. The appellant deposited the cheque the same day it was received, namely December 27, 1990, in the Bank of Montreal branch located in the Galeries Duplessis complex in Sainte-Foy. At that time he pave instructions to deposit it to his bank account in the Sainte-Adéle branch of the same bank on December 31, 1990. He checked and found that December 31, 1990 was not a working day at the Sainte-Adèle branch of the Bank of Montreal and his cheque was accordingly not deposited until January 3, 1991.

In his submissions to the Court the appellant relates the following, speaking of himself in the third person:

In early January 1991 he obtained an update of his account and saw that the cheque had not been deposited until January 3, 1991. He checked with his branch, arguing that by this means he had lost three days’ interest. He was told that cheques over a certain amount cannot be deposited electronically and human intervention is necessary. That human intervention was not possible until January 3, 1991, as indicated by Exhibit P-3. The authorities at the branch disclaimed any liability, as indicated by the explanatory note contained in Exhibit P-3.

The appellant then contacted the bank's legal branch. He was told by telephone that the cheque had to be regarded as dated January 3, 1991 and not December 31, 1990, as cheques for an amount requiring human intervention could not be deposited on a bank holiday.

[Translation.]

In support of his arguments the appellant maintains that the sum of $34,042.82 should be included in his income for the 1991 taxation year, since for reasons beyond his control the cheque for $152,151.78 could not be deposited in his personal account until January 3, 1991, and so this deposit could not produce interest for him before January 3, 1991.

It is not in dispute that paragraph 12(1)(c) applies to the sum of $34,042.82 representing interest on the capital of $118,108.96. Paragraph 12(1)(c) reads as follows:

There shall be included in computing the income of a taxpayer for a taxation year as income from a business or property such of the following amounts as are applicable:

(c) any amount received by the taxpayer in the year or receivable by him in the year (depending upon the method regularly followed by the taxpayer in computing his profit) as, on account or in lieu of payment of, or in satisfaction of, interest to the extent that such interest was not included in computing his income for a preceding taxation year;

The question is therefore as to the time at which the sum of $152,151.78 was received, $34,042.82 of which was interest.

In my opinion, there is no doubt that this sum of $152,151.78 was received by the appellant on December 31, 1990 at the latest. On that day the appellant was able to negotiate the cheque, as he intended to do. He could, for example, have deposited it in an account at a branch of the Bank of Montreal which was open on that day. On December 31, 1990 he had all the rights of an ordinary holder of the cheque in question. The fact that the cheque in question could not be deposited to his personal account at the Sainte-Adèle branch of the Bank of Montreal until January 3, 1991 is a personal circumstance which does not in any way determine the time the appellant received the money represented by this cheque which he got on December 27, 1990.

There are two completely separate operations here: the first involves payment by Piché, Charron & Associés Inc. by means of a cheque for $152,151.78 and acceptance by the appellant of the cheque in question. The second operation involves the appellant and someone else, the Bank of Montreal. We are only concerned here with the first operation, since among other things the cheque was honoured when it was presented for cashing.

In coming to this conclusion I rely on the decision of Brulé, T.C.C.J. of this Court in Kowalczyk v. M.N.R., [1986] 2 C.T.C. 2092, 86 D.T.C. 1552. Brulé, T.C.C.J. said at page 2093 (D.T.C. 1553):

Before looking more closely at the arguments, I would like to deal with the question of payments made by cheque. Courts have had to deal with this problem on a number of occasions. The conclusion generally accepted is that a payment by cheque is equivalent to a payment in cash as long as no special circumstances lead to another conclusion, and of course, that the cheque is not dishonoured on presentation for payment.

In Moody v. M.N.R., [1957] C.T.C. 110, 57 D.T.C. 1051, Thurlow, J. of the Exchequer Court of Canada, as he then was, made the following comments at page 117 (D.T.C. 1054):

In the absence of some special circumstance indicating a contrary conclusion such as, for example, post-dating or an arrangement that the cheque is not to be used for a specified time, a payment made by cheque, although conditional in some respects, is nevertheless presumably made when the cheque is delivered and, in the absence of such special circumstance, there is, in my opinion, no ground for treating such a payment other than as a payment of cash made at the time the cheque was received by the payee.

I should note that in the instant case the cheque in question was honoured when it was presented for payment. Assuming that section 76 of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") applied here, it would lead to the same conclusion.

I therefore conclude that the sum of $34,042.82 was properly included in the appellant's income for the 1990 taxation year by the assessment on appeal.

For these reasons, the appeal is dismissed.

Appeal dismissed.