James Catton and David v. Listoe v. Minister of National Revenue (Informal Procedure), [1993] 1 CTC 2108, 93 DTC 117

Bell, T.C.C.J.:—The appellant, in his 1988 income tax return, claimed a deduction described therein under the general heading CALCULATION OF NORTHERN RESIDENTS DEDUCTIONS FOR 1988. Form 12222, attached to his return, providing for the calculation of such deduction states that it is

For use by an individual who resided in a prescribed or previously prescribed area (refer to the 1988 Northern Residents Deductions Tax Guide) throughout a period of six months or longer beginning or ending in 1988.

In completing that form the appellant filled in the portion provided for computation of deduction for persons who resided "in a previously prescribed area” in 1988.

In making a similar claim in his 1989 taxation year on Form T2222(E), the appellant completed that portion of the form described as “applicable to individuals who resided in a prescribed area during 1989".

The appellant claimed a similar deduction in his income tax return for the 1990 taxation year on Form T2222(E) Rev. 90 and in so doing filled out the portion of such form that referred to "a dwelling in a prescribed area".

In respect of the appellants 1988 and 1989 taxation years the respondent, in his amended reply to notice of appeal, stated that he relied, inter alia, upon section 3 and subsection 110.7(1) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the"Act"), as amended and sections 7302 and 7303 of the Income Tax Regulations (” Regulations”) applicable to the 1988 and 1989 taxation years. He also submitted that the appellant did not live in a prescribed area pursuant to section 7303(1)(c) of the Regulations and that the appellant was not entitled to a deduction pursuant to subsection 110.7(1) of the Act.

With respect to the 1990 taxation year, the respondent's reply to notice of appeal stated that he relied on section 110.7 of the Act and on sections 7302, 7303 and 7304 of the Regulations as amended for the 1990 taxation year and submitted that for that year the appellant was not entitled to a northern resident's deduction pursuant to subsection 110.7(1) of the Act.

The appeal for the 1990 taxation year was under the informal procedure of the rules of this court.

The appellant testified that he claimed a similar deduction for his 1987 taxation year on the basis that Loon Lake, Saskatchewan, the area of his residence, was listed as a“ "prescribed area” (a term used both in section 110.7 of the Act and section 7303 of the Regulations applicable to 1987) in a guide for northern residents issued by the Department of National Revenue. A letter dated March 20, 1989 to the appellant from Mr. Otto Jelinek, the Minister of National Revenue, was filed as an exhibit. This letter stated, inter alia:

On December 17, 1987, Mr. MacKay released a list of areas that would qualify for the northern residents deductions for 1987. This announcement recognized that the list of prescribed areas could contain names of communities which, upon further review, might be found ineligible. However, assurance was given that the residents of any community included on the list, which was later found to be ineligible, would be allowed the deductions for 1987 only, even though the community had not met all of the criteria to qualify as a prescribed area for that year.

and also

Loon Lake was included in the list of areas released on December 17 as qualifying for the northern residents deductions for 1987. However, in reviewing the population figures from the 1986 Census, it was subsequently determined that Loon Lake is less than 160 kilometres from the nearest urban centre. The 1986 Census data revealed that Grand Centre, Alberta has a population in excess of 10,000, thus making it an urban centre. Because the community of Loon Lake is less than 160 kilometres from Grand Centre, it does not meet the criteria to qualify as a prescribed area for purposes of the northern residents deductions. However, as I mentioned earlier, the deductions would still be allowed for 1987.

The Income Tax Act provides a phase-out of the northern residents deductions for an area which ceases to be prescribed: two-thirds for the first subsequent year and one-third for the second. However, because Loon Lake was never prescribed, the phase-out provisions do not apply.

The aforesaid guide, being only a publication issued by the Department of National Revenue, does not have any force of law. The Act and the Regulations, together with judicial decisions, constitute the rule book for all deductions.

The pertinent part of section 110.7 of the Act applicable to the 1987 taxation year read as follows:

110.7 (1) In computing the taxable income for a taxation year of an individual who, throughout a period of not less than six months commencing or ending in the year, resided in an area that was a prescribed area for the year or for one of 2 preceding taxation years and who files a claim in prescribed form with his return of income for the year pursuant to section 150, there may be deducted

(a) where the area was a prescribed area for the year, 100 per cent,

(b) where the area was not a prescribed area for the year but was a prescribed area for the immediately preceding year, 2/3, and

(c) where the area was not a prescribed area for the year or the immediately preceding taxation year but was a prescribed area for the second preceding taxation year, 1/3

of such of the following amounts as are applicable . . .

Sections 7302 and 7303 of the Regulations, applicable to the 1987, 1988, 1989 and 1990 taxation years, read as follows:

7302. (1) In this section and sections 7303 and 7304,

“administrative centre", in respect of an urban centre, means the city or town hall of the city or town, all or part of which is within the urban centre, that has the largest population of all the cities and towns in the urban centre;

“all-weather road” means

(a) a gravel or higher quality road, or

(b) a daily ferry service

that is ordinarily continuously usable except for not more than three consecutive weeks during the annual freeze-up period and not more than three consecutive weeks during the annual break-up period;

“area” includes a city, town village or hamlet or any place listed in the most recent edition of the Place Name Reference List, published by Statistics Canada;

"grassland" means a part of Canada indicated on the Vegetation Regions map in The National Atlas of Canada, 4th edition (revised), published in 1974 by The Macmillan Company of Canada Ltd. as having a physiognomy described as

(a) iow grass,

(b) medium grass, or

(c) tall grass;

“open woodland" means a part of Canada indicated on the Vegetation Regions map in The National Atlas of Canada, 4th edition (revised), published in 1974 by The Macmillan Company of Canada Ltd. as having a physiognomy described as

(a) lichen floor with scattered needleleaf trees,

(b) shrub floor with scattered needleleaf trees,

(c) shrubby needleleaf trees with patches of heath and barrens,

(d) scattered needleleaf trees with broadleaf shrubs,

(e) shrubs or grass with patches of needleleaf trees, or

(f) small lakes, moss and sedge covered floor and strings of needleleaf trees;

"tundra" means a part of Canada indicated on the Vegetation Regions Map in The National Atlas of Canada, 4th edition (revised), published in 1974 by the Macmillan Company of Canada Ltd. as having a physiognomy described as

(a) Arctic dwarf shrubs, sedges, lichen-heath,

(b) Arctic mature sedges, grasses and shrubs,

(c) alpine sedges, grasses and shrubs, or

(d) lichens-heath, shrubs patches of needleleaf trees,

"urban centre" means an urban area within the meaning assigned by the 1986 Census Dictionary published under the authority of the Minister of Supply and Services in January 1987, Catalogue 99-101E, south of the 60th parallel of north latitude that has a population of 10,000 or more as shown in Table 14 of the publications entitled Population and Dwelling Counts—Provinces and Territories published under the authority of the Minister of Supply and Services in September 1987, Catalogues 92-109 to 92-118.

(2) For the purposes of this section and sections 7303 and 7304, the population of an area in respect of a taxation year is the population determined for the area on the basis of the most recent quinquennial census taken by Statistics Canada before the end of the year.

7303. (1) An area is a prescribed area for a taxation year for the purposes of section 110.7 of the Act where it is

(a) an area in Canada that is on or north of the 60th parallel of north latitude:

(b) an area in Canada south of the 60th parallel of north latitude and on or north of the 55th parallel of north latitude that, in the preceding taxation year, met the following requirements:

(i) it had a population of less than 10,000, and

(ii) there was no all-weather road providing access to the area or, where there was an all-weather road providing access to the area, it was more than 80 kilometres by all-weather road from the administrative centre of the urban centre that was nearest to the area;

(c) an area in Canada south of the 55th parallel of north latitude other than an area that is situated in grassland south of the 50th parallel of north latitude, that, in the preceding taxation year, met the following requirements:

(i) it had a population of less than 10,000,

(ii) it was entitled to a total of 50 points or more determined under subsection (7),

(iii) where there was no all-weather road providing access to the area, it was more than 80 kilometres in a straight line from the administrative centre of the nearest urban centre with a population of 50,000 or more, and

(iv) where there was an all-weather road providing access to the area, it was more than 320 kilometres by all-weather road from the administrative centre of the urban centre with a population of 50,000 or more that was nearest to the area by all-weather road and was more than 160 kilometres by all- weather road from the administrative centre of the urban centre that was nearest to the area;

(d) an area in Canada south of the 60th parallel of north latitude and on or north of the 55th parallel of north latitude that, in any preceding taxation year after 1985, met the requirements set out in paragraph (b) and in the immediately preceding taxation year met the following requirements:

(i) it had a population of less than 15,000, and

(ii) there was no all-weather road providing access to the area or, where there was an all-weather road providing access to the area, it was more than 1,610 kilometres by all-weather road from the administrative centre of the urban centre with a population of 100,000 or more that was nearest to the area; or

(e) an area in Canada south of the 55th parallel of north latitude other than an area that is situated in grassland south of the 50th parallel of north latitude that, in any preceding taxation year after 1985, met the requirements set out in paragraph (c) and in the immediately preceding taxation year met the following requirements:

(i) it was entitled to a total of 50 points or more determined under subsection (7),

(ii) where there was no all-weather road providing access to the area, it had a population of less than 15,000, and

(iii) where there was an all-weather road providing access to the area,

(A) it had a population of less than 10,000, or

(B) it had a population of more than 9,999 and less than 15,000 and it was more than 1,610 kilometres by all-weather road from the administrative centre of the urban centre with a population of 100,000 or more that was nearest to the area.

(2) For the 1987 to 1992 taxation years, the areas set out in Division I of Schedule IX shall, in addition to the areas prescribed by reason of subsection (1), be prescribed areas for the purposes of section 110.7 of the Act.

(3) For the 1987 to 1992 taxation years, the areas described in Division II of Schedule IX shall, in addition to the areas prescribed by reason of subsection (1), be prescribed areas for the purposes of section 110.7 of the Act.

(4) For the 1987 to 1992 taxation years, an area within a region described in Division III of Schedule IX that, in the preceding taxation year,

(a) had a population of less than 10,000, and

(b) had no all-weather road providing access to the area, or where there was an all-weather road providing access to the area, was more than 160 kilometres by all-weather road from the administrative centre of the urban centre that was within the province in which the area was situated, has a population of 10,000 or more and was nearest to the area,

shall, in addition to the areas prescribed by reason of subsection (1), be a prescribed area for the purposes of section 110.7 of the Act.

(5) For the 1987 taxation year, the areas on or north of the 55th parallel of north latitude and that are not otherwise prescribed areas under this Part shall, in addition to the areas prescribed by reason of subsection (1), be prescribed areas for the purposes of section 110.7 of the Act.

(6) For the 1987 taxation year, the areas south of the 55th parallel of north latitude and that are not otherwise prescribed areas under this Part, but that would be prescribed areas pursuant to paragraph (1)(c) if the reference to “60th parallel" in the definition "urban centre” in subsection 7302(1) were read as a reference to "55th parallel", shall, in addition to the areas prescribed by reason of subsection (1), be prescribed areas for the purposes of section 110.7 of the Act.

(7) For the purposes of subparagraphs (1)(c)(ii) and (e)(i), the number of points to which an area is entitled is the aggregate of

(a) where the population of the area is

(i) from 1 to 99, 50 points,

(ii) from 100 to 499, 40 points,

(iii) from 500 to 999, 35 points,

(iv) from 1,000 to 1,999, 30 points,

(v) from 2,000 to 4,999, 25 points,

(vi) from 5,000 to 7,499, 15 points, and

(vii) from 7,500 to 9,999, 5 points;

(b) where there is no all-weather road providing access to the area, the aggregate of 15 points and

(i) if the area is not served by a scheduled air, rail or ferry passenger service, 15 points,

(ii) if the area is served by a scheduled air, rail or ferry passenger service on fewer than 4 days per week, 10 points, and

(iii) if the area is served by a scheduled air, rail or ferry passenger service on more than 3 days per week, 5 points,

(c) where the distance by all-weather road between the area and the administrative centre of the urban centre with a population of 15,000 or more that is nearest to the area is

(i) equal to or more than 402 kilometres but less than 483 kilometres, 5 points,

(ii) equal to or more than 483 kilometres but less than 803 kilometres, 10 points, and

(iii) equal to or more than 803 kilometres, 15 points,

(d) where the area is in

(i) tundra, 30 points, or

(ii) open woodland, 15 points, and

(e) where the area

(i) falls on or is encompassed by a line on one of the maps set out in Schedule X to which a point value has been assigned, the number of points assigned to that line,

(ii) falls entirely between two lines on one of the maps set out in Schedule X to which point values have been assigned, the higher number of points assigned to one of the lines,

(iii) falls between a line on one of the maps set out in Schedule X to which a point value has been assigned and the southern boundary of Canada, the number of points assigned to that line,

(iv) falls west of the most westerly line on the map of British Columbia set out in Schedule X to which a point value of 15 points has been assigned, 20 points, and

(v) falls between the most northerly line on one of the maps set out in Schedule X to which a point value has been assigned and the northern edge of the map, the number of points that is 5 points more than the number assigned to that line.

At the hearing, neither the appellant nor Crown Counsel raised the fact that section 110.7 had been amended applicable to the 1988 and subsequent taxation years in such fashion that the term “ prescribed area” no longer appeared therein. Instead, that section made provision for a deduction for:

. . . a taxpayer who is an individual (who) has resided in one or more particular areas each of which was a prescribed northern zone or prescribed intermediate zone for the year and has filed for the year a claim in prescribed form . . .

Although draft regulation 7303.1 describing a''prescribed northern zone" and a“ prescribed intermediate zone” was prepared and published, it has not been brought into force. Hence, no regulation exists which corresponds with the new language of section 110.7 of the Act. Throughout the three taxation years in question, section 7303 of the Regulations continues to provide that:

An area is a prescribed area for a taxation year for the purposes of section 110.7 of the Act. . .

even though prescribed area" was no longer a term appearing in section 110.7. It could be argued therefore, that no taxpayer would be entitled to any deduction whatsoever under a combination of section 110.7 of the Act and sections 7302 and 7303 of the Regulations. Although subsection 44(g) of the Interpretation Act, R.S.C. 1985, c. 1-21, may assist an appellant in these circumstances, I need not reach any conclusion on this matter because even if the term "prescribed area" in Regulation 7303 could be said to refer to:

One or more particular areas each of which was a prescribed northern zone or prescribed intermediate zone for the year. ....

within the meaning of section 110.7 as it applied to the 1988 and subsequent taxation years the appellant could not succeed.

Specifically, making the assumption that the term “prescribed area" did refer to the amended section 110.7 of the Act,

(a) Neither the appellant nor Mr. David V. Listoe whose appeal was heard at the same time as the appellant’s appeal, according to their own evidence, lived in an area described in subsection 7303(1) of the Regulations. Counsel for the Minister of National Revenue reinforced this admission by establishing in detail in cross- examination that neither of these gentlemen qualified, under the provisions of section 110.7(1) of the Act, as residing in an area that was a "prescribed area" within the meaning of that term as described in section 7303 of the Regulations at any relevant time. In so doing, inter alia, she conceded that Grand Centre aforesaid did not have a population in excess of 10,000 but then established, through cross-examination of the appellant and Mr. Listoe, that Lloydminster had a population in excess of 10,000 and that it was less than 160 kilometres from the residence of both the appellant and Mr. Listoe.

(b) With respect to subsection 7303(2), Division I of Schedule IX in the relevant years set out the following areas only in Saskatchewan as "prescribed areas" for the purposes of section 110.7 of the Act, namely:

Big Head Indian Reserve 124

Carragana

Chelan

Climax (including Port of Climax)

Consul (including Willow Creek)

Goodsoil

Monchy

Pierceland

Porcupine Plain

(c) With respect to subsection 7303(3), Division II of Schedule IX did not include any areas in the province of Saskatchewan.

(d) With respect to subsection 7303(4), paragraph 3 of Division III of Schedule IX included one area only in the Province of Saskatchewan, described as follows:

The region in Saskatchewan known as the Rural Municipality of Meadow Lake (588).

(e) Subsections 7303(5) and (6) were expressed to apply to the 1987 year only.

The fact that the Minister of National Revenue permitted the appellant a deduction in respect of his 1987 year on the basis of a mistaken inclusion in the list of areas published in the aforesaid guide for 1987 and the fact that his letter was inaccurate so far as the population of Grand Centre being in excess of 10,000 is concerned cannot alter the fact that, within the rules set out above (assuming they apply), the appellant did not live within a" prescribed area" that would qualify a taxpayer for the deduction sought.

The appellant and Mr. Listoe gave evidence as to the difficulty they had encountered attempting to receive information with respect to why areas similar to Loon Lake were "prescribed areas" and Loon Lake was not. However frustrating their experiences may have been, this Court cannot furnish any relief on any basis other than strict compliance with the rules aforesaid.

Accordingly, the appellant’s appeal is dismissed.

Appeal dismissed.