Sandra C. Markman v. Minister of National Revenue, [1989] 1 CTC 2381, 89 DTC 253

Couture, C.J.T.C.:—This appeal deals with an assessment of income tax for the 1986 taxation year of the appellant. The facts giving rise to this assessment followed by the appeal are not in dispute.

In 1985 the appellant was employed as counsel in the legislation drafting section of the Department of Justice in Ottawa. In that year her position was reclassified retroactively to a higher level, effective April 1, 1985. As a result she was entitled to an increase in salary for the period from April 1, 1985 to December 31, 1985 amounting to $7,841.03. This amount was actually received by the appellant on January 2, 1986. In reporting her income for the 1985 taxation year, the appellant included the amount of $7,841.03 as income for that year on the ground that she had constructive receipt of this amount in 1985 even though it was actually received by her in 1986.

In assessing her return for the 1986 taxation year, the respondent increased her declared income by including the $7,841.03 reported on the form T4-1986 issued to her by the Department of Supply and Services and made other related minor adjustments. The appellant filed a notice of objection against this assessment and following its confirmation by the respondent filed a notice of appeal in this Court.

The facts that led the appellant to conclude that the assessment under appeal is wrong are summarized in these paragraphs of her notice of appeal :

4. The intent of the Department of Justice was to ensure that all salary arrears were paid in 1985, and all the necessary authorizations or approval were prepared in timely fashion.

5. However, despite the hand delivery of the required documents to the Compensation Services Branch of the Department of Supply and Services by the appropriate date, none of the $7,841.03 salary arrears was paid until January 2, 1987 (should read 1986).

6. The failure to make this payment was due entirely to administrative delay in the Compensation Services Branch.

In support of her contention that the Justice Department intended that the amount of the arrears be paid to the appellant in 1985 is a letter attached to her income tax return for 1986 entered as an exhibit. It is dated February 19, 1986 and signed by N.J. Fortier, Director, Personnel Officer, Department of Justice, confirming her allegation.

The appellant's first submission is that since all the parties meaning the appellant, the Department of Justice and the Department of Supply and Services intended that the amount of $7,841.03 be paid in the 1985 taxation year, it should be determined that she constructively received the amount in that year.

Her second ground of appeal is set out in this extract from the notice of appeal:

12. Because The Queen in Right of Canada is both employer and taxing authority, inclusion of the $7,841.03 salary arrears in Ms. Markman's 1986 income not only has the effect of reducing Ms. Markman's net salary, it also has the effect of reducing Her Majesty's actual salary expenditure. Her Majesty is therefore able to benefit from her arbitrary delay in making salary payments in a way no other employer can. Any interpretation of the Income Tax Act that permits Her Majesty to arbitrarily reduce her own salary expenditure at Ms. Markman's expense would constitute an infringement of the fundamental rights and freedoms guaranteed by section 15 of the Canadian Charter of Rights and Freedoms and by paragraph 1(a) of the Canadian Bill of Rights.

Counsel for the respondent relied on the provisions of section 5 of the Income Tax Act (the Act) and asserted that under the circumstances which gave rise to the appeal, it could not under the law and the jurisprudence be considered that the appellant had constructive receipt of the amount of $7,841.03 in her 1985 taxation year.

Secondly, on the question of the appellant's rights and freedoms being infringed by actions of agents of Her Majesty The Queen, counsel submitted that there was no such infringement and even if infringement could be inferred as a result of the actions of these agents to the extent that the provisions of the Act, section 5, themselves are not discriminatory, this Court has no jurisdiction to remedy the situation. Its powers are spelled out in subsection 171(1) and are limited to:

(a) dismissing the appeal;

(b) allowing it and;

(i) vacating the assessment,

(ii) varying the assessment, or

(iii) referring the assessment back to the Minister for reconsideration and reassessment.

On the first contention of the appellant with respect to the doctrine of constructive receipt, I cannot agree having regard to the circumstances relating to this appeal that it applies. In the context of the making of a payment in cash or in kind, the doctrine applies only when a payment has been made by a payor to a party who is not the payee, but was made for the benefit of the payee or in satisfaction of an obligation contracted by him. As the expression "constructive receipt” implies there must have been a payment and that payment must have been received by someone before the doctrine may be invoked. In the present situation no such payment was effected until 1986.

Counsel for the respondent referred the Court to the judgment of the Federal Court, Trial Division in Jean-Paul Morin v. The Queen, [1975] C.T.C. 106; 75 D.T.C. 5061 in which an illustration of the application of this doctrine is found. The [D.T.C.] headnote of the reasons reads:

The plaintiff taxpayer was an employee of the Government of Quebec. During the taxation year 1971, the provincial government deducted at source from the taxpayer's salary an amount in respect of provincial income tax. In his return the taxpayer declared as his income from employment the amount which he actually received after the deduction. The Minister included in the taxpayer's income the amount deducted by the provincial government. The taxpayer objected, contending that his income was the sum which he actually received, that is, his salary after tax deductions. The Minister dismissed the objection, and the taxpayer brought this action.

Mr. Justice Lacroix said at page 110 (D.T.C. 5064):

In other words, the plaintiff puts forward as a proposition of law that in order to receive his salary in the legal sense, he must actually touch or feel it, or have it in his bank account.

We regret to say that this proposition seems to us absolutely inadmissible, because the word "receive" obviously means to get or to derive benefit from something, to enjoy its advantages without necessarily having it in one's hands.

In other words the money had been paid by the Government of the Province of Quebec to the Receiver General of Canada, a third party, for the benefit of the appellant in that instance, and such payment constituted constructive receipt in his hands. No such claim may be made by the appellant in the present appeal.

As an employee the appellant was taxable under the provisions of subsection 5(1) of the Act which read:

5.(1) Subject to this Part, a taxpayer's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities received by him in the year.

These provisions cannot be regarded as discriminatory and do not by themselves infringe on any rights or freedoms of taxpayers unless taxation itself constitutes such an infringement which it does not.

Counsel for the appellant relied on a decision of Muldoon, J. of the Federal Court of Canada in Dianena Alvero-Rautert v. Minister of Employment and Immigration, [1988] 3 F.C. 163 at page 164. He submitted that the rationale of that judgment should apply to the situation of the appellant.

The headnote reads:

On July 31, 1984, the applicant herein applied for Canadian citizenship, the first day upon which she was eligible to do so. Since she intended to sponsor her family, including a brother who would attain 21 years of age on April 19, 1985, she made efforts to speed up the process but could not take her oath of citizenship before April 1, 1985. In the meantime, she was told by immigration officials that she could sponsor her brother up to April 19, 1985. She presented the application to sponsor her family at the earliest possible date—April 16, 1985 but it was not “authorized” until April 19. At no time was she told that there would be any difficulty with the sponsorship of her twenty-year-old brother. The sponsorship undertaking, sent to the Canadian Embassy in Manila by surface mail, arrived there on May 16, 1985. For her brother to be eligible, the sponsorship undertaking would have to have been communicated to the Embassy in the Philippines in time for the Embassy to contact her brother and have him fill out an immigration application form before April 19, 1985. Since September 1986, it has been the policy of the immigration authorities to telex the information on a sponsorship application to a post abroad when an accompanying dependant of a family class applicant is approaching twenty-one years of age.

This is an application for certiorari to quash the decision of the respondent Minister that the applicant's brother is not a dependant within the meaning of section 2 of the Immigration Regulations, 1978 and for mandamus ordering the respondent to process her brother's application for permanent residence as an accompanying dependant of his father.

Held, The application was allowed.

The immigration officer who handled the sponsorship application and the personnel of the respondent's department, if not also the very respondent at that time, were negligent, lackadaisical and entirely wanting in any reasonable sense of urgency in such matters. Their negligence, coupled with inadequate regulations in this case frustrated the will of Parliament.

There is no parallel between the two situations. In the Federal Court judgment, findings were made that the officer of the department had been negligent in processing the sponsorship of the applicant with the result that the applicant had been deprived of a statutory right of sponsoring her brother as an immigrant to Canada.

In the present appeal there is no evidence of negligence on the part of employees of the Department of Supply and Services and even if such evidence had been adduced, the appellant has not led evidence that she was deprived of a right derived from a statutory or contractual obligation. The Tax Court of Canada has no jurisdiction to issue writs of certiorari and mandamus as was submitted by counsel for the respondent. The only question that this Court is allowed to determine under its statutory authority is whether the assessment was made in accordance with the provisions of the Act. From the evidence before the Court and having regard to the provisions of subsection 5(1), I have no hesitation in arriving at the conclusion that it was.

The appeal is therefore dismissed.

Appeal dismissed.