Bonner,
T.C.J.:
—This
is
an
appeal
from
an
assessment
of
income
tax
for
the
1984
taxation
year.
This
appeal
raises
the
question
whether
subsection
60.1(3)
of
the
Income
Tax
Act
("Act")
permits
the
parties
to
a
separation
agreement
to
amend
it
and
thereby
transform
payments
which
have
already
been
made
and
received
as
interest
into
payments
for
the
maintenance
of
the
payee.
In
making
the
assessment
under
appeal
the
respondent
disallowed
the
deduction
of
$
13,806.04
claimed
by
the
appellant
in
his
tax
return
as
"Maintenance
Payments
—Helen
Syrier".
The
payments
were
in
point
of
fact
made
in
1984
pursuant
to
a
written
separation
agreement
which
had
been
entered
into
in
August
of
1982.
The
assessment
was
made
on
November
15,
1985.
In
response
to
that
assessment
the
former
spouses
proceeded
in
December
of
1985
to
enter
into
an
agreement
providing
for
a
retroactive
amendment
to
the
1982
separation
agreement.
The
appellant
relied
primarily
on
section
60.1
of
the
Act
and
on
the
agreement
as
amended
in
support
of
his
claim
that
the
amount
in
question
is
deductible
by
virtue
of
paragraph
60(b)
of
the
Act.
Paragraph
60(b)
provides
for
the
deduction
in
the
computation
of
income
of:
...
an
amount
paid
by
the
taxpayer
in
the
year,
pursuant
to
.
.
a
written
the^ecipîenUhereo
/
payable
on
P
basis
for
the
maintenance
of
The
1982
agreement
in
its
original
form
provided
in
part
as
follows:
7.
Maintenance
for
the
Wife
(a)
The
husband
shall
pay
to
the
wife
as
a
lump
sum
payment
for
her
support,
the
sum
of
$125,000.00
which
amount
shall
be
payable
as
follows:
(1)
Â
oq°
by
certified
cheque
on
or
before
the
1st
day
of
Septem-
ber
(2)
$25
000.00
on
the
1st
day
of
September
1985
and
the
balance
on
the
1st
day
of
September
1987;
(3)
After
payment
on
the
first
instalment
of
$25,000.00
on
the
1st
day
of
September
1982,
the
balance
of
$100,000.00
shall
attract
interest
at
the
rate
of
14/o
per
annum
which
interest
shall
be
payable
on
the
1st
day
of
each
and
every
month
on
any
unpaid
balance.
(c)
The
husband
and
the
wife
each
acknowledge
that
the
lump
sum
payment
for
support
herein
together
with
interest
thereon
shall
not
constitute
mainte-
nance
payments
within
the
meaning
of
the
Income
Tax
Act.
(d)
The
husband
shall
have
the
privilege
of
making
any
payments
at
any
time
on
this
indebtiness
[sic]
to
the
wife
without
notice
or
penalty
for
prepayments.
The
payments
now
in
question
were
in
fact
made
pursuant
to
clause
7(a)(3)
of
the
agreement.
Subsection
60.1(3)
provides:
For
the
purposes
of
this
section
and
section
60,
where
a
decree,
order
or
judgment
of
a
competent
tribunal
or
a
written
agreement
made
at
any
time
in
a
taxation
year
that
an
amount
paid
before
that
time
and
in
the
year
or
the
ediatel
preceding
taxation
year
is
to
be
considered
as
having
been
paid
and
received
pursuant
thereto,
the
following
rules
apply:
(a)
the
amount
shall
be
deemed
to
have
been
paid
pursuant
thereto;
and
(b)
the
person
who
made
the
payment
shall
be
deemed
to
have
been
separated
pursuant
to
a
divorce,
judicial
separation
or
written
separation
agree-
ment
from
his
or
T
/
spouse
at
the
time
the
payment
was
made
and
throughout
the
remainder
of
the
year.
The
1985
amending
agreement
recites
the
1982
agreement
and
the
desire
of
the
parties
to
amend
it.
It
then
provides
in
part:
NOW
THEREFORE
this
agreement
witnesseth:
1.
?
?
?
P
of
paragraphs
7(a),
7(c),
7(d),
and
7(e)
are
deleted
and
replaced
in
total
by
the
following:
(a)
The
husband
shall
pay
to
the
wife
as
a
lump
sum
payment
for
her
support,
the
sum
of
$125,000.00
which
amount
shall
be
payable
as
follows:
k
$25,000.00
‘
by
certified
cheque
on
or
before
the
1st
day
of
Septem-
ber
1982:
(2)
$25,000.00
on
the
1st
day
of
September
1985,
and
(3)
the
balance
on
the
1st
day
of
September
1987.
(4)
The
h
^i
k.
?i
have
P
8
of
making
any
payments
at
any
time
on
this
indebtedness
the
wife
without
notice
or
penalty
for
prepay-
J
husband
and
the
wife
each
acknowledge
that
the
lump
sum
payment
for
support
described
in
sub
paragraph
(a)
above
or
any
instalments
thereof
shall
not
constitute
maintenance
payments
within
the
meaning
of
the
Income
Tax
Act.
(c)
So
long
as
all
or
any
part
of
the
lump
sum
payment
for
the
support
of
the
wife
described
in
sub
paragraph
(a)
remains
outstanding,
the
husband
shall
pay
to
the
wife
by
way
of
periodic
payments
for
her
maintenance
and
support
commencing
on
the
first
day
of
January,
1984
and
continuing
on
the
first
day
of
each
and
every
month
thereafter
a
sum
equal
to
1.166667
per
cent
(an
effective
annual
rate
of
14
per
cent)
of
the
balance
of
such
lump
sum
payment
remaining
outstanding
on
the
last
day
of
the
month
immediately
preceding
the
due
date
of
any
such
periodic
payment.
(d)
The
husband
and
the
wife
each
acknowledge
that
the
periodic
payments
for
support
described
in
sub
paragraph
(c)
shall
constitute
maintenance
payments
within
the
meaning
of
the
Income
Tax
Act.
(e)
The
amount
of
the
aforesaid
payments
either
for
the
lump
support
or
the
periodic
support
of
the
wife
shall
not
be
subject
to
any
change
in
the
event
of
any
material
or
any
changes
in
circumstances
including
but
not
limited
to
financial
needs
or
income,
remarriage,
increases
or
decreases
in
the
cost
of
living
or
the
death
of
either
or
both
spouses
and
therefore
shall
not
be
subject
to
any
variation
for
any
reason
whatsoever.
The
wife
hereby
releases
the
husband
from
any
claim
for
any
payment
for
support
of
any
kind,
except
as
described
herein,
notwithstanding
the
payment
of
periodic
support
to
her
in
accordance
with
the
terms
of
this
amending
agreement
and
agrees
to
indemnify
and
save
harmless
the
husband
from
any
order
for
support
which
may
at
any
time
hereafter
be
awarded
to
her
contrary
to
the
terms
of
this
agreement.
2.
All
payments
made
between
January
1,
1984
and
the
date
of
execution
of
this
agreement
pursuant
to
the
provisions
of
paragraph
7(a)(3)
of
the
separation
agreement
of
August
16,
1982
will
be
considered
to
have
been
made
pursuant
to
the
terms
of
this
agreement.
3.
The
word
"interest"
appearing
in
the
second
line
and
13th
line
of
subparagraph
7(f)
of
the
aforesaid
separation
agreement
shall
be
deleted
and
replaced
in
both
places
by
the
words
"the
aforesaid
periodic
support
payments".
Provided
that
this
amendment
shall
not
in
any
way
affect
the
validity
or
enforceability
of
the
mortgage
described
in
such
paragraph
or
the
amount
outstanding
thereunder.
4.
The
parties
confirm
that
the
aforesaid
separation
agreement
as
previously
amended
shall
remain
in
full
force
and
effect
except
as
amended
by
this
agreement.
Mr.
McNair,
for
the
appellant,
argued
that
by
virtue
of
the
operation
of
subsection
60.1(3)
the
amounts
in
question
must
be
deemed
to
have
been
paid
pursuant
to
the
amending
agreement
of
December
1985
which
agreement
called
for
payment
of
them
”.
.
.
by
way
of
periodic
payments
for
her
maintenance
and
support
.
.
.”.
The
1984
payments
could
not,
after
the
formation
of
the
1985
agreement
be
regarded
as
interest.
The
characterization
of
the
payments
either
as
an
allowance
for
the
maintenance
of
the
recipient
or
as
interest
did
not,
according
to
the
argument,
necessarily
rest
on
the
basis
on
which
the
amount
was
calculated.
On
this
point
Mr.
McNair
cited
Farrell
v.
M.N.R.,
[1985]
2
C.T.C.
2429;
85
D.T.C.
706.
Thus,
so
the
argument
continued,
the
"allowance
for
the
maintenance
of
the
recipient”
condition
precedent
to
deductibility
contained
in
paragraph
60(b)
was
met.
Finally
he
argued
that
the
question
whether
the
payments
are
or
are
not
interest
is
not
determinative
for
purposes
of
paragraph
60(b).
Interest
payable
for
the
maintenance
of
the
recipient
is,
he
said,
deductible
under
paragraph
60(b).
Mr.
Teichman,
counsel
for
the
respondent,
argued
that
subsection
60.1(3)
is
intended
to
permit
payor
and
payee
to
put
into
the
form
of
a
written
agreement
the
framework
or
basis
on
which
payments
previously
made
were
in
fact
made.
The
provision
does
not,
he
said,
permit
the
parties
to
make
an
agreement
which
recharacterizes
payments
made
in
the
past.
The
use
of
the
word
"interest"
to
describe
the
payments
called
for
by
clause
7(a)(3)
of
the
original
agreement
is
clearly
appropriate.
In
Re:
Farm
Security
Act,
[1947]
S.C.R.
394
at
411,
interest
is
defined
as
follows:
Interest
is,
in
general
terms,
the
return
or
consideration
or
compensation
for
the
use
or
retention
by
one
person
of
a
sum
of
money
belonging
to,
in
a
colloquial
sense,
or
owed
to
another.
This
definition
was
later
adopted
in
Attorney
General
for
Ontario
v.
Barfried
Enterprises
Ltd.,
[1963]
S.C.R.
570
at
575.
The
nature
of
the
payments
is
not
changed
by
the
attempt
in
clause
1(c)
of
the
1985
agreement
to
characterize
them
as
”.
.
.
periodic
payments
for
her
maintenance
and
support
..
.
.”.
They
are
required
to
be
made
only
”.
.
.
so
long
as
all
or
any
part
of
the
lump
sum
payment.
.
.
remains
outstanding".
They
remain
payments
received
by
the
wife
qua
creditor
and
not
qua
person
entitled
to
look
to
the
payor
for
support.
For
this
reason
they
are
not
payments
of
the
sort
described
in
paragraph
60(b)
even
though
the
money
may
have
had
the
effect
of
supporting
Mrs.
Syrien
The
significance
of
names
used
by
the
parties
was
considered
in
Huston
et
al.
v.
M.N.R.,
[1962]
Ex.
C.R.
69;
[1961]
C.T.C.
414.
At
page
420
Thurlow,
J.
Said;
The
name
attached
by
the
parties
to
payments,
the
way
the
amounts
are
calculated,
and
what
they
represent
may
often
be
of
great
importance
in
resolving
such
an
issue,
but
the
issue
is
one
of
substance
and
depends
not
on
these
features
alone
but
on
the
other
features
of
the
case,
as
well.
For
just
as
a
sum
which
is
in
truth
interest,
though
called
by
some
other
name,
will
fall
within
the
meaning
of
the
section,
so
a
sum
which
in
truth
is
not
interest,
in
my
opinion,
will
not
be
''received
as
interest"
within
the
meaning
of
the
section,
even
though
it
may
have
the
name
and
some
of
the
other
attributes
of
interest.
[Emphasis
added.]
In
my
view
subsection
60.1(3)
does
not
assist
the
appellant.
At
best
for
the
appellant
the
subsection
would
operate
to
deem
the
payments
to
have
been
made
pursuant
to
an
agreement
which
describes
as
"payments
for
maintenance",
payments
which
in
substance
are
payments
of
interest.
Because
the
issue
is
one
of
substance
the
incorrect
characterization
of
the
payments
in
the
amended
agreement
would
not
govern
for
purposes
of
paragraph
60(b)
of
the
Act.
It
is
true
of
course
that
the
words
"pursuant
to"
mean
more
than
in
consequence
of.
The
term
means
in
conformity
with.
However,
by
deeming
the
payments
to
have
been
made
pursuant
to
the
agreement
as
amended,
subsection
60.1(3)
does
not
confer
on
the
parties
a
right
to
characterize
payments
previously
made
in
any
way
they
please.
Such
a
result
was
not
necessary
to
the
achievement
of
the
objectives
of
the
legislature
when
this
subsection
was
enacted.
The
subsection
was
intended
to
permit,
within
certain
time
limitations,
the
deduction
of
spousal
support
payments
made
during
the
period
between
the
separation
of
the
spouses
and
the
formation
of
the
separation
agreement
or
making
of
the
court
order
for
support.
The
fiction
introduced
by
the
deeming
clause
was
never
intended
to
extend,
at
the
whim
of
the
parties,
the
type
of
payment
which
is
the
subject
of
paragraph
60(b)
and
56(1)(b)
deductions
from
and
inclusions
in
income.
For
the
foregoing
reasons,
the
appeal
will
be
dismissed.
Appeal
dismissed.
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