Luc Archambault v. Minister of National Revenue, [1988] 2 CTC 2391, 88 DTC 1722

Tremblay, T.C.J. [Translation]:—This appeal was heard in Montreal, Quebec, on May 12, 1987.

1. Issue

The issue is whether the appellant was justified in not including the sums of $12,285, $70,578, $65,610 and $51,246 in computing his income for the 1979, 1980, 1981 and 1982 taxation years respectively.

The appellant maintains that following a decision by the Régie de I'assur- ance-maladie du Québec (hereinafter referred to as the RAMQ), his income was reduced by the above amounts. He disputed this decision and won his case in 1985. He maintains that prior to 1985, the said sums could not constitute income even as a claim and that the total of the said amounts should have been included in the income for 1985.

According to the respondent, in 1982 the RAMQ demanded reimbursement of the above sums totalling $199,719. The respondent then issued reassesments excluding the said amounts, but demanded that the appellant waive the four-year limitation period provided for in subsection 152(4) of the Income Tax Act for the years in question.

Following the arbitration decision favouring the appellant against the RAMQ, the respondent again added the said sums to the appellant's income for 1979 to 1982.

2. Burden of Proof

2.01 The burden is on the appellant to show that the respondent's assessments are incorrect. This burden of proof derives from a number of judicial decisions, including the judgment delivered by the Supreme Court of Canada in Johnston v. M.N.R., [1948] S.C.R. 486; [1948] C.T.C. 195; 3 D.T.C. 1182.

2.02 In the same judgment the Court decided that the assumed facts on which the respondent based his assessments or reassessments are also deemed to be correct until proved otherwise. In the present case, the facts assumed by the respondent are described in paragraphs 7(a) to (h) of the respondent's reply to the notice of appeal. These paragraphs read as follows:

(Translation)

7. In assessing the appellant for his 1979 to 1982 taxation years, the respondent, the Minister of National Revenue, made the following assumptions of fact, inter alia :

a) During the years in questions, the appellant practised his profession as a medical specialist (neurologist);

b) In March 1982, the Régie d'assurance-maladie du Québec demanded reimbursement of $199,719.00 from the appellant;

c) The claim of the Régie de l'assurance-maladie du Québec was for the following amounts for each of the taxation years in dispute:

d) In reassessments prior to those in dispute, the respondent had assessed the appellant by excluding the above-mentioned amounts from the appellant's income pending the decision in the dispute between the appellant and the Régie d'assurance-maladie du québec;

1979	1980	1981	1982
$12,285.00	$70,578.00	$65,610.00	$51,246.00

e) On April 20, 1983 the appellant sent the respondent T-2029 forms in which he indicated that he was waiving the four-year limitation period provided for in subsection 152(4) of the Income Tax Act for the taxation years in dispute with respect to the above-mentioned amounts;

f) Following an arbitration decision [upheld by the Quebec Court of Appeal], the appellant won his case and kept full reimbursement of the amounts claimed by the Régie de l'assurance-maladie du Québec;

g) The respondent added the sums of $12,285.00, $70,578.00, $65,610.00 and $51,246.00 to the appellant's income for the 1979 to 1982 taxation years respectively.

h) The above-mentioned sums represent income of the appellant for each of the years in question.

3. Facts

3.01 The facts assumed by the respondent and described above in paragraph 2.02 are not in dispute except paragraph 7(h).

These facts are very general. It is necessary to know further details in order to determine the tax implications.

3.02 The conflict between the appellant and the RAMQ may be summarized as follows.

3.02.1 The medical services in dispute consisted in electroencephalography services. The fee charged by the appellant was $41 under code 0347. The RAMQ maintained that a $14 fee should be claimed under code 40010.

3.02.2 The RAMQ claimed that the service was rendered “in an institution”, in other words a hospital, namely the Valleyfield Hospital Centre. In that case it is clause 8 of the 1976 agreement with medical specialists which applies and the applicable fee is $14.

3.02.3 The appellant maintained that since he owned the equipment necessary to perform electroencephalograms and since he himself paid a paramedical technician in charge of operating the equipment, he was entitled to apply clause 2 of the agreement and therefore code 0347 at $41.

3.02.4 Since neither clause 2 nor clause 8 of the said 1976 agreement precisely covered the appellant's case, the Conseil d'arbitrage des professionnels de la santé du Québec, interpreting the provisions on the basis of the parties’ true intention, in accordance with Articles 1013, 1018 and 1020 of the Civil Code of the Province of Quebec, rather than the literal meaning, came to the conclusion that it should rule in favour of the appellant. Clause 8, which covers services rendered “in an institution”, implies that all equipment costs and technical personnel services are provided by the institution, namely the hospital, and therefore the Department of Health. That is why the rate applied is only $14. The appellant, who bore all costs, was entitled to the $41 rate. This decision was handed down on May 5, 1983.

3.02.5 The Quebec Court of Appeal upheld this decision on November 1, 1984.

3.03 The fiscal year of the appellant’s business ends on April 30 of the year.

3.04 On March 29, 1982, the general manager of the RAMQ wrote to the appellant claiming the sum of $199,719 (Exhibit A-1). The first four paragraphs of that letter read as follows:

(translation)

Dear Dr. Archambault:

Following an investigation conducted by the Investigations Section of the Régie de l'assurance-maladie, it was established that 7,397 procedures bearing code 0347 (basic electroencephalogram at the office) claimed from the Régie between March 30, 1979 and February 20, 1982, for which you received payment from the Régie, were services which you falsely described.

The investigation revealed that the above-mentioned procedures were performed in a hospital environment, namely at l'Hôtel-dieu in Sorel or at the Valleyfield Hospital Centre, and not at the office as you claimed on your payment claims. Consequently, they should have been claimed from the Régie under the hospital insurance plan using code 40010 at $14.00, not the $41.00 rate provided for in the health insurance plan agreement. The Régie is therefore allowing you the rate provided for in the hospital insurance plan agreement for all the procedures mentioned above.

The overpayments made to you with respect to the said procedures amount to $199,719.00. I would like to advise you that the Régie intends to be reimbursed by compensation or otherwise, as provided for in section 22.2, paragraph 2 of the Health Insurance Act, a copy of which is attached.

The Operations Branch will be in touch with you shortly to establish the terms of reimbursement with you.

3.05 There was in fact no agreement on the terms of reimbursement. The RAMQ was reimbursed by compensation at the rate it intended as amounts were earned by the appellant.

3.06 In preparing the 1982 tax return, Mr. Proulx, the taxpayer's accountant, being aware of the RAMQ's claim, decided to deduct a sum of approximately $50,000 for his 1982 taxation year on account of fees claimed by the RAMQ. His intention was to make other similar deductions in the coming years up to a total of $149,000. He discussed the matter with the respondent's representatives, who objected. They offered, however, to reduce the income in each of the years in which the appellant had received it, but on condition that the appellant signed notices of waiver for each of the said years.

3.07 On June 23, 1982, the respondent issued notices of reassessment for 1979, 1980 and 1981, reducing the appellant's income by $12,285, $70,578 and $65,610 respectively. On the T7W-C forms accompanying the notices of reassessment for each year we read the following:

There was not notice of reassessment issued by the respondent respecting the fiscal year ending on April 30, 1982. In filing his return, the appellant apparently did not report the difference between $41 and $14 totalling $51,246.

3.08 On November 19, 1985, following the judgment rendered by the Quebec Court of Appeal, the respondent issued notices of reassessment including the amounts in question for the years concerned.

The comments on the T7W-C forms read as follows:

For 1980, 1981 and 1982, the form is the same, with only the figures differing. I note that on form T7W-C, no interest was added to the income regarding the capital amount included.

3.09 The notices of waiver for each of the years 1979 (Exhibit 1-1 (D)), 1980 (Exhibit 1-1(1)) and 1981 (Exhibit I-1(N)), all signed on April 20, 1983, are identical except for the amount. The notice for 1979 reads as follows:

(Translation)

Waiver

I hereby waive, for the taxation year indicated above, the four-year limitation period provided for in subsection 152(4) of the Income Tax Act during which the Minister may make a reassessment, additional assessment or assessment of tax, interest or penalties under Part of the Act, with respect to:

The difference between the sum of $12,285 and the amount which the taxpayer would be called upon to pay the Régie de l'assurance-maladie du Quebec would be added to his income.

4. Act, Case Law and Authors, Analysis

4.01 Act

The main provisions involved in this case are section 3 and subsection 9(1) of the Income Tax Act and the second paragraph of section 22.2 of the Health Insurance Act. The latter paragraph reads as follows:

22.2 Where, after an investigation, the Board believes that services for which payment is claimed by a professional in the field of health or for which he has obtained payment in the preceding 36 months were services furnished in nonconformity with the agreement, the Board may refuse payment for such services or have them reimbursed by compensation or otherwise, as the case may be.

4.02 Case Law and Authors

The case law and authors referred to by counsel for the parties are as follows:

Case Law

1. Kenneth B.S. Robertson Ltd. v. M.N.R., [1944] Ex.C.R. 170; [1944] C.T.C. 75; 2 D.T.C. 655;

2. The Queen v. Poynton, [1972] 1 C.T.C. 411; [1972] 3 O.R. 727; 72 D.T.C. 6329;

3. Gagnon v. The Queen, [1986] 1 S.C.R. 264; [1986] 1 C.T.C. 410; 86 D.T.C. 6179;

4. Northern and Central Gas Corporation Ltd. v. The Queen, [1985] 1 C.T.C. 192; 85 D.T.C. 5144 (F.C.T.D.);

5. Commonwealth Construction Company Limited v. The Queen, [1984] C.T.C. 338; 84 D.T.C. 6420 (F.C.A.);

6. The Queen v. Savage, [1983] C.T.C. 393; 83 D.T.C. 5409 (S.C.);

7. Brown v. Helvering, 291 U.S. 193 (1934);

8. Wilson v. M.N.R., [1955] S.C.R. 352; [1955] C.T.C. 87; 55 D.T.C. 1065;

9. M.N.R. v. St. Catharines Flying Training School Ltd., [1955] S.C.R. 738; [1955] C.T.C. 185; 55 D.T.C. 1145;

10. M.N.R. v. Bégin, [1962] Ex.C.R. 159; [1962] C.T.C. 148; 62 D.T.C. 1099;

11. Tremblay v. M.N.R., [1956] Ex.C.R. 416; [1956] C.T.C. 175;

Authors

12. F.E. La Brie, The Principles of Canadian Income Taxation, C.C.H., pp. 23-30, pp. 305-310.

4.03 Analysis

4.03.1 The issue is whether the amounts totalling $199,719, regarded by the RAMQ as not being income for the appellant, can be regarded as income from a tax point of view.

4.03.2 According to counsel for the appellant, there is no case law directly on this point. It is therefore necessary to rely on the basic principles of the Income Tax Act, primarily the meaning of the word "income".

The Act does not define this term, however. It is the case law which lays down criteria for determining what constitutes income.

4.03.3 Concerning the meaning of the term "income", counsel for the appellant referred to The Principles of Canadian Income Taxation, by F. Eugene LaBrie, specifically chapter 9 entitled Realization, Measurement and Apportionment. At pages 305-7, under the subheading Beneficial Receipt of Income, we read the following:

It has already been emphasized that mere beneficial entitlement to money or money's worth without receipt thereof does not constitute income. The converse also holds true. Mere receipt of payment without benefit to the recipient is not income. Both propositions may be viewed as expressions of the basic requirement that income, either in the form of money or money's worth, may be regarded as received only when it becomes effectively at the disposal of the alleged recipient.

Canadian courts have recognized that a taxpayer may be deprived of benefit through obligations that do not require a formal accounting or create loss of beneficial ownership of payments received. Obligations linked directly to the receipt of income may render it not beneficially received. Better reasoning might be that there can be no income without gain, which we have seen to underlie the entire question of deductible expenditure in computing income. [Emphasis added. I]

A number of judicial decisions have been rendered applying this principle. A few of them are summarized in the following subparagraphs.

4.03.3(1) In Kenneth B.S. Robertson Ltd. v. M.N.R. (para. 4.02(1)), the appellant company was taxed by the respondent on insurance premiums received.

The Exchequer Court held that since the appellant was acting as an agent for certain underwriting syndicates, the premiums could not be taxed in its hands. The appellant was bound by a clause in the contract requiring it to repay a certain portion of the premiums in the event policies were cancelled or premiums adjusted. The Exchequer Court relied on an American judicial decision, Brown v. Helvering (para. 4.02(7)), which held that income is received by the recipient only if his right to the money is absolute, and under no restriction, contractual or otherwise, as to its disposition, use or enjoyment.

In Robertson, the appellant did not have an absolute right to the premiums.

4.03.3(2) In Wilson v. M.N.R. (para. 4.02(8)), the appellant, in accepting his father's estate, being an income-producing business, undertook, under the will, to pay an annuity to his mother during her lifetime. The Supreme Court of Canada held that the annuity could not form part of the son's income. He was not the beneficiary of it at the outset.

4.03.3(3) In M.N.R. v. St. Catharines Flying Training School Ltd. (para. 4.02(9)), the appellant company had signed a contract with the Minister of National Defence to run a flying school for members of the Royal Canadian Air Force. A clause in the contract provided that the profit earned would not be distributed but would be kept by the appellant company in a reserve account until the end of the contract and would then be paid to a flying school approved by the Minister of National Defence. If that condition was not met, the money would have to be repaid to the Minister. The profits were held by the Supreme Court of Canada not to be income for the company.

4.03.3(4) In M.N.R. v. Bégin (para. 4.02(10)), the Exchequer Court held that the profits of a partnership to sell beer under a provincial licence within a municipality were not taxable in the hands of the partners. Under a clause of the partnership and pursuant to a municipal by-law, the profits were to be applied to municipal charities.

4.03.3(5) In Tremblay v. M.N.R. (para. 4.02(11)), an insurance company was sold for a certain price. In addition, a further amount of $7,000 was to be paid to the vendor in monthly instalments. It was agreed that this sum of $7,000 was a renewal of insurance premiums which had been invested by the vendor.

The Exchequer Court held that this sum could not be income for the purchaser. The latter was in effect not entitled to it.

4.03.4 In the present case, counsel for the appellant maintains that Dr. Archambault was not entitled to the sums involved prior to the decision of the Quebec Court of Appeal handed down on November 1, 1984, in the appellant's 1985 fiscal year. Before this time, the RAMQ, applying paragraph 2 of section 22.2 of the Health Insurance Act (cited in paragraph 4.01), removed from the appellant any right to use or enjoy the amount not received of $51,246 in 1982. The same applies to the amounts already paid of $12,285 (1979), $70,578 (1980) and $65,610 (1981), since the RAMQ was reimbursed by compensation (para. 3.05) for fees which the appellant had claimed for "services you falsely described" (Exhibit A-1, para. 3.04).

4.03.5 In addition, according to counsel for the appellant, the respondent could not use the word "deduction" either in the notices of reassessment issued in June 1983 (para. 3.07), or in those issued on November 19, 1985 (para. 3.08).

Nowhere in the Act is there a deduction permitted in this regard. According to him, the word “reduction” more accurately describes the reality. The amounts in question were in effect not taxable owing to fees applied by the RAMQ, making it impossible to regard the said amounts as income.

In any event, according to counsel, the Department of National Revenue had made its bed by issuing the notices of reassessment in 1983 and had to keep them as they had been issued.

4.03.6 Again according to counsel for the appellant, the notices of waiver signed could not be binding on the appellant (para. 3.09). They were signed by him but he did not have the right not to sign them. His signature was demanded by the respondent so that his income could be reduced in the years in question. He had difficulty seeing how the appellant could have refused to sign them. In any event, if the sums involved are not income by their very nature, he did not see how the signing of a notice of waiver of the limitation period could retroactively alter the nature of these amounts and turn them into income.

4.03.7 Finally, according to counsel for the appellant, by refusing to allow the appellant to deduct $50,000 for 1982 and similar amounts for the following years and by requiring that the notices of waiver be signed (para. 3.06), the respondent was offering a solution which was more ideal and that is why it was accepted. However, this solution constituted a trap, he maintained. By reducing the income for 1979, 1980 and 1981, he was thereby removing any incentive to contest and support the position we had adopted as accountant and taxpayer. The Department cannot come and say in 1985: Okay, now everything is done, you did not object to the assessment in 1983, now I am going to redo what I have done. And that cannot be done (TS, p. 52).

4.03.8 According to counsel for the respondent, the question which must be asked is whether during 1979 to 1982, the amounts invoiced and generated by the appellant were income for him.

The fact that the RAMQ disputed the claimed and collected cannot alter the nature of the said amounts received, according to counsel for the respondent.

In support of his argument he relied on Robertson (para. 4.02(1)), already cited by counsel for the appellant (para. 4.03.3(1)). In this regard he cited Gagnon (para. 4.02(3)), in which the Supreme Court of Canada examined Robertson and other decisions in light of whether or not a taxpayer can dispose of a sum received.

Beetz, J. stated the following at pages 273-4 (C.T.C. 416-17):

What matters is not the way in which a taxpayer may dispose of, or be required to dispose of, the amounts he receives, but rather the fact of whether he can dispose of them or not.

In Robertson, supra, Thorson P. of the Exchequer Court, had to decide whether certain amounts received on deposit constituted income. At pages 182-83 he wrote:

. . . the question remains whether all of the amounts received by the appellant during any year were received as income or became such during the year. Did such amounts have, at the time of their receipt, or acquire, during the year of the receipt, the quality of income, to use the phrase of Mr. Justice Brandeis in Brown v. Helvering (1934), 291 U.S. 193. In my judgment, the language used by him, to which I have already referred, lays down an important test as to whether an amount received by a taxpayer has the quality of income. Is his right to it absolute and under no restriction, contractual or otherwise, as to its disposition, use or enjoyment?

The Federal Court of Appeal apparently found in Robertson the third aspect of what in its opinion constitutes an allowance; but if that is so, I consider that it misinterpreted the judgment in that case. What Thorson P. meant by “restriction” in the rule which he adopted was not a restriction as to the way in which an amount is disposed of, but a restriction which has the result that a taxpayer derives no benefit from it at all. This is indicated by what he wrote at p. 183:

To put it in another way, can an amount in a taxpayer's hands be regarded as an item of profit or gain from his business, as long as he holds it subject to specific and unfulfilled conditions and his right to retain it and apply it to his own use has not yet accrued, and may never accrue?

[Emphasis added.]

See also Sura v. Minister of National Revenue, [1962] S.C.R. 65.

In Brown v. Helvering, 291 U.S. 193 (1934), Brandeis J. had to decide whether commissions, which were potentially subject to partial reimbursement if insurance policies were cancelled, constituted income for the agent in the year in which he received them. At page 199 he wrote:

But the mere fact that some portion of it might have to be refunded in some future year in the event of cancellation or reinsurance did not affect its quality as income. Compare American National Co. v. United States, 274 U.S. 99. When received, the general agent's right to it was absolute. It was under no restriction, contractual or otherwise, as to its disposition, use or enjoyment.

Here again, in view of the facts in Brown v. Helvering, it seems clear that in formulating a rule to determine what is in the nature of income, Brandeis J. referred to restrictions on the very right to dispose of an amount, not to restrictions on the way in which it is used.

What confirms my view is the restatement of this rule in Rutkin v. United States, 343 U.S. 130 (1952), affirmed in James v. United States, 366 U.S. 213 (1961), in which Warren C.J., at p. 219, cites the restatement in Rutkin, at p. 137:

A gain "constitutes taxable income when its recipient has such control over it that, as a practical matter, he derives readily realizable economic value from it"

[Emphasis added.]

This restatement of the rule for determining what constitutes taxable income emphasizes the benefit the taxpayer derives from income, whatever the way in which it is derived.

In The Queen v. Poynton, 72 D.T.C. 6329, Evans J.A., rendering the unanimous judgment of the Ontario Court of Appeal, specifically adopted the ratio in James, and at p. 6335 suggested additional guidelines for determining whether an amount received by a taxpayer is in the nature of income:

. . . the manner of receipt, the control over it, the liabilities and restrictions attaching to it, the use made of it by the holder, the person to whom the benefits accrue. These are but some of the circumstances to be weighed.

4.03.9 In the present case, still according to counsel for the respondent, during 1979, 1980, 1981 and 1982, the appellant had such control over the amounts invoiced and received from the RAMQ that, as a practical matter, "he derived readily realizable economic value from them", as stated in Rutkin and James cited by Beetz, J.

At the time the appellant received the said sums, he was entitled to dispose of, use and enjoy them absolutely, without any contractual restrictions, as stated in American National Co. v. United States, also cited in Gagnon, supra.

The fact that the RAMQ disputed the legitimacy of the account affecting 1979 to 1982 in 1982 does not alter the fact that the appellant used the sums received in those years, as he was entitled to do. According to counsel for the respondent, the appellant even had the enjoyment of the sum received in his 1982 fiscal year (May 1, 1981 to April 30, 1982). It was on March 29, 1982 that the general manager of the RAMQ informed the appellant of his decision and the claim for $199,719 (para. 3.04). The sum of $51,246 respecting 1982 is included in the $199,719 claimed on March 29, 1982. The fact that the appellant deliberately omitted to include the said sum of $51,246 (para. 3.07) in filing his return after April 30, 1982 does not alter in any way the fact he received this sum and had the enjoyment of it.

Perhaps it was more advantageous for the appellant to deduct $50,000 per year beginning in 1982, over four years. However, the procedure used by the respondent is in accordance with the economic reality of the use of the sums received in the 1979 to 1982 fiscal years and therefore in accordance with the Act.

4.03.10 Counsel for the appellant admits that in reassessing 1979 to 1982 and subtracting the amounts in dispute, the respondent was offering a more ideal solution but maintains that at the same time "that was the trap”. The appellant could no longer object to the 1983 assessment, in other words, if I understand learned counsel correctly, to the assessment which would have been issued for 1983, disallowing the $50,000 deduction on the basis of the position "adopted as accountant and as taxpayer" (para. 4.03.7).

In any event, assuming the appellant had objected and appealed the 1983 assessment disallowing the $50,000 deduction, would the final outcome have been any different? I doubt it.

The present issue would still have surfaced in 1985, when the final decision by the Quebec Court of Appeal had been handed down : is the amount taxable in 1985 or during 1979 to 1982? According to the principles invoked by the respondent above, it seems clear at first sight that the solution would have been the same. All avenues should be explored, however.

4.03.11 The issue can be seen from another aspect assuming that the facts are presented otherwise, namely that during 1979 to 1982, the RAMQ paid only $14 per medical procedure, refusing to pay the $41, and that following legal proceedings by the appellant, the Court of Appeal finally ruled in favour of the appellant, the RAMQ paying the sum owed in 1985. Would the sum received in 1985 have been taxable in the 1979 to 1982 fiscal years or in 1985? There does not seem to be any doubt that it would be taxable in 1985.

Why in 1985? Is this not precisely because it was in that year that the appellant was entitled to dispose of this amount, and not during 1979 to 1982?

It should be noted that the appellant in this appeal is not an employee computing his income on a cash basis, but a professional computing it on an accrual basis. Under the latter method, a taxpayer must include accounts receivable at the end of the year in the income for a particular year. In the present appeal, still on the assumption that the RAMQ refuses to pay the $27 per medical procedure because it disputes the validity thereof, it cannot be said that the sum of $27 would have been an account receivable, precisely because it is disputed in law. It would become receivable when the Court of Appeal made its final ruling. This sum would therefore be included in income that year because it would have become payable, even if it had not in fact been paid that year.

4.03.12 In actual fact, the sum of $27 per medical procedure was disputed only in March 1982 by the general manager of the RAMQ, who had legal authority to do so (para. 3.04, Exhibit A-1). In the meantime, during the years under appeal, the $27 had been at the appellant's disposal. By disputing the very ownership of the $27 and claiming reimbursement thereof, however, the manager raised the issue of the right to dispose thereof, as a right dependent upon the right of ownership.

Can it be added that by claiming reimbursement, the manager was also raising the entire fiscal aspect arising from the fact that the appellant had had the use thereof during 1979 to 1982?

I very much doubt it. In my view, the Quebec Court of Appeal simply recognized the appellant's ownership of the $27. The appellant had this right of ownership from the time he performed the medical procedure, in other words, during the years in question, and the Quebec Court of Appeal retroactively confirmed this right. Since it was during the years in question that he disposed of this sum, it seems to me that it is during these years that it must be included in his income.

The fact that the appellant computes his income on an accrual basis cannot, in my view, influence the inclusion in the income for 1985, even if the reimbursement of the $27 per medical procedure by the appellant for the years concerned raised again, at least temporarily, the right of ownership and the resulting right to dispose of the money.

According to the principles of civil law, retroactivity applies, and according to the principles of tax law (Income Tax Act), the apellant's right to use the sum in question during the years concerned also applies.

I am therefore obliged to uphold the respondent's reassessments.

4.03.13 Hypothetically, but still plausibly, what would have happened in the event the respondent had not issued reassessments, leaving the sums in dispute in the income for the years concerned, if the Quebec Court of Appeal had upheld the RAMQ's decision?

Should the original assessments be upheld on the basis of the actual use which the appellant had of the amounts in question during the years concerned? If the answer is yes, would it not then have been appropriate, since the appellant uses the accrual method, to grant the reserve mentioned earlier (para. 3.06 and 4.03.7)?

4.03.14 What would happen if the taxpayer were an employee whose employer, by error resulting from computer programming or otherwise, paid him let us say $100 too much per week in wages, without the taxpayer himself realizing the error, which was not detected until later, perhaps when the employee was working for another employer? Should the original assessments including the said sums in income not be upheld?

And if the question is answered in the affirmative, on what basis could the employee, who operates on a cash basis under section 8 of the Act, deduct the reimbursement required by his employer or former employer?

Would it not be necessary to apply the same strict principles as in the case of an employee acting dishonestly who defrauds his employer of sums of money in the course of his employment? The sums wrongfully taken are taxable during the years in which the employee took them and therefore had use of them, and he cannot subsequently deduct the same amounts reimbursed to his employer, or to an insurance company who reimbursed the employer, who was insured in this regard. There is no provision in section 8 of the Act that would permit such a deduction.

4.03.15 In conclusion, I would like to note that the limitation period waivers signed by the appellant merely allowed the respondent to reassess beyond four years and did not necessarily determine that the income in dispute was to be taxed in the years covered by the waiver.

5. Conclusion

The appeal is dismissed for the above reasons for judgment.

Appeal dismissed.