Helene Wood v. Minister of National Revenue, [1984] CTC 2117

Taylor, TCJ:—This is an appeal heard in Montreal (Québec) on October 13, 1983, against an income tax assessment for the year 1980 in which the Minister of National Revenue reduced the amount allowable in connection with an RRSP contribution from $899 to $860, On the grounds that the term “earned income” in subsection 146(5) of the Income Tax Act, SC 1970-71-72, c 63, as amended, is to be calculated after deduction from gross income of any amounts allowable for either “employment expense” (section 8.1) and unemployment insurance premium (subsection 8(1)(1.1)). The documentation filed with the appeal was largely in the English language, but the hearing itself was largely conducted in the French language. Because the point at issue is so unique and the objection to the assessment so clearly described by the appellant in the notice of appeal, I am writing this in the English language, but a copy of the judgment is available in the French language. i would quote as follows from the notice of appeal:

ADDING AS GROUNDS OF APPEAL THAT

5. The taxpayer-APPELLANT now appeals to the Board from the assessment on the ground of error in Law by the Minister in the interpretation of the Income Tax Act, and related statutes mentioned below, more particularly in

(a) misreading section 8(1) of the Act “. . . there may be deducted . . .”, as if it said “shall” instead of “may”,

(b) overlooking section 28 of the Interpretation Act (1970 RSC 1-23) to the effect that

“may” is to be construed as permissive

‘‘shall” is to be construed as imperative,

(c) imposing his erroneous interpretation on his Department by issuing Interpretation Bulletins IT-124R3 and IT-124R4, as well as Form T2097 (especially Area VI thereof),

(d) contradicting his own interpretation of the same words “salary or wages” in respect to the employer’s contribution under S 147(8) of “20% of the salary or wages” as exemplified in his Interpretation Bulletin IT-363 (paragraph 3) which expressly states that “Section 8 deductions are ignored for purposes of this calculation”,

(e) contradicting his own interpretation of the same words in respect to employer’s deductions or withholding at the source under s 153(l)(a) from “salary or wages”, as exemplified in Regulation 100 and tables of deductions, which are always based on (gross) “salary or wages”, and

(f) failing to consider the difference in the latest dates relevant to the deductions, namely “60 days after the end of the year” in s. 146(5) in respect to the 20% deduction and “on or before April 30, in the next year” in S 150( l)(d) in respect to the Section 8 deductions.

In the instant appeal, the taxpayer had total income from “salary and wages” of $4,495 and calculated the maximum RRSP contribution at 20 per cent of that amount to be $899. The Minister calculated the maximum contribution to be 20 per cent of $4,300 ($4,495 - $135, employment expense, and $60, unemployment insurance premium).

Dealing with points (a), (b) and (c) above raised by the appellant, I would agree that the term “may” is permissive, obviously, but the fact that the deduction may be taken by a taxpayer in filing an income tax return, and thereby arriving at a lesser amount of “taxable income”, has no bearing on the issue before the Court. If indeed a taxpayer for whatever reason decided not to deduct the amounts in question, that would have no effect on the amount which must be calculated as “earned income”. The only effect, and it would be adverse to the taxpayer, would be that his calculated “taxable income” would be higher than it otherwise might have been.

With regard to items (d) and (e) above, there might be read into other Interpretation Bulletins or other sections of the Act, certain differences of meaning, and to that I can only conclude that for its own reasons Parliament did not include in subsection 146(5) of the Act (which is that at issue here) the same phrase “Section 8 deductions are ignored for purposes of this calculation”. That cannot affect the decision of this Court on the meaning of “earned income” for the purposes of subsection 146(5) of the Act.

With regard to point (f) above, the argument was that a taxpayer probably would not know the correct amount (as determined by the Minister) until April 30, whereas the contribution to an RRSP must be made by about February 28 of each year. That contention is not supportable. Filing the return, and calculating the maximum amount upon which a contribution can be made are entirely separate. There are other provisions in the Act which permit refunds of over-contributions where applicable.

Ultimately, therefore the point at issue is the definition of “earned income” and that is to be found in paragraph 146(l)(c) of the Act. Only the first few words are required to resolve the issue:

146. (l)(c) “earned income” means the aggregate of

(i) salary or wages, . . .

I find nothing therein upon which to base a conclusion that “salary or wages” should be represented by anything other than the gross amount.

The appeal is dismissed.

Appeal dismissed.