Dreilich v. R., [1999] 2 CTC 2588

Teskey T.C.J. (orally):

Proceeding with the judgement that I was reading.

There are two issues before us. The first issue is whether the assessment should fail because certain information was obtained from the R.C.M.P. improperly, and the second issue is whether the taxpayer can deduct the amount of his moving allowance.

Counsel for the respondent has argued quite eloquently the first issue. I do not take issue with his comments whatsoever.

I am more than satisfied that the information obtained by Revenue Canada from the R.C.M.P. was not obtained improperly, and in fact I think the R.C.M.P. would have been the laughing stock of all of the citizens of this country if they had not given the information to Revenue Canada. I find as a fact that the R.C.M.P. for the years ’91, ’92, ’93 and ’94 were not filling out the T4 forms as required by law which was their obligation to do and if they had, then no inquiry would have had to be made, Revenue Canada’s computer program would have shown exactly who received these allowances and they would have had all of the information.

The R.C.M.P. as employer were at fault for not completing the T4 forms properly.

Revenue Canada could have, with a great deal of expenditure of public money, gone through the 16,000 returns and arrived at the same result. Revenue Canada is part of the Government of Canada, the R.C.M.P. is part of the Government of Canada and it’s all taxpayer’s money and it would have been totally ludicrous, I have used the word again, to have required Revenue Canada to rectify the error of the R.C.M.P. to look at 16,000 returns when they realized that there appeared to be a problem which came from Regina.

When I look at the exhibits in R-1, it’s abundantly clear what happened, just as counsel for the respondent said, they asked for it and they voluntarily gave it and the privacy commissioner in tab 8 of R-l refers to it, and I quote,

In the one paragraph Revenue Canada audit of Regina District R.C.M.P. members revealed that many were simply deducting the full amount of the allowances and moving expenses. Auditors also discovered the R.C.M.P. had not properly reported the taxable allowance on members’ T4 slips. If they had, Revenue Canada could have found any discrepancies from its own computer system and not needed the R.C.M.P.’s list. Once Revenue Canada discovered the omission it asked the R.C.M.P. for the list to conduct a random sampling to determine the extent of the problem. Following a telephone conversation between the R.C.M.P. Commissioner and Revenue Canada, Deputy Minister, the R.C.M.P. agreed to turn over the necessary records to ensure that transfer allowances were being properly reported.

There is no impropriety whatsoever in what Revenue Canada did and what the Royal Canadian Mounted Police did.

On the second issue, I would state that I have all the sympathy in the world for this appellant. He found himself in a terrible position and he did probably what any reasonable person would do.

The law is quite clear, he isn’t entitled to the deduction. The money was used to renovate his house and it does not fall in the heading of “moving expenses”. The law is simply against him. The Federal Court of Appeal has, had several cases and dealt with this issue, one of which is the Morris decision.

This issue came before me in Toronto many years ago and I dismissed the appeal. The following year the same taxpayer appeared before a colleague of mine on the same issue and again, as the issue herein, he was convinced a member of our court, that his appeal should be allowed and it was allowed, and the respondent appealed that case to the Federal Court of Appeal and in very short reasons they said,

Judge Teskey in his reserve decision in writing concerning the moving allowance was correct.

Thus confirming my decision of the year previous and reversed my colleague’s decision, and unfortunately I do not have the citation. My guess would be that it was probably ’95 or ’96 and pre-dated the Morris Court of Appeal decision, but it’s the same decision.

As stated previously today, the late Mr. Justice Sopinka of the Supreme Court of Canada in the Frys case said,

Fairness and equity have nothing to do with tax law. It’s either in the statutes or it’s not.

And, this issue has been before the Federal Court of Appeal in many different ways and not just R.C.M.P. officers, and the Federal Court of Appeal has been consistent that this type of payment is taxable and this type of expense is not deductible.

If I allowed this appeal, all the taxpayers of this country would be subsidizing this appellant and the respondent would file a Notice of Appeal within 30 days and the Federal Court would reverse me so quick it would make you blink, so there is absolutely no point in me letting my heart or my sympathy for this appellant to govern my decision.

The appeal is dismissed.

Appeal dismissed.