Grant C Brown v. Minister of National Revenue, [1979] CTC 2190, 79 DTC 201

M J Bonner:—These are appeals from assessments of income tax for the appellant’s 1973, 1974, 1975 and 1976 taxation years. The appellant is the son of the late Ethel Jane Brown whose will provided that:

All the rest and residue of my estate I direct my Trustee to invest and keep invested . . . and to receive the income therefrom and the income from so much of my estate as shall for the time being remain unsold and unconverted, and to pay the said income to my son Grant Cullen Brown during his lifetime . ..

The estate did not, in its returns of income for the taxation years 1973 to 1976 inclusive, claim any deduction in respect of amounts payable to the appellant pursuant to that provision. It had the right to claim such deductions pursuant to subsection 104(6) of the Income Tax Act, which reads as follows:

104.(6) For the purposes of this Part, there may be deducted in computing the income of a trust for a taxation year such part of the amount that would, but for this subsection and subsection (12), be its income for the year as was payable in the year to a beneficiary or was included in computing the income of a beneficiary for the year by virtue of subsection 105(2).

The appellant did not include, in computing his income for the taxation years in question, the amounts so payable to him. The respondent assessed tax on the basis that their inclusion was required by subsection 104(13), which reads as follows:

104.(13) Such part of the amount that would be the income of a trust for a taxation year if no deduction were made under subsection (6) or (12) or under regulations made under paragraph 20(1)(a) as was payable in the year to a beneficiary shall be included in computing the income of the person to whom it so became payable whether or not it was paid to him in that year and shall not be included in computing his income tor a subsequent year in which it was paid.

Thus, the issue in these appeals is whether the appellant is correct in contending, in effect, that where no deduction is claimed by the estate or trust under the provisions of subsection 104(6) of an amount payable in the year to a beneficiary, the provisions of subsection 104(13) do not require the inclusion of such amount in the computation of the income of the beneficiary for that year.

One further fact should be noted. Although the trust, in reporting its income, did not seek any deduction in respect of amounts payable to the appellant, the respondent, in assessing the trust, excluded the amounts payable to the appellant in the computation of the income of the trust. The trust objected and filed waivers, but was itself unable to appeal because, as a consequence of the deduction in effect thrust by the respondent upon the trust, the respondent notified the trust that no tax was payable by it for any of the years in question.

Counsel for the appellant argued that the purpose of subsection 104(13) is to quantify the amount taxable in the hands of the beneficiary. He asserted that the scheme of the legislation is to tax the income in the hands either of the beneficiary or of the trust, and that to tax the amounts in question in the hands of the appellant in circumstances where the trust had not taken a subsection 104(6) deduction would be double taxation. In short, counsel argued that there existed a right in the trust to elect that it bear the tax on the amount in question by refraining from claiming the subsection 104(6) deduction and that the consequence of such election was the exclusion, from the tax base of the beneficiary, of amounts which would otherwise be included pursuant to subsection 104(13).

I cannot accept the argument. Subsection 104(13) does not appear to me to be in any way unclear. It does not follow from the words “Such part of the amount that would be the income of a trust for a taxation year if no deduction were made under subsection (6) ... as was payable in the year to a beneficiary shall be included in computing the income of the person to whom it so became payable . . that the inclusion thereby required is required only when the trust has refrained from making the deduction permitted by subsection 104(6). The words of subsection 104(13), which precede the words “shall be included”, do not look to the contingency suggested.

Counsel for the appellant referred in argument to the history of the legislative provisions dealing with trusts and to certain rules of interpretation. Such aids to interpretation do not assist in this case, either in the manner suggested or at all. Generally speaking, aids to interpretation come into play when the legislature has failed in the words of the statute to make its intention clear. I should add that in this case no question of double taxation need arise. The deduction provided for in subsection 104(6) has been made. I can see no basis on which I can allow these appeals and they must therefore be dismissed.

Appeals dismissed.