M
J
Bonner:—This
is
an
appeal
from
an
assessment
of
tax
for
the
appellant’s
1975
taxation
year.
The
respondent,
on
assessment,
disallowed
as
a
deduction
in
computing
income
the
sum
of
$2,500
claimed
by
the
appellant
under
subsection
146(5.1)
of
the
Income
Tax
Act
in
respect
of
an
amount
paid
by
the
appellant
into
a
registered
retirement
savings
plan
under
which
the
appellant’s
spouse
was
the
annuitant.
The
appellant’s
evidence
followed
a
written
outline
and
it
was
that
he
took
out
the
registered
retirement
savings
plan
in
February
of
1976
with
every
intention
of
cancelling
it
in
March
of
1976.
He
borrowed
the
money
from
the
Royal
Bank
of
Canada
for
that
purpose,
paying
one
month’s
interest
on
the
loan.
The
evidence
was
further
that
the
Loans
Officer
was
well
aware
of
what
the
appellant
was
doing
and
that
the
Bank
was
encouraging
its
customers
to
take
advantage
of
a
loophole
in
the
tax
laws
which
allowed
it.
The
Bank
made
money
on
the
interest
for
the
loan
with
no
risk
because
the
money
never
left
its
control.
I
gather
the
Loans
Officer
pointed
out
that
many
people
were
doing
it.
The
appellant
said
that
he
did
not
cancel,
nor
did
his
wife,
on
the
day
in
February
when
the
registered
retirement
savings
plan
was
taken
out
as
the
Minister
found,
but
rather
he
remembers
driving
his
wife
from
Georgetown,
where
the
couple
lives,
in
March
to
sign
the
cancellation
form.
They
were
anxious
to
ensure
that
they
would
pay
only
one
month’s
interest.
It
may
be
that
the
Loans
Officer
went
ahead
with
the
cancellation
papers
on
the
day
that
the
registered
retirement
savings
plan
was
taken
out
for
reasons
unknown
to
the
appellant,
the
Loans
Officer
knowing
that
the
appellant
was
going
to
cancel
anyway.
In
my
view
nothing
turns
on
the
question
whether
the
cancellation
papers
were,
as
indicated
by
Exhibit
R-3,
signed
in
February
of
1976
or,
as
alleged
by
the
appellant,
signed
in
March
of
1976.
I
am
quite
prepared
to
accept
the
appellant’s
evidence
that
the
signing
of
the
cancellation
papers
took
place
in
March.
The
plan
in
question
was
the
Roy
Fund
Registered
Retirement
Savings
Plan.
The
appellant
admitted
that
his
purpose
in
taking
out
the
spousal
plan
was—and
I
am
quoting
his
words—..
to
reduce
my
taxable
income”.
The
appellant
argued
that
his
action
served
to
highlight
that
he,
as
a
Canadian
citizen,
did
what
he
felt
was
his
legal
and
moral
right
to
do,
that
is,
to
use
every
legal
avenue
available
to
him
to
reduce
his
personal
tax
payable,
and
that
his
understanding
of
the
law
is
not
only
that
it
was
his
right
to
do
as
he
did,
but
that
as
a
Canadian
citizen
he
was
encouraged
by
the
Government
to
take
complete
advantage
of
laws
governing
tax.
The
respondent
argued
that
the
payment
made
by
the
appellant
was
not,
by
reason
of
the
appellant’s
admitted
purpose,
a
premium
within
the
meaning
of
paragraph
146(1
)(f)
of
the
Income
Tax
Act.
The
short
answer
to
this
contention
is
that
subsection
146(5.1)
permits
deductions
within
stipulated
limits
of—and
I
am
quoting—“.
.
.
the
amount
paid
by
the
taxpayer
.
.
to
or
under
the
spousal
plan.
This
subsection
does
not,
in
contrast
with
subsection
146(5),
tie
deductions
to
amounts,
..
each
of
which
is
the
amount
of
any
premium
paid
by
the
taxpayer”.
Paragraph
146(1)(j)
of
the
Act,
so
far
as
it
is
relevant
here,
reads:
In
this
section,
.
..
(j)
“retirement
savings
plan”
means
.
.
.
(ii)
an
arrangement
under
which
payment
is
made
by
an
individual
(A)
.
.
.
to
a
corporation
.
.
.
of
an
amount
as
a
contribution
.
.
.
to
be
used
.
.
.
by
that
corporation
.
.
.
for
the
purpose
of
providing
an
annuity
The
purpose
which
is
relevant
in
this
definition
section
is
the
purpose
of
the
corporation
as
it
relates
to
the
use
of
the
funds.
The
purpose
of
this
appellant
cannot
therefore
lead
to
the
conclusion
that
the
contract
in
question
here
was
not
a
registered
retirement
savings
plan
within
the
meaning
of
paragraph
146(1)(j).
The
respondent
raised
a
further
argument,
however,
founded
on
subsection
245(1)
of
the
Act.
It
will
be
observed
that
subsection
146(5.1),
on
which
the
appellant
founds
his
claim,
provides
for
a
deduction
in
computing
income.
In
one
sense
it
might
be
said
that
any
deduction
in
respect
of
a
contribution
to
a
registered
retirement
savings
plan
would
unduly
or
artificially
reduce
income.
The
deductions
allowed
by
section
146
have
nothing
to
do
with
the
process
of
earning
the
income
from
which
they
are
allowed
to
be
made.
My
initial
reaction
was
that
where,
as
here,
the
strict
terms
of
section
146
are
met,
the
deduction
sought
could
not
be
regarded
as
one
which
would
artificially
reduce
income
because
Parliament
could
not
have
intended
to
take
away,
by
subsection
245(1),
that
which
it
apparently
specifically
permitted
by
section
146.
Subsection
245(1)
of
the
Income
Tax
Act
opens
with
the
words,
“In
computing
income
for
the
purposes
of
this
Act
.
.
Those
purposes
include
the
making
of
deductions
falling
within
the
scheme
of
section
146.
That
scheme,
in
broad
terms,
looks
to
the
deduction
of
amounts
paid
with
a
view
to
the
making
by
the
taxpayer
of
provision
for
future
income
for
himself
and
for
his
spouse.
The
subject
matter
with
which
section
146
deals
is
registered
retirement
savings
plans.
The
operation
in
which
the
appellant
was
engaged
involves
a
perversion
of
the
scheme
of
the
section.
On
that
basis
I
regard
the
deduction
sought
as
falling
within
the
ambit
of
subsection
245(1),
and
the
deduction
is
therefore
prohibited.
The
appeal
must
therefore
be
dismissed.
Appeal
dismissed.
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