André Desjardins v. Minister of National Revenue, [1979] CTC 2881, 79 DTC 734

Guy Tremblay [TRANSLATION]:—This case was heard at Quebec City, Quebec on September 14, 1978.

1. Point at Issue

The question is whether the appellant is correct in claiming as a deduction the $7,200 paid to his wife as alimony in 24 equal weekly instalments of $300 each. These payments were not, however, made pursuant to a written agreement.

2. Burden of Proof

The burden is on the appellant to show the respondent’s assessment is incorrect. This burden of proof derives not from a particular section of the Income Tax Act but from a number of judidcial decisions, including the judgment of the Supreme Court of Canada in P W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. Facts

3.01 The appellant, an engineer, testified that his wife left him on June 9, 1975 and that they have lived apart under a de facto separation since that time.

3.02 On July 2,1975 a written agreement was concluded at the chambers of the notary G G Garceau in Trois Rivières concerning the separation. The appellant undertook at that time, inter alia, to pay his wife the sum of $7,200 in “complete and final settlement of the benefits contemplated in the contract of marriage’’ (clause 4(a) of the notarial contract, filed as Exhibit 1-1).

3.03 In a letter dated October 21, 1977, the notary explained the change which was made at this meeting of July 2, 1975 in his office:

After certain explanations on my part, it was decided by the parties that the sum of $7,200 mentioned in clause 4(a) of the said agreement would be paid in twenty- four equal weekly instalments of $300 each as alimony. It was then verbally agreed by them before me that the written agreement giving effect to this new agreement would be prepared and signed later, and that pending this new written agreement they would sign the agreement as it stood. If it has been signed the new agreement would in law and in fact have replaced the agreement signed on July 2,1975, but inadvertently no action was taken toward the preparation and signing of a anew agreement giving effect to the agreement concluded to this effect in my office, making the said amount payable in instalments.

3.04 The payments were in fact made. A series of 24 receipts signed by the appellant’s wife were filed jointly as Exhibit A-1.

4. Act— Case Law—Comments

4.1 Act

The principal section of the new Income Tax Act involved in the case at bar is 60(b), which reads as follows:

Other deductions.

There may be deducted in computing a taxpayer’s income for a taxation year such of the following amounts as are applicable:

(b) Alimony payments.—an amount paid by the taxpayer in the year, pursuant to a decree, order of judgment of a competent tribunal or pursuant to a written agreement, as alimony or other allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the marriage, or both the recipient and children of the marriage, if he was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year.

4.2 Case Law

Counsel for the respondent cited the following cases:

1. Walter G Lumbers v MNR, [1943] CTC 281; 2 DTC 631;

2. William M O’Connor et al v MNR, [1943] CTC 255; 2 DTC 637;

3. MNR v John James Armstrong, [1956] CTC 93; 56 DTC 1044;

4. James Robert Stafford v MNR, [1971] Tax ABC 332; 71 DTC 247;

5. Charles Edmond Brown v MNR, 37 Tax ABC 86; 64 DTC 812;

6. Eddie D Hardy v MNR, [1978] CTC 3120; 78 DTC 1802;

7. James Beatty v MNR, 13 Tax ABC 285; 55 DTC 444;

8. Keith Norman Fryer v MNR, 31 Tax ABC 143; 63 DTC 176;

9. No 345 v MNR, 15 Tax ABC 236; 56 DTC 327;

10. Edward Kostiner v MNR, 32 Tax ABC 124; 63 DTC 478;

11. Roland Vaillancourt v MNR, [1978] CTC 3157; 78 DTC 1829;

12. John Reid v MNR, [1972] CTC 2661; 72 DTC 1540;

13. Ronald E Volk v MNR, [1977] CTC 2012; 77 DTC 12;

14. Her Majesty the Queen v Morton Pascoe, [1975] CTC 656; 75 DIC 5427;

15. Guy Chenail v MNR, [1968] Tax ABC 641; 68 DTC 498;

16. George William Haigh v MNR, [1971] Tax ABC 434; 71 DTC 308;

17. Julien André Pezet v MNR, [1974] CTC 2315; 74 DTC 1246;

18. Jim Wing Yuen v MNR, 14 Tax ABC 363; 56 DTC 116.

4.3 Comments

Paragraph 60(b) cited above provides, inter alia, that an agreement must be written and that the written agreement must provide for the payment of alimony on a periodic basis.

The notarial contract (Exhibit 1-1) does not meet these requirements. However, the facts established in evidence show that the payments were in fact made on a periodic basis.

Although the letter of the law was not observed, should this case not be decided by equity in accordance with the rules of interpretation of a taxation statute, and the deduction allowed?

Like the Federal Court of Canada and the Supreme Court of Canada, the Tax Review Board is bound by the strict and literal interpretation which must be given to a taxation statute. In its interpretation the Income Tax Act is not an equity statute: that is to say, the Court must follow not equity but the letter of the law.

The long list of authorities cited by counsel for the respondent is to this effect, and unfortunately the Board cannot make an exception and depart from precedent in the case at bar. Many other judgments might also be cited to the same effect.

The legislator should write the section in question so that it can be more easily applied to allow a deduction for an individual who pays. That is not the function of the Board, which unfortunately in the case at bar has no choice but to apply the strict interpretation and so dismiss the appeal.

5. Conclusion

The appeal is dismissed in accordance with the foregoing reasons for judgment.

Appeal dismissed.