Desjardins J.A.:
1 This application for judicial review raises the issue of whether the mortgage interest charges on the respondent's old residence constitute moving expenses within the meaning of section 62 of the Income Tax Act (“the Act”).
2 In early 1990, the respondent, who was living in Montréal, accepted a job in the Outaouais region. He immediately put his residence in Montreal up for sale and, on July 1, 1990, purchased a second one in Hull. His Montréal residence was not rented and remained vacant until it was sold in March 1992, twenty-two months later.
3 During the 1991 taxation year, the respondent paid $9,321 in interest on the mortgage on his Montréal residence. The Minister refused the deduction of this amount claimed under section 62 of the Act. The Tax Court of Canada later overturned the Minister's decision.
4 The Tax Court of Canada judge concluded, first, that Parliament, in enacting section 62 of the Act, intended to encourage employment mobility and that section 62 should be construed in light of that purpose. Having then noted that the enumeration in subsection 62(3) was not exhaustive, the tax court judge found that, since paragraph 62(3)(d) allows a taxpayer who moves his or her cost of cancelling the lease, it was logical, in his opinion, to hold that the costs incurred by the taxpayer for the payment of the mortgage interest on his old residence were also included in this paragraph, as any ambiguity should be resolved in favour of the taxpayer.
5 We are all of the opinion that the tax court judge was unable to reach this conclusion.
6 Although the purpose of the provision is no doubt to encourage mobility of employment, and the enumeration in subsection 62(3) of the Act is not exhaustive, as is indicated by the use of the verb “includes” (“comprend”) in that section, since its purpose is not to cover all possible moving expenses, we do not think section 62 as a whole can be read as it was by the tax court judge.
7 What section 62 allows, within its first subsection, is a deduction by the taxpayer of the amounts
62(1) ...paid by him as or on account of moving exprenses incurred in the course of moving from his old residence to his new residence
62(1) ...payées à titre ou au titre des frais de déménagement engagés pour déménager de son ancienne résidence pour venir occuper sa nouvelle résidence....
8 According to the ordinary meaning of the words used, the provision includes those expenses incurred for physically moving, changing one's residence, and certain other expenses directly related to the actual move and resettlement, and not some amount intended to compensate for accessory damages that are unrelated to the actual move to and resettlement in the new residence.Thus, it excludes the interest expenses on the old residence that do not pertain directly to the physical move of the taxpayer and his family, but instead pertain to the bank loan he took out on his old residence.
9 In our opinion, Stubart Investments Ltd. v. R and Québec (Communauté urbaine) c. Notre-Dame de Bonsecours (Corp.) do not prompt us in any way to alter the principles laid down in Gold v. R., Storrow v. R. and Rath v. R.,the latter judgment being upheld by this Court.
10 Furthermore, contrary to the conclusion reached by the tax court judge, the costs of cancelling the lease are not comparable to the interest expenses on the old residence. The costs of cancelling the lease are a penalty imposed on a tenant for breaking the lease agreement. The amount of such a penalty is expressly provided in the lease and is a direct consequence of the change in residence imposed by the change in employment. The mortgage interest resulting from the loan on a house that the taxpayer is no longer inhabiting has more to do with his desire to keep the house until he has his price, instead of selling it.
11 The application for judicial review will be allowed, the decision of the Tax Court of Canada will be vacated, and the Minister's reassessment for the 1991 taxation year will be restored.
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