Words and Phrases - "provision"

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Fèdèration des Caisses Populaires Desjardins, 2000 DTC 1585 (TCC), rev'd on second (statutory contribution) issue 2002 DTC 7413 (FCA)

The employees of the taxpayer earned vacation leave during a reference period running from May 1 to April 30 each year. When they took their vacation leave in the following twelve-month period, they would receive generally 2% of all their earnings during the reference period for each week of leave taken.

Before going on to find that the taxpayer was able to deduct, in each calendar taxation year, the vacation leave that had accumulated by employees to December 31 (estimated as 8% of the current year's payroll) on the basis that the accrued vacation pay represented a "real legal liability that exists during the reference year but will be paid in a future year", Lamarre TCJ. stated (at p. 1595):

"As regards the meaning to be given to the word 'reserve' as used in the English version of paragraph 18(1)(e), in my view it cannot have any meaning other than the one given to the word 'provision' in French terminology." Lamarre TCJ. went on to find that various statutory contributions could not be deducted until paid because the "obligation to make those employer contributions does not arise until the vacation pay is actually paid" (p. 1596) and noted that where only a "suspensive condition" exists there is "not yet any actual relationship between the future creditor and the future debtor". Such a relationship existed for the accrued vacation pay, but not the employer statutory contributions.

Words and Phrases
provision reserve