Judge K A Flanigan (orally: October 2, 1974):—This is an appeal by Julien André Pezet against the reassessment of the Minister of National Revenue for the 1971 taxation year. The point in issue is whether or not the appellant is entitled to a deduction under paragraph 11(1)(I) of the pre-1972 Act for payments made in each of the months of the 1971 taxation year.
The appellant and his spouse separated in October of 1970. An agreed statement of facts (Exhibit A-1) has been filed, and attached thereto is an unsigned separation agreement of February, 1971 and a subsequent agreement of September 1971 which was executed.
It is also admitted that the amount of alimony that the appellant was obligated to pay was $500 per month, being $300 for the spouse and $100 for each of the two children of the marriage. It is admitted that the payments were made from the beginning of 1971 to the end of 1971 on a periodic basis in the amounts agreed upon. The appellant has included in the executed separation agreement a provision that for the purposes of the Income Tax Act it is acknowledged by the parties that the past payments are to be in conformity with the provisions of paragraph 11(1)(l), now paragraph 60(b) of the new Act, which is not changed in substance.
The wife has recognized that she has received these payments for this purpose, and it is the thrust of the appellant’s argument, first, that the word “pursuant” in paragraph 11 (1)(l) does not necessarily mean “following” or “subsequent to” the execution of a separation agreement, but, by dictionary definition, means “in conformity with” or “in conformity to” a separation agreement signed in the taxation year.
All aspects of paragraph 11 (1)(l) have been complied with, and the Minister’s only objection to the deduction claimed is that taxpayers cannot by consent alter the provisions of the Act, and that it is well established and long established by the jurisprudence that such payments are only deductible from the date of the execution of the agreement, and that “pursuant to a written agreement” means that the spouse making the payments is entitled to the deduction only from the date of the agreement on.
lt was also argued by the respondent that this is a deducting section and, in order to take advantage of a deduction under a fiscal statute such as the Income Tax Act, the person seeking the deduction must bring himself or herself clearly within the provisions of the deducting section; and that, in so far as the payments made from January to August are concerned, the appellant fails to do so, by virtue of the fact that the agreement was not signed until September 1, 1971.
It is also argued, and it is quite true, that to allow the parties to a separation agreement to fix retroactively the date at which the deductions are to commence would open the door to the possibility of fraudulent agreements being drafted, and would place the assessors of the Minister in an unsatisfactory position. It is also true, however, that many sections of the Act leave the Minister’s representatives open to deception by the execution of agreements which are subsequently found to be shams in the classical definition of that word as accepted in income tax law and in law generally—that is, agreements penned by the parties in one sense but to be read in another, or designed to convey to the court that something is to take place which, in fact, the parties never intend shall occur. The decisions on the interpretation of documents, as to whether or not they are shams created for the purpose of reducing or avoiding the payment of tax, are legion.
Paragraph 11(1)(l) has been rigidly interpreted since it first came into being. In my view, it is only recently that archaic interpretations have ceased to be applied to the wording of the section. In this case there is evidence—in fact, there is no evidence to the contrary—that exactly what the separation agreement intended was carried out. From January 1, 1971 until the end of December 1971 the payments were made on a periodic basis pursuant to an agreement between the parties which was reduced to writing in September 1971, so there is no question whatsoever of this agreement being a sham. The agreement was drafted in precise terms and in an effort to enable the husband to take maximum advantage of paragraph 11(1)(l).
However, it has been said in many cases that it is not for the courts to make the law, but merely to interpret the law as made by Parliament. I say, with all respect to Parliament, that this section could have been given much more attention and a much more realistic wording, at the time of the revision of the Act in 1972.
Notwithstanding what I have said, I feel that I am bound by the wording of paragraph 11(1)(l), which to me clearly means “from and after the making of an order, judicial separation, or written separation agreement”. There is no discretion in this Board to apply the benefits of this deducting section to an appellant retroactively, notwithstanding the fact that he has complied completely with what was obviously verbally agreed to but was not reduced to writing until all terms of the agreement were completed.
To me that is a completely illogical approach to take in respect of a case where the facts are such as these, but I feel it would be irresponsible for me to change what I think is the obvious intent of Parliament by finding otherwise. I can only hope that the new counterpart of this section will soon be re-worded to clearly allow deductions for persons in cases where there is no sham, no fraud, and nothing but a carrying-out of responsibilities of civil and criminal law in meeting an obligation to supply the necessities of life to a wife and children, and to maintain them in the manner to which they were accustomed, so that relief for spouses in the position of this appellant will be available in the future.
It is with some degree of regret that I find I must dismiss the appeal.
Appeal dismissed.