Maurice Boisvert:—This is an appeal from assessments in respect of the taxation years 1967 and 1968.
The appeal was heard at Montreal, Province of Quebec on October 18, 1971 by the Tax Appeal Board as it was then constituted.
During the above-mentioned taxation years, the appellant was before the Superior Court of Quebec in an action for separation from bed and board. In a first interlocutory judgment dated January 26, 1967 there is a decree which reads as follows:
DOTH GRANT to Petitioner the right to reside during the pendancy of the suit in the common domicile at 39 Aldercrest Street in Dollard des Ormeaux, PQ.
DOTH GRANT to Petitioner the provisional custody of the minor children of the parties as per the consent of the parties, with Respondent having the right to take out his children every Sunday between 11 o’clock in the forenoon until 5 o’clock in the afternoon;
DOTH CONDEMN Respondent to pay to Petitioner as a provisional alimentary allowance for herself and the minor children of the parties a sum of $83.50 per week being $33.50 for the hypothec, taxes and upkeep of the domicile and $50.00 as “Modus Vivendi” for Petitioner and the children.
While the proceedings were still pending a second interlocutory judgment dated May 31, 1967 ordered the appellant to pay the following:
WHEREAS the Plaintiff-Petitioner alleges that by an Interlocutory Judgment of this Court she was granted the custody of the four minor children af the parties, and the Defendant-Respondent was ordered to pay her an alimentary allowance of $50.00 per week and, because of a change in circumstances, this alimentary pension is insufficient for the Plaintiff’s. requirements;
CONSIDERING the evidence adduced at the Hearing of the present Petition;
CONSIDERING that the Petition is well founded in part;
DOTH GRANT SAME;
DOTH INCREASE the provisional alimentary allowance aforesaid to $65.00 per week, as a modus vivendi for the support of the Plaintiff and the four minor children of the parties in her custody; and, in addition, Defendant Shall pay to the Plaintiff the sum of $33.50 for the hypothec, taxes and the upkeep of the domicile, making a total payment of $98.50 per week to be paid by Defendant to Plaintiff at her domicile;
Pursuant to the decree of the first judgment, the appellant paid the alimentary allowance to his wife and since he was obliged to pay the sum of $33.50 weekly for the hypothec taxes and upkeep of the domicile which was the common domicile of the spouses, with his wife’s consent, the appellant paid the said sum of $33.50 to the mortgagor. After the second judgment he continued to make the mortgage payments directly to the mortgagor.
In 1967 the appellant paid the amount of $2,915 to his wife as alimentary allowance and in 1968, he paid the sum of $3,380 for said allowance. In addition to the above amounts, the appellant paid $1,440 in 1967 and $1,616 in 1968 to discharge his obligations under the decrees. These last two amounts were not paid directly to his wife but indirectly for his wife as they were paid to the mortgagor. The respondent disallowed the last two amounts for the following reasons as alleged in the Reply to Notice of Appeal:
3. The amounts of $1,440 and $1,616 paid directly by the Appellant to the holder of the mortgage on his property and to municipal authority, has been properly disallowed, since they were not paid directly to his spouse or former spouse;
4. The amounts paid on account of the mortgage and property taxes were not paid for the Appellant’s wife maintenance, but to protect a capital asset, namely, the matrimonial residence of which the appellant was the absolute owner, and accordingly has been properly disallowed;
5. The respondent relies, inter alia, on section 11(1 )(l) of the Income Tax Act;
It has been admitted that the appellant has met all the conditions indicated in paragraph 11 (1 )(l) of the Income Tax Act then in force (RSC 1952, c 148 as amended) which reads as follows:
11. (1) Notwithstanding paragraphs (a), (b) and (h) of subsection (1) of section 12, the following amounts may be deducted in computing the income of a taxpayer for a taxation year:
(I) an amount paid by the taxpayer in the year, pursuant to a decree, order or 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;
The only reason for disallowing the deduction was because the weekly payments were not paid directly to the appellant’s wife. His wife was satisfied with the manner in which the payments were made. According to the judgment she was granted the right “to reside during the pendancy of the suit in the common domicile”. Therefore, the payments were made pursuant to a decree and in law, went where they belonged in order to assure the spouse a place of residence in the common domicile. It is to be noted that the second decree was rendered on a petition for an increase of the alimentary allowance only and had nothing to do with the payment of $33.50. The first judgment did not set a place as to where the payments had to be made. What difference does it make provided that she had the benefit of the amount of $33.50 in order to have a residence during the pendancy of the suit.
“Pursuant” means carrying out or with effect. Paid directly or not, the payments had the same effect and were made in accordance with a civil obligation and a decree and were made for the purpose intended by the decree.
There is no doubt that the appellant was bound to make the payments to the mortgagor. His wife had no legal obligation to make such payments. If they had not been made by the appellant, she would have lost the place assigned to her for her temporary residence and that of the children.
The respondent relied upon the decision of the Exchequer Court of Canada in MNR v Edward H Sproston, [1970] Ex CR 603; [1970] CTC 131; 70 DTC 6101. In that case, the minor children had no title to receive the payments which the Court directed that they be made to their mother. She was the one who was obliged to look after them for their living, their maintenance and their education. Mrs Sproston was always protesting against the way the payments were made.
In the case at bar, the wife consented to the payments being made to the mortgagor and the latter had an enforceable right against the appellant who paid “an amount pursuant to a decree” and representing an “allowance payable on a periodic basis”.
I am of the opinion that the harsh interpretation given by the respondent does not represent the legislator’s intention. Section 1139 of the Civil Code of Quebec says:
1139. By payment is meant not only the delivery of a sum of money in satisfaction of an obligation, but the performance of any thing to which the parties are respectively obliged.”
(The italics are mine.)
Section 1144 of the Civil Code says:
1144. Payment must be made to the creditor or to some one. having his authority, or authorized by a court of justice or by law to receive for him.
Who was authorized by law to receive the weekly payment of $33.50 if not the mortgagor? Being so, subsection 16(1) of the Act should be considered. Said section reads as follows:
16. (1) A payment or transfer of property made pursuant to the direction of, or with the concurrence of, a taxpayer to some other person for the benefit of the taxpayer, . . . shall be included in computing the taxpayer’s income to the extent that it would be if the payment or transfer had been made to him.”
(The italics are mine.)
Who benefited from the payments made by the appellant to the mortgage company? The appellant’s wife. It was done with her concurrence and that is in evidence. As a result of the respondent’s interpretation of paragraph 11(1)(l) the appellant was refused the deductibility of the mortgage payments which were made for the wife’s advantage. If she had been paid the weekly amounts of $33.50, she would have been obliged to make the payments to the mortgagor in order to protect her right to live, with the children, in the common domicile of the spouses. Therefore, the weekly amount of $33.50 was taxable in the hands of the recipient, Mrs Hastie.
On the whole I am of the opinion to allow the appeal and to refer the assessments to the Minister for reconsideration and reassessments.
Appeal allowed.