Guy Tremblay:—This case was heard at Halifax, Nova Scotia, on June 12, 1978.
1. Point at Issue
The first point is to know whether the appellant is correct, according to the Income Tax Act, in claiming a deduction of $1,000 in the computation of his income for the 1976 taxation year, as registered retirement savings plan premiums.
The second point is to know whether an undertaking given by the Department of Supply and Services to the effect that the amount was deductible, is binding upon the respondent.
2. Burden of Proof
The burden is on the appellant to show that the respondent’s assessment is incorrect. This burden of proof derives not from one particular section of the Income Tax Act, but from a number of judicial decisions, including the judgment delivered by the Supreme Court of Canada in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.
3. The Facts
3.01 The appellant was in the Canadian Navy from April 8, 1942 to August 26, 1946.
3.02 During the 1976 taxation year, the appellant contributed $2,059.72 to his superannuation account in respect of services rendered by him in the Canadian Navy previous to the year when he was not a contributor.
3.03 The appellant contributed to his superannuation account for current services during the same taxation year.
3.04 During 1976, the appellant paid premiums in the amount of $1,000 under a registered retirement savings plan.
3.05 The appellant made the payment of $1,000 under a registered retirement savings plan mainly because of the opinion given in a letter. dated June 2, 1975 by the Superannuation Division of the Compensation Services Branch of Supply and Services Canada (Exhibit A-1). Paragraph second of this letter reads as follows:
We assume, since your annual pension contributions take up the whole $2500, that this includes current contributions as well as contributions to a Registered Retirement Pension plan with Royal Trust. You are allowed a further $2500 on “arrears of pension premiums relief” which are also tax deductible. Since your monthly installments are shown to be $158.44 on your estimate of cost, you should be well below this $2500 annually.
3.06 By an assessment dated July 6, 1977, the respondent disallowed the amount of $1,000.
3.07 Following a notice of objection dated July 20, 1977, the respondent confirmed the assessment by a notification dated October 5, 1977.
3.08 On October 27, 1977, an appeal was lodged before the Tax Review Board.
4. Law—Jurisprudence—Comments
4.1 Law
The main sections of the new Act concerned in the present case are:
8.(1 )(m) Contribution to registered pension plan—amounts contributed by the taxpayer in the year to or under a registered pension fund or plan,
(i) not exceeding in the aggregate his contribution limit for the year under this subparagraph in respect of the fund or plan, if retained by his employer from his remuneration for or under the fund or plan in respect of services rendered in the year or paid into or under the fund or plan by the taxpayer as part of his dues for the year as a member of a trade union,
(ii) not exceeding in the aggregate, the lesser of
(A) his contribution limit for the year under this subparagraph in respect of the fund or plan, paid by him in the year into or under the fund or plan in respect of services rendered by him previous to the year while he was not a contributor, and
(B) that. part of an amount paid by him in the year into or under the fund or plan in respect of services rendered by him previous to the year while he was not a contributor that is not in excess of the product obtained by multiplying the number of years previous to the year in which he rendered services while he was not a contributor by his contribution limit for the year under this subparagraph in respect of the fund or plan, and subtracting from the product so obtained the aggregate of all amounts deducted under this subparagraph in previous years,
to the extent not deductible in the immediately preceding year under paragraph 60(j), and
(iii) not exceeding in the aggregate $2,500 minus any amount deducted under subparagraph (i) or (ii) in computing his income for the year, paid by him in the year whether into or under the fund or plan or into Or under any other such fund or plan in respect of services rendered by him previous to the year while he was a contributor, to the extent not deductible in the immediately preceding year under paragraph 60(j).
60.(i) Premium or payment under registered retirement savings plan—an amount paid by the taxpayer as a premium under a registered retirement savings plan, or aS a payment to or under such a plan under which his Spouse is the annuitant, as permitted by section 146.
146.(5) Amount of premium deductible. There may be deducted in computing the income for a taxation year of a taxpayer who is an annuitant under a registered retirement savings plan or becomes, within 60 days after the end of the taxation year, an annuitant thereunder, the aggregate of all amounts each of which is the amount of any premium paid by the taxpayer under the plan during the taxation year or within 60 days after the end of the taxation year (to the extent that it was not deducted in computing his income for a previous taxation year), not exceeding however the amount, if any, by which
(a) where the taxpayer was employed in the year and as a consequence thereof was a person who is or may become entitled to benefits under a pension fund or plan that provides for payment of a pension to him payable in whole or in part out of contributions made or to be made to the fund or plan or out of or in respect of amounts credited or to be credited in lieu of such contributions by a person other than the taxpayer in respect of the taxpayer’s employment in that year, an amount that, when added to the amount, if any, deductible under paragraph 8(1)(m) in computing the income of the taxpayer for that year, does not exceed the lesser of $3,500 and 20% of his earned income for that taxation year, or
(b) in any other case, the lesser of $5,500 and 20% of his earned income for that taxation year
exceeds the amount, if any, deductible under subsection (6) in computing his income for that taxation year.
4.2 Jurisprudence
The following judgments were cited by the respondent:
1. McDowell v Proffitt, [1920] OWN 176:
2. Robertson v Minister of Pensions, [1949] 1 KB 227;
3. Bert W Woon v MNR, [1950] CTC 263; 50 DTC 871 ;
4. MNR v Inland Industries Ltd, [1972] CTC 27; 72 DTC 6013:
5. Ernest G Stickel v MNR, [1972] CTC 210; 72 DTC 6178;
6. Mark G Smerchanski v MNR, [1975] CTC 295: 74 DTC 6197;
7. The Queen v Cecil M Langille, [1977] CTC 144; 77 DTC 5086:
8. George L Bowen v MNR, [1972] CTC 2174; 72 DTC 1161.
4.3 Comments
4.3.1 Computation of figures
It is clear that the amount of $1,593.40 paid by the appellant to his Superannuation account for current services during 1976 is deductible according to subparagraph 8(1 )(m)(i) cited above.
It is also clear that the amount of $2,059.72 paid by the appellant to his superannuation account in respect of services rendered by him the previous year when he was not a contributor, is also deductible according to subparagraph 8(1 )(m)(ii) cited above. Those two amounts were in fact allowed and are not in dispute. However, those two amounts paid under registered pension plan are necessary to compute the amount of premiums allowed under a registered retirement savings plan during the 1976 taxation year and provided for in paragraph 60(i) and subsection 146(5).
A premium is deductible under a registered retirement savings plan (if the taxpayer already contributes, as in the present case, to a registered pension plan) only if the contribution to the said registered plan for the’ year (8(1)(m)(i)(ii)) (amount of $1,593.40 + 2,059.72
$3,653.12) plus, the contributions of $1,000 to the registered retirement savings plan do not exceed $3,500 12+ $1,000 $4,653.12). These conditions are provided in subparagraph 8(1 )(m)(iii).
Consequently it is clear, according to the Income Tax Act, that the amount of $1,000 paid in 1976 under a registered retirement savings plan cannot be allowed unless the Department of National Revenue is bound by a letter of the Department of Supply and Services (paragraph 3.05 of the Facts).
4.3.2 In the opinion of the Board, the Department of Supply and Services which has no administrative authority on income tax law and which is a department distinct from the Department of National Revenue, cannot bind by its actions and writings the latter department which is the only administrative authority of the Income Tax Act.
Moreover, the Supreme Court of Canada has decided in MNR v Inland Industries Limited, cited above, that the Department of National Revenue itself is not bound by its own actions and writings when it is against the law as in the present case.
. . I However, the Minister could not be bound by an approval given when the conditions prescribed by the law were not met.
said the learned Judge Pigeon.
5. Conclusion
The appeal is dismissed in accordance with the above Reasons for Judgment.
Appeal dismissed.