The Assistant Chairman:—Had section 60.1 of the Income Tax Act (as amended by tax reform) not been put into that Act, this case would never have been appealed as the claim the appellant is asserting clearly is not within the ambit of paragraph 60(b) as that section has been interpreted by the Federal Court of Appeal in the cases of Her Majesty the Queen v Morton Pascoe, [1976] 1 FC 372; [1975] CTC 656; 75 DTC 5427, and Attorney General of Canada v James C Weaver and Freda J Weaver, [1976] 1 FC 423; [1975] CTC 646; 75 DTC 5462.
The appellant and his wife entered into a separation agreement in October 1974. On order of the Supreme Court of Ontario by Master Davidson with respect to interim alimony was made in June 1975. A further order of that Court by Master McBride amending the order of Master Davidson was made in March 1976. The relevant portions of the order of June 1975 are as follows:
2. AND IT IS FURTHER ORDERED that the defendant do continue to make payments to maintain the present maintenance of the plaintiff in the amount of $75 per week during the period of adjournment.
3. AND IT IS FURTHER ORDERED that the defendant do continue to pay mortgage installments, realty taxes and utilities on the matrimonial home at the rate he has been paying in the past, during the period of adjournment.
and the relevant portion of the order of March 1976 is as follows:
2. AND IT IS FURTHER ORDERED that the order of Master Davidson, made the 3rd day of June, 1975, is varied to provide for weekly payments of $110 per week during the period of adjournment, but otherwise is to remain in full force.
The appellant claimed as a deduction, presumably pursuant to paragraph 60(b) and section 60.1 of the said Income Tax Act, all amounts he paid to his spouse as well as all amounts paid to third parties pursuant to the court orders. With respect to the claims, the respondent disallowed $4,368.75 in 1975 and $5,487.17 in 1976 as not coming within the provisions of paragraph 60(b) or section 60.1.
It should be mentioned, and counsel for the parties agreed, that the wife in 1975 and 1976 resided in the matrimonial home, which home was owned in joint tenancy by the appellant and his wife. It was also agreed that the amounts disallowed were payments on account of mortgage principal, mortgage interest, and municipal taxes on the matrimonial home as well as for utilities, eg gas, oil, water, etc, used during those years by the wife. The appellant did not reside in the matrimonial home. Of the amounts disallowed in 1975, $2,093 was the total of payments to the mortgage company, being made up of principal of $254.93, interest of $962.81, and taxes of $875.26. In 1976 the total payments was $3,780, made up of principal of $499.58, interest of $1,608.72, and taxes of $1,671.70. It should be noted that the claim for 1975 is only for 7 months (first order, June 1975) and for 1976 it is for 12 months.
Counsel for the appellant, in effect, relied on my decision in the appeal of Gordon A Bryce v MNR, [1978] CTC 3144; 78 DTC 1833. The Crown did not ac- cept that judgment and has appealed it to the Federal Court of Canada, Trial Division. I understand it finally came up for hearing in early February 1980, but no one appeared for the taxpayer and so it was adjourned. In any event, no one could tell me that that appeal had been heard.
Counsel for the Crown, while not accepting the Bryce decision, said with respect to that decision, it appears that two positions were not submitted to the Board or, if they were, it would appear that they were not considered.
The first point is to realize how the amount of any allowance in paragraph 60(b) or (c) to be deducted in computing the payer’s income in the year is allowed. It is not allowed, counsel stressed, because of the words in either paragraph (b) or (c), but because of the opening words of section 60, namely:
There may be deducted in computing a taxpayer’s income for a taxation year such of the following amounts as are applicable.
Section 60.1 he submits is not a subsection of section 60, but is a separate section by itself and section 60.1 of itself really says nothing more than that the payments contemplated therein, if made, are deemed to be paid to the spouse or former spouse. There is no statement anywhere that the payment within section 60.1 is to be deducted in computing the payer’s income for the year. Section 60.1 reads as follows:
Where, after May 6, 1974, a decree, order, judgment or written agreement described in paragraph 60(b) or (c), or any variation thereof, has been made providing for the periodic payment of an amount by the taxpayer to or for the benefit of his spouse, former spouse or children of the marriage in the custody of the spouse or former spouse, the amount or any part thereof, when paid, shall be deemed to have been paid to and received by the spouse or former spouse if the taxpayer was living apart from the spouse or former spouse at the time the payment was received and throughout the remainder of the year in which the payment was received.
In addition, the Bryce case does not indicate a consideration of the word “periodic” in section 60.1 in that the payments therein have to be at least “periodic” to be deductible and the type of payment disallowed in the appeal was of the type considered in the Weaver case by the Federal Court of Appeal. In this respect counsel referred to the dissenting reasons of Urie, J in the Weaver case. The payments therein were similar to the payments herein. The Court said they were not an allowance under paragraph 60(b) and so upheld the assessment, Urie, J stated:
However, none of the payments, with the exception of the mortgage payments, meet either the test for an allowance enunciated in the Pascoe case nor the requirement of payment on a periodic basis. The payments were not determined by the agreement to be at fixed, recurring intervals of time. Indeed, the agreement said nothihg about when the payments of such expenses must be made. None, except the mortgage payments meet the requirement of regularity of payment that is an essential characteristic of payment on a periodic basis. They were, therefore, in my view, not properly deductible in the tax year in question.
Clearly he is of the view that the mortgage payments meet the test of “regularity of payment”. He did say the others did not in that the agreement said nothing about when they were to be made. Here he was considering “periodic” with reference to allowance in paragraph 60(b). Counsel’s submission in the instant appeal was with respect to “periodic” in section 60.1.
Mr Justice Urie concluded his dissent as follows:
In the result, therefore, I would set aside the decision of the Tax Review Board and refer the matter back to the Board for determination on the basis that in addition to the deduction of $1,950 permitted by the assessment in respect of the respon dent Husband’s 1972 taxable income, there be permitted as a deduction pursuant to section 60(b) of the Income Tax Act that portion of the monthly instalments paid in respect of the mortgage in the taxation year 1972 made up of one-half of the principal portion of each such payment, together with the interest and tax portion thereof.
With respect to counsel’s first submission, I am of the view that, while section 60.1 does not contain the opening clause as does section 60, it (section 60.1) is so related to paragraph 60(b) and paragraph 60(c) that that section, if the payment or payments meet the qualification of that section, permits the deduction to the payer of those amounts.
I am of the view that section 60.1 was enacted to permit at least some of the types of payments the appellant made in this instant appeal which were for the benefit of his spouse or former spouse. Counsel suggested the section intended to clearly state that, if part of the “allowance” in paragraph 60(b) or paragraph 60(c) were paid by the husband or former husband to a creditor of the wife or former wife at the direction of the wife or former wife, it was still payment to the wife or former wife. With respect, I cannot agree. It appears to me that the part of the allowance, which counsel suggested was brought into income by section 60.1 in the above situation, was already required to be treated as income of the wife or former wife by subsection 56(2) of the said Act. This section reads as follows:
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 or as a benefit that the taxpayer desired to have conferred on the other person 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.
Concluding as I do that section 60.1 is to permit a deduction of “benefits” as well as an “allowance”, I think that the word “periodic” should be interpreted accordingly. The various utility bills, when submitted to the occupant of the home, had a due date. Whether the appropriate meter is read and billed every month, every two months or every three months, I believe “regularity of payment” is expected and demanded by the supplier. Consequently, I find the amount paid for utilities to be within the ambit of section 60.1 and so deductible. With respect to payments for interest, principal and taxes, since the appellant’s wife was occupying the matrimonial home, counsel for the appellant submitted that the total of those three amounts should be a deduction to the appellant. As Urie, J stated in the Weaver case, only one-half of the principal should be deductible but all the taxes and interest would be deductible. I make the same finding in this appeal.
The result is the appeal will be allowed and the assessments remitted to the respondent for variation to increase the allowance in 1975 by $4,241.29 and in 1976 by $5,237.38.
Appeal allowed.