Date: 19980609
Docket: 98-47-IT-I
BETWEEN:
CHRISTIAN ROUX,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Guy Tremblay, J.T.C.C.
Point at issue
[1] According to the Notice of Appeal and the Reply to the Notice of Appeal, the question is whether the appellant was correct, in calculating his income for the 1996 taxation year, to claim a sum of $6,089 paid to Denise Brosseau for the benefit of three minor children.
[2] The respondent disallowed the deduction because the written agreement to which effect was given at the time of the court proceeding specified that the money paid to Denise Brosseau by the appellant was not deductible by him or taxable in the hands of Denise Brosseau. The appellant argued that these were payments for the benefit of his three minor children.
[3] The respondent maintained that there was no agreement on this matter. For the amounts to be deductible there had to be a written agreement.
Burden of proof
[4] The appellant has the burden of showing that the respondent's assessment is incorrect. This burden of proof derives from a number of judicial decisions, including that of the Supreme Court of Canada in Johnston v. Minister of National Revenue.[1]
[5] In Johnston, the Supreme Court held that the facts assumed by the respondent in support of assessments or reassessments are presumed to be true until the contrary is shown. The facts assumed by the respondent in the instant case are set out in subparagraphs (a) to (g) of paragraph 8 of the Reply to the Notice of Appeal. Paragraph 8 reads as follows:
[TRANSLATION]
8. In arriving at the reassessment dated July 28, 1997 the Minister took into account inter alia the following facts:
(a) the appellant married Denise Brosseau on August 8, 1987 at Saint-Lambert, province of Quebec; [admitted]
(b) three minor children were born of the union of the appellant and Denise Brosseau:
(i) Geneviève, born on March 24, 1990;
(ii) Alexandra, born on March 24, 1990;
(iii) Charles-Olivier, born on March 22, 1993; [admitted]
(c) the appellant and Denise Brosseau ceased living together on December 28, 1995; [admitted]
(d) in accordance with an agreement on interim and corollary relief dated September 25, 1996, the parties agreed inter alia on the following measures:
(i) Denise Brosseau obtained custody of the three minor children; [admitted]
(ii) the appellant undertook to pay Denise Brosseau $11,220 a year as a financial contribution, payable in 24 equal and consecutive instalments of $467.50 on the fifteenth and thirtieth day of each month; [admitted]
(iii) the financial contribution would be payable as of September 30, 1996 and, in accordance with the wishes of the parties, the amounts paid by the appellant would not be deductible by him or taxable in the hands of Denise Brosseau; [admitted]
(e) according to the proofs of payment submitted, a total of $6,089 was paid to Denise Brosseau by the appellant for the benefit of the three minor children during the period between January 7 and September 23, 1996; [admitted]
(f) Mr. Justice Gilles Mercure of the Superior Court granted a divorce decree to the appellant and Denise Brosseau on February 26, 1997, and in it effect was given to the agreement on interim and corollary relief dated September 25, 1996; [admitted] and
(g) the payments made to Denise Brosseau by the appellant for the benefit of the minor children in the period between January 7 and September 23, 1996 are not deductible as alimony or other allowance payable on a periodic basis because the agreement between the parties signed on September 25, 1996 did not provide for this. [denied]
Evidence of facts
[6] Pursuant to the foregoing admissions the appellant filed, as Exhibit A-1, 20 cheques made out to Denise Brosseau between January 7 and May 24, 1996 for a total of $6,089:
1 - the first cheque, dated January 7, 1996, is for $50, without further notation;
2 – one dated January 14, 1996 is for $839, with the notation [TRANSLATION] "support ($225) for children and household fittings ($614)";
3 – one dated January 21, 1996 is for $300, with the notation [TRANSLATION] "support ($225) + electricity (exception)".
The other six cheques dated January 28 to March 2, 1996 are all for $150, with the notation [TRANSLATION] "support - children" or [TRANSLATION] "child support". The other 11 cheques dated March 10 to May 24, 1996 are also all for $150, but bear no notation regarding support.
[7] Denise Brosseau's signature appears on the back of the cheques. In addition, [TRANSLATION] "without prejudice" can be seen on the third cheque.
[8] The appellant admitted that he did not have a written agreement within the meaning of ss. 56(1)(b) and 60.1(3) of the Income Tax Act ("the Act"), which read as follows:
56. (1)(b) Alimony. — any amount received 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 the recipient was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, the spouse or former spouse required to make the payment at the time the payment was received and throughout the remainder of the year . . . .
. . .
60.1 (3) Prior payments. For the purposes of this section and section 60, where a decree, order or judgment of a competent tribunal or a written agreement made at any time in a taxation year provides that an amount paid before that time and in the year or the immediately preceding taxation year is to be considered as having been paid and received pursuant thereto, the following rules apply:
(a) the amount shall be deemed to have been paid pursuant thereto; and
(b) the person who made the payment shall be deemed to have been separated pursuant to a divorce, judicial separation or written separation agreement from his spouse or former spouse at the time the payment was made and throughout the remainder of the year.
[9] The appellant submitted that he was represented by counsel in the divorce proceedings in the Superior Court of Quebec on February 26, 1997 and that his counsel promised him that the amounts paid previously would be deductible but did not act accordingly.
[10] The appellant referred to two judgments of the Quebec Court of Appeal: Langis Bilodeau v. Sous-ministre du Revenu du Québec, a judgment rendered in June 1985, [1985] R.D.F.Q. 209-217, and Sous-ministre du Revenu du Québec v. Louise Letarte, a judgment rendered on June 9, 1997, J.E. 97-1323, D.F.Q.E. 97F-79.
[11] In Letarte, the question was whether the total of $8,660 claimed by the taxpayer for services rendered by one Ms. Caron was paid for child care expenses. Revenu Québec allowed $4,000 but disallowed the balance because Ms. Caron refused to issue a receipt for anything more. In addition to child care she provided housekeeping services. Revenu Québec told her she should not issue a receipt for the housekeeping work.
The evidence at trial was that the household work was done at the same time as she sat the children:
[TRANSLATION]
In the Court of Québec the Department relied on the requirement that a receipt be produced in accordance with s. 353 of the Taxation Act ("the Act"), from which the following is taken:
S. 353. An individual may deduct, in computing his income for a taxation year, the aggregate of each of amount paid in the year as child care expenses regarding any eligible child of the individual for the year, if the amount is paid either
(a) . . .
(b) . . . .
In no case may an individual deduct any amount under the first paragraph unless proof of payment of the amount is given by filing with the Minister one or several receipts issued by the payee, including, where the payee is an individual, the social insurance number of the latter individual. (appellant's factum, pp. 6-7)
. . . Noting that the proof of payment was made other than by means of receipts, he observed that in the instant case, and for the same taxation year, the Department had accepted an endorsed cheque in place of a receipt as proof of payment. This alternative form of evidence was expressly admitted twice in the Minister's Defence:
13. In the assessment of June 15, 1990 the respondent assumed that:
(a) . . .
(b) the respondent allowed an additional deduction of $206 since the proof of payment by cheque with an endorsement amounted to the filing of receipts; and
(c) the respondent disallowed the additional deduction of $4,660 as there was no proof in the form of receipts or endorsed cheques. (appellant's factum, pp. 94-95)
The judge added the following:
It should be added that, at the close of the hearing, the Court asked Ms. Caron whether in the circumstances she was then prepared to issue the applicant a receipt for $4,660, simply acknowledging that she had received this amount without characterizing it: Ms. Caron said she was. No one was in any hurry to request it, and in any case this does not change anything in our decision.
What is at issue here is the scope of s. 353. The point at issue is stated as follows in the appellant's factum: "The question is whether, under the Taxation Act (R.S.Q., c. I-3), the respondent is entitled to deduct the money paid to Carmelle Pelletier Caron for which no receipt was issued as child care expenses for the 1988 taxation year". (appellant's factum, p. 4)
According to the appellant [Revenu Québec], the requirement of a receipt is clear and no substitution is possible. It fully recognized the validity of this Court's judgment in Langis Bilodeau v. Sous-ministre du Revenu du Québec, but submitted that despite that case a receipt is required and nothing else will do, as the legislature by s. 353 has provided a simple means of verification in the case of child care expenses, the only case apart from certain construction work where this type of receipt is required.
I respect the appellant's point of view, but I do not share it.
. . .
The rules in Bilodeau are still valid and support the dismissal of this appeal. In that case Bilodeau, a pharmacist, had not kept the record of prescriptions and renewals as required by the applicable Act and regulations. In court, appealing from an objection which had been dismissed, he submitted expert accounting evidence as well as his own testimony and that of his employees. A majority of this Court found that the evidence was such as to rebut the presumption that the assessment was valid and that it was persuasive. L'Heureux-Dubé J.A., as she then was, dissenting because the evidence submitted did not persuade her, nonetheless considered that in the absence of proper records the taxpayer did not lose his right to present a valid defence to the assessment. I also refer to the comments of Nichols and Vallerand JJ.A. on the possibility of presenting evidence where there is no documentation consistent with the legal or regulatory requirements.
The Court dismissed Revenu Québec's appeal with costs.
[12] In this Court's opinion, the problem in the instant case is different. Section 56(1)(b), supra, has a counterpart in the Quebec Taxation Act, namely s. 312, which reads as follows:
312. The taxpayer must also include:
(a) an amount received under a decree, order or judgment of a competent tribunal or under a written agreement, as alimony or other allowance payable on a periodic basis for the maintenance of the recipient thereof, a child of the recipient or both the recipient and child, if the recipient, because of the breakdown of the recipient's marriage occurring before 1 January 1993, was separated pursuant to a divorce, judicial separation or written separation agreement and was living apart from his spouse or former spouse who was required to make the payment at the time the payment was received and throughout the remainder of the year . . . .
The same is true of s. 60.1(3), the counterpart of which is s. 336.4. It reads as follows:
336.4 For the purposes of this chapter, where a decree, order or judgment of a competent tribunal or a written agreement made at any time in a taxation year provides that an amount paid before that time and in the year or the preceding taxation year is to be considered as having been paid and received thereunder,
(a) the amount is deemed to have been paid thereunder; and
(b) the person who made the payment is deemed to have been 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.
[13] In both statutes a decree, order or judgment of a competent tribunal or a written agreement is necessary for support payments to be deducted.
[14] Sections 60.1(3) and 336.4 were added by the legislatures so that payments made previously will be deductible, although provided at all times that there is a decree, order, judgment or written agreement to that effect. This is a condition sine qua non.
Conclusion
[15] The appeal is dismissed.
Signed at Québec, Quebec, June 9, 1998.
"Guy Tremblay"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 19th day of October 1998.
Stephen Balogh, revisor