[OFFICIAL ENGLISH TRANSLATION]
2000-431(IT)I
BETWEEN:
JOSEPH LABONTÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard by telephone conference on July 18, 2001,
and written submissions received on August 21, 2001, at Ottawa, Canada, by
the Honourable Judge Louise Lamarre Proulx
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Stéphanie Côté
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1998 taxation year is dismissed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 21st day of November 2001.
|
"Louise Lamarre Proulx" |
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Date: 20011121
Dockets: 2000-431(IT)I
BETWEEN:
JOSEPH LABONTÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
LamarreProulx, J.T.C.C.
[1] This is an appeal under the informal procedure respecting the 1998 taxation year.
[2] The issue is whether an amount of $34,804.74, received from the appellant's former employer in compensation for a dismissal not made for good and sufficient cause, should be included in the appellant's income.
[3] The facts on which the Minister of National Revenue (the "Minister") relied in making his reassessment are set out in paragraph 5 of the Reply to the Notice of Appeal (the "Reply") as follows:
[TRANSLATION]
(a) the appellant filed his income tax and benefit return (T1) for the 1998 taxation year within the time prescribed by the Income Tax Act (hereinafter the "Act");
(b) for the 1998 taxation year, the appellant reported $34,804.74 in employment income, in accordance with the T4 issued by his former employer, Ornements St-Michel Inc., (hereinafter "the employer"), which he attached to his income tax and benefit return, T1, for the year at issue;
(c) according to the information on the T4, an amount of $34,804.74 is reported as employment income in box 14 and an amount of $5,220.71 is reported as tax withheld in box 22;
(d) the appellant was born on November 25, 1921, and because of his age (77 in 1998), he could not contribute to a registered retirement savings plan, as mentioned;
(e) the appellant incurred legal expenses of $8,386 to collect an amount of $34,804.74, owed to him by his former employer;
[4] According to the Notice of Appeal, the amount paid was not compensation for hours of work but an amount that was paid to put an end to proceedings against the employer. It was an amount paid as compensation fordamages.
[5] Following the hearing, the appellant forwarded to this Court the decision rendered by the labour commissioner, Andrée St-Georges, in respect of the appellant's complaint filed pursuant to section 124 of the Act respecting Labour Standards. The complaint alleged that the appellant's employer, Ornements St-Michel Inc., had not dismissed the employee for good and sufficient cause on October 11, 1996. The commissioner concluded the reasons for decision with these words:
[TRANSLATION]
. . .
His [the employer's] threshold of tolerance may have been reached, given what he had put up with for years. Nonetheless, he should have warned the complainant as problems arose or opted for an initial disciplinary measure that was less severe than dismissal on October 11, 1996.
For this reason alone, I must allow Mr. Labonté's complaint.
This being the case, to what compensation is he entitled? Reinstatement is impossible and he is claiming two years' wages.
Considering his age and therefore his occupational life expectancy, considering as well his contributory fault in the sense that he is not altogether blameless, and considering moreover his 20 years' service, I am of the opinion that compensation equivalent to one year's wages is good and sufficient, especially since Mr. Labonté has already been given eight weeks' notice.
No evidence was presented regarding the damages that Mr. Labonté may otherwise have suffered. I therefore cannot award any. As far as being reimbursed for his legal expenses, I do not think that this is warranted since, in my opinion, the respondent did not act so as to unduly prolong the proceedings. It also does not appear to me that in dismissing the complainant, the employer demonstrated bad faith.
. . .
ORDERS ORNEMENTS ST-MICHEL INC. to pay JOSEPH LABONTÉ an amount equivalent to one year's wages plus interest accrued from the date the complaint was filed;
[6] In her written submissions, counsel for the respondent argued as follows:
[TRANSLATION]
The law
A reading of the judgment of the Commission des normes du travail that was submitted by the appellant indicates that the amount of $34,804 represents compensation for wrongful dismissal. He was in fact laid off by his former employer, Ornements St-Michel Inc., on October 11, 1996. Quebec's civil law recognizes a worker's right to be given sufficient notice in the event of a termination. Since the appellant did not receive this, the Commission awarded him the equivalent of one year's wages in compensation, plus accrued interest from the date on which the complaint was filed with the Commission. This is the source of the T4 issued by the employer for $34,804.
This amount, from a tax point of view, is a retiring allowance, because it represents an amount received by a taxpayer in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal (s. 248(1) ITA). This retiring allowance is taxable (s. 56(1)(a) ITA). The legal expenses incurred to establish a right to this are deductible (s. 60(o.1) ITA). The Minister allowed the deduction on the basis of the document provided by the appellant, which comes from the firm of Bastien Champagne.
With respect to the right to contribute to a Registered Retirement Savings Plan (RRSP), we submit that, because he was 77 in 1998, the taxpayer could not contribute to an RRSP. A retirement savings plan cannot be registered when it provides, inter alia, for maturity after the end of the year in which the annuitant attains 69 years of age (s. 146(2)(b.4) ITA), which would obviously be the case here.
Conclusion
[7] Let us begin with the issue of contributions to a registered retirement savings plan (RRSP). Section146(2) of the Income Tax Act(the "Act") reads as follows:
(2) Acceptance of plan for registration. The Minister shall not accept for registration for the purposes of this Act any retirement savings plan unless, in the Minister's opinion, it complies with the following conditions:
. . .
(b.4) the plan does not provide for maturity after the end of the year in which the annuitant attains 69 years of age;
. . .
[8] An RRSP must mature no later than the end of the year in which the annuitant attains 69 years of age. No premium may be paid after maturity. As stated by counsel for the respondent, the 77-year-old appellant could not contribute to an RRSP since, under the Act, there is no RRSP for which he would be eligible.
[9] With regard to the main point of this case, that is, whether or not an amount received in compensation for a dismissal without good and sufficient cause should be included in income, we must refer to the definition of "retiring allowance" found in subsection 248(1) of the Act:
"Retiring allowance" means an amount (other than a superannuation or pension benefit, an amount received as a consequence of the death of an employee or a benefit described in subparagraph 6(1)(a)(iv)) received
(a) on or after retirement of a taxpayer from an office or employment in recognition of the taxpayer's long service, or
(b) in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal,
by the taxpayer or, after the taxpayer's death, by a dependant or a relation of the taxpayer or by the legal representative of the taxpayer;
(Emphasis added.)
[10] The amount in question was paid and received pursuant to the decision of the Commissaire du Travail. This amount had been awarded to the appellant on the basis of his dismissal without good and sufficient cause. It is therefore an amount received as, on account or in lieu of the appellant's loss of employment and the appellant received this amount pursuant to an order or judgment of a competent tribunal. In these circumstances, I find that the amount at issue received by the appellant is a retiring allowance within the meaning of the above-quoted definition. I refer as well to the jurisprudence of this Court and the Federal Court of Appeal, which have made identical findings in similar fact situations: Clavet v. Canada, [1996] T.C.J. No. 86 (T.C.C.) (Q.L.), [1997] F.C.J. No. 212 (F.C.A.) (Q.L.); Anderson v. Canada, [1997] T.C.J. No. 1137 (Q.L.), 98 DTC 1190 (T.C.C.); Jolivet v. Canada, [2000] T.C.J. No. 48 T.C.C.) (Q.L.); Graham v. The Queen, [2001] T.C.J. No. 461 (T.C.C.) (Q.L.).
[11] Accordingly, the appeal is dismissed.
Signed at Ottawa, Canada, this 21st day of November 2001.
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"Louise Lamarre Proulx" |
J.T.C.C.