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Docket: 2004-237(OAS) |
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BETWEEN: |
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SAMUEL GERSTEL, |
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Appellant, |
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and |
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THE MINISTER OF HUMAN RESOURCES DEVELOPMENT,
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Respondent. |
____________________________________________________________________
Appeal heard on November 4, 2004, at Montréal, Quebec
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Before: The Honourable Justice François Angers |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Julie David |
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JUDGMENT
The appeal from the decision of the Minister of Human Resources and Development dated October 4, 2002, reducing the Appellant's Guaranteed Income Supplement under the Old Age Security Act is allowed.
Signed at Ottawa, Canada, this 31st day of January 2005.
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"François Angers" |
Angers, J.
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Citation: 2005TCC64 |
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Date: 20050131 |
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Docket: 2004-237(OAS) |
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BETWEEN: |
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SAMUEL GERSTEL, |
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Appellant, |
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and |
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THE MINISTER OF HUMAN RESOURCES DEVELOPMENT,
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Respondent. |
REASONS FOR JUDGMENT
Angers, J.
[1] This appeal has been referred to our Court by the Office of the Commissioner of Review Tribunals for Old Age Security pursuant to subsection 28(2) of the Old Age Security Act ("OASA"). Under that subsection, where the grounds for appeal relate to the determination of income within the meaning of section 2 of the OASA, the appeal must be referred to our Court for decision. This particular appeal concerns the Respondent's calculation of the appellant's 2001 income pursuant to sections 2 and 13 of the OASA for the purposes of calculating entitlement to the Guaranteed Income Supplement ("GIS") for the period from July 2002 to June 2003.
[2] No evidence was adduced at trial. The appellant agreed with the statement of facts included in the Reply to the Notice of Appeal, which reads as follows:
A. STATEMENTS OF FACT
2. The Respondent denies all allegations of fact as stated in the Notice of Appeal except the facts specifically pleaded herein.
3. Since 1996 the Appellant and his spouse have received a monthly Old Age Security and the Guaranteed Income Supplement ("GIS") in accordance with the Old Age Security Act (hereinafter the "Act").
4. The Act provides that an OAS pensioner may be eligible for the GIS benefit in a given calendar year. Eligibility for the monthly GIS benefit is dependant largely upon the income of the pensioner and his/her spouse for the preceding calendar year. Sections 2 and 13 of the Act define income for a calendar year for the purpose of determining the amount of the supplement that may be paid to a pensioner.
5. Section 2 of the Act provides that a person's income for the year is computed in accordance with the Income Tax Act, subject to several limited exceptions. The Respondent considered and applied section 2 of the Act when calculating the Appellant's income for the year.
6. On March 27, 2002 the Appellant filed an application to renew his GIS benefits for the payment period July 2002 to June 2003.
7. The year 2001 is base [sic] calendar year for the purpose of calculating the supplement payable pursuant to the Act. The income earned by the Appellant and his spouse during the 2001 taxation year therefore determines the GIS payable for the period of July 2002 to June 2003.
8. In March 2002 the Appellant reported the couple's income for 2001 was $ 5,883.00 calculated as follows:
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Source
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Mr. Gerstel
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Mrs. Gerstel
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QPP Benefits |
$ 6,532.44 |
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Dividend Income |
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$ 645.00 |
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Capital Gains |
$ 2,675.62 |
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Rental income |
$ 125.00 |
$ 125.00 |
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Carrying Charges |
($ 4 219.88) |
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Total Income |
$ 5,113 |
$ 770 |
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Combined Income |
$ 5,883 |
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In so doing the Appellant confirmed that the information was exact and complete.
9. The Respondent has the right to verify the information declared with the Minister of National Revenue ("MNR"). The MNR rounds its figures however, the Respondent does not.
10. On July 12, 2002, the MNR provided the Respondent with a statement indicating that for the 2001 taxation year: (a) the Appellant had declared Rental Income of $733.00; and (b) the Appellant's spouse had declared Rental Income of $731.00 and dividend income of $588.00.
11. On July 12, 2002, the MNR provided to the Respondent a statement regarding the Appellant's spouse income for the 2001 taxation year. The Respondent found discrepancies in the Net Rental Income and dividend income reported by each spouse for income tax purposes and GIS purposes. For GIS purposes the couple each declared Net Rental Income of $125.00 but for income tax purposes, they declared Net Rental Income of $733.50 and 731.00. The Appellant's spouse reported dividend income of $588.00 for income tax purposes but declared $645.00 for GIS purposes.
12. On August 7, 2002 the Respondent received a revised Statement of Income from the Appellant and his spouse for the 2001 calendar year showing combined income of $5,721.68 calculated as follows:
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Source
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Mr. Gerstel
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Mrs. Gerstel
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QPP Benefits |
$ 6,532.44 |
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Dividend Income |
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$ 558.12 |
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Capital Gains |
$ 2,675.62 |
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Rental income |
$ 733.50 |
$ 731.00 |
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Carrying Charges |
($ 4 219.88) |
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Total Income |
$ 5,721 |
$ 1,289.12 |
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Combined Income |
$ 7,010 |
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13. In September 2002 the Respondent asked the Appellant and his spouse to verify the differences in income reported for dividends, Net Rental Income from Property using a table provided and to attach copies of their T1 Income Tax Returns for 2001.
14. The couple indicated that the $125 claimed as Rental Income from Property was the figure arrived at after capital cost allowance; $733 was the figure before capital cost allowance was deducted. The Appellant's spouse stated the $588.00 interest income declared by her was received in U.S.funds totalling $837.00 CAD.
15. In October 2002 the Respondent recalculated the couple's combined income using the same figures as before except it included dividend income of $837.00 rather than $645.00 as originally declared for GIS purposes. The Respondent determined the couple's combined income was $6,219.94.
16. On or about October 4, 2002 the Respondent advised the Appellant and his spouse that $837 was added to the spouse's income for the 2001 taxation year and that their combined income for 2001 would be adjusted to include the Net Rental Income amount as reported to the MNR. The Respondent, having determined that the couple's combined income was $6,219.94, advised the Appellant and his spouse that their GIS benefits would be adjusted accordingly. Consequently, there was an overpayment of $51 for each spouse for the GIS payments issued for the period July to September 2002. The Respondent recovered this overpayment by withholding the amount from the October GIS benefits.
17. By undated letter received by the Respondent on October 24, 2002 the Appellant asked for a re-examination of the decision rendered on October 4, 2002.
18. In December 2002 the MNR advised the Respondent that for 2001 income tax purposes the Appellant and his spouse had declared capital gains of $2,675.62 and dividend income of $558.00, respectively.
19. In January 2003 the Respondent calculated the combined income for 2001 to be $7,010.80 as follows:
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Source
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Mr. Gerstel
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Mrs. Gerstel
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QPP Benefits |
$ 6,532.44 |
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Capital Gains |
$ 2,675.62 |
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Dividend Income |
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$ 558.12 |
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Rental income |
$ 733.50 |
$ 731.00 |
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Carrying Charges |
($ 4,219.88) |
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Total Income |
$ 5,721.68 |
$ 1,289.12 |
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Combined Income |
$ 7,010.80 |
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20. On January 15, 2003, the Respondent advised the Appellant and the Appellant's spouse that they each had received a GIS overpayment of $161.00 (for the period July 2002 to January 2003) based on their combined income of $7,010.80 for 2001. The Respondent stated it would recover this amount.
21. On January 29, 2003, the Appellant sent a letter to the MNR requesting that his and his spouse's income for 2001 be re-examined.
22. In March 2003 the MNR advised the Respondent that the Appellant's capital gains were $1,605.37 instead of the $2,675.62 originally declared by the Appellant for GIS purposes. The Respondent again recalculated the couple's combined income for GIS purposes to be $5,940.55 as follows:
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Source
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Mr. Gerstel
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Mrs. Gerstel
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QPP Benefits |
$ 6,532.44 |
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Dividend Income |
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$ 588.00 |
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Capital Gains |
$ 1,605.37 |
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Rental income |
$ 733.50 |
$ 731.00 |
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Carrying Charges |
($ 4 219.88) |
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Total Income |
$ 4,651.43 |
$ 1,289.12 |
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Combined Income |
$ 5,940.55 |
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23. On March 6, 2003 the Respondent advised the Appellant and his spouse that the MNR had determined the couple's income for the 2001 taxation year was $5,940.55. Unfortunately, the letter itself erroneously indicated the Appellant's income was $5,721.68 when it was actually $4,651.43. The Respondent advised the Appellant and his spouse that their GIS entitlement for the 2002/2003 payment year had been reassessed. The Respondent had underpaid the Appellant and his spouse GIS benefits of $184.00 for July 2002 to February 2003. The Respondent advised that $23.00 (the difference between the existing overpayment of $161.00 and the underpayment of $184.00) would be included in the April 2003 GIS payment.
24. On August 16, 2003, the Appellant requested the legal basis of the Appellant's decision of March 13, 2003.
25. By letter dated October 17, 2003, the Respondent referred the Appellant to the Old Age Security Act and the definition of income. The Respondent confirmed its decision.
26. On November 26, 2003, the Appellant appealed the Respondent's decision of March 13, 2003 to the Review Tribunal.
27. On January 13, 2004, the Review Tribunal referred the case to the Tax Court of Canada.
28. In March 2004 the MNR advised the Respondent that the $558.12 dividend income included in the Appellant's spouse' [sic] was received in U.S. dollars. The MNR applied the average 2001 U.S.exchange rate to the interest income received and changed the figure $558.12 to $864.20.
29. Therefore, the Respondent states that the Appellant's base income for the 2001 calendar year is $6,246.63 calculated as follows:
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Source
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Mr. Gerstel
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Mrs. Gerstel
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QPP Benefits |
$ 6,532.44 |
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Interest Income |
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$ 864.20 |
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Dividends |
$ 1,605.37 |
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Rental income |
$ 733.50 |
$ 731.00 |
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Carrying Charges |
($ 4 219.88) |
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Total Income |
$ 4,651.33 |
$ 1,595.20 |
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Combined Income |
$ 6,246.63 |
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[3] The office of the Commissioner of Review Tribunals had suggested that since the appellant's wife may be directly affected by the decision, she should be made a party to this appeal. Unfortunately, this did not take place.
[4] The issue in this appeal is whether the Respondent has properly calculated the appellant's combined base income for 2001 in accordance with sections 2 and 13 of the OASA for the purposes of calculating entitlement to the GIS for the period from July 2002 to June 2003. The parties submitted and agreed that the only issue (in those calculations) is whether the appellant may claim a Capital Cost Allowance (CCA) in calculating both his income and his spouse's income for the purposes of applying for the GIS under the OASA and in the same year decline to deduct CCA from their income for tax purposes. Does the definition of income under the OASA allow the appellant and his spouse to do that? In all other respects, the calculations made by the Respondent are not being appealed.
[5] The definition of "income" for the purposes of the OASA reads as follows:
"income"
"income" of a person for a calendar year means the person's income for the year, computed in accordance with the Income Tax Act, except that
(a) there shall be deducted from the person's income from office or employment for the year
(i) a single amount in respect of all offices and employments of that person equal to the lesser of five hundred dollars and one fifth of the person's income from office or employment for the year,
(ii) the amount of employee's premiums paid by the person during the year under the Employment Insurance Act, and
(iii) the amount of employee's contributions made by the person during the year under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act,
(b) there shall be deducted from the person's self-employment earnings for the year the amount of contributions made in respect of those self-employed earnings by the person during the year under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act, and
(c) there shall be deducted from the person's income for the year, to the extent that those amounts have been included in computing that income,
(i) the amount of any benefit under this Act and any similar payment under a law of a provincial legislature,
(ii) the amount of any death benefit under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act, and
(iii) the amount of any social assistance payment made on the basis of a means, a needs or an income test by a registered charity as defined in subsection 248(1) of the Income Tax Act or under a program provided for by an Act of Parliament or a provincial legislature that is neither a program prescribed under the Income Tax Act nor a program under which the amounts referred to in subparagraph (i) are paid;
(d) there shall be deducted from the person's income for the year three times the amount, if any, by which
(i) the total of any amounts that may be deducted under section 121 of the Income Tax Act in computing the person's tax payable for the year
exceeds
(ii) the person's "tax for the year otherwise payable under this Part" (within the meaning assigned by subsection 126(7) of the Income Tax Act for the purposes of paragraph 126(1)(b) of that Act) for the year;
[6] For the purposes of the monthly guaranteed income supplement, the calculation of income is defined as follows in s. 13 of the OASA:
Calculation of income
13. For the purposes of determining the amount of supplement that may be paid to a pensioner for a month before July 1, 1999, the income for a calendar year of a person or an applicant is the income of that person or applicant for that year computed in accordance with the Income Tax Act, except that
(a) there shall be deducted from the person's or applicant's income from office or employment for that year
(i) a single amount in respect of all offices and employments of that person or applicant equal to the lesser of five hundred dollars and one fifth of the person's or applicant's income from office or employment for that year,
(ii) the amount of employee's premiums paid by the person or applicant during the year under the Employment Insurance Act, and
(iii) the amount of employee's contributions made by the person or applicant during the year under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act;
(b) there shall be deducted from the person's or applicant's self-employed earnings for that year the amount of contributions made in respect of those self-employed earnings by the person or applicant during the year under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act; and
(c) there shall be deducted from the person's or applicant's income for that year, to the extent that those amounts have been included in computing that income,
(i) the amount of any benefit under this Act and the amount of any similar payment under a law of a provincial legislature,
(ii) the amount of any allowance under the Family Allowances Act and the amount of any similar payment under a law of a provincial legislature,
(iii) the amount of any death benefit under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act,
(iv) the amount of any grant under a program that is a prescribed program of the Government of Canada relating to home insulation or energy conversion for the purposes of paragraphs 12(1)(u) and 56(1)(s) of the Income Tax Act, and
(v) the amount of any social assistance payment made on the basis of a means, a needs or an income test by a registered charity as defined in subsection 248(1) of the Income Tax Act or under a program provided for by an Act of Parliament or a provincial legislature that is neither a program prescribed under the Income Tax Act nor a program under which the amounts referred to in subparagraph (i) are paid.
[7] The appellant's argument is that paragraph 20(1)(a) of the Income Tax Act ("Act") allows a taxpayer to claim CCA deductions from a business or property in computing a taxpayer's income for a taxation year. Since the taxpayer's income must be computed in accordance with the ITA for his GIS, he is therefore entitled to deduct CCA from his rental income, as allowed by the Act and its Regulations, even though he did not claim that deduction in computing his income for that year for tax purposes. The Respondent's position is that they must consider the net rental income on the appellant's tax return (i.e. without CCA deductions) since the appellant cannot choose to claim CCA deductions for GIS purposes and not claim them on his tax return for the same year.
[8] The definition of income under the OASA does not preclude the appellant from claiming CCA deductions for tax purposes and not for OASA purposes. The definition lists several modifications that must be made in computing income but the words "computed in accordance with the ITA" leave open the possibility that two different methods for computing income may be used as long as both methods are provided for under the ITA. In Markevich v. Canada, 2003 D.T.C. 5185 (S.C.C.), the Supreme Court of Canada adopted Driedger's modern approach to statutory interpretation both generally and in the construction of taxation legislation, which requires that the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
[9] The English Oxford Dictionary defines "in accordance with" as "in agreement or harmony with; in conformity to". If the method for computing income reported in a GIS application conforms to the ITA, the method used by the appellant is valid. CCA is a discretionary deduction that may or may not be claimed in any given year depending on the taxapayer's wishes. Furthermore, the definition does not define income as being income on which tax was "assessed" under the ITA; therefore, it refutes an assumption that, for the purposes of the OASA, income must match income reported or assessed for tax purposes. The OASA leaves open the possibility for two different but equally valid methods of "computing" income, such that the ordinary grammatical meaning of the provision defining "income" supports the appellant's position.
[10] The object of the OASA is to provide assistance to elderly, low income Canadians. As such, a broad liberal reading of the definition of income is favoured. The teleological approach to statutory interpretation as found in Corporation Notre-Dame de Bon-Secours v. Communauté urbaine de Quebec, (1994) 95 D.T.C. 5017 supports this approach with any ambiguity being resolved in favour of the appellant.
[11] Although the OASA is not a tax statute, the rules of construction found in the above decision are of assistance. At page 5023, the Supreme Court of Canada summarized the rules it relied on in Symes v. Canada; an earlier decision:
- The interpretation of tax legislation should follow the ordinary rules of interpretation;
- A legislative provision should be given a strict or liberal interpretation depending on the purpose underlying it, and that purpose must be identified in light of the context of the statute, its objective and the legislative intent: this is the teleological approach;
- The teleological approach will favour the taxpayer or the tax department depending solely on the legislative provision in question, and not on the existence of predetermined presumptions;
- Substance should be given precedence over form to the extent that this is consistent with the wording and objective of the statute;
- Only a reasonable doubt, not resolved by the ordinary rules of interpretation, will be settled by recourse to the residual presumption in favour of the taxpayer.
[12] Given that the object of the OASA is to provide financial assistance to low income seniors and that there are two methods for calculating income, the method providing a more accurate picture of income should be preferred. Depreciation is an economic cost to a taxpayer and the OASA does not preclude the appellant from claiming it for OASA purposes as long as the deduction is in accordance with the ITA. The object of the OASA, in my opinion, supports a liberal interpretation.
[13] Counsel for the Respondent argued that to allow the appellant to deduct CCA under the OASA and not deduct CCA for tax purposes would create a problem in that the Respondent would have to maintain a record of undepreciated capital cost for the purposes of the OASA on a yearly basis. As such, it would create an administrative burden. One could further suggest that the Minister of National Revenue is better equipped than the Respondent to maintain a balance of the year-to-year CCA and UCC balances of the Appellant, therefore favouring that the Minister of National Revenue should determine what the Appellant's income for the year should be. No evidence was adduced to support such a burden.
[14] As for the scheme of the Act, there is no doubt that income is to be computed in accordance with the ITA and as such it suggests that the Minister of National Revenue is the person best equipped to assess and review tax returns. In fact, s. 33.11 of the OASA is authority for the Minister of National Revenue to make available to the Respondent a report providing information he has with respect to any applicant or beneficiary or the spouse or common-law partner of any applicant or beneficiary. Therefore, this allows the Respondent to compare the income declared by an applicant in his or her application for GIS with the income reported on the applicant's tax return. It therefore suggests that, for reasons of efficiency, the accuracy of income is left to the Minister of National Revenue to determine.
[15] Notwithstanding the above, I find that the Appellant is entitled to claim his CCA deduction in computing income under the ITA for the purposes of the OASA and to deprive him of this right for reasons of efficiency is not sufficient. As Noël J. stated in obiter in Penner International Inc. v. Canada, [2003] 2 F.C. 581 at paragraph 72:
... it is not the role of the Court to curb the meaning of the legislation so as to accommodate the administration.
[16] In my opinion, the appellant can claim CCA deductions for the purposes of the OASA and not claim same for income tax purposes. The appeal is allowed.
Signed at Ottawa, Canada, this 31st day of January 2005.
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"François Angers" |
Angers, J.
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CITATION: |
2005TCC64 |
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COURT FILE NO.: |
2004-237(OAS) |
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STYLE OF CAUSE: |
Samuel Gerstel and the Minister of Human Resources Development |
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PLACE OF HEARING: |
Montreal, Quebec |
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DATE OF HEARING: |
November 4, 2004 |
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REASONS FOR JUDGMENT BY: |
The Hon. Justice François Angers |
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DATE OF JUDGMENT: |
January 31, 2005 |
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APPEARANCES: |
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For the Appellant: |
The appellant himself |
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Counsel for the Respondent: |
Julie David |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada |