Tax Court of Canada Judgments

Citation: 2006TCC110

Date: 20060406

Docket: 2004-4613(IT)I

BETWEEN:

GURUDATT NARAIN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

___________________________________________________________________

For the Appellant: The Appellant himself

Counsel for the Respondent: Kandia Aird

___________________________________________________________________

REASONS FOR JUDGMENT

(Delivered orally from the Bench at

Toronto, Ontario, on April 18, 2005)

BowieJ.

[1]      This appeal is from an income tax assessment for the year 2001. The Minister of National Revenue has disallowed the Appellant's claim that he is entitled to deduct the amount of $13,200 for child support and spousal support. Specifically, the Appellant was required, pursuant to a written separation agreement dated April 23, 1997, to pay to his former common-law spouse $200 per month spousal support and $900 child support. There was at the outset an issue as to whether or not that written separation agreement had been amended by a subsequent court Order, or another written separation agreement, but the evidence demonstrates otherwise, as Ms. Aird quite properly conceded at the outset of her argument.

[2]      The only issue remaining is whether the Appellant in fact paid $13,200 pursuant to the separation agreement in 2001. His evidence of this consisted of a receipt signed by Janet Genge, his former common law spouse, saying that he had made the payments, which was admitted in evidence without objection, and his own testimony. He said that he made the payments partly in cash, partly by cheque, and partly by making payments to the pharmacist for which Ms. Genge was liable, using his credit card for that purpose. He could not produce cancelled cheques, because the bank told him it would charge him $15.00 each to obtain them. He said that he tried to make the payments by the 15^th of each month, and that if he did not have sufficient funds he would pay for the medication that the children required on an ongoing basis by credit card, and those payments were then credited as part of the $1,100 that he was required to pay each month under the separation agreement. This evidence was confirmed by Ms. Genge. Neither of them attempted to estimate how much of the $13,200 for 2001 was paid in this way.

[3]      Ms. Aird argues that amounts paid in this way do not fall within the definition of "support amount" found in subsection 56.1(4) of the Income Tax Act, because that definition requires that the recipient have discretion as to the use of the amount. That is found in the opening words of the definition, which reads:

"support amount" means an amount payable or receivable as an allowance on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and children of the recipient, if the recipient has discretion as to the use of the amount, and ...

The definition goes on to impose further requirements that are no longer in issue in this case. In my view, that definition limits those matters in a separation agreement or a court Order that may be considered to be support amounts. In other words, if the separation agreement or the court Order provides for payments to third parties, rather than to the other parent or former spouse, then those may be payments as to which the recipient has no discretion. That is not the case here, however.

[4]      The separation agreement simply provides, by its terms, that the Appellant shall pay to the wife for her support the sum of $200, and as to child support shall pay to the wife for the maintenance of the three children three times $300. It was open to Ms. Genge to insist on payment being made directly to her, had she chosen to do so. The Appellant's explanation, which strikes me as quite credible and reasonable, is that there were times when his former spouse did not have the means to pay for medication required by the children, and he did not immediately have cash with which to enable her to do so. On such occasions, by mutual agreement, he made the payments to the druggist which she was obliged to make, and he made them by Visa and got credit for them against his $1,100 obligation for support payments.

[5]      This, in my view, is not a matter of the recipient's discretion being limited, but rather of the recipient directing on a month-to-month basis, as she was entitled to do, that the payment be made not to her but to somebody to whom she was indebted. In my view, nothing in that circumstance takes the payments made by way of Visa to the drug store out of the definition of "support amount". Accordingly, the appeal is allowed.

Signed at Ottawa, Canada, this 6th day of April, 2006.

"E.A. Bowie"

Bowie J.

CITATION:

2006TCC110

COURT FILE NO.:	2004-4613(IT)I

STYLE OF CAUSE:

Gurudatt Narain and Her Majesty the Queen

PLACE OF HEARING

Toronto, Ontario

DATE OF HEARING

April 18, 2005

REASONS FOR JUDGMENT BY:

The Honourable Justice E.A. Bowie

DATE OF JUDGMENT

April 25, 2005

APPEARANCES:

For the Appellant:

The Appellant himself

Counsel for the Respondent:

Kandia Aird

COUNSEL OF RECORD:

For the Appellant:

Name:

N/A

Firm:

N/A

For the Respondent:

John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada