T-648-83
The Queen (Plaintiff)
v.
Henry E. Hoffman (Defendant)
Trial Division, Rouleau J.—Toronto, April 18;
Ottawa, October 15, 1985.
Income tax — Income calculation — Income from employ
ment — Employee contributions to U.S. social security —
Taxpayer American citizen, resident in Canada, employed by
Canadian subsidiary of American company — Amounts with
held pursuant to agreement between U.S. government and
parent company — Taxpayer acquiesced to procedure — Case
law not supporting proposition income to be in employee's
actual possession before taxable — Sufficient if amount paid
for employee's eventual benefit — Criteria established in
Murphy (GA) v The Queen, [19801 CTC 386 (F.C.T.D.)
applied — Defendant's silence constituting concurrence though
not party to contract — Case law indicating employer contri
butions from employee remuneration taxable benefit —
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 5(1), 56(2) —
Social Security Act, 42 U.S.C. § 301 (1976).
Income tax — Income calculation — Deductions —
Employee contributions to U.S. social security — Taxpayer
employed by Canadian subsidiary of American company —
Contributions to U.S. social security applied either as deduc
tion or foreign tax credit from source of income in U.S. -
Contribution to foreign social security plan not listed deduc
tion in s. 8(1) — S. 8(1)(m) contributions to registered pension
fund or plan not applying as social security payments not
"registered pension fund or plan" — Contributions to foreign
security plan not deductible under s. 8(1)(1), permitting deduc
tion of contributions to Canada Pension Plan or provincial
pension plan, as not expressly included by Parliament —
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 8(1)(1),(m),(2),
20(12) (as am. by S.C. 1977-78, c. 32, s. 5), 126(7)(c) (as am.
by S.C. 1974-75-76, c. 26, s. 83; 1977-78, c. 32, s. 33;
1980-81-82-83, c. 140, s. 88), 146(5) (as am. by S.C. 1976-77,
c. 4, s. 56), (5.2) (as am. idem), 248(1) — Social Security Act,
42 U.S.C. § 301 (1976).
The defendant is an American citizen, resident in Canada
and employed by a Canadian subsidiary of an American com
pany. Pursuant to an agreement with the U.S. Internal Reve
nue, the employer withheld employee social security contribu
tions. The plaintiff neither directed nor concurred in the
payments of the withheld amounts, but he deducted them from
his earnings. The Minister disallowed the deductions. The Tax
Review Board held that the withheld amounts formed no part
of the defendant's income. Initially the plaintiff was unaware of
the agreement between his employer and the U.S. government.
Shortly after his arrival in Canada he questioned the head
office about the deductions for contributions to social security
in the U.S. He acquiesced to this procedure because it persisted
throughout his years of employment in Canada. The defendant
submits that the deductions were not taxable as income because
they were never received by him pursuant to subsection 5(1) of
the Income Tax Act. Furthermore, he argues that his contribu
tions should be deductible as a contribution to an approved
pension plan pursuant to section 8.
Held, the plaintiff's claim should be allowed and the decision
of the Tax Review Board set aside.
If the proposition that income must be in the actual posses
sion of the employee before it can be taxed is correct, then an
employee's contributions to Canadian or provincial pension
plans deducted at source are not income. Case law does not
support this proposition. The Tax Review Board has held that it
is sufficient to say that the amount of the salary was paid either
to the employee or to his benefit or that it was paid to a third
party under a federal or provincial statute. The deductions here
were for the defendant's eventual benefit.
Murphy (GA) y The Queen, [1980] CTC 386 (F.C.T.D.)
establishes four criteria that must be satisfied before subsection
56(2) will establish tax liability. Two of those criteria at issue
are: whether the payments are pursuant to the direction of or
with the concurrence of the taxpayer and whether the payments
are for the taxpayer's benefit. Ministerial policy and case law
indicate that the defendant's silence over the course of several
years, as to the contractual arrangements between the U.S.
parent company and the U.S. government constituted concur
rence, notwithstanding that the defendant was not a party to
the contract. An interpretation bulletin indicates that the direc
tion or concurrence of the taxpayer may be implicit. Absence of
privity is not the sole criterion assessable in the determination
of concurrence. Of equal relevance is whether subsequent
behaviour—the absence of objection—constitutes tacit accept
ance of the contractual arrangement. The case law indicates
that employer contributions from employee remuneration con
stitute a taxable benefit of the employee. The cases cited do not
consider whether an employee's pension contribution retained
by his employer from his remuneration constitutes a taxable
benefit in the hands of the employee.
The defendant argued that the contributions in question
constitute non-business income within paragraph 126(7)(c) and
thus were properly deducted pursuant to subsection 20(12).
Policy and the case law indicate that U.S. social security
contributions constitute an amount which may be used either as
a deduction from income or as a foreign tax credit, or con
sidered a non-business income within paragraph 126(7)(c) and
subsection 20(12). However, the deduction or credit must be
applied against income from sources in the United States.
The defendant argued that notwithstanding subsection 8(2),
payments made to the U.S. social security system constitute an
allowable deduction under subsection 8(1). The Income Tax
Act must be applied strictly. Only such deductions as are
explicitly provided for should be allowed. A contribution to a
foreign social security plan is not a listed deduction in subsec
tion 8(1) and that argues against its inclusion as a deduction
from the defendant's income.
Pursuant to paragraph 8(1)(m) a taxpayer may deduct con
tributions to a registered pension fund or plan, which is defined
as a fund accepted for registration by the Minister. The Minis
ter does not consider that employee social security payments
constitute a deductible expense under paragraph 8(1)(m). The
defendant's contributions to social security are not contribu
tions to a "registered pension fund or plan" and are not
deductible within paragraph 8(1)(m).
Subsection 146(5) stipulates that a taxpayer may deduct
from his income premiums paid by him into a registered
retirement savings plan. Subsection 146(5.2) stipulates that
"pension fund or plan" does not include the Canada Pension
Plan, a provincial plan or any similar plan of a foreign country.
It has been argued that since subsection 146(5.2) likens similar
plans of a foreign country to the Canada Pension Plan or a
provincial pension plan, the contributions thereto being deduct
ible pursuant to paragraph 8(1)(1), then contributions to a
foreign social security plan are similarly deductible under
paragraph 8(1)(l). If Parliament wanted to include as a deduc
tion against employment income, contributions to a "similar
plan of a country other than Canada", it would have done so.
That Parliament expressly chose to include the phrase in
respect of a provision concerned with the determination of
maximum allowable deductibility limits of premium contribu
tions, yet did not expressly do so in relation to paragraph
8(1)(l), indicates that contributions paid under social security
are not allowable deductions under paragraph 8(1)(1).
CASES JUDICIALLY CONSIDERED
APPLIED:
Lucien Gingras v. M.N.R., decision dated March 26,
1973, Tax Review Board, not reported; Murphy (GA) y
The Queen, [1980] CTC 386 (F.C.T.D.); Hartland v.
Diggines, [1926] A.C. 289 (H.L.); Minister of National
Revenue v. Bronfman, Allan, [1966] Ex.C.R. 172; [1965]
C.T.C. 378; Fluet (J-P) v MNR, [1982] CTC 2319
(T.R.B.); Ledwidge v. M.N.R. (1971), 71 DTC 188
(T.A.B.); Stelfox (MJ) v MNR, [1985] 1 CTC 2065
(T.C.C.).
DISTINGUISHED:
Cliffe, R.R. v. M.N.R. (1957), 57 DTC 305 (T.A.B.);
Minister of National Revenue v. Rousseau, Claude,
[1961] Ex.C.R. 45; [1960] C.T.C. 336; The Queen v.
Chrapko, G.R. (1984), 84 DTC 6544 (F.C.T.D.); Pazuk
v. M.N.R. (1955), 13 Tax A.B.C. 264; Norris, H.B. v.
M.N.R. (1957), 17 Tax A.B.C. 257.
CONSIDERED:
Seley v. M.N.R. (1962), 62 DTC 565 (T.A.B.).
REFERRED TO:
Bruce v. Hatton (1921), 38 T.L.R. 323 (K.B.); Morin,
J.-P. v. The Queen (1974), 75 DTC 5061 (F.C.T.D.);
Salter v. Minister of National Revenue, [1947] C.T.C.
29 (Ex. Ct.).
COUNSEL:
H. Erlichman for plaintiff.
William I. Innes and Kevin C. Wark for
defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Stikeman, Elliott, Toronto, for defendant.
The following are the reasons for judgment
rendered in English by
ROULEAU J.: The plaintiff brings this action
against the defendant by way of trial de novo. The
Tax Review Board having set aside the reassess
ments by the Minister involving the defendant for
the taxation years 1978 and 1979. The issue con
cerns monies deducted at source from the defend
ant's salary and paid to the U.S. social security
system.
The defendant is a citizen of the U.S.A. and a
resident of Canada. He was first employed by the
Firestone Tire and Rubber Company and was
working in the United States until August 1, 1967
when he was transferred by Firestone to one of its
Canadian subsidiaries, Firestone Textiles Com
pany.
In March, 1955, prior to the defendant joining
the firm, Firestone Tire and Rubber Company
entered into an agreement with the U.S. Internal
Revenue. It provided for obligatory contributions
by all employees of the company under the Social
Security Act [42 U.S.C. § 301 (1976)]. It also
extended to employees who performed services in
foreign affiliates who remained U.S. citizens, and
were non-residents. Pursuant to this agreement, in
the taxation years 1978 and 1979, the company
withheld $1,209.63 and $1,645.10 from the tax
payer's salary and forwarded it to the U.S. govern
ment. Though he neither directed nor concurred in
the payments of the withheld amounts, he never
theless deducted them from his earnings for the
years 1978 and 1979.
By notices of reassessment dated March, 1984,
the plaintiff reassessed the defendant for the 1978
and 1979 taxation years disallowing the deductions
of the withheld amounts. In 1982 the Tax Review
Board allowed the defendant's appeal and held
that the withheld amounts formed no part of the
defendant's income from employment for the 1978
and 1979 taxation years.
The evidence indicates that initially the defend
ant was not aware of the agreement between his
principals and the U.S. government. Shortly after
his arrival in Canada, in 1967, he questioned the
head office about the amounts being deducted for
contributions to social security in the U.S. He
undoubtedly acquiesced to this procedure because
it persisted throughout his years of employment in
Canada. A letter dated September 7, 1982, was
forwarded by Firestone's head office to Mr. Hoff-
man confirming that they had entered into this
agreement in 1955 and that, as an American citi
zen working for a foreign subsidiary of an Ameri-
can employer, he was covered under this agree
ment and had no choice but to contribute.
The defendant submits that he is not taxable
with respect to the withheld amounts, as income,
for the years in question because they were never
received by him. This within the meaning of sub
section 5(1) of the Act [Income Tax Act, R.S.C.
1952, c. 148 (as am. by S.C. 1970-71-72, c. 63, s.
1)] ; that income must be received before it can be
taxed; that the amounts were withheld without his
direction or concurrence; further, that section 8 of
the Income Tax Act provides for the monies that a
taxpayer may deduct before calculating his net
income; and that his contribution is one that
should be considered in the same class as an
approved pension plan.
It should be noted that the defendant was being
paid by Firestone Canada Inc., a Canadian corpo
ration, and the monies deducted were then for
warded to the U.S. for contribution to social
security.
Issues:
A) Whether contributions deducted by defendant's
employer, pursuant to an agreement entered into
between the parent corporation of the defendant's
employer and the United States government, con
stitute income received within the meaning of sub
section 5(1) of the Income Tax Act.
B) Whether those amounts, if income received by
the defendant, qualify as a deductible expense in
computing the taxpayer's income for a taxation
year within the meaning of subsections 8(1) and
8(2) of the Income Tax Act.
Issue A
Receipt of income within the meaning of subsec
tion 5(1) of the Income Tax Act
Defendant relies on Cliffe, R.R. v. M.N.R.
(1957), 57 DTC 305 (T.A.B.); Minister of Na
tional Revenue v. Rousseau, Claude, [1961] Ex.
C.R. 45; [1960] C.T.C. 336 and The Queen v.
Chrapko, G.R. (1984), 84 DTC 6544 (F.C.T.D.)
for the proposition that monies not actually
"received" do not constitute "received" income
within the meaning of subsection 5(1) of the
Income Tax Act (I.T.A.).
In Cliffe (supra) and Rousseau (supra), the
issue to be decided was not whether certain speci
fied sums had to be in the actual physical posses
sion of the taxpayer before those amounts could be
construed as income "received", but whether the
word "received" within the meaning of subsection
5(1) of the I.T.A. incorporates the words
"received" and "receivable".
In Chrapko (supra) the determination of wheth
er weekly wages received by a parimutual cashier
constituted income in the hands of the taxpayer
was dependent upon the degree to which he com-
plied with the terms of a contractually established
condition precedent: the contract of employment
provided that overpayments on winning tickets
were to be deducted from employee's weekly
wages. There existed a legally binding require
ment; a cashier's total weekly shortages were to be
deducted from his total weekly wages. It had to be
determined whether monies received by the cash
ier, before shortages were deducted, constituted his
weekly income. The Tax Review Board and the
Federal Court expressly refused to apply subsec
tion 56(2) of the I.T.A. and found that the cash
shortages deducted from the cashier's salary were
not his property to begin with.
In this case, the defendant does not dispute the
ownership of the amounts contributed to the U.S.
government in the 1978 and 1979 taxation years.
Nor can he argue that he will not eventually derive
a benefit from these monies. He does argue that he
did not receive the sums deducted from his salary.
If the proposition that income must be in the
actual possession of the employee before it can be
taxed is correct, then I would have to conclude
that an employee's contributions to Canadian or
provincial pension plans, deducted at source by the
employer, are not income in the hands of the
employee. Jurisprudence does not support this
proposition.
In Lucien Gingras v. M.N.R. [unreported deci
sion dated March 26, 1973] the Tax Review Board
noted (at pages 4 - 5):
[TRANSLATION] The expression "touché" (received) does
not necessarily mean that the full amount of the salary must be
physically received by the payee or be deposited in full in his
bank account.
According to the interpretation of section 5 it is sufficient to
say that the amount of the salary was paid by the employer
either to the employee himself or to his benefit, or that it was
handed over to a third party under a federal or provincial
statute.
The fact that defendant's employer deducted at
source employee's social security contributions in
the 1978 and 1979 taxation years does not support
the proposition that he received income net of the
withheld amounts. The amounts deducted and for
warded were for his eventual benefit.
Construction receipt pursuant to subsection 56(2)
of the Income Tax Act
In Murphy (GA) y The Queen, [ 1980] CTC 386
(F.C.T.D.), Mr. Justice Cattanach listed four
essential ingredients that have to be satisfied
before subsection 56(2) will establish tax liability
in the hands of the taxpayer (at pages 389-390):
(1) that there must be a payment or transfer of property to a
person other than the taxpayer;
(2) that the payment or transfer is pursuant to the direction of
or with the concurrence of the taxpayer;
(3) that the payment or transfer be for the taxpayer's own
benefit or for the benefit of some other person on whom the
taxpayer wished to have the benefit conferred, and
(4) that the payment or transfer would have been included in
computing the taxpayer's income if it had been received by him
instead of the other person.
At issue is whether conditions (2) and (3) are
applicable to the defendant.
Transferred without direction or concurrence
Defendant argues that he did not consent,
concur nor direct that payment of the withheld
amounts be transferred to the U.S. government.
According to him, the obligation to pay the with
held amounts was established pursuant to a con
tract to which he was not a party. However, the
defendant did abstain from objecting to the con
tractual arrangement for several years.
Ministerial policy and jurisprudence indicate
that defendant's silence, over the course of several
years, as to the contractual arrangement between
Firestone Tire and Rubber Co. and the U.S. gov
ernment constituted concurrence in the transfer of
the withheld amounts, notwithstanding the fact
that the defendant was not a party to the contract.
Interpretation Bulletin No. IT-335 notes that
the direction or concurrence of the taxpayer may
be implicit. In Hartland v. Diggines, [1926] A.C.
289 (H.L.) it was held that, notwithstanding the
fact that neither verbal nor written agreement had
been entered into between employee and his
employer, wherein the employer paid income tax
on the employee's salary, payment constituted
income received in the hands of the employee.
Viscount Cave L.C. noted (at page 291):
But it is said—and this is the main argument used on behalf of
the appellant—that the sum is not an emolument, because it
was not paid to the appellant or at his request, although in fact
it was paid regularly over a series of years. I do not agree with
that argument. There was that continuity in payment to which
reference was made in the case of Blakiston v. Cooper, and the
effect of the payment was in practice and in fact to relieve the
appellant year after year from his liability for the payment of
the tax.
In Minister of National Revenue v. Bronfman,
Allan, [1966] Ex.C.R. 172; [1965] C.T.C. 378 the
Directors of a company bestowed gifts upon rela
tives and former employees in the amount of
$97,000 in the absence of shareholder authoriza
tion. It was held that such gifts constituted income
in the hands of the Directors pursuant to subsec
tion 16(1) [56(2)] of the I.T.A. (R.S.C. 1952, c.
148). However all the shareholders of the company
were to share, proportionately to their individual
holdings, the tax liability imposed by subsection
16(1). By their failure to object to the corporate
gifts at shareholder meetings, the shareholders had
concurred in their Directors' generosity. Mr. Jus
tice Dumoulin noted (at page 179 Ex.C.R.; 385
C.T.C.):
Shareholders possessing voting rights could have, had they so
wished, objected to and voted down at annual or specially
convened meetings their directors' generosities. And, of course,
they also might have resorted to the radical remedy of voting
out of office the entire Board and elected a more thrifty slate of
directors. Their abstention or indifference, unbrokenly main
tained, becomes tantamount to an approval of their administra
tors' gift distributing policies, and they should, with the latter,
have shared proportionately to their individual holdings, the
burden of taxation decreed by s. 16(1). [Emphasis added.]
Thus mere absence of privity is not the sole criteri
on assessable in the determination of concurrence.
Of equal relevance is whether subsequent behavi-
our—the absence of objection—constitutes tacit
acceptance of the contractual arrangement.
Whether withheld amounts constitute taxable ben
efits when payment made without the concurrence
of the taxpayer
Defendant cites Pazuk v. M.N.R. (1955), 13
Tax A.B.C. 264 and Norris, H.B. v. M.N.R.
(1957), 17 Tax A.B.C. 257 as authority for the
proposition that defendant's social security contri
butions do not constitute a taxable benefit.
In fact those cases turned on the issue of wheth
er an employer's contribution to a pension or
superannuation fund constituted a taxable benefit
in the hands of the taxpayer. They did not consider
the issue, presently in dispute, of whether an
employee's pension contribution retained by his
employer from his remuneration constitutes a tax
able benefit in the hands of the employee.
Jurisprudence indicates that employer contribu
tions from employee remuneration constitute a
taxable benefit of the employee (Bruce v. Hatton
(1921), 38 T.L.R. 323 (K.B.); Morin, J.-P. v. The
Queen (1974), 75 DTC 5061 (F.C.T.D.); Salter v.
Minister of National Revenue, [1947] C.T.C. 29
(Ex. Ct.)).
Issue B
Section 8: Deductibility of amounts paid to the
U.S. government under social security (U.S.)
1) Non-Business Income Tax
Defendant has argued that the amounts of
$1,209.63 and $1,645.10 for the 1978 and 1979
taxation years respectively, paid to the U.S. gov
ernment as contributions under social security,
constitute non-business income within the meaning
of paragraph 126(7)(c) [as am. by S.C. 1974-75-
76, c. 26, s. 83; 1977-78, c. 32, s. 33] of the I.T.A.
and thus were properly deducted pursuant to sub
section 20(12) [as am. by S.C. 1977-78, c. 32, s. 5]
of the I.T.A.
Ministerial administrative policy and the case
law indicate that U.S. social security contributions
constitute an amount which may be used either as
a deduction from income or as foreign tax credit,
or considered a non-business income within the
meaning of paragraph 126(7)(c) and subsection
20(12) of the I.T.A. However, the income tax
deduction or tax credit must be applied against
income from sources in the United States.
Interpretation Bulletin No. IT-122R indicates
that:
Normally, a United States citizen who is neither a resident of
the United States nor employed by a United States resident is
neither required nor permitted to pay tax under the Social
Security Act. An exception occurs, however, when a corpora
tion resident in the United States elects to pay the full tax on
behalf of United States citizens resident in Canada who are
employees of a Canadian corporation which is a subsidiary of
the United States corporation. Where part of the tax is with
held from the salary of such an employee by the Canadian
subsidiary, the amount so withheld should be regarded as an
income tax paid to the United States, in respect of which a
foreign tax credit will be allowable if the employee has income
in the year from sources in the United States.
Interpretation Bulletin No. IT-122R reflects the
decision rendered in Seley v. M.N.R. (1962), 62
DTC 565 (T.A.B.) wherein it was held that a
taxpayer's contributions did constitute an income
or profits tax levied in the U.S. and therefore
formed an integral part of the foreign tax credit
which credit could be applied against taxpayer's
income earned from a foreign source.
Paragraph 126(7)(c) was amended by S.C.
1980-81-82-83, c. 140, s. 88 with the addition of
subparagraph 126(7)(c)(iv). By that subparagraph
Parliament has expressly excluded from the defini
tion of Non-Business Income, any income payable
to a foreign country solely because: a) the taxpayer
was a citizen of that country, and, b) such taxes
could be reasonably attributable to income from a
source within Canada.
It was argued that the exclusionary stipulation
enunciated in subparagraph 126(7)(c)(iv) was not
a provision of paragraph 126(7)(c) in the taxation
years 1978 and 1979; that the absence of the
relevant subparagraph permits defendant to apply
his contributions as a Non-Business Income
against his employment income earned in Canada;
otherwise, that I should conclude that, notwith
standing subsection 8(2) of the I.T.A., payments
made to the U.S. social security system constitute
an allowable deduction within the meaning of
subsection 8(1) of the I.T.A.
I disagree. In Fluet (J-P) y MNR, [1982] CTC
2319 the Tax Review Board commented on apply
ing a liberal interpretation to the tax exemptions
enumerated in subsections 8(1) and 8(2) of the
I.T.A. It noted the following at page 2323 of the
decision:
The income earned is therefore taxable whether the fine is
paid directly by the employee or is deducted from his salary.
Can the fine, however, be allowed as a deduction?
4.03.3 In view of the fact that all the deductions allowed
against income from an office or employment are set out in
section 8 of the Act and that no provision is made therein for
the payment of a fine to one's employer, the deduction cannot
be allowed.
The Tax Review Board, like any other tribunal in this
country, must interpret the Income Tax Act strictly, since the
Act falls within the realm of public law.
The need for strict interpretation obliges the tribunal to
allow only such deductions as are explicitly provided for;
moreover, the words used in the legislation must be interpreted
according to their dictionary meaning unless they are defined in
the Act.
In the instant case, the Act contains no provision, either
general or particular, that would enable the Board to allow the
deduction claimed. Unfortunately for the appellant, the appeal
must be dismissed. [Emphasis added.]
The fact that a contribution to a foreign social
security plan is not among the listed deductions in
subsection 8(1) of the I.T.A. argues against its
inclusion as a deduction to be applied against the
defendant's income.
2) Listed Section 8 Exemptions
i) Paragraph 8(1)(m): Contribution to a Regis
tered Pension Plan
A taxpayer may deduct, in computing his
income for a taxation year from an office or
employment, amounts contributed by him to a
registered pension fund or plan. Subsection 248(1)
of the I.T.A. defines a registered pension fund or
plan to mean a fund "accepted by the Minister for
registration for the purposes of this Act in respect
of its constitution and operations for the taxation
year under consideration."
Information Circular No. 72-13R7 discusses the
administrative rules with respect to employees'
pension plans, including registration. The circular
indicates that the Minister of National Revenue
does not consider that employee social security
payments made pursuant to social security consti
tute a deductible expense within the meaning of
paragraph 8(1)(m).
In Ledwidge v. M.N.R. (1971), 71 DTC 188,
the Tax Appeal Board held that contributions
made by a former citizen of France, now resident
in Canada, to a pension plan of the French govern
ment did not constitute a deductible contribution
on the ground that such amount was not a contri
bution to a "registered pension fund or plan"
within the meaning of the I.T.A.
Thus defendant's contributions under social
security do not constitute amounts deductible
within the meaning of paragraph 8(1)(m).
ii) Paragraph 8(1)(1)
Subsection 146(5) [as am. by S.C. 1976-77, c. 4,
s. 56] of the I.T.A. stipulates that a taxpayer may
deduct from his income premiums paid by him
into a registered retirement savings plan. However,
the amount deductible is limited by, inter alia, the
taxpayer's contribution to another pension fund or
plan. Subsection 146(5.2) [as am. idem] of the
I.T.A. stipulates that the term "pension fund or
plan" does not include the Canada Pension Plan, a
provincial plan or any similar plan of a foreign
country.
In Stelfox (MJ) v. MNR, [1985] 1 CTC 2065
taxpayer argued that since subsection 146(5.2)
likens "similar plans of a foreign country" to the
Canada Pension Plan or a provincial pension
plan—the contributions thereto being deductible
pursuant to paragraph 8(1)(l) of the I.T.A.—then
contributions made by the taxpayer to the British
Department of Health and Social Security are
similarly deductible under paragraph 8(1)(l) of
the I.T.A. The Tax Court of Canada rejected this
argument noting (at page 2067) that:
It seemed quite clear that there was no provision for the
specific deduction of this amount.... [Original emphasis.]
If Parliament wanted to include, as a deduction
against employment income, contributions made to
a "similar plan of a country other than Canada", it
would have done so. That Parliament expressly
chose to include the phrase in respect of a provi
sion concerned with the determination of max
imum allowable deductibility limits of premium
contributions, yet did not expressly do so in rela
tion to paragraph 8(1)(l), indicates that contribu-
tions paid under social security are not allowable
deductions within the meaning of paragraph
8(1)(1).
The plaintiff's claim is hereby allowed and the
decision of the Tax Review Board dated November
8, 1982 is hereby set aside and varied.
The reassessment made by the Minister of Na
tional Revenue in respect to the defendant's 1978
and 1979 taxation years is hereby restored.
Costs to the plaintiff.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.