T-1288-88
Her Majesty the Queen (Plaintiff)
v.
Helen E. McLaren (Defendant)
INDEXED AS: CANADA V. MCLAREN (T.D.)
Trial Division, MacKay J.—Ottawa, September
19, 1990.
Income tax — Income calculation — Deductions — Child
care expenses — Reassessment disallowing deduction — Hus
band's income nil — Income Tax Act, s. 63(2) permitting
deduction of child care expense when taxpayer's income
exceeding income of supporting person of child in specific
circumstances, none of which applicable — S. 63(2) not appli
cable where income of supporting person nil — "Income" in
ordinary, grammatical sense and in context of Act implying
positive sum.
This was an appeal from a decision of the Tax Court which
allowed the taxpayer's appeal from a notice of reassessment. In
1983 the taxpayer deducted $535 as child care expenses. Her
husband had no income in 1983. Income Tax Act, subsection
63(2) allows a deduction where a taxpayer's income exceeds the
income of a supporting person of the child in specific circum
stances, none of which applied here. The Tax Court held that
subsection 63(2) does not apply when a "supporting person"
has no income. The issue was whether subsection 63(2) disenti-
tles a taxpayer from claiming the child care deduction when his
or her supporting person had no income.
Held, the action should be dismissed.
The word "income" in subsection 63(2), when read both in
its grammatical and ordinary sense and in its context in the
Act, means the existence of a positive sum. Where the support
ing parent has no income, subsection 63(2) does not apply and
one reverts to paragraph 63(1)(b) and the taxpayer may claim
the deduction. This is consistent with the legal concept
employed by the Income Tax Act. Subsection 5(1), which
defines income from an office or employment, subsection 9(1),
which determines income from business or property, and sub
section 39(1), which defines capital gain, all involve the receipt
of a positive or net amount. The use of "income for a taxation
year" and "income for that year" together with the phrase "(on
the assumption that both incomes are computed ...)" presumes
that each of the parties received income within the meaning of
the Act. Moreover, the entirety of section 3, which is the closest
thing to a definition of "income" under the Act, consists of a
process of reduction from one amount to another until one
reaches a final amount which represents the taxpayer's income
for the year. The explicit use of the words "remainder, if any"
in the final phrase of the section mandates the existence of
something positive before the taxpayer can be said to have
income for the purposes of the Act. A fundamental premise
underlying the Income Tax Act is that "income" means the
"net accretion of economic power". That concept does not
apply where there is no income. There is no indication in
subsection 63(2) that the use of "income" was intended to be
different from that used throughout the rest of the Act. If a
provision is not aptly worded to carry out the intent of its
drafter, the courts should not be precluded from allowing the
taxpayer to take advantage of the benefits of the provision as
worded.
Section 63 was amended to apply equally to both male and
female taxpayers as result of a Human Rights Tribunal finding
that it was discriminatory because it excluded men from the
deduction unless they were unmarried, separated or had a wife
who was incapable of caring for the children. The distinction
between higher and lower income earners in the current provi
sion is predicated on the taxpayer and the supporting person
each having income for the taxation year as provided in accord
ance with section 3. That income, the "remainder, if any" after
following the steps of section 3 must be "a net accretion of
economic power", not merely no income.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 2(2) (as am.
by S.C. 1984, c. 1, s. 1), 3, (as am. by S.C. 1977-78, c.
1, s. 1; c. 42, s. 1; 1984, c. 1, s. 2), 4(1), 5(1), 9(1),
39(1) (as am. by S.C. 1974-75-76, c. 26, s. 15; 1976-
77, c. 4, s. 9; c. 42, s. 3; 1979, c. 5, s. 11; 1980-81-82-
83, c. 48, s. 16; c. 140, s. 18; 1984, c. 1, s. 13), 56(1)(s)
(as am. by S.C. 1980-81-82-83, c. 48, s. 25; c. 140, s.
26), (u) (as added by S.C. 1980-81-82-83, c. 140, s.
26), 63 (as am. by S.C. 1984, c. 1, s. 25; c. 45, s. 22),
122.2 (as am. by S.C. 1984, c. 1, s. 65), 178(2) (as am.
by S.C. 1980-81-82-83, c. 158, s. 58; 1985, c. 45, s. 75).
CASES JUDICIALLY CONSIDERED
APPLIED:
Fiset (N.) v. M.N.R., [1988] 1 C.T.C. 2335; (1988), 88
DTC 1223 (T.C.C.); Canterra Energy Ltd. v. The Queen,
[1987] 1 C.T.C. 89; (1986), 87 DTC 5019; 71 N.R. 394
(F.C.A.).
CONSIDERED:
Tahsis Company Ltd. v. R., [1980] 2 F.C. 269; [1979]
CTC 410; (1979), 79 DTC 5328 (T.D.); Johns-Manville
Canada Inc. v. The Queen, [1985] 2 S.C.R. 46; (1985),
21 D.L.R. (4th) 210; [1985] 2 CTC 111; 85 DTC 5373;
60 N.R. 244; Bailey et al. v. M.N.R. (1980), 1 C.H.R.R.
193 (H.R.T.).
AUTHORS CITED
Concise Oxford Dictionary of Current English, 7th ed.,
Oxford: Clarendon Press, 1982, "remainder".
Driedger, Elmer A. Construction of Statutes, 2nd ed.,
Toronto: Butterworths, 1983.
Report of the Royal Commission on Taxation, Vol. 1,
Ottawa: Queen's Printer, 1966 (Chair: K. M. Carter).
Shorter Oxford English Dictionary, vol. I, 3rd ed.,
Oxford: Clarendon Press, 1986, "income".
Webster's Third New International Dictionary of the
English Language, (Unabridged), Springfield, Massa-
chusetts: Merriam—Webster Inc., 1986, "income".
COUNSEL:
Max J. Weder for plaintiff.
Werner H. G. Heinrich for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Freeman & Company, Vancouver, for defend
ant.
The following are the reasons for judgment
rendered in English by
MACKAY J.: This is an appeal by the plaintiff
Her Majesty The Queen from a decision of the
Tax Court of Canada, dated February 22, 1988,
[[1988] 1 C.T.C. 2371] which allowed the defend
ant taxpayer's appeal from a notice of reassess
ment of income tax made by the Minister of
National Revenue in 1985 for the taxation year
1983.
Counsel for the parties submitted an agreed
statement of facts which provides as follows:
1. The defendant resides in the Municipality of
North Vancouver in the Province of Vancouver.
2. The defendant's income for 1983 was $43,851.
3. The defendant's husband in 1983 was Martin
McLaren.
4. The defendant's husband had no income in
1983.
5. The defendant's children were under fourteen
years of age in 1983.
6. In 1983 the children were ordinarily in the
custody of the defendant.
7. The defendant's husband was a supporting
person of the children within the meaning of sub
section 63(3) of the Income Tax Act.
8. The defendant's husband was not a person
within the meaning of sub-paragraphs
63(2)(b)(iii), (iv), (v) or (vi) of the Income Tax
Act.
9. The defendant paid the amount of $535 on
account of child care expenses incurred with
respect to the children.
10. The defendant deducted the child care
expenses incurred by her in computing her income
for her 1983 taxation year.
11. By notice of reassessment dated March 18,
1985, the Minister of National Revenue reassessed
the defendant to disallow the deduction for child
care expenses claimed by her in respect of her
1983 taxation year in the amount of $535.
12. In so reassessing the defendant, the Minister
of National Revenue proceeded on the basis that
the defendant's income for 1983 of $43,851
exceeded the income for 1983 of a supporting
person of the eligible children for whom the child
care expenses were claimed.
The authority for deducting child care expenses
is found in section 63 of the Income Tax Act, S.C.
1970-71-72, c. 63, as amended [S.C. 1984, c. 1, s.
25; c. 45, s. 22]. I set forth the relevant portions of
the section:
63. (1) Subject to subsection (2), there may be deducted in
computing the income of a taxpayer for a taxation year the
aggregate of all amounts each of which is an amount paid in
the year as or on account of child care expenses in respect of an
eligible child of the taxpayer for the year
(a) by the taxpayer, where he is a taxpayer described in
subsection (2) and the supporting person of the child for the
year is a person described in subparagraph (2)(b)(vi), or
(b) by the taxpayer or a supporting person of the child for
the year, in any other case,
to the extent that
(c) the amount is not included in computing the amount
deductible under this subsection by an individual (other than
the taxpayer), and
(d) the amount is not an amount (other than an amount that
is included in computing a taxpayer's income and that is not
deductible in computing his taxable income) in respect of
which any taxpayer is or was entitled to a reimbursement or
any other form of assistance,
and the payment of which is proven by filing with the Minister
one or more receipts each of which was issued by the payee and
contains, where the payee is an individual, that individual's
Social Insurance Number; but not exceeding the amount, if
any, by which
(e) the least of
(i) $8,000,
(ii) the product obtained when $2,000 is multiplied by the
number of eligible children of the taxpayer for the year in
respect of whom the child care expenses were incurred,
and
(iii) 2 A of the taxpayer's earned income for the year
exceeds
(f) the aggregate of all amounts each of which is an amount
deducted, in respect of the eligible children of the taxpayer
that are referred to in subparagraph (e)(ii), under this
subsection for the year by an individual (other than the
taxpayer) to whom subsection (2) is applicable for the year.
(2) Where the income for a taxation year of a taxpayer who
has an eligible child for the year exceeds the income for that
year of a supporting person of that child (on the assumption
that both incomes are computed without reference to this
section and paragraphs 56(1)(s) and (u)), the amount that may
be deducted by the taxpayer under subsection (1) for the year
as or on account of child care expenses shall not exceed the
lesser of
(a) the amount that would, but for this subsection, be
deductible by him for the year under subsection (1); and
(b) the product obtained when the lesser of
(i) $240, and
(ii) $60 multiplied by the number of eligible children of
the taxpayer for the year in respect of whom the child care
expenses were incurred
is multiplied by the number of weeks in the year during
which the child care expenses were incurred and throughout
which the supporting person was a person described in one or
more of the following subparagraphs:
(iii) a person in full-time attendance at a designated edu
cational institution (within the meaning assigned by para
graph 110(9)(a)),
(iv) a person certified by a qualified medical practitioner
to be a person who
(A) by reason of mental or physical infirmity and con
finement throughout a period of not less than 2 weeks in
the year to bed, to a wheelchair or as a patient in a
hospital, an asylum or other similar institution, was
incapable of caring for children, or
(B) by reason of mental or physical infirmity, was in
the year, and is likely to be for a long-continued period
of indefinite duration, incapable of caring for children,
(v) a person confined to a prison or similar institution
throughout a period of not less than 2 weeks in the year, or
(vi) a person living separate and apart from the taxpayer,
throughout a period of not less than 90 days commencing
in the year, by reason of a breakdown of their marriage or
similar domestic relationship.
(2.1) For the purposes of this section, where, in any taxation
year, the income of a taxpayer who has an eligible child for the
year and the income of a supporting person of the child are
equal (on the assumption that both incomes are computed
without reference to this section and paragraphs 56(1)(s) and
(u)), no deduction shall be allowed under this section to the
taxpayer and the supporting person in respect of the child
unless they jointly elect to treat the income of one of them as
exceeding the income of the other for the year.
"Child care expense", "eligible child" and "sup-
porting person" are all defined in subsection 63(3)
of the Act. There is no dispute that the claimed
$535 is within the definition of child care expense
and that in 1983, the children for whom the
expenses were incurred were eligible children and
that Martin McLaren, the defendant's husband,
was a supporting person, in accord with the Act.
The issue before this Court raises a question of
statutory interpretation: does subsection 63(2) dis-
entitle a taxpayer from claiming the child care
deduction when his or her supporting person had
nil income for the relevant taxation year? When
the question was considered by the Tax Court, His
Honour Judge Taylor answered it in the negative.
He gave the following explanation for his decision
to allow the taxpayer's appeal from the reassess
ment at page 2372:
As I see it, the point at issue has been determined by this
Court in a recent judgment of Chief Judge Couture—Normand
Fiset v. M.N.R., [1988] 1 C.T.C. 2335; [88 D.T.C. 1223], in
which the Chief Judge reached the conclusion that under
circumstances where the "supporting person" had no income,
that subsection 63(2) of the Act did not apply.
It has been the position of the plaintiff since the
issuance of the reassessment that the essential
nature of subsection 63(2) is comparative. Simply
put, this means that where the income of the
taxpayer exceeds that of the supporting person,
and where none of the limiting circumstances set
out in subparagraphs (iii)-(vi) apply, no deduction
may be claimed by the taxpayer. The plaintiff
submits that to enter into a debate as to whether
"income", for the purposes of section 63, consti
tutes a positive amount merely confuses the issue.
It is the plaintiff's contention that in this instance
the defendant's income is greater than zero and
therefore the deduction must be disallowed. This
logically follows, states the plaintiff, because
where the supporting person does not fall within
any of the situations outlined in subparagraphs
63(2)(b)(iii) to (vi), the product obtained in para
graph 63(2)(b) is zero, and the subsection as a
whole excludes any deduction which exceeds the
lesser of the amounts calculated in paragraphs
63(2)(a) and (b).
In support of its contention, the plaintiff refers
to section 3 [as am. by S.C. 1977-78, c. 1, s. 1; c.
42, s. 1; 1984, c. 1, s. 2] of the Act, which
stipulates the method for determining a taxpayer's
income:
3. The income of a taxpayer for a taxation year for the
purposes of this Part is his income for the year determined by
the following rules:
(a) determine the aggregate of amounts each of which is the
taxpayer's income for the year (other than a taxable capital
gain from the disposition of a property) from a source inside
or outside Canada, including, without restricting the general
ity of the foregoing, his income for the year from each office,
employment, business and property;
(b) determine the amount, if any, by which
(i) the aggregate of
(A) the aggregate of his taxable capital gains for the
year from dispositions of property other than listed
personal property,
(B) his taxable net gain for the year from dispositions
of listed personal property, and
(C) the amount, if any, by which
(I) the aggregate of his taxable capital gains for the
year from indexed security investment plans
exceeds
(II) the aggregate of his allowable capital losses for
the year from indexed security investment plans,
exceeds
(ii) the amount, if any, by which his allowable capital
losses for the year from dispositions of property other than
listed personal property exceed his allowable business
investment losses for the year;
(c) determine the amount, if any, by which the aggregate
determined under paragraph (a) plus the amount determined
under paragraph (b) exceeds the aggregate of the deductions
permitted by subdivision e in computing the taxpayer's
income for the year (except such of or such part of those
deductions, if any, as have been taken into account in
determining the aggregate referred to in paragraph (a));
(d) determine the amount, if any, by which the remainder
determined under paragraph (c) exceeds the aggregate of
(i) the aggregate of amounts each of which is his loss for
the year from an office, employment, business or property
or his allowable business investment loss for the year, and
(ii) the amount, if any, by which the amount determined
under, subclause (b)(i)(C)(II) exceeds the amount deter
mined under subclause (b)(i)(C)(I); and
(e) determine the amount, if any, by which the remainder
determined under paragraph (d) exceeds the lesser of
(i) the amount, if any, by which the amount determined
under subparagraph (b)(ii) exceeds the aggregate deter
mined under subparagraph (b)(i), and
(ii) $2,000, or if the taxpayer is a corporation, nil;
and the remainder, if any, obtained under paragraph (e) is the
taxpayer's income for the year for the purposes of this Part.
The plaintiff points out that what one is left with
at the end of the process described in section 3 is
the taxpayer's income. It is this amount which
must be determined for the purposes of section 63
and this can incorporate the figure zero. It is the
plaintiff's submission that the Tax Court, both in
this case and Fiset, supra, [Fiset (N.) v. M.N.R.,
[1988] 1 C.T.C. 2335] erred by focusing instead
on whether there was income from a source, such
as employment, and it is this misconception which
leads the Court to the conclusion that "income"
must be a positive amount. The plaintiff also
argues that the Tax Court erred in finding that the
word "remainder" at the end of the section 3
formula implies a positive amount. According to
the plaintiff, if one accepts the dictionary defini
tion put forward by the defendant that "remain-
der" is the number left after subtraction or divi
sion, then when one divides 63 by 9, the result is 7
and the remainder zero. Thus, zero is a number
like any other, except that it holds a very impor
tant place in the numerical system.
Moreover, when one turns to the definition of
taxable income in subsection 2(2) [as am. by S.C.
1984, c. 1, s. 1] of the Act, which states that
"taxable income of a taxpayer for a taxation year
is his income for the year plus the addition and
minus the deductions permitted by Division C", it
is the plaintiff's contention that a taxpayer with
zero income can and should fit into this equation.
It only makes sense, according to the plaintiff, that
a taxpayer can start with zero income and then
only where he or she has zero taxable income in
the result, does he or she not pay any tax. In order
to be logically consistent with the overall object
and purpose of the Act as a whole, income must
include the number zero. For it would be absurd,
to the plaintiff's way of thinking, if one were to
follow the reasoning of the Tax Court and hold
that pursuant to section 63, the taxpayer with the
higher income can claim the child care deduction
where the supporting person has no income and yet
when the supporting person has income in the
positive amount of $1, the deduction is then
claimed only by the supporting person. That result
counsel for the plaintiff characterizes as not logi
cally consistent or rational.
The plaintiff refers also to other provisions of
the Act. Paragraphs 56(1)(s) [as am. by S.C.
1980-81-82-83, c. 48, s. 25; c. 140, s. 26] and (u)
[as added by S.C. 1980-81-82-83, c. 140, s. 26]
rely on a comparison of incomes for the purpose of
allocating, between a taxpayer and his or her
spouse, certain amounts paid as social assistance
payments and home insulation or energy conver
sion grants, as income. In these instances, where
the taxpayer is married or residing with his or her
spouse at the time the payment is received, the
amount can only be attributed as income of the
taxpayer, if his or her income for the year is less
than the spouse's income for the year, otherwise it
is attributed to the spouse where he or she has
income for the year which is less than that of the
taxpayer. The obvious intent of these provisions is
said to be that if you are a married couple, the
person with the lower income includes the desig
nated amounts as income. The plaintiff asserts
that it would fly in the face of parliamentary
intent if the interpretation of income as found by
the Tax Court in this case was applied to these
provisions. I am not persuaded that the allocation,
as income, of payments in accord with paragraphs
56(1)(s) and 56(1)(u) is comparable to the entitle
ment to claim deductions under subsections 63(1)
and (2), nor that the interpretation of "income" as
found by the Tax Court in this case would be
contrary to the intent of Parliament in the two
other paragraphs mentioned. As I see it the result
would then be that payments there referred to
would be allocated to the taxpayer as income
where the spouse has no income and the payments
would be taxable, which seems consistent with the
general intent of Parliament.
The plaintiff refers as well to section 122.2 (as
am. by S.C. 1984, c. 1, s. 65), dealing with a child
tax credit calculated as that provision specifies by
a formula including "the aggregate of all amounts
each of which is the income for the year of the
individual or a supporting person of an eligible
child". Again, I am not persuaded that the defini
tion of income found by the Tax Court in refer
ence to subsection 63(2) would be adverse to the
intent of Parliament apparent in section 122.2.
Finally, the plaintiff also canvasses the legisla
tive history of the provision. Initially, the benefit
provided by section 63 was directed principally
toward women. A man could only claim the deduc
tion if he was not married, or was separated from
his wife, or his wife was mentally or physically
incapable of caring for children, or his wife was in
prison. Thus, Parliament was basically granting a
form of assistance to women in order that they
could work outside the home. The current wording
of the legislation apparently resulted from concern
that it was discriminatory in its original form, and
now the focus is simply on the lower income
person. Thus, the plaintiff points out that the
object and purpose of section 63 is, and always has
been, comparative only. It was never Parliament's
intention to grant the normal breadwinner, the one
parent earning income in a family, a deduction for
child care expense. For this intention the plaintiff
relies on the fact that the various subsections and
subparagraphs of the provision severely limit not
only the situations within which the deduction may
be claimed, but also the actual amount of the
deduction itself.
The defendant, on the other hand, submits that
the object of the provision in question is to general
ly enable the earning of income by either the
taxpayer or the supporting person. Counsel for the
defendant finds support for his position by turning
to subsection 63(1), which he submits cannot be
completely ignored in the analysis of the meaning
of subsection 63(2). For although it is subject to
subsection 63(2), subsection (1) is still the first
step to entitlement to the child care deduction and
thus serves as an important indication of Parlia
ment's intent in this regard. Paragraphs 63(1)(a)
and (b), according to the defendant, clearly evi
dence the fact that someone, either the taxpayer or
the supporting person, at least initially, is entitled
to claim the deduction. The defendant submits
that subsection 63(2) merely shifts this entitlement
to the supporting person with income that is lower
than that of the taxpayer, and one must return to
paragraph 63 (1) (b) in order to calculate the actual
amount of the claim. Thus, subsection 63(2) is at
best a limitation provision and not a means for
disentitlement altogether.
Counsel for the defendant also urges support for
his contention that the child care deduction was
not intended to be lost by noting subsection
63(2.1) which provides for the situation where
both the taxpayer and the supporting person have
incomes which are equal. In that case the taxpayer
and the supporting person must jointly elect the
income of one to exceed that of the other in order
to claim the deduction. Accordingly, the defendant
maintains that Parliament's intention here is clear.
Child care expenses, by definition, are expenses
incurred to earn income and the aim of section 63
is to grant a credit for this type of expenditure to
the taxpayer or to the supporting person.
Counsel for the defendant also refers to section
3 of the Act, but does so in support of his position
that income cannot include zero. The defendant
notes that, contrary to the view expressed by the
plaintiff, the section 3 process only commences
where there is an amount in the form of income for
the year from an office, employment, a business or
property. The existence of income from a source is
a basic consideration. In this case, the defendant
points out that the supporting person had no such
income, but this contention is disputed and indeed
there is no evidence other than the agreed fact that
the supporting person here had no income; the
result of the full application of section 3, not a
result with reference to any specific source. The
defendant further urges that after one has pro
ceeded through the steps of section 3, the use of
the phrase "remainder, if any" at the end of the
section presupposes that if there is no amount in
remainder, there is no income for the purposes of
the Act. The defendant refers to The Concise
Oxford Dictionary of Current English which
defines the word "remainder" as a "residue, re
maining persons or things; number left after sub
traction or division." "[R]emainder, if any", sub
mits the defendant, means there must be
something positive left.
The defendant relies on the decision of this
Court in Tahsis Company Ltd. v. R., [1980] 2
F.C. 269, at page 273 for the proposition that if
the legislators had intended the interpretation pro
posed by the plaintiff, it would have been easy
enough for Parliament to have made this intention
clear. The Federal Court in that case was asked to
interpret a provision of the Income Tax Act deal
ing with currency rate fluctuations. The Court
found that as the provision clearly indicated fluc
tuations after 1971 should be taken into account,
an intention to consider earlier fluctuations could
not be inferred from the subsection because such
an objective could easily have been clearly stipu
lated. According to the defendant, this premise
applies equally to this case, especially when Parlia
ment has elsewhere in the Act evidenced an inten
tion that where there is no income that be taken
into account. Subsection 4(1) of the Act provides
for income or loss from a source or from sources in
a place and it includes specific reference to "the
taxpayer's income or loss, as the case may be,
computed in accordance with this Act on the
assumption that he had during the taxation year
no income or loss except from that source or no
income or loss except from those sources, as the
case may be". Thus, the defendant argues that
there are in fact two concepts referred to in the
Act. One involves income and where, as in subsec
tion 63(2), a comparison of two incomes is drawn,
this presupposes the existence of two amounts. The
second involves no income, which Parliament has
indicated in section 4 is another concept altogeth
er.
Finally, counsel for the defendant puts forth an
alternative argument. He submits that if the word
ing employed in the section is ambiguous, it is
clear from the case law that the issue must be
resolved in favour of the taxpayer. In this regard,
he relies on the statement made by the Supreme
Court of Canada in Johns-Manville Canada Inc.
v. The Queen, [1985] 2 S.C.R. 46, at page 72:
Such a determination is, furthermore, consistent with another
basic concept in tax law that where the taxing statute is not
explicit, reasonable uncertainty or factual ambiguity resulting
from lack of explicitness in the statute should be resolved in
favour of the taxpayer.
Both parties are in agreement that the appli
cable principle for guidance in the interpretation
of the Income Tax Act is that stated by E. A.
Driedger in Construction of Statutes, 2nd ed.,
(1983), at page 87:
Today there is only one principle or approach, namely, 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.
It is my opinion that the word "income", both in
its ordinary usage and that employed in the con
text of the Act imputes the existence of a positive
amount. Dictionary definitions refer to "income"
as an annual and recurring gain derived from
labour or capital. Webster's Third New Interna
tional Dictionary of the English Language, Una
bridged, (1986), for example, defines "income" as
"a gain or recurrent benefit that is usually mea
sured in money and for a given period of time,
derives from capital, labor, or a combination of
both, includes gains from transactions in capital
assets, but excludes unrealized advances in value".
The Shorter Oxford English Dictionary (3rd ed.,
1986) defines "income" in the sense of that word
we are concerned with here, as "That which comes
in as the periodical produce of one's work, busi
ness, lands, or investments (commonly expressed in
terms of money); annual or periodical receipts
accruing to a person or corporation; revenue."
These definitions of "income" are generally con
sistent with the legal concept employed by the
Income Tax Act as canvassed by Chief Judge
Couture of the Tax Court in his decision in Fiset,
supra. At the risk of repeating his review of the
Act's provisions, I would simply note that subsec
tion 5(1), which defines income from an office or
employment, subsection 9(1), which determines
income from business or property, and subsection
39(1) [as am. by S.C. 1974-75-76, c. 26, s. 15;
1976-77, c. 4, s. 9; c. 42, s. 3; 1979, c. 5, s. 11;
1980-81-82-83, c. 48, s. 16; c. 140, s. 18; 1984, c.
1, s. 13] which defines a capital gain, all involve
the receipt of a positive or net amount which is
derived from a source within the taxation year. I
agree with the Chief Judge that subsection 63(2)
itself in using the words "income for a taxation
year" and "income for that year" together with
the phrase "(on the assumption that both incomes
are computed ...)" clearly presumes that each of
the parties received income within the meaning of
the Act in the taxation year. Moreover, the entire
ty of section 3, which is the closest thing to a
definition of "income" under the Act, consists of a
process of reduction from one amount to another
until one reaches a final amount which is said to
represent the taxpayer's income for the year. The
very explicit use of the words "remainder, if any"
in the final phrase of the section clearly mandates
the existence of something positive before the tax
payer can be said to have income for the purposes
of the Act. It seems clear to me that a fundamen
tal premise underlying the Income Tax Act is that
"income" means the "net accretion of economic
power", a definition suggested in Canada Report
of the Royal Commission on Taxation, (Carter
Commission) (1966), vol. 1, at pages 9-10. That
concept does not apply where there is no income or
income is zero.
Turning then to the section in question, there is
no clear indication that the use of the term
"income" in subsection 63(2) was intended to be
anything different than that used throughout the
rest of the Act. To my mind, this in itself is
significant. As the defendant pointed out, had
Parliament intended that in section 63 "income"
includes zero, it would have been an easy matter to
have made this intention evident. The section does
provide for numerous other possible contingencies
and considerable thought went into the wording of
this provision. Inherent in the section are a variety
of situations, for example, where supporting per
sons of the child are not the child's parents in a
strictly legal sense or where families are separated.
Often the proper application to a particular fact
situation will involve an analysis of the interaction
of more than one paragraph of the section. Even
with respect to who may in fact claim the child
care expense, care must be taken to read the
wording employed in paragraphs 63(1)(a) and (b)
in conjunction with that of subsection 63(2). Sub
section 63(1) indicates that the deduction may be
claimed by either the taxpayer or another support
ing person of the child. In general, while only one
person can deduct child care expense, either a
taxpayer or a supporting person may claim the
expense. However, subsection 63 (2) limits a claim
by the taxpayer to a portion of the expenses
incurred for the year based on the number of
weeks the supporting person with income has lower
income than the taxpayer and satisfies the condi
tions outlined in subparagraphs 63(2)(b)(iii)
through (vi). To the extent the latter conditions
are not met for a full year, a claim to deduct the
expense is shifted to the supporting person with
income which is less than that of the taxpayer.
Therefore, one cannot help but wonder how the
legislators could have failed, to have considered the
scenario presently before this Court. Even if there
was a failure to adequately express an intention
that income, as it pertains to child, care expenses,
includes zero, I must agree with the Court of
Appeal in its reasoning in Canterra Energy Ltd. v.
The Queen, [1987] 1 C.T.C. 89, at page 95 that if
a provision is not aptly worded to carry out the
intent of its drafter, the courts should not be
precluded from allowing the taxpayer to take
advantage of the benefits of the provision as
worded.
With respect to the overall object and purpose of
section 63, the parties have each asserted differing
views in this regard in support of their respective
arguments. The background to section 63 in its
prior form was considered at length by the Canadi-
an Human Rights Tribunal in Bailey et al. v.
M.N.R. (1980), 1 C.H.R.R. 193. The Tribunal
found that the section was discriminatory because
it excluded men from the benefit of the deduction,
unless they were unmarried, separated or had a
wife who was incapable of caring for the children
because of physical or mental infirmity or confine
ment to prison. It was as a result of this decision
that section 63 was amended to apply equally to
both male and female taxpayers. The distinction
drawn between higher and lower income earners in
the current provision, in my view, is clearly predi
cated on the taxpayer and the supporting person
each having income for the taxation year as pro
vided in accordance with section 3. In each case
that income, the "remainder, if any" after follow
ing the steps of section 3 must be "a net accretion
of economic power", not merely zero or no income.
I conclude that the word "income" found in
subsection 63(2) of the Income Tax Act, when
read both in its grammatical and ordinary sense,
and in its context in the Act, means the existence
of a positive sum. Where the supporting person has
no income, subsection 63(2) does not apply and
one reverts to paragraph 63(1)(b) and the taxpay
er may claim the deduction. In my view, this
finding does not result in any repugnancy or incon
sistency with the object and spirit of the Act as a
whole, nor with the intention of Parliament.
For the foregoing reasons, this action is dis
missed and the matter is referred back to the
Minister of National Revenue for reassessment in
a manner not inconsistent with these reasons. This
is an appeal to which subsection 178(2) [as am. by
S.C. 1980-81-82-83, c. 158, s. 58; 1984, c. 45, s.
75] of the Income Tax Act applies and the defend
ant is entitled to recover costs of this action.
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