Norman Lusby Goodwin v. Minister of National Revenue
Published in: (1971), 71 Dominion Tax Cases 67
Tax Appeal Board
January 8, 1971
The appellant was a medical doctor employed by the Ontario Government and also an officer in the Royal Canadian Naval Reserve. In his 1967 return, he deducted his wardroom dues and the cost of his naval uniform. The Minister disallowed both deductions. The appellant (who conducted his own appeal) contended that both claimed amounts were compulsory expenses which were properly deductible. In his notice of appeal, he maintained also that the Income Tax Act was unconstitutional. He argued that the British North America Act gives exclusive power to the provinces to levy direct taxes, that the delegation of such power from a province to the federal government was unconstitutional, and that his income for the year had all been earned in Ontario and therefore should he taxed only by that province.
Held: The appeal was dismissed. Both amounts claimed by the appellant were non-deductible personal or living expenses. For the reasons given by the Exchequer Court in M.N.R. v. Montgomery (70 DTC 6080), the appellant's wardroom dues were not deductible under section 11(10)(a) as professional membership dues, the payment of which was necessary to maintain a professional status. The cost of the appellant's uniform was not deductible under section 11(10)(c). Such cost did not constitute an amount expended for supplies that were consumed directly in the performance of the duties of the appellant's office or employment.
There was no substance to the appellant's allegation with respect to the unconstitutionality of the federal income tax legislation. Under the British North America Act, the provincial taxing powers are limited to direct taxation for provincial purposes whereas the federal taxing powers are unlimited. There was no unconstitutional delegation of taxing authority from the provinces to the federal government although there was a delegation of administrative authority in the arrangement by which the federal government collects the provincial income tax when collecting federal income tax. While the appellant's income for the year had all been earned and received in the Province of Ontario, section 3 of the federal Income Tax Act provides that the income of a taxpayer for a taxation year is his income for the year from all sources inside or outside Canada.
The appellant acted on his own behalf.
P. Vita for the Minister.
Before: W. O. Davis, Q.C.
W. O. DAVIS, Q.C.: The appellant, who is a medical doctor employed by the Ontario Government and is also a reserve officer in the Canadian Armed Forces, has appealed from an assessment to income tax dated July 3, 1968, in respect of his income for the 1967 taxation year.
In his income tax return for 1967, the appellant claimed deductions in the amount of $110.80 in respect of annual union, professional or like dues, plus an amount of $194.49 for uniform expenses. In assessing the appellant, the Minister of National Revenue disallowed the uniform expenses claimed and $95.80 of the amount claimed on account of annual union, professional or like dues, the explanation given at that time being:
Your claim for annual union, professional or like dues has been reduced because of the disallowance of 1966 dues, special assessments, and initiation fees. The revised amount is $15.
Your claim under other deduction -- (uniform expenses) -- has been disallowed as it does not qualify as a deduction under the Income Tax Act. . . .
In answer to the appellant's objection to this assessment, it was confirmed by the Minister on the ground that the amount of $194.49 in respect of uniforms claimed as a deduction from income does not come within the provisions of paragraph (c) of subsection (10) of section 11 of the Income Tax Act, and that the outlay was a personal or living expense within the meaning of paragraph (h) of subsection (1) of section 12 of the Act, whereupon the taxpayer appealed to this Board.
In the respondent's reply to the said notice of appeal, the Minister is said to have acted on the following assumptions of fact in assessing the taxpayer as he did:
(a) that during the 1967 taxation year the appellant's income was from an office or employment;
(b) that the $95.80 disallowed represented expenses incurred for dues and other charges in social clubs and organisations, payment of which was not necessary to maintain the appellant's professional status; and,
(c) that the said uniform expenses, claimed by the appellant, represented an amount not expended for supplies that were consumed directly in the performance of the appellant's office or employment.
Constitutionality of Income Tax Act questioned
The appellant's notice of appeal goes somewhat beyond the items specifically dealt with in the Minister's assessment by questioning the jurisdiction of the federal government in income tax matters, but one is left with the impression, or can at least speculate, that if the Minister had permitted the two items of deduction claimed by the appellant, the latter would not have brought up the matter of jurisdiction and would have had no complaint against the assessment on that ground.
As matters stand, in detailing his allegations of fact in his notice of appeal, the appellant enlarges the issue somewhat, as follows:
Among the reasons advanced in support of the above allegations of fact were the following:
Not entitled to deduction
In so far as the merits of this case under the Income Tax Act are concerned, the question as to the deductibility of 'wardroom ,dues', sometimes called 'mess (or messing) fees', as 'annual professional dues' under the provisions of Section 11(10)(a) was dealt with at some length by Kerr, J., of the Exchequer Court of Canada in the case of Minister of National Revenue v. R. A. F. Montgomery, 70 DTC 6080, (1970) C.T.C. 115. There the Minister of National Revenue had disallowed the deduction of wardroom dues on the premise that such dues did not constitute the payment of annual professional membership dues 'the payment of which was necessary to maintain a professional status recognized by statute' within the meaning of Section 11(10)(a) of the said Act. Kerr, J., held that such disbursements were personal or living expenses of the taxpayer, the deduction of which was prohibited by Section 12(1)(h) of the Act. This informative judgment of the Exchequer Court of Canada appears definitively to dispose of the question of the claim put forward in the appellant's notice of appeal with regard to the deduction of wardroom dues.
As to the question of the uniforms worn by officers of the Royal Canadian Naval Reserve, this matter has been very fully dealt with in the case of Christopher John Goodman v. Minister of National Revenue, 53 DTC 225, 8 Tax A.B.C. 320, where it was held by B S. W. Fordham, Esquire, Q.C., now acting Chairman of this Board, that a service uniform is not a consumable supply within the terms of Section 11(10)(c) of the Act, but is a capital asset for which no deduction may be claimed. See also Income Tax Case No. 625, (1946) 14 South African Tax Cases 528, the reasoning behind that decision being completely applicable to this matter.
Income Tax Act not unconstitutional
Turning now to the question of the constitutionality of the Income Tax Act, R.S.C 1952, c. 148, and amendments thereto, I consider it to be clearly set out in Section 91(3) of the British North America Acts, 1867 to 1965, that, while by subsection (2) of Section 92 of the 1867 Act the provinces are empowered exclusively to make laws in relation to matters of direct taxation within the province to raise revenue for provincial purposes, in subsection (3) of Section 91 thereof, among the enumerated powers of the Parliament of Canada, is the right to make laws for 'the raising of money by any mode or systems of taxation'.
In his notice of appeal, the appellant made reference to the fact that the income upon which he had been taxed had all been earned and received within the Province of Ontario and therefore should only be taxed by that province. In approaching the matter in this way, the appellant has completely overlooked the provisions of Section 3 of the Income Tax Act which provide that the income of a taxpayer for a taxation year for the purposes of Part I of that Act is his income for the year from all sources inside or outside Canada.
I fail to find any evidence of delegation of taxing authority from the provinces to the federal government. As already indicated, the provincial taxing powers are limited to direct taxation for provincial purposes whereas the federal taxing powers are unlimited. (If any authority need be cited at this late date for this precedent, reference may be had to Bank of Toronto v. Lambe, a judgment of the Privy Council of Great Britain delivered July 9, 1887, and conveniently reported in (1917-27) C.T.C. at page 82.)
In practice, the federal and provincial legislatures each enact their own income tax statutes and, by arrangement amounting to a delegation of administrative authority, arrange for the federal government to collect provincial income tax at the same time as it is collecting federal income tax, both of which are direct taxes. The provincial income tax raised for purely provincial purposes is then paid over to the provincial governments in accordance with a formula arranged between the two taxing authorities.
I therefore find no substance to the appellant's allegations with respect to the unconstitutionality of the federal income tax legislation which imposes a direct tax on the income of individuals or of any unconstitutional delegation of taxing authority to the federal government by the provincial government of Ontario or of any other province.
In the circumstances, the assessment to income tax challenged herein is confirmed and the appeal is dismissed.
(Sgd.)W. O. Davis, Member.