Lucien Pilon v. Her Majesty the Queen

Court File No. 95-3886(IT)I

Tax Court of Canada
Montreal, Quebec

Lamarre Proulx T.C.J.

Heard: May 9, 1996
Judgment: July 18, 1996

The Appellant, in person.
Michel Ares, for the Respondent.


The appeals from the assessments made under the Income Tax Act for the 1990, 1991 and 1992 taxation years are dismissed, in accordance with the attached Reasons for Judgment.


LAMARRE PROULX T.C.J.:—The appellant is appealing under the informal procedure from assessments by the Minister of National Revenue ("the Minister") for the 1990, 1991 and 1992 taxation years.

This appeal concerns the inclusion of retirement pensions in computing the appellant's income, the imposition of penalties for failure to file tax returns within the prescribed time and the constitutionality of the Income Tax Act ("the Act").

First, the appellant relied on an amendment made to the Public Service Superannuation Act, 40-41 Eliz. II, c. 46, s. 7:

7. Subsection 10(10) of the said Act is repealed and the following substituted therefor:

(10) Subject to Part II of the Garnishment, Attachment and Pension Diversion Act and to the Pension Benefits Division Act:

(a) a benefit under this Part or Part III is not capable of being assigned, charged, anticipated or given as security and any transaction that purports to assign, charge, anticipate or give as security any such benefit is void;

(b) a benefit to which a contributor, surviving spouse or child is entitled under this Part or Part III is not capable of being surrendered or commuted during the lifetime of that person and any transaction that purports to so surrender or commute any such benefit is void; and

(c) a benefit under this Part or Part III is exempt from attachment, seizure and execution, either at law or in equity.

That legislation also made a similar amendment to the Canadian Forces Superannuation Act.

The appellant reasoned that since pension benefits can neither be attached nor assigned they are not subject to income tax.

He further argued that his Quebec government pension income is not subject to tax because the appellant transferred years of service with the Canadian Army and those pensions are not subject to tax.

The appellant further maintained that the Act is not constitutional.

So far as the appellant's pension benefits are concerned, he referred to amendments made to federal legislation while he was receiving a pension under a Quebec statute, namely the Act respecting the government and public employees retirement plan, R.S.Q. c. R-10. However, s. 222 of that Act also provides that pension benefits may not be assigned or attached.

The appellant received the pension payments from the Commission administrative des régimes de retraite et d'assurances ("Carra"). This body was created by the same statute. The amounts received under that pension plan were $34,854.96, $36,528 and $38,646 for 1990, 1991 and 1992 (Exhibit I-6).

In so far as the appellant's service with the Canadian Army is concerned, the appellant was entitled from the date of his application, namely February 16, 1993, to a pension for chronic rhinitis due to military service in the Second World War, under s. 21(1) of the Pension Act. This pension was not included in calculating the appellant's income under s. 81(1)(d) of the Act.

The evidence disclosed that the appellant failed to comply with the duty to file his income tax returns for the 1990, 1991 and 1992 taxation years by April 30 of the following year, at the latest, for each of the taxation years concerned. Under s. 162(1) of the Act, the Minister imposed penalties amounting to $1,378.57 for 1990, $1,797.02 for 1991 and $603.09 for 1992. There was no proof of reasonable diligence.


Section 56(1)(a)(i) of the Act reads as follows:

"(1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,

(a) any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,

(i) a superannuation or pension benefit including, without limiting the generality of the foregoing,"

This provision of the Act means that pensions received under government plans are subject to income tax even though those plans usually contain the provision prohibiting assignment or attachment. The only pensions which are exempt from tax are those specifically exempted by Parliament, as provided in s. 81(1) of the Act. Exemption from attachment and assignment on the one hand and exemption from tax on the other are distinct legal concepts and are not equivalent. Accordingly, the pension benefits received by the appellant from Carra were correctly included by the Minister in calculating the appellant's income.

Section 162(1) of the Act reads as follows:

"(1) Every person who has failed to file a return of income for a taxation year as and when required by subsection 150(1) is liable to a penalty equal to the total of

(a) an amount equal to 5% of the person's tax payable under this Part for the year that was unpaid when the return was required to be filed, and

(b) the product obtained when 1% of the person's tax payable under this Part for the year that was unpaid when the return was required to be filed is multiplied by the number of complete months, not exceeding 12, from the date on which the return was required to be filed to the date on which the return was filed".

In view of the circumstances relating to the failure to comply with s. 150(1) of the Act, as set out above, the Court must conclude that the penalties were correctly imposed by the Minister.

The appellant challenged the constitutionality of the Act, relying on the Supreme Court of Canada judgment in A.G. of N.S. and A.G. of Can. and Lord Nelson Hotel Company Limited, [1951] S.C.R. 31, which held that the federal and provincial governments could not delegate the powers conferred on them by the constitutional Act. I quote the passage from that judgment referred to by the appellant:

"The constitution of Canada does not belong either to Parliament, or the Legislatures; it belongs to the country and it is there that the citizens of the country will find the protection of the rights to which they are entitled. It is part of that protection that Parliament can legislate only on the subject matters referred to it by section 91 and that each Province can legislate exclusively on the subject matters referred to it by section 92. The country is entitled to insist that legislation adopted under section 91 should be passed exclusively by the Parliament of Canada in the same way as the people of each Province are entitled to insist that legislation concerning the matters enumerated in section 92 should come exclusively from their respective Legislatures. In each case the Members elected to Parliament or to the Legislatures are the only ones entrusted with the power and the duty to legislate concerning the subjects exclusively distributed by the constitutional Act to each of them.

No power of delegation is expressed either in section 91 or in section 92, nor, indeed, is there to be found the power of accepting delegation from one body to the other; and I have no doubt that if it had been the intention to give such powers it would have been expressed in clear and unequivocal language."

In fact, the judgment to which reference must be made on the constitutionality of the Act is Caron v. The King, [1924] A.C. 999. We see there that the Act is not a delegation of power and that the constitutional Act authorizes the federal Parliament to collect income taxes for federal purposes.

"By s. 91 of the Act it is provided that: "It shall be lawful for the Queen, by and with the advice and consent of the Senate and House of Commons, to make laws for the peace, order and good government of Canada, in relation to all matters not coming within the classes of subjects by this Act assigned exclusively to the Legislatures of the Provinces; and for greater certainty, but not so as to restrict the generality of the foregoing terms of this section, it is hereby declared that (notwithstanding anything in this Act) the exclusive legislative authority of the Parliament of Canada extends to all matters coming within the classes of subjects next hereinafter enumerated, . . . . . that is to say: . . . . (3.) The raising of money by any mode or system of taxation . . . . . And any matter coming within any of the classes of subjects enumerated in this section shall not be deemed to come within the class of matters of a local or private nature comprised in the enumeration of the classes of subjects by this Act assigned exclusively to the Legislatures of the Provinces."

Money raised by an income tax Act is unquestionably money raised by a mode or system of taxation.

It is true that by the provisions of s. 92 the Legislature in each Province may exclusively make laws in relation to certain matters coming within the classes of subjects which are there enumerated, and that one of these classes of subjects is "direct taxation within the Province in order to the raising of a revenue for provincial purposes".

As such particular direct taxation is reserved to the Province, to that extent there is some deduction to be made from the totality of power apparently given exclusively to the Dominion Parliament to raise money for any purpose by any mode or system of taxation.

This apparent antinomy has been noticed in various decisions. It is sufficient to mention Citizens' Insurance Co. v. Parsons and the Bank of Toronto v. Lambe. In the latter case, their Lordships observed as follows:"It is impossible to give exclusively to the Dominion the whole subject of raising money by any mode of taxation, and at the same time to give to the provincial Legislatures, exclusively or not at all, the power of direct taxation for provincial or any other purposes. This very conflict between the two sections was noticed by way of illustration in the case of Parsons": and after quoting from the earlier judgment, their Lordships proceeded:"Their Lordships adhere to that view, and hold that, as regards direct taxation within the Province to raise revenue for provincial purposes, that subject falls wholly within the jurisdiction of the provincial Legislatures."

Upon any view there is nothing in s. 92 to take away the power to impose any taxation for Dominion purposes which is prima facie given by head 3 of s. 91. It is not therefore ultra vires on the part of the Parliament of Canada to impose a Dominion income tax for Dominion purposes; and the first point must therefore be decided against the appellant." [Emphasis added]

For all these reasons, I must conclude that the appellant was correctly assessed in fact and in law for the years at issue, and the appeals are accordingly dismissed.