Qing Gang K. Li v. The Queen, 94 DTC 6059, [1994] 1 CTC 28 (FCA)

Isaac, C.J. (McDonald concurring):—This section 28 application seeks to review and set aside the decision of a judge of the Tax Court in which it was held that the sum of $14,249.92 which the applicant had received in the taxation year 1990 as a scholarship or bursary payment, from a Canadian University, was subject to taxation as income.

Facts

The applicant is a Chinese citizen who was resident in China before he came to Canada on July 15, 1984. He entered Canada on a visitor's visa issued to him under the Immigration Act, 1976, S.C. 1976, c. 52 (now the Immigration Act, R.S.C. 1985, c. 1-2). It expired on August 30, 1985.

Upon entry into Canada the applicant stated that the purpose of his visit was to pursue studies in Canada. He enrolled at the University of Ottawa and pursued his studies there successfully from July 1984 to July 1988, when he entered McGill University to pursue doctoral studies in experimental medicine, in which he is still engaged.

In August, 1987, the applicant married a Canadian citizen and, with her, established a family home in Ottawa where the spouse continues to reside and work. In August or September, 1987, some 15 to 30 days after the marriage, the applicant applied for landed immigrant status under the Immigration Act, supra. On July 13, 1990, his application was granted and his status changed from visitor to landed immigrant.

At the hearing before the Tax Court, the applicant testified that he acquired landed immigrant status for three reasons. First, because, if successful, he would no longer be required to leave Canada upon the completion of his studies, a likely consequence of his retaining the status of a visitor. Secondly, because he wished to take advantage of the lower school fees paid by students who were either citizens or permanent residents of Canada. Thirdly, because he wished to avoid the inconvenience of yearly renewals.

Prior to his acquisition of landed immigrant status, the applicant was required by law to and did renew his visa every year from 1985 to July, 1990 when his status changed. Evidence of these renewals was also required by McGill University as conditions precedent to the payment of bursaries to the applicant for the years 1988, 1989 and 1990. The amount which the applicant received in 1990 was $14,749.92; the amount in issue on this application. There was no evidence before the Tax Court judge or before us as to the precise time during the year 1990 when the University paid this amount to the applicant.

The issue before the Tax Court judge was whether that amount was taxable as income received by the applicant in the taxation year 1990 or whether it was exempt from taxation, as the applicant claims, by reason of Article 19 of the Canada-China Income Tax Agreement ("the Agreement"). [1] As mentioned earlier, the Tax Court judge determined the issue adversely to the applicant.

Before us, as he did below, the applicant appeared unrepresented. He conceded that after the date on which he became a landed immigrant he was not entitled to an exemption by reason of Article 19 of the Agreement, because he was then no longer temporarily resident in Canada; but he contended strenuously that before that date he was so entitled and that the Tax Court judge was wrong in concluding otherwise.

The applicant says that he was temporarily resident in Canada before July 13, 1990 for two reasons. First, because until that date he was required by the Department of Manpower and Immigration to renew his student's visa annually. Secondly, because McGill University required him to pay foreign students’ fees.

Since Article 19 of the Agreement lies at the heart of the dispute, I reproduce it below in both official languages:

English

Payments which a student, apprentice or business trainee who is, or was immediately before visiting a contracting state, a resident of the other contracting state and who is present in the first-mentioned contracting state solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that contracting state.

[Emphasis added.]

French

Les sommes qu'un étudiant, un stagiaire ou un apprenti qui est, ou qui était immédiatement avant de se rendre dans un état contractant, un résident de l’autre état contractant et ui séjourne dans le premier état contractant à seule fin d'y poursuivre ses études ou sa formation, reçoit pour couvrir ses frais d’entretien, d’études ou de formation ne sont pas imposables dans cet état contractant.

[Accentuation ajoutée.]

The Agreement is one of many that Canada has entered into with foreign States and is patterned on the Model Convention for the Avoidance of Double Taxation with respect to Taxes on Income and on Capital which was adopted by the Organization for Economic Co-operation and Development (OECD) on April 11, 1977. As a result, the decisions of courts in OECD states as to the meaning of the various articles in similar provisions in their governing convention could be of assistance in deciding the meaning of the words in the agreement.

Article 20 of the OECD Model Convention reads:

Article 20: Students

Payments which a student or business apprentice who is or was immediately before visiting a contracting state a resident of the other contracting state and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that state, provided that such payments arise from sources outside that state.

It is evident that except for the concluding proviso, Article 20 of the Model Convention is virtually identical to Article 19 of the agreement.

Reduced to its essentials, the position of the applicant is that he is entitled to claim the shelter of Article 19 because, he says, he has satisfied all conditions precedent to such entitlement. More particularly, he says that:

(a) he is a student;

(b) immediately before coming to Canada, he was a resident of China;

(c) he is present in Canada solely for the purpose of his education; and

(d) he received payment of the amount in dispute solely for the purpose of his maintenance, education or training.

Counsel for the respondent, on the other hand, while conceding that the applicant has satisfied the conditions mentioned in (a), (b), and (d) above, contends that he has not satisfied the condition mentioned in (c). In support of that contention counsel says that Article 19, properly construed, applies only to persons who are resident in Canada temporarily and in 1990 the applicant was not a temporary resident of Canada, having lost that status when he made application to become a landed immigrant. This, in essence, is the basis upon which the learned Tax Court judge supported her conclusion, and counsel submitted that it was well founded. The Tax Court judge concluded her reasons as follows (applicants’ application records, pages 37-38):

I am not saying that the establishment of family ties have not changed the purpose of the appellant’s presence in Canada, but I am of the view that, it is more because the appellant can no longer be found to be a visiting student in the year 1990, that he is not allowed to claim the exempting provision of Article 19 of the agreement. I am not basing my finding on the Immigration Act and the meaning that it gives to a visitor. I am giving the term "visit" its usual sense, that is to be temporarily present.

There is no Canadian decision on that specific question. However, a review of the administrative rulings and court decisions pursuant to the other international tax treaties based on the OECD model in Edwardes-Ker International Tax Treaties shows that this article on student income applies to individuals who are temporarily present in the other contracting states. The various tax treaties in relation to student income use the expression "visit" or “is temporarily present" and the rulings and court decisions speak of transient persons or sojourners.

It is not a student’s marriage in Canada that necessarily brings an end to the visiting student status. In the circumstances of the case at bar, it is the appellant’s marriage to a Canadian citizen, a professional woman residing and working in Canada, the appellant’s application for landed immigrant status, the length of his stay in Canada, his establishment of a family home and the indefinite term of his stay. All these circumstances are not indicators of a student temporarily present in Canada.

It is my view that Article 19 has as its purpose the avoidance of double taxation of Canadian and Chinese nationals who are in receipt of income while temporarily in the state of which he or she is not a national. This much is clear from the recitals in the agreement and from reading the text of the agreement as a whole. Although the English version of Article 19 is arguably ambiguous, the use of the phrase qui séjourne in the French version, which is equally authoritative, puts it beyond doubt that the presence in Canada of which the article speaks, as a prerequisite to its successful invocation, is a temporary one. Here, the applicant was a visitor and as such he was entitled to claim the benefit of Article 19 while he retained that status in Canada. However, for reasons of his own, he chose to make application to become a landed immigrant, thus evidencing an intention to remain in Canada permanently. This intention was actualized when he was granted landed immigrant status on July 13, 1990. In these circumstances the applicant cannot, in my view, properly invoke Article 19 of the agreement for his benefit.

Article 3.2 of the agreement reads:

2. As regards the application of this agreement by a contracting state any term not defined in this agreement shall, unless the content otherwise requires, have the meaning which it has under the law of the contracting state concerning the taxes to which this agreement applies.

The Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") does not define the word "visiting". Thus, in deciding whether in the taxation year 1990 the applicant was a visitor resident in Canada, resort must be had to the ordinary meaning of the word interpreted in context of Article 19 and the agreement as a whole. This principle is well established (Pfizer Co. v. D./ M.N.R., [1977] 1 S.C.R. 456, 68 D.L.R. (3d) 9, at page 460 (D.L.R. 12). This was the approach taken by the learned Tax Court judge when she concluded that it meant temporarily resident and her conclusion is supported by the authorities upon which she relies. I find no error in that conclusion. On this basis there was ample evidence before her to support the conclusion of fact that in 1990 the applicant was no longer temporarily resident in Canada. In any case, since the applicant did not establish that he had received the amount in dispute before July 13, 1990 the Tax Court judge was right in my view in concluding that the amount was taxable as income received during that year.

It is my view, therefore, that the applicant has failed to establish any legal basis for intervention by this Court and that the application should be dismissed.

Robertson, J.A. (dissenting):— The Minister of National Revenue (the "Minister") reassessed the applicant for the 1990 taxation year by including in his income Canadian university scholarships totalling $14,749.92 (less the $500 exemption). The applicant, a citizen of China, was unable to convince the Minister that a portion of those moneys was exempt from taxation pursuant to Article 19 of the Canada-China Income Tax Agreement, see Canada-China Income Tax Agreement Act, 1986, S.C. 1986, c. 48, Part III (the “tax agreement”). Article 19 states:

Payments which a student, apprentice or business trainee who is, or was immediately before visiting a contracting state, a resident of the other contracting state and who is present in the first-mentioned contracting state solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that contracting state.

Unassisted by legal counsel, the applicant invoked and pursued the informal appeal procedures under the Tax Court of Canada Act, 1980-81-82-83, c. 158, but was unable to convince the learned Tax Court judge that the Minister had erred in his reassessment. Nor did he persuade my colleagues that judicial review was warranted. I have had the advantage of reading the majority reasons but, with respect, am unable to concur. As my disagreements are fundamental, I must state the case afresh. The fact that this section 28 application stems from a “small claims” tax case does not detract from the significance of the legal issues it raises.

Facts

The essential facts are not in dispute. Prior to July 1984, the applicant was a citizen and resident of China. On July 15, 1984, he entered Canada on a visitor's visa issued to him under the Immigration Act, 1976, S.C. 1976, c. 52. The stated purpose of his visit was to pursue university studies. From July 1984 to July 1988, he attended university in Ottawa. In July 1988, the applicant was accepted into a Ph.D. program in experimental medicine at McGill University. At all relevant times he was and remains in full-time attendance at that institution.

In August 1987, the applicant married a Canadian citizen. Fifteen days after the marriage he applied for landed immigrant status. He did so for two principal reasons. First, he wanted to avoid the possibility of being forced to leave Canada with his wife immediately upon completion of his studies but before expiration of his visa (respondent's application record, transcript at page 18). Second, he wanted to avoid the higher tuition fees demanded of "foreign" students.

The applicant was required to renew his visitor's visa from time to time until he obtained landed immigrant status on July 13, 1990. In 1990, he received $14,749.92 in scholarships from McGill. The facts, however, do not reveal what portion of that money was received between January 1 and July 13, 1990.

The positions of the parties

Before turning to the reasons for judgment of the Court below, it is instructive to outline the respective positions of the parties. As will become apparent, the Minister's predilection to advance divergent grounds for denying the tax exemption throughout the history of this case was bound to generate confusion.

After obtaining landed immigrant status, the applicant wrote to Revenue Canada for a determination with respect to his residency status. The Minister responded that the applicant would be "considered a resident of Canada as of July 15 nineteen eighty-four (1984) for taxation purposes" (respondent's application record, transcript at page 27). However, the Minister's position would not remain constant.

In response to the applicant's objection to the inclusion of the scholarship moneys in income, the Minister explained his decision as follows (reasons for judgment at page 2):

To qualify for an exemption under Article 19 of the Canada/China Tax Treaty, an individual must be considered a resident of China.

You have been considered to be a resident of Canada as of the date you applied for landed status.

As a Canadian resident, you are not eligible for this exemption and scholarship income is taxable under paragraph 56(1)(n) of the Income Tax Act.

At this juncture, the Minister's position was that the applicant's residency Status was fixed as of the date of his landing application. This argument was apparently based on the presumption that once an individual is considered a resident of Canada, he or she can no longer be regarded a resident of China.

The Minister’s obligation to provide the applicant with legal justifications for denying him the exemption had the effect of further confusing the Minister's position. In the reply to the applicant's notice of appeal, the reassessment was Claimed to have been based on the following assumptions (reasons for judgment at pages 1-2):

5. In so reassessing the appellant, the Minister made the following assumptions of fact:

(a) the appellant came to Canada on a student visa on July 15, 1984 from China;

(b) in 1988, the appellant went to McGill university and required a student visa to register and a temporary permit to get his stipends for 1988, 1989 and 1990 taxation years;

(c) in 1988 the appellant married a Canadian resident and applied for landed immigrant status in that year;

(d) the date the appellant applied for landed immigrant status is the date at which time he changed his student status to resident;

(e) by applying for landed immigrant status, it is the appellant’s intent to become a resident of Canada;

(f) the appellant became a landed immigrant on July 13, 1990 as declared and signed by himself on the form NR74(E), on June 23, 1991.

It is to be noted that while the Minister did not change his mind with respect to the date the applicant became a Canadian resident, he did state that the applicant's" intention" to become a resident (manifested by his application for landed immigrant status) was relevant to the legal issue of his residency. As is well known, the notion of “intention” is relevant only to a determination with respect to “domicile”.

It appears that it was not until the hearing before the Tax Court judge that the Minister abandoned the argument that the entitlement to the article 19 exemption depended upon residency status. At that time, the respondent's position as understood by the Tax Court judge was as follows (reasons for judgment at page 3):

[By] marrying and applying for the landed immigrant status, the appellant is no longer in Canada solely for the purpose of his education.

On judicial review, the Minister sought refuge in the conclusions of the Tax Court judge. The Minister, without expressly acknowledging his earlier positions, focused his argument upon the proper construction of Article 19. I now turn to the applicant's position.

The applicant has always considered himself to be a resident of Canada for tax purposes. His position before the Tax Court was straightforward. He maintained that scholarship moneys received prior to the date he became a landed immigrant (July 13, 1990) are exempt under the tax agreement. Moneys received after that date are taxable (respondent's application record, transcript at pages 23-24).

While the applicant's argument lacks legal sophistication, it does reflect certain rationales underlying the law of unjust enrichment (improvement). As a "foreign" student at McGill, the applicant was required to pay significantly higher tuition fees than resident students. Once he was granted landed status, he was no longer required to pay the higher tuition fees. Hence, the applicant concedes that while he should be able to invoke the tax exemption until acquiring landed immigrant status, he is not entitled to claim the exemption after that date. Unfortunately, the fact that tax law and the setting of tuition fees must be treated as two juristic solitudes (federal v. provincial) is a legal reality which most Canadians would not readily appreciate. Thus, I rest the applicant's case on conventional legal analysis.

The decision below

With respect, it is not easy to discern the true grounds which motivated the learned Tax Court judge to deny the exemption. Any inconsistencies in her reasons for judgment arise, in my opinion, from the Minister's unwillingness to pursue a consistent line of argument with respect to the purpose and application of the exemption.

At page 2 of the reasons for judgment, the Tax Court judge articulated the applicant's position in the following terms:

The appellant's position is that immediately before coming to Canada, he was a resident of China and that he is present in Canada solely for the purpose of his education or training. He states that Article 19 requires him only to have been a resident of China before his coming to Canada and not to have maintained his residential status with China.

While the above statement is consistent with the applicant's argument, it is by no means a complete summation. As well, it raises the inference that the Tax Court judge perceived the issues to be whether the applicant was a resident of Canada or of China and the point in time at which his status changed. This impression is reinforced at pages 3 and 4 of the reasons for judgment:

There was no evidence adduced by the appellant that he was still a resident of China and subject to China's income tax. One of the objects of the agreement is the avoidance of double taxation. If the appellant is no longer subject to the tax legislation of China, it would appear that he has no ground to ask for the application of the agreement. The appellant argues that Article 19 requires only that ne be a resident of China before coming to study in Canada. It is true of Article 19, but the scope of the agreement is clearly stated at Article 1:

This agreement shall apply to persons who are residents of one or both of the contracting states.

It is also clear from the preamble that says:

The Government of Canada and the Government of the People’s Republic of China,

Desiring to conclude an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income,

Have agreed as follows: [Emphasis is by Tax Court judge]

If the appellant is no longer subject to the income tax legislation of China, it would seem that he cannot ask for the application of the agreement, the purpose of which is the avoidance of double taxation. He must then be treated as another Canadian resident. I am not however deciding the case at bar on this aspect.

Although the Tax Court judge declined to decide the case on the grounds of residency, in my view this issue obviously coloured her analysis of the other salient criteria prescribed by Article 19. On the question of whether the applicant was presention Canada solely for the purpose of his education, she concluded (reasons for judgment at page 4):

With respect to the argument of counsel for the respondent that the appellant was not present in Canada solely for the purpose of his education or training, it may very well be that the appellant's marriage to a Canadian citizen working in Canada, the appellant's application for landed immigrant status and his indefinite stay changed the purpose of the appellant’s presence in Canada and that he is no longer present in Canada solely for the purpose of his education and training within the meaning of Article 19 of the agreement. It would seem however, from my reading on the subject, that these words are there to ensure that the purpose of the stay cannot have another economic purpose than the obtaining of an education or training and that the moneys received by the student are not received for purposes other than the student's education and training and not for some other economic purposes, such as the rendering of professional services or the carrying on of a business. These other economic purposes would then be the real source of the income that the student receives. In other terms, the words in question would be there to ensure that the exempted income under Article 19 is truly a student income.

The Tax Court judge reasoned that the applicant's “family ties" may have changed the purpose of his presence in Canada. However, her conclusion that the applicant was not entitled to the article 19 tax exemption was based on the determination that he could no longer be classified as a "visiting student” for the 1990 taxation year. At pages 4 and 5 of the reasons for judgment, she concluded:

I am not saying that the establishment of family ties have changed the purpose of the appellant's presence in Canada, but I am of the view that, it is more because the appellant can no longer be found a visiting student in the year 1990, that he is not allowed to claim the exempting provision of Article 19 of the agreement. I am not basing my finding on the Immigration Act and the meaning that it gives to a visitor. I am giving the term “visit” its usual sense, that is to be temporarily present.

There is no Canadian decision on that specific question. However, a review of the administrative rulings and court decisions pursuant to the other international tax treaties based on the OECD model in Edwardes-Ker International Tax Treaties shows that this article on student income applies to individuals who are temporarily present in the other contracting states. The various tax treaties in relation to student income use the expression "visit" or “is temporarily present" and the rulings and court decisions speak of transient persons or sojourners.

It is not a student's marriage in Canada that necessarily brings an end to the visiting student status. In the circumstances of the case at bar, it is the appellant's marriage to a Canadian citizen, a professional woman residing and working in Canada, the appellant's application for landed immigrant status, the length of his stay in Canada, his establishment of a family home and the indefinite term of his stay. All these circumstances are not indicators of a student temporarily present in Canada.

[Emphasis added]

The issues

The respondent maintains that three principal requirements must be met before the tax exemption may properly be invoked:

(a) The student, apprentice or business trainee who receives the payment must be a resident of China, or must have been a resident of China immediately before visiting Canada;

(b) the student, apprentice or business trainee must be "visiting" Canada and must be present in Canada solely for the purpose of his education or training”;

(c) the student, apprentice or business trainee must receive the payment in question for the purpose of his maintenance, education or training.

It is common ground that only paragraph (b) is in issue. The respondent and the Tax Court judge assumed that the applicability of the tax exemption hinged on two separate determinations: Was the applicant a "visitor"? If so, was he present solely for the purpose of obtaining an education?

Having identified the primary issues, it remains to be asked whether it is of any relevance to consider the resident/non-resident status of the applicant under the Income Tax Act, S.C. 1970-71-72, c. 63, as am. (the "Act"). Though the Minister has long since abandoned that approach, I do not believe the issue can be ignored. Much of this case has proceeded on the apprehension that once the applicant was considered a resident of Canada he could no longer be considered a resident of China. This is so despite the fact that one of the purposes of a tax treaty is to avoid double taxation precisely because one can be found to be a resident of both countries and hence taxable by each.

I agree that it is unnecessary to determine as a matter of law the residency of the applicant. I note, however, that the indicia listed by the Tax Court judge in determining whether the applicant had lost his visitor status mirror those used in the determination of residency. This similarity renders it necessary to dispel the nagging inference underscoring her decision that if one is found to be a resident of Canada for income tax purposes then one cannot be a "visitor" to Canada for the purposes of Article 19 of the tax agreement.

As treaty interpretation is understood to be a subject in and of itself, rather than a mere extension of statutory interpretation, the respondent came pre- pared to argue extensively the interpretation of the tax agreement (see J.F. Jones et al., The Interpretation of Tax Treaties with Particular Reference to Article 3(2) of the OECD Model-I, British Tax Review 14). In my view, the proper interpretation of Article 19 does not require the type of analysis which might have been necessary had the issue before us concerned the problem of double taxation. As will be explained below, Article 19 was not intended to address the problem of double taxation of scholarship moneys.

There is one other matter which must be acknowledged. While the Tax Court judge stated that there was no evidence regarding the source of the scholarship (reasons for judgment at page 2), the hearing before us proceeded on the basis that the moneys were received from McGill University. A supplementary T4 slip was included in the application record without objection from the respondent, most likely because the source of the scholarship is not a relevant factor under Article 19 (applicant's application records at page 22). As noted earlier, the precise amount received by the applicant from that institution between January 1 and July 13, 1990 is not before us.

Analysis

Ultimately, the learned Tax Court judge focused on two questions: Was the applicant a visitor? If so, was he here in this country solely for the purpose of his education?

In addressing these questions, it must be made clear at the outset that we are dealing with taxation of individuals who have entered Canada to pursue full-time university studies and who are not permitted to engage in employment outside of the university context (i.e., teaching assistants). More broadly, we are dealing with the tax treatment of scholarship moneys received from a source within Canada. Hence, the starting point of the analysis lies in the tax treatment accorded scholarship moneys under the Act. Once that general framework is in place, consideration can be given to the narrower question of the intended scope and effect of Article 19.

The general scheme of the Act is that individuals found to be residents of this country are subject to tax on their world income (see sections 2 and 3 of the Act). Specifically, paragraph 56(1)(n) of the Act requires that scholarship moneys of residents be included in income irrespective of its source. The treatment of non-residents is more restrictive. Generally speaking, such individuals are subject to tax with respect to income derived from a Canadian source (section 115 of the Act). Subparagraph 115(2)(e)(ii) of the Act provides that a non-resident must include in income scholarship moneys received from a source in Canada (e.g., McGill University). Thus, it makes no difference whether the applicant is found to be a resident or non-resident of this country for tax purposes. The true issue is whether he can avail himself of the exemption found in Article 19.

In my opinion, the learned Tax Court judge did not address that issue. She essentially held that the applicant's status changed from one of "visitor" to one of "resident" at the moment landed immigrant status was sought. Admittedly that conclusion was not expressly stated in the formal reasons for judgment, but the indicia relied on to disqualify the applicant are all derived from the case law concerning the determination of whether an individual is a resident of this country for tax purposes. The indicia identified by the Tax Court judge are:

(a) marriage to a Canadian citizen, a professional woman residing and working in Canada;

(b) the application for landed immigrant status; [2]

(c) the length of stay;

(d) the establishment of a family home; and

(e) the indefinite terms of the applicant's stay.

Pursuant to the reasoning of the seminal Supreme Court decision in Thomson v. M.N.R., [1946] S.C.R. 209, [1946] C.T.C. 51, 2 D.T.C. 812, it is trite law that residency status is not governed by a single criterion but by the cumulative weight of indicia now scattered throughout the tax reports. Professor Krishna has identified no less than 31 relevant factors in determining an individual's residence and the list is by no means exhaustive: see V. Krishna, The Fundamentals of Canadian Income Tax, 4th ed. (Toronto: Carswell, 1993) at pages 84-86. To exacerbate matters, the relative weight to be attached to any particular criterion is "a question of fact in each case” (at page 83).

It is of immediate interest that the indicia identified by the Tax Court judge to determine whether the applicant was entitled to the article 19 exemption are the very ones so often raised or applied to the question of whether an individual is a resident of Canada for tax purposes (see, e.g., Lee v. M.N.R., [1990] 1 C.T.C. 2082, 90 D.T.C. 1014). The Tax Court judge effectively concluded that the article 19 exemption is unavailable once an individual is found to be a resident of this country for tax purposes because the problem of double taxation is no longer present. That reasoning and conclusion had been adopted earlier by the Minister and, in my opinion, are fundamentally flawed.

In my opinion, the purpose of Article 19 is not to prevent double taxation but to ensure that money received for the purpose of maintaining a student is rendered immune from taxation by the contracting state (Canada) in which the student is pursuing studies. It is true that an individual can have more than one residence for tax purposes and may so be subjected to double taxation. For example, the applicant could be declared a resident of Canada for tax purposes and at the same time subject to taxation in China solely on the basis of his citizenship. One of the obvious purposes of international tax treaties is the elimination of double taxation (and the prevention of tax evasion) by prescribing rules to govern which of two contracting states has the right to tax the individual. Article 4 of the Canada-China Income Tax Agreement addresses that paramountcy question. Hence, the contextual approach to statutory interpretation dictates that Article 19 must have been intended to serve another purpose. This conclusion is, in my opinion, reinforced by the wording of Article 19. At this point, it is worthwhile reproducing that provision:

Payments [received by] a student. . .who is or was immediately before visiting [Canada], a resident of [China] and who is present in [Canada] solely for the purpose of his education. . . shall not be taxed in [Canada].

[Emphasis added.]

In my view, it seems clear that the scholarship moneys of a student who is or was a resident of China are not subject to taxation in Canada. Moreover, Article 19 implicitly, if not expressly, contemplates a student who is no longer a resident of China for tax purposes but who is classified as a Canadian resident under the Act.

It must be emphasized that Article 19 is not unique to the Canada-China Income Tax Agreement. For example, Article XX of the Canada-United States Income Tax Convention (1980) provides an exemption from Canadian tax to American students in respect of amounts received from the United States for the purpose of their education in Canada. The Canada-China Income Tax Agreement differs in only one material respect: the exemption under Article 19 extends to moneys received from a Canadian source.

It is understandable that many countries prefer tax exemptions to embrace scholastic awards irrespective of their source. They are simply unable to pro vide access to educational programs within their own universities, much less full funding for their students who must study abroad. It is this economic reality that leads to agreements of the kind exemplified by Article 19.

In summary, it seems eminently clear that an individual who is found to be a resident of Canada for tax purposes is not automatically precluded from claiming a tax exemption under Article 19. Hence our task is to determine as a matter of reasonable implication the point in time at which the applicant was no longer entitled to the benefits of Article 19. In other words, at what point in time could it be reasonably concluded that the applicant was no longer visiting Canada solely for the purpose of his education?

Had the applicant obtained Canadian citizenship, it is relatively clear that the tax agreement would no longer have been applicable. The applicant is also willing to concede that once he obtained landed immigrant status, he had no moral right to claim the benefit of Article 19. There is only one other point at which the applicant could have become ineligible for the exemption: the day on which he applied for landed immigrant status.

In my opinion, applying for landed immigrant status is not a sufficient ground on which to exclude the application of a tax agreement. Applicants for landed immigrant status have only a mere hope or expectation that the government will look favourably upon their request. Given the diverse reasons underlying a decision to seek landed immigrant status, it would be improper to conclude that such applicants intend to forego the benefits of existing citizenship. Accordingly, for purposes of this application, it is sufficient to conclude that the applicant could no longer claim the tax exemption once he obtained landed immigrant status. It remains to be determined, however, whether he lost the benefit of the tax exemption because he was not present in Canada solely for the purpose of his education.

On this particular issue, the learned Tax Court judge concluded, and in my opinion correctly so, that one of the obvious purposes of Article 19 is to ensure that the exempted “income” is truly student income. The American cases reveal that students invoking tax exemptions under an Article 19 equivalent were seeking to shelter employment income earned at a time when they were not enrolled in university; see Quidwai v. C.I.R. (1984), 47 T.C.M. 962; Siddiqiv. C.I.R. (1978), 70

T.C. 553; and Budhwani v. C.I.R. (1978), 70 T.C. 287. Needless to say, the facts of the present case do not generate those kinds of concerns. Suffice it to say that the scholarship moneys are truly student income.

Can it be said that the establishment of family ties (marriage) changed the purpose of the applicant’s presence in Canada? The applicant's visitor’s visa limited the purpose of his stay to the pursuit of university studies while expressly ruling out the possibility of seeking employment. In my opinion, the establishment of family ties is irrelevant to the question of the applicability of Article 19. If the establishment of family ties changed anything, it changed the applicant's status from one of “non-resident” to that of "resident". The immediate objection to this analytical approach is that it has the effect of integrating two legislative regimes: the Income Tax Act and the Immigration Act. In my opinion, the objection can be disposed of readily.

It is true that one should not confuse, for example, the notion of residency under the Act with that used for determining the right to register as a voter; see MacDonald v. M.N.R., [1968] Tax A.B.C. 502, 68 D.T.C. 433. It is also true that the determination of residency under the Act should not be presumed to be somehow dependent on the meaning of "residency" in the context of another federal statute. However, this is not to suggest that two federal statutes cannot be complementary. A person who gains entry to this country for the limited purpose of attaining an education, is prohibited from obtaining employment and whose presence remains conditional on the renewal to a visa fulfils the spirit and intent of Article 19. Without a plausible explanation, the left hand should not deny what the right hand is doing. That explanation has not been proffered here.

For the foregoing reasons, I would allow the application and remit the matter for consideration to the learned Tax Court judge on the basis that scholarship moneys received between January 1 and July 13, 1990 are exempt from taxation pursuant to Article 19 of the Canada-China Income Tax Agreement. In view of the amounts of tax involved, the rehearing should be based on the evidence originally adduced, together with any additional evidence as agreed by the parties including evidence of scholarship moneys received by the applicant from McGill University prior to July 13, 1990. In the unlikely event that the parties are unable to reach an agreement on this aspect, the Minister shall apply to the Tax Court judge for directions.

Appeal dismissed.