Docket: 2013-2400(IT)I
BETWEEN:
NATHAN ZAILO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal
heard on February 7, 2014, at Vancouver, British Columbia.
Before: The Honourable
Eugene P. Rossiter, Associate Chief Justice
Appearances:
|
For the Appellant:
|
The
Appellant himself
|
|
Counsel for the Respondent:
|
Paige MacPherson
|
____________________________________________________________________
JUDGMENT
The appeal from the assessment made under
the Income Tax Act for the 2011 taxation year is dismissed in accordance
with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 26th day of February, 2014.
“E.P. Rossiter”
Citation: 2014 TCC 60
Date: 20140226
Docket: 2013-2400(IT)I
BETWEEN:
NATHAN ZAILO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Rossiter A.C.J.
[1]
The
Appellant in 2011 was enrolled full-time in the Musicians Institute College of
Contemporary Music Audio Engineering program. The Musicians Institute is a
“university outside Canada” for the purposes of paragraph 118.5(1)(b) of
the Income Tax Act (“ITA”), offering bachelor’s degrees,
associate’s degrees and non‑degree programs. The Audio Engineering program
can lead to an associate of arts degree when combined with one of the Musicians
Institute’s performance programs. The Audio Engineering program does not,
however, lead to a bachelor’s degree at the Musicians Institute. Rather, it
leads to a certificate. The Musicians Institute offers two bachelor programs,
one in composition and one in performance. The Audio Engineering program can
lead to an associate of arts degree if combined with a performance program. The
associate of arts degree could then be used towards a bachelor’s degree. But
the Appellant did not pursue a performance program to complete the association
of arts degree. Rather, he resolved to complete the program of Audio
Engineering, a certificate. The Audio Engineering program does not contribute
to either of the bachelor programs in composition or performance at the
Musician’s Institute. The Appellant claimed a tuition credit of $9,160 based on
tuition fees of $8,400, a student recovery fee of $22.50 and some audio
engineering equipment of $750, which the Appellant asserts is required in order
to take the program. The Minister of National Revenue (Minister) refused the
tuition credit on the basis that the Appellant was not in “a course leading to
a degree” as required by paragraph 118.5(1)(b) of the ITA, with the
Minister asserting a “degree” in this context is a bachelor’s degree or higher.
[2]
The
Appellant attended the same program in 2012. The Minister allowed the tuition
credits for the Appellant in his 2012 income tax return, but denied the same
credits for the 2011 return. The taxation year before the Court is in relation
to 2011.
[3]
The
issue before the Court is: Does “degree” as used in paragraph 118.5(1)(b)
of the ITA include associate’s degrees such that students enrolled in
associate’s degrees at universities outside Canada can receive the tuition
credit? The position of the Appellant is that the tuition credits for 2011
ought to be granted as it is not a requirement for the Appellant to complete a
degree in order to obtain the tuition credits and he did the first part of this
degree initially and, further, paragraph 118.5(1)(b) was complied with,
in that the ITA does not exclude the program of the Appellant’s
attending. Also the Appellant is of the view that the same tuition credits were
allowed by the Minister for 2012 and the Minister is obliged to apply the law consistently
and therefore such tuition credits for 2011 ought to be granted.
[4]
The
Respondent’s position is that the certificate obtained by the Appellant in 2011
is not a degree as contemplated in paragraph 118.5(1)(b) and therefore
that paragraph was not complied with and the tuition credits were correctly
denied. Further, the Respondent’s position is that the only taxation year
before the Court is 2011, and what the Minister did and did not do with respect
to the Appellant’s tuition credits claimed for 2012 is irrelevant and is not a
factor to be considered by the Court. Paragraph 118.5(1)(b) of the ITA
states as follows:
118.5(1)
For the purpose of computing the tax payable under this Part by an individual
for a taxation year, there may be deducted,
. . .
(b)
where the individual was during the year a student in full-time attendance at a
university outside Canada in a course leading to a degree, an amount
equal to the product obtained when the appropriate percentage for the year is
multiplied by the amount of any fees for the individual’s tuition paid in
respect of the year to the university, except any such fees . . .
[Emphasis added.]
[5]
It is
my view that the Appellant does not meet the requirements for receiving a
tuition credit under paragraph 118.5(1)(b) because he is not enrolled in
a program leading to a degree of the bachelor’s level or above. Paragraph
118.5(1)(b) of the ITA specifically requires that the individual
be a full-time student at a university outside Canada “in a course leading to a
degree”. The ITA does not define the term “degree”.
[6]
In the
process of defining “university outside Canada” for the purposes of paragraph
118.5(1)(b) of the ITA in Klassen v. Canada, the
Federal Court of Appeal equated a “degree” to a bachelor’s degree or higher.
The Federal Court of Appeal concluded:
21 . . .
the expression “university outside Canada” refers to an educational institution
which confers degrees usually granted by universities, that is a doctorate
degree, a master degree or at minimum degrees at the baccalaureate level or its
equivalent. . . .
[7]
This
raises the question, does “degree” used in paragraph 118.5(1)(b) of the ITA
mean a bachelor’s degree or higher for determining whether an educational
institute is a university, but include associate’s degrees for determining
which programs qualify for the tuition credit? While the Federal Court of
Appeal did not specifically state that lesser degrees from a university outside
of Canada are ineligible for the tuition credit, it could be said that
principles of statutory interpretation prohibit a word in a provision to have
two contradictory meanings. However, in the context, why would courses leading
to an associate’s degree, which could in fact be included as part of the
qualification to a bachelor’s degree, not be eligible for a tuition credit? It
is noted that the evidence at trial showed that at least two of the courses
which the Appellant would have to take in order to receive a bachelor of music
in performance were part of the Audio Engineering program: “Studio Recording I”
and “Studio Recording II”. The answer is that, as per the Appellant’s
testimony, these courses were used towards a certificate program and not
towards a bachelor’s degree.
[8]
It
should also be noted that, for educational institutions in Canada and for
cross-border commuters, the legislation in question extends the benefits of
tuition credits common to those enrolled in a “college or other educational
institution providing courses at a post-secondary school level”.
Therefore, Parliament obviously distinguished between universities and colleges
or other post-secondary educational institutions. The distinguishing factor is
that universities offer bachelor’s degrees and higher while the others do not. If
associate’s degrees are accepted in the definition of “degree”, then
universities and other post-secondary institutions are no longer
distinguishable and the legislative scheme becomes incoherent.
[9]
The
Federal Court of Appeal’s decision in Klassen strongly suggests that an
associate’s degree is not eligible for a tuition credit. I find this to be a
reasonable conclusion in law, especially in light of the incoherent nature that
the legislation would become if associate’s degrees were accepted in the
definition of “degree”, in light of subparagraphs 118.5(1)(a)(i) and
118.5(1)(c)(i) and paragraph 118.6(1)(c) of the ITA.
[10]
Lastly,
the Minister’s treatment of the Appellant’s 2012 taxation year has no bearing
on this appeal.
[11]
On the
basis of the foregoing, I would dismiss the appeal.
Signed at Ottawa, Canada, this 26th day of February,
2014.
“E.P. Rossiter”
CITATION: 2014 TCC 60
COURT FILE NO.: 2013-2400(IT)I
STYLE OF CAUSE: NATHAN ZAILO v. HER MAJESTY THE QUEEN
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: February 7, 2014
REASONS FOR JUDGMENT BY: The
Honourable Eugene P. Rossiter, Associate Chief Justice
DATE OF JUDGMENT: February 26, 2014
APPEARANCES:
|
For the Appellant:
|
The Appellant himself
|
|
Counsel for the
Respondent:
|
Paige MacPherson
|
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent: William F. Pentney
Deputy
Attorney General of Canada
Ottawa,
Canada
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