Campbell v. MNR, 92 DTC 1855, [1992] 2 CTC 2256 (TCC)

Teskey, T.C.C.J.:—The appellant elected to have his appeals heard under the informal procedure. He appeals his reassessments wherein the Minister of National Revenue (the "Minister") added to the appellant's income for 1987 and 1988 moneys received from Bernt Gilbertson Enterprises Ltd. ("Gilbertson") in the amounts of $10,230 and $18,800 respectively and a late filing penalty for 1988.

Issue

The only issue in contention is whether the sums of $10,230 and $18,800 were gifts received by the appellant or income. The appellant readily admitted that his income tax return for 1988 was signed on May 18, 1990 and not mailed to Revenue Canada until a couple of days after signing and that the deadline for the 1988 return was April 30, 1989.

Facts

The appellant describes himself as a minister of the gospel. He has a Grade 13 education and is a Christian teacher and minister of the gospel, but not ordained in any recognized religious institution.

From 1982 up to April of 1987, he was a director and worked full-time providing Christian teaching for Kee-Way-Din Christian Centre ("Kee-Way").

In April of 1987, he resigned as a director and employee of Kee-Way and started to provide Christian teaching as a self-employed Minister conducting three evening teaching sessions per week. The appellant agrees that his activity constituted a self-employed business activity starting in April of 1987. No charges were made, offerings were given and were considered by the appellant as income and declared as such. He saw them as a direct consequence of his profession. (This is in line with a decision of Judge Bonner of this Court in Cheshire v. M.N.R., [1984] C.T.C. 2820, 84 D.T.C. 1719). In August of 1987, the appellant received from Gilbertson a cheque for $4,000 and every two weeks thereafter the sum of $500 which was increased to a $1,000 by 1988. These are the moneys in dispute.

Gilbertson was under no obligation to pay any money to the appellant and could have varied or ceased making the payments at anytime. Gilbertson is a construction company owned equally by three brothers who are first cousins of the appellant. He has a close relationship with Donald Galvin Gilbertson ("Donald") the president of Gilbertson. Donald's wife attends the religious teachings on a regular basis.

The appellant, when asked by counsel for the respondent to distinguish between the moneys placed in offerings at each teaching session and the payments made by Gilbertson, gave the following answer: "I see a great distinction between the two. On the one hand, I'm providing a service directly to these people and they are benefiting from it in some way and they reimburse me as a consequence of what I have given to them; I see an exchange taking place. With Gilbertson Enterprises, I see no such exchange taking place.”

Analysis

I fail to see any distinction between the offerings received at the time of the teachings and the money received from Gilbertson. I fail to see how this money can be classified as a” "gift" coming into the appellants hands.

The Federal Court-Trial Division held in The Queen v. Zandstra, [1974] C.T.C. 503, 74 D.T.C. 6416, that the word "gifts" should be interpreted in its ordinary (rather than technical) sense given that the term is not defined in the income tax statute itself. This position has been carried forward by subsequent decisions. (See The Queen v. Burns, [1988] 1 C.T.C. 201, 88 D.T.C. 6101 (F.C.T.D.) and The Queen v. McBurney, [1985] 2 C.T.C. 214, 85 D.T.C. 5433 (F.C.A.)).

According to Black's Law Dictionary (revised 6th edition),"gift" is defined at page 688 as:

A voluntary transfer of property to another made gratuitously and without consideration. . . . In tax law, a payment is a gift if it is made without conditions, from detached and disinterested generosity, . . . and not . . . from the incentive of anticipated benefits of an economic nature.

The Shorter Oxford English Dictionary on Historical Principles at page 849, refers to a "gift" in the following manner:

A transfer of property in a thing, voluntarily and without any valuable consideration.

One essential characteristic of a "gift" is an intentional element that is referred to in Roman law as the animus donandi or liberal intent. In other words, the donor must be aware of the fact that he will not receive any form of compensation in return for his financial contribution from the donee.

In the case at bar, the appellant was providing Christian teaching or spiritual guidance to those people who wished to attend. That was a service he was providing. Although the moneys received by the appellant in the hands of the payers may well be classified as non-deductible tax paid gifts, this is irrelevant. In my view, I must classify the money as it appears in the appellants possession. By analogy, I see no difference between the appellant and the musician standing on a street corner playing a violin and receiving money from pass- erbys. Both are essentially providing a service and being compensated for that service. They are not receiving "gifts" per se.

The providing of a service was dealt with by Cecil L. Snyder, Q.C., a member of the Tax Appeal Board in Campbell v. M.N.R. (1959), 21 Tax A.B.C. 145, 59 D.T.C. 8. Shirley Campbell was a professional swimmer who entered into a contract with the Toronto Daily Star (a daily newspaper published in Toronto with a wide circulation in Ontario) which provided that she would receive the sum of $5,000 if she successfully swam across Lake Ontario. Her attempt to swim across Lake Ontario failed when she was taken from the water approximately one mile short of completion. The Star paid the $5,000 although they were under no legal obligation to do so. The Board held that the true nature of the transaction was the performance of services for which payment was made. Snyder, Q.C. emphasized that it is irrelevant whether a payment is made voluntarily or pursuant to an enforceable obligation on the part of the person making it. He quoted from the decision of Herbert v. McQuade, [1901] 2 K.B. 761, per Collins, M.R., at page 649:

. . . a payment may be liable to income tax although it is voluntary on the part of the persons who made it, and that the test is whether, from the standpoint of the person who receives it, it accrues to him in virtue of his office; if it does, it does not matter whether it was voluntary or whether it was compulsory on the part of the persons who paid it.

Also cited was the case in Goldman v. M.N.R., [1953] C.T.C. 95, 53 D.T.C. 1096 (S.C.C.) a decision in which Mr. Justice Kellock (concurred in by the Chief Justice, Locke and Fauteux, JJ.) said at pages 98-99 (D.T.C. 1098-99):

The appellant having succeeded in obtaining the remuneration he set out to obtain, I do not consider the form by which that result was brought about is important . . . What the appellant received, he received as remuneration as he intended . . . This was not received by him as a testimonial nor as anything but remuneration for the services which he had performed. That the services had been completed when payment was made or that there was no assurance from the beginning that the services would be remunerated do not prevent the amount in question being taxable income.

The Supreme Court of Canada in Curran v. M.N.R., [1959] C.T.C. 416, 59 D.T.C. 1247 is authority that to establish the true nature of a payment, I must deal with the terms of any existing written agreement and the surrounding circumstances. Herein, there is in fact no contractual agreement between Gilbertson and the appellant except a voluntary giving and an accepting of money. The reason for the giving being the appellant's Christian teaching or spiritual guidance, being a service rendered to those wishing to attend.

Martland, J. with Locke and Judson, JJ. concurring held in the Curran decision that the circumstances made it clear that the $250,000 payment made by Mr. Brown (the principal shareholder of both Home Oil Company Ltd. and Federated Petroleums Ltd.) to Curran was to induce Curran to serve as manager of Federated Pfetroleums Ltd.

Herein, the payments to the appellant must be considered in the hands of the appellant as moneys received for the services provided by him for conducting Christian teaching and giving of spiritual guidance. This is counselling (a service) in its broadest sense.

The respondent's counsel also referred to several other authorities on the classification of "gifts", namely:

The Queen v. Friedberg, [1992] 1 C.T.C. 1, 92 D.T.C. 6031 (F.C.A.);

Tite v. M.N.R., [1986] 2 C.T.C. 2343, 86 D.T.C. 1788 (T.C.C.);

Gervais v. The Queen, [1984] C.T.C. 661, 85 D.T.C. 5004 (F.C.T.D.).

The Court has considered these other authorities.

On review of all the surrounding circumstances of the giving and receiving of this money, I can come to no other conclusion other than that the true nature of the payments in question were for services rendered. It is immaterial if the service is to be performed, or has been performed to the contributor or to others.

For these reasons, the appeals are dismissed.

Appeals dismissed.