Date: 19990526
Docket: 96-4008-IT-G
BETWEEN:
LIONEL A. MITCHELL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for judgment
Sarchuk, J.T.C.C.
[1] These are the appeals of Dr. Lionel A. Mitchell (the
Appellant) from assessments of tax with respect to the 1991 and
1992 taxation years whereby the Minister of National Revenue (the
Minister) disallowed the deduction of expenses claimed in the
amounts of $15,551.68 for 1991 and $11,116.00 for 1992.
[2] During the years in issue, the Appellant was a professor
with tenure and a full-time faculty member in the School of
Business Administration at Acadia University, Wolfville, Nova
Scotia. His area of expertise is marketing with the focus being
the relationship between marketing and economic development. For
a number of years, he has been conducting research, writing,
speaking and publishing on various aspects of the subject.
[3] In the fall of 1988, the Appellant submitted an
application to the University Sabbatical Leave Committee for a
sabbatical leave and outlined therein a proposed research project
to be conducted by him during that period. The leave was approved
but at the University’s request, the Appellant postponed
the sabbatical period to July 1, 1990 to June 30, 1991.
[4] The Appellant testified that he considered his research
projects to be an integral part of his obligations both as a
faculty member and under his contract of employment. Accordingly,
he was required to do research on a scale and at a level
appropriate to his professional status. He said that although he
chose the subject to be researched, it had to be approved by the
University's Sabbatical Leave Committee and that when
approved, the pursuit of his research program during the
sabbatical leave was part of his duties under the Collective
Agreement (the Agreement).
[5] In 1991 during the sabbatical year, the Appellant
commenced his research program which included travel to several
Caribbean Islands as well as to the United States, Quebec and
Ontario. During this period, he received from the University an
amount equal to 80% of his normal salary and in addition, in 1991
received funding from the University towards research expenses in
the amount of $7,936. In computing his income for the 1991
taxation year, the Appellant claimed the amount of $15,551.68 as
a research expenditure deduction.[1]
[6] Upon his return from the sabbatical, the Appellant resumed
his teaching duties and continued to pursue his project. In 1992,
he travelled to the West Indies, the United States and to
other parts of Canada to further his research which enabled him
to complete and publish two articles on the subject. He further
said that his research in 1992 was merely a continuation of the
project on which he had worked during his sabbatical leave.
According to the Appellant, his travel in 1992 was not unusual
but was necessary to fulfil his obligations under the Agreement
with respect to scholarship and research.
[7] In the calculation of his income for the 1992 taxation
year, he included inter alia, his regular salary as well
as a grant of $4,000 from the University and claimed the amount
of $11,116 as "other deductions". This amount reflected
what he described as research expenses incurred in this taxation
year.
[8] The issues as pleaded by both parties are:
(a) whether the Appellant was entitled, during his sabbatical
leave in 1991, to deduct his net research expenses pursuant to
subparagraph 56(1)(o)(i) of the Income Tax Act (the
Act).
(b) whether for 1992 the Appellant was entitled to deduct his
research expenses pursuant to paragraph 8(1)(h) of the
Act.
In the alternative, Counsel for the Appellant argued that:
(c) in the event subparagraph 56(1)(o)(i) of the
Act did not apply in taxation year 1991, the Appellant was
nonetheless entitled to deduct his research expenses pursuant to
paragraph 8(1)(h) of the Act, and
(d) in carrying out his research program in both years, the
Appellant was an independent contractor carrying on the business
of research and writing and in that capacity, was entitled to
deduct any net expenses relating to that business.
Deductibility of Research Expenses pursuant to subparagraph
56(1)(o)(i) of the Act.
[9] Section 56(1)(o) provides:
56(1) Without restricting the generality of section 3, there
shall be included in computing the income of a taxpayer for a
taxation year,
...
(o) the amount, if any, by which any grant received by
the taxpayer in the year to enable him to carry on research or
any similar work exceeds the aggregate of expenses incurred by
him in the year for the purpose of carrying on the work, other
than
(i) personal or living expenses of the taxpayer except
travelling expenses (including the entire amount expended for
meals and lodging) incurred by him while away from home in the
course of carrying on the work,
(ii) expenses in respect of which he has been reimbursed,
or
(iii) expenses that are otherwise deductible in computing his
income for the year;
[10] With respect to the 1991 taxation year, the Appellant
contends that because sabbatical leave is only granted by the
University once the applicant’s research program and
expenses have been approved, any payment in lieu of salary during
the leave is in essence a research grant within the meaning of
paragraph 56(1)(o) of the Act, whether or not the
University designates it as such. Consequently, he was entitled
to exclude from his income the amount that he received from the
University during the sabbatical period in lieu of salary, up to
the amount of his research expenses. Since the Appellant included
in his income for 1991 the amount that he received in that year
while on leave, he should have been allowed deductions for
research expenditures not in excess of that amount, which is what
he claimed.
[11] Counsel for the Appellant also submitted that specific
language in the Act overrides more general language that
might otherwise apply in the same circumstances.[2] By virtue of subsection 4(4) of
the Act, as it applied during the years in questions, the
same receipt is not to be included in income twice. While the
compensation received by the Appellant from the University during
his sabbatical (80% of his usual salary) would appear to be
included in his income from employment under the broad but
general language of paragraph 6(1)(a) of the
Act, it also fits within the more specific provisions of
paragraph 56(1)(o) relating to research grants.
Counsel contends that to treat the payments to the Appellant as
salary would unfairly detract from the overall objective of the
section.[3]
Consequently, the latter provision should apply, allowing for the
deduction of the Appellant's related expenses, as he has
claimed.
[12] I am unable to accept the Appellant's position and in
particular, I am unable to conclude that the amounts paid to the
Appellant by the University in 1991 were a payment by way of a
grant for the purpose of doing research on a specific project.[4] The decision of
Cardin J. in Taylor v. M.N.R.[5]cited by Counsel for the
Appellant provides little assistance. Taylor, an associate
professor of physical education at the University of Alberta, was
entitled to, applied for, and was granted sabbatical leave for
1973-1974. During his sabbatical, he received 80% of his salary
from the University of Alberta. At about the same time, he
applied to the Canada Council for a grant to do research in his
field of work which was approved. In his reasons, the Chairman of
the Board observed that although the basis upon which the funds
had been granted by Canada Council was not clear, the
preponderance of the evidence led him to accept the
Appellant's position that the funds constituted a research
grant within the meaning of paragraph 56(1)(o) of the
Act and rejected the Respondent's position that the
funds amounted to a scholarship or bursary within the meaning of
paragraph 56(1)(n) of the Act.
[13] In Taylor, it was both necessary and appropriate
for the Board to consider the purpose and nature of the payments
since no other relationship existed between the Canada Council
and the payee, other than that of grantor and grantee. This of
course is readily contrasted with the employer/employee
relationship between the University of Acadia and the Appellant,
which relationship was governed by the Agreement. It is not
disputed that the Appellant was an employee within the meaning of
the Agreement. It is also not disputed that the academic year is
the 1st of July to the 30th of June of the following year.
Article 21 of the Agreement provides for the remuneration of
employees and sets out, inter alia, the salary grid for
each of the taxation years in issue. Article 24.10 provides
for a sabbatical leave which "is intended to provide an
opportunity for employees to pursue scholarly interests related
to their disciplines at other Universities or appropriate
places" and also states: "sabbatical leave is the
earned right of any employee who is granted leave by the
Sabbatical Leave Committee". Article 24.11 provides that the
salary for leave shall be according to the following scale: 12
month leaves ... six or more years of eligible service
... sabbatical salary 80%.
[14] I might add that the parties to this Agreement put their
minds to the issue that expenses might be incurred by an employee
in the course of conducting research at any time during his
employment. For example, Article 25.00 – Fringe Benefits
makes reference to a number of matters including the provision of
"research monies" and funding for "professional
development" and allocates the sum of $60,000 for the
support of research in each academic year to be distributed
amongst the various faculties. Requests for funds pursuant to
this Article are made on an Application for Regular Research
Grant form.
[15] In light of these provisions, it is not possible to
consider that the amount received by him during the term of his
sabbatical constituted anything other than the bargained-for
portion of his salary. There is nothing in the relevant Articles
of the Agreement to suggest that either the employer or the
employee considered a sabbatical salary to be a grant or
fellowship or any other form of remuneration.
[16] I am also unable to accept the Appellant's submission
that the receipt of these monies could be considered both as
income from an office or employment under paragraph
6(1)(a) and as a research grant governed by paragraph
56(1)(o) and that accordingly, this Court should apply the
principle of generalia specialibus non derogant to the
provisions before the Court. There is no doubt that as was
observed in Driedger on the Construction of
Statutes:[6]
Where two provisions are in conflict and one of them deals
specifically with the matter in question while the other is a
general application, a conflict may be avoided by applying the
specific provision to the exclusion of the more general one.
and that as Cattanach J. concluded in The Queen v.
Patterson,[7]a decision cited by Counsel for the
Appellant:
A general provision in a statute such as paragraph
8(1)(a) by its nature, is not to control or govern a
special provision such as paragraph 8(1)(h) is. The
special provision must be read as accepted out of the
general.
Thus, since the defendant falls within the words of paragraph
8(1)(h), he must be governed thereby and he is entitled to
the benefits thereunder as well.
Although two provisions can, in certain cases (as exemplified
by Patterson), apply without conflict to the same facts,
that is not the case here. Paragraph 56(1)(o) can
only apply where the receipt by a taxpayer is clearly and
unequivocally a grant. Since I have concluded that it is not a
grant, there is no possibility of it being taken into income
twice and potentially lead to double taxation of his income.
Deductibility of expenses pursuant to paragraph
8(1)(h) of the Act
[17] With respect to taxation year 1992,[8] the Appellant says that having regard
to his specific duties with the University, his areas of
interest, and the provisions of the Agreement, he was ordinarily
required to carry on some of his duties away from the
employer's place of business and in the different places
where he conducted his research. In order to do so, aside from
certain funds received from the University,[9] he was required to pay the travel
expenses so incurred out of his own resources.
[18] The Appellant contends that the terms of the Agreement
and the institutional practices at the University make it clear
that there was an implied term of his contract of employment to
undertake research or comparable scholarly activity and that
failure to do so would produce unfavourable employment
repercussions.[10] In his chosen field, research was called for and
necessarily required travel outside of Canada for extensive
periods. Counsel for the Appellant argued that it takes very
little by way of implication to find that the Appellant was
required by his contract of employment to travel to do research.
Apart from sabbatical leaves, the obvious time to do so was in
the summer recesses, as occurred in 1992 but also occurred
regularly and customarily in the summers of other years.
Consequently, the Appellant contends that he is entitled to
deduct his net travelling expenses relating to research pursuant
to paragraph 8(1)(h) of the Act. With specific
reference to 1992, the Appellant contends that although a portion
of his research was conducted beyond the sabbatical period, that
is irrelevant to the application of paragraph 8(1)(h).
[19] The Respondent relied to a substantial extent on the
decision of the Federal Court Trial Division in The Queen v.
Jeromel.[11]In that case, the Court concluded that
the taxpayer could not deduct the expenses as he was not employed
during the sabbatical period and was therefore not required to
carry out duties of employment. It was further argued by Counsel
for the Respondent that in the present appeals, the
Appellant's contract of employment permitted him to travel
but did not require it. Consequently, he submitted that the
Appellant's situation does not fall within the parameters of
paragraph 8(1)(h) of the Act.
Analysis
[20] The Appellant's position is that not only was he
required by the terms of employment to carry out research but
that the only way it could be done in his chosen field was to
travel and incur expenses. These expenses, he says, are
deductible pursuant to the provisions of paragraph 8(1)(h)
of the Act which provides that:
8(1) In computing a taxpayer's income for a taxation year
from an office or employment, there may be deducted such of the
following amounts as are wholly applicable to that source or such
part of the following amounts as may reasonably be regarded as
applicable thereto:
...
(h) where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of his
employment away from his employer's place of business or in
different places, and
(ii) under the contract of employment was required to pay the
travelling expenses incurred by him in the performance of the
duties of his office or employment,
amounts expended by the taxpayer in the year (other than motor
vehicle expenses) for travelling in the course of the
taxpayer's employment, except where the taxpayer
(iii) received an allowance for travelling expenses that was
by reason of subparagraph 6(1)(b)(v), (vi) or (vii), not
included in computing the taxpayer's income for the year,
or
(iv) claimed a deduction for the year under paragraph
(e), (f) or (g);
[21] Counsel for the Appellant referred to a number of
decisions where the special circumstances of a taxpayer's
employment required that he carry out, as frequent and regular
occurrences, a number of his duties in places other than his
regular place of work.[12] Without exception, these cases dealt with situations
where the primary or fundamental duties of employment
automatically included an element of travel, i.e. a principal did
not have a choice as to which meetings he will attend, a junior
accountant had no choice regarding his attendance at clients'
offices to perform audits, nor did psychologists required to make
frequent trips from their offices to various schools to provide
testing, counselling and educational services to students. In
such cases, there is no element of choice on the part of the
Appellants, they simply had to travel in order to satisfy their
respective duties of employment or suffer the consequences. It is
not difficult to understand why in Rozen, Strayer J. had
no difficulty concluding that the Appellant was "indeed
required to use his automobile to do his job". I am unable
to equate the Appellant's position with that of the
accountant whose employer expected him to use his own car for the
purposes of going to work in clients' offices, failing which
would probably result in dismissal.
[22] These decisions are instructive as they relate to the
individual requirements of paragraph 8(1)(h) but they
contribute little to the present appeals since they do not
address a situation in which a taxpayer is relieved of the
primary responsibilities of his employment, in this case
teaching, and is given leave to pursue a scholarly interest
related to his discipline (which includes research) in a manner
and a place of his own choosing. In this context, reference may
be made to Article 5:00 of the Agreement which provides in part
as follows: "It is recognized by both parties that many of
the freedoms and responsibilities ... have been developed as
a result of existing practices over a period of years. ...
This Article seeks to outline the general areas into which these
freedoms and responsibilities fall". The academic
responsibilities listed include research, scholarly or other
creative activity. This "responsibility" must be
considered in the context of the definition of academic freedom
found in the same Article which reads in part: " ...
the freedom of Employees to express and uphold opinions without
incumbrance, (sic) to carry out research which they
believe will enhance knowledge, and to express the results of
such research in a reasonable manner without interference. The
Parties shall scrupulously adhere to and protect this principle,
against threats from inside and outside the University."
Thus, although scholarly activity including in appropriate cases,
research, is an academic responsibility of the Appellant he had
an unfettered right to submit a program of his own choosing to
the Sabbatical Committee and to expect that as long as it had
some academic merit within his discipline, it would be
approved.
[23] The facts in the present appeal are distinguishable from
those found in the cases cited on behalf of the Appellant. The
primary function of a professor at a University is to teach
students. Sabbatical leave is intended to provide a teacher with
an opportunity to be absent from his teaching post to pursue
scholarly interests related to his discipline but leaves the
choice as to what and where as well as the matter of costs to the
person on leave.[13] Although in a general way the sabbatical program is
approved by a committee, that fact is not altered since such
approval does not (and cannot) mandate or direct the manner in
which a particular scholarly pursuit is to be carried out.
[24] One further aspect of this matter is of concern. The
Appellant testified that travel to conduct research in his chosen
field was required by the terms of his employment contract and
was undertaken in part to prevent professional repercussions. He
also contends that this research (both while on sabbatical leave
and in other years) was conducted for the purpose of obtaining
and collating material to author a textbook. Specifically, he
pleads that in carrying out his research program in 1991 and 1992
he was an independent contractor carrying on the business of
research and writing and as such, should be entitled to deduct
any expenses relating to that business. Furthermore, he said that
his research over the years has led to remunerative external
teaching appointments and to the receipt of royalties from books
he had written.[14] The existence of such personal financial objectives
cast doubt on the Appellant's assertions that the expenses
incurred flowed from a requirement by the University to perform
duties calling for travel.
[25] On balance, I am not satisfied that the requirements of
paragraph 8(1)(h) of the Act have been met. The
appeals are dismissed, with costs.
Signed at Ottawa, Canada, this 26th day of May, 1999.
"A.A. Sarchuk"
J.T.C.C.
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