Date: 19981215
Docket: 98-1487-IT-I
BETWEEN:
DAVID GILBERT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
______________________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: Eric Douglas
____________________________________________________________________
Reasonsfor
Judgment
(Delivered orally from the Bench at Victoria,
British Columbia, on September 25, 1998.)
Mogan J.T.C.C.
[1]
In 1996, the Appellant paid a tuition fee to an educational
institution in the United States of America for the enrolment of
his daughter. In computing his income for that taxation year, the
Appellant claimed a tax credit under section 118.5 of the
Income Tax Act (the Act) which permits a deduction
with respect to tuition fees paid either by the taxpayer or by a
child of the taxpayer. When the Appellant was first assessed, it
appeared that the tax credit had been accepted by Revenue Canada,
but then the Appellant was reassessed later in 1997 to disallow
the credit claimed with respect to the tuition paid on behalf of
the daughter. The Appellant has appealed from that assessment and
has elected the informal procedure.
[2]
In June 1996, the Appellant's daughter, Kathleen, graduated
from high school in Victoria, British Columbia. She was gifted in
talents related to music, drama and theatre arts and, therefore,
she applied for enrolment at an institution in the
United States known as the American Musical and Dramatic
Academy (AMDA). According to the Appellant's evidence,
which I found to be totally credible, there are about 3,000
persons who audition for acceptance by AMDA, but only 300 are
admitted each year. It was the good fortune of Kathleen to be
admitted to the program. She enrolled in February 1997 to
commence her two-year AMDA program. In order for her to enrol,
however, her tuition had to be paid in October 1996 and,
therefore, the Appellant paid the tuition at that time.
[3]
The Appellant described the AMDA program and produced documents
to support his description. It is located in New York City and
provides a two-year course which I assume relates to the
performing arts of music and drama. Also, it has an affiliation
with another academic institution in New York City that is known
as the New School for Social Research which is a degree-granting
institution in Lower Manhattan. It appears that at some time
during 1996-1997, that institution changed its name to "New
School University". The affiliation or partnership between
the two institutions permits a person who graduates from AMDA to
continue his or her education at New School University which
grants to a graduate of AMDA approximately 60 credits of the 120
credits needed for a degree. Therefore, at the end of a further
two years at New School University, a graduate of AMDA can
receive a bachelor degree of Fine Arts in Musical Theatre.
[4]
Exhibit A-2 is page 10 from a New School University 1997
publication which I regard as its syllabus or calendar. Under the
heading "Degree Requirement" there is a subheading
"Bachelor of Fine Arts" which states:
In conjunction with the American Musical and Dramatic Academy
(AMDA), it is possible to earn a Bachelor of Fine Arts in Musical
Theatre at The New School. Candidates for this degree must
complete a total of 120 credits, of which 60 are non-liberal arts
credits awarded for completion of the AMDA program. AMDA
graduates may transfer up to 30 credits from other accredited
colleges as well. Of the total program 48 credits must be taken
in the liberal arts.
The relevant passage in that paragraph is the clause at the
end of the second sentence which says, "... of which 60 are
non-liberal arts credits awarded for completion of the AMDA
program." That is a clear statement that New School
University will grant a Bachelor of Fine Arts degree in Musical
Theatre to a person who completes the AMDA program on the basis
that they can transfer 60 of the required credits to New School
University. It appears that the two institutions are working
together in order that someone who wants to go on from AMDA to
New School University can look on his or herself as having
already achieved 60 of the necessary 120 credits by completing
the AMDA program.
[5]
Exhibit A-1 is a letter dated April 13, 1990 from the State
Education Department in Albany to the President of the New School
for Social Research. I do not regard the letter as having much
significance in this appeal because one would have to know about
and be familiar with all of the terminology of education in the
State of New York to understand it. There is, however, a clear
statement in that letter in response to a request for
registration of a proposed program in musical theatre to be
offered jointly by New School for Social Research and the
American Musical and Dramatic Academy. There is nothing in the
letter which indicates that the State authority is rejecting the
proposed joint program to be operated by the New School for
Social Research and the AMDA. It simply indicates that perhaps it
was around 1989 when this joint program was developed.
[6]
The evidence is that Kathleen attended AMDA commencing in
February 1997 and is still, apparently, a student. The critical
question is whether the amount paid by her father in October 1996
can be used as a tax credit. In questioning the Appellant,
counsel for the Respondent brought out the fact that AMDA cannot
grant a degree, which the Appellant was candid in admitting. In
other words, it is not a degree-granting institution but it is a
recognized educational institution in the State of New York.
[7]
On the above facts, I turn to the relevant provisions of the
statute. Paragraph 118.5(1)(b) grants tax credits for
tuition paid at certain educational institutions, the relevant
parts of which read:
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
...
The exceptions referred to are not relevant to this
appeal.
[8]
The legislation implies that the taxpayer is the student herself.
There is another provision, however, which permits the credit for
tuition paid by a parent to be transferred by a child to the
parent. Therefore, in this case, we are concerned with the parent
because it was he who paid the tuition. Revenue Canada does not
dispute that the credit may be transferred by Kathleen to her
father if the credit is otherwise deductible.
[9]
The Appellant takes the position that the partnership between
AMDA and New School University is such that the AMDA program
should be regarded as leading to a degree because of the ease
with which, under the agreement between those two institutions, a
graduate of the AMDA program can slide over into the degree
program at New School. By completing the AMDA program, an AMDA
graduate will have 50% of the credits required for the degree in
Fine Arts to be issued by New School University.
[10] The
Appellant also argues that when he prepared his income tax return
for 1996 in the spring of 1997, he was concerned about the
deductibility of his credit and contacted Revenue Canada. He
spoke with an individual in the local office of Revenue Canada
who, in response to his inquiry, stated that "yes, the
amount would be deductible". The Appellant relied on what he
called a concept of officially-induced error which he applied
from his own field as a professional forester. I regard that as a
form of estoppel argument; a concept in law where person
"A" may induce person "B" to do something
to "B's" detriment. "A" cannot
renounce a commitment he has made to "B" because he
is estopped from doing so.
[11] I am more
concerned with the first argument of the Appellant which is one
of statutory interpretation and relates to the meaning of the
words in paragraph 118.5(1)(b), the first portion of
which reads:
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, ...
The question is whether Kathleen was a student in full-time
attendance at a university outside Canada in a course leading to
a degree.
[12] As this
case was argued, the critical word was "university".
The Appellant made the point that in the United States, a
university is a publicly-funded institution whereas a
college is a non-publicly funded institution. He gave as examples
the well-known academic institutions of Harvard and Yale which
are not universities in accordance with the strict definition of
terms in the United States because they are not publicly
funded.
[13] Counsel
for the Respondent referred me to a number of dictionary
definitions of the word "university" as well as a case
in the Ontario Court of Appeal which indicate that the critical
criteria for a university is whether it has the authority to
grant a degree. I am inclined to accept the argument of the
Respondent and conclude that AMDA was not a university within the
meaning of paragraph 118.5(1)(b) for the following
reasons.
[14] The word
"university" is not defined in the Act, but the
Respondent has provided me with three dictionary definitions of
the word, all of which have as a condition the granting of a
degree. The Dictionary of Canadian Law defines university
as follows:
The chief distinguishing characteristic between a university
and other institutions of learning is the power and authority
possessed by an institution of learning to grant titles or
degrees.
In Webster's Third New International Dictionary
(an American publication), the word "university" is
defined as:
A body of persons gathered at a particular place for the
disseminating and assimilating of knowledge in advanced fields of
study; an institution of higher learning providing facilities for
teaching and research and authorized to grant academic
degrees.
And lastly, in Black's Law Dictionary, it is
described as:
An institution of higher learning, consisting of an assemblage
of colleges united under one corporate organization and
government, affording instruction in the arts and sciences and
the learned professions, and conferring degrees.
[15] Also, in
the case of Re City of London and Ursuline Religious of
the Diocese of London, (1964) 43 D.L.R. (2d) 220, the
Ursuline Order was an order of religious women who sought to
achieve an exemption under the Assessment Act, R.S.O. 1960
on the basis that it was a university because it was located on
the campus of the University of Western Ontario. The Ursuline
Religious Group was affiliated with the University of Western
Ontario and authorized to give courses accepted by the
University. Therefore, it sought exemption under the
Assessment Act which granted such exemption to any
university. The unanimous decision of the Ontario Court of Appeal
was delivered by Schroeder J.A. When stating the facts of the
case, he said at page 222:
... The appellant has no power to confer degrees but is
affiliated with the University of Western Ontario under agreement
made in 1919. The appellant teaches classes in subjects approved
by the University both to their own students and to other
students of the University from different colleges. Examinations
are set in accordance with the standards fixed by the University,
degrees of Bachelor of Arts are conferred on students so educated
by the University of Western Ontario upon those who pass the
examinations.
Schroeder J.A. also quoted from Wharton's Law
Lexicon and Murray's New English Dictionary in
defining "university". Also, at page 228, he
states:
The chief distinguishing characteristic between a university and
other institutions of learning is the power and authority
possessed by an institution of learning to grant titles or
degrees such as Bachelor of Arts, Master of Arts or Doctor of
Divinity by which it is certified that the holders have attained
some definite proficiency. ...
[16] Dealing
with paragraph 118.5(1)(b) in isolation, I do not have any
difficulty in concluding that to be a university within the
meaning of those words, it has to be an institution with the
power and authority to grant degrees. The fact that a
degree-granting institution, New School University in New York
state, had an arrangement with AMDA to accept graduates of the
AMDA program on the basis that they would be awarded 60 credits
towards a degree from New School University does not mean that
AMDA, as a stand-alone institution, is a degree-granting
university.
[17] Indeed, I
should think that a person who is interested in the performing
arts and attends AMDA could very easily, on graduation, have an
opportunity in the performing arts to go on and use his or her
skills in such a way that that person would never continue or
finish the degree at New School University. In other words,
the accomplishment of the certificate of AMDA would be (not
necessarily an end in itself) the academic achievement that the
person needed to be launched in the performing arts.
[18]
Responding to the argument put forward by the Appellant that he
wished me to construe this legislation on the meaning of the word
"university" in the United States, I regard that
argument as irrelevant. I cannot construe a statute in Canada for
general application in accordance with the particular culture of
some other country, even if it is an English-speaking country.
Also, having regard to the wording of
paragraph 118.5(1)(b): "... attendance at a
university outside of Canada in a course leading to a degree
...", I think it is implicit that the degree is to be
granted by the university attended. I would have to construe AMDA
as being a university. That is the only way in which the
Appellant can succeed in this appeal.
[19] As
counsel for the Respondent pointed out, the Ursuline
Religious case is much stronger because the Order was
affiliated with a university granting degrees and giving courses
authorized by the University of Western Ontario on the premises
of the University. It was not regarded as a university because it
could not grant a degree. With respect to the Ursaline
Religious case, I think it would apply even more to AMDA as
not being a university because it is a stand-alone institution
totally separate from New School University. The only connection
is that if the Appellant's daughter successfully completes
her AMDA course, she may then apply to the New School University
and transfer 60 credits towards a degree to be granted by New
School University.
[20] The
second reason for interpreting the statute against the Appellant
is in contrasting the words in paragraphs 118.5(1)(a) and
(b). Paragraph (b) is described above and paragraph
(a) states:
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,
(a)
where the individual was during the year a student enrolled at an
educational institution in Canada, that is
(i)
a university, college or other educational institution providing
courses at a post-secondary school level, or
(ii)
...
It is interesting to note the contrast between paragraphs
(a) and (b) on the basis that if the person is
attending an educational institution in Canada, that institution
may be a university or a college or another educational
institution providing courses at a post-secondary school level.
In other words, if a person wants to deduct a tuition tax credit
in Canada, the person paying the tuition does not have to be
attending a university. It can be an educational institution
other than a university. But if a person wants to deduct a
tuition tax credit by going to an educational institution outside
of Canada, it is very clear to me that that institution must be a
university because of the words in the opening lines of paragraph
(b) which state: "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".
[21]
Parliament has created a broader spectrum of institutions which a
person can attend at the post-secondary level within Canada and
still get the tuition credit, but Parliament has restricted the
number of institutions outside Canada for which a tuition credit
can be achieved. I have already given what I regard as the
generally accepted definition of a university being one to grant
a degree. I speculate that the distinction is to place some
control on the kind of post-secondary institutions which may
exist in countries outside of Canada where it would be impossible
to determine whether they were truly of an educational nature in
that they grant a degree. I think the legislation is more
confining in paragraph (b) to give some measure of control
as to the kinds of tuition paid to institutions outside Canada
which will give the payer or parent a tax credit. For these two
reasons, the interpretation of the word "university" on
a stand-alone basis and the comparison of paragraphs
118.5(1)(a) and (b) lead me to the conclusion that
this appeal must be dismissed.
[22] On the
other argument of whether this was an officially-induced error,
it is a difficult point for a person to argue for two reasons.
First, it is difficult to prove that the error was based on
accurate information when it is based entirely on a telephone
call. Certain things are said by party A to party B; and party B
may or may not understand the accuracy of what party A has said
or whether the full information is given. Even if parties are
acting in good faith, all of the relevant information may not
have been given by party A; and party B may or may not have a
full understanding of what the situation is but gives a certain
answer. Party A proceeds to act on what he or she thinks is a
favourable answer.
[23] I do not
have enough evidence to determine if the answer given by a
Revenue Canada employee was based on complete information from
the telephone conversation which the Appellant referred to. That
would be the first problem in accepting the second argument. The
more far-reaching problem is the question of estoppel. This case
is a question of statutory interpretation on the meaning of
"university". No employee of Revenue Canada, even with
the best information accurately delivered by a taxpayer, can
permit a taxpayer to have a deduction if it is not permitted
under the statute.
[24] In other
words, an employee of Revenue Canada listening to a
taxpayer's story, accurately and honestly delivered by the
taxpayer, and the employee acting in good faith with reasonable
intelligence and thinking that under the given circumstances a
deduction is permitted, may very well say to the taxpayer in the
course of the conversation: "Oh, yes you would be entitled
to that deduction. Go ahead and deduct it." That kind of
conversation could easily happen.
[25] But if on
the facts as delivered to the employee of Revenue Canada, the
deduction was not permitted by law and the employee gives a wrong
answer, the employee cannot change the law. It is simply a wrong
answer. If the deduction is not permitted under the statute, it
is not permitted. The taxpayer does not get any advantage because
he happened to speak with an ill-informed or ill-advised
employee. I would hold that particularly so where, in the
circumstances of this appeal, we have a sophisticated taxpayer
who looks at the law and has the prudence to make an enquiry. I
find that there are no grounds to grant relief on what the
Appellant has called officially-induced error. To do so would be
to say that the Minister is estopped from assessing by an
erroneous opinion expressed by one of his employees over the
telephone.
[26] In the
circumstances of this case, the Appellant cannot gain any relief.
I therefore dismiss the appeal.
Signed at Ottawa, Canada, this 15th day of December, 1998.
"M.A. Mogan"
J.T.C.C.
COURT FILE
NO.:
98-1487(IT)I
STYLE OF
CAUSE:
David Gilbert & Her
Majesty
the Queen
PLACE OF
HEARING:
Victoria, British Columbia
DATE OF
HEARING:
September 25, 1998
REASONS FOR JUDGMENT BY: The
Honourable Judge M.A. Mogan
DATE OF
JUDGMENT:
December 15, 1998
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Eric Douglas
COUNSEL OF RECORD:
For the
Appellant:
Name:
N/A
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
Email this Content