Elizabeth Joan Savage v. Her Majesty the Queen, [1981] CTC 332, 81 DTC 5258

Le Dain, J:—This is an appeal from a judgment of the Trial Division allowing an appeal from a decision of the Tax Review Board, which allowed an appeal from a reassessment of income tax in respect of the appellant’s 1976 taxation year by which an amount of $300 received by the appellant from her employer for the successful completion of courses of instruction was included in the computation of her income for the year.

The Crown’s appeal from the decision of the Tax Review Board proceeded in the Trial Division upon the basis of the following agreed statement of facts:

1. During 1976, the Defendant was employed by the Excelsior Life Insurance company (“Excelsior”) as a research assistant.

2. During 1976, the Defendant was involved in actuarial research; such research involved preparing quotations, sending out life insurance briefs and researching future life insurance products.

3. During 1976, the Defendant took three Life Office Management Association courses; namely, Life Insurance Law, Economics and Investment and Life Insurance Actuary Mathematics.

4. These courses were part of a series of courses leading to the designation Fellow of the Life Office Management Association and were designed to provide a broad understanding of modern life insurance and life insurance company operations including management practices and personnel needs.

5. All courses in the Life Office Management Association program including the three courses taken in 1976 were voluntarily taken by the Defendant in order to improve her knowledge in the life insurance field.

6. In 1976, the Defendant received from Excelsior the amount of $300 as a result of successfully passing the examinations in the three Life Office Management Association courses ($100 per course).

7. Excelsior paid its employees taking these Life Office Management Association Courses $100 per course upon successful completion.

8. Such payment per course by Excelsior was available to all employees of Excelsior in accordance with a publicized company policy.

At the hearing of the appeal in this court the case was varied to include a summary of the results of the Life Office Management Association examinations for the year 1976. In addition, counsel for the parties agreed that the evidence disclosed the following facts:

(a) that the employer reported the amount of $300 on a T4A Supplementary under “Other Income”, indicating that it was a “Prize for passing LOMA examinations”, and claimed the same as an expense of doing business:

(b) that the employer’s policy of awarding $100 for the successful completion of the Life Office Management Association course was advertised by the employer to encourage self-upgrading of staff members;

(c) that the courses, in both study time required and complexity of material, were comparable to university courses;

(d) that a number of other employees took the courses;

The appellant contends that the sum of $100 received by her from her employer for the successful completion of each of the three Life Office Management Association courses was “a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer”, within the meaning of paragraph 56(1 )(n) of the Income Tax Act, SC 1970-71-72, c 63, and that the total of such payments received for the taxation year 1976 did not, therefore, have to be included in the computation of her income since it was less than the $500 that is exempted by paragraph 56(1 )(n) as follows:

56. (1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,

(n) the amount, if any, by which

(i) the aggregate of all amounts received by the taxpayer in the year, each of which is an amount received by him as or on account of a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer,

exceeds

(ii) $500;

The respondent contends that the sum of $300 received by the appellant was not a prize within the meaning of paragraph 56(1 )(n), but that even if it were such a prize it was required to be included in the computation of the appellant’s income because it was income from an employment, within the meaning of section 3, subsection 5(1) and paragraph 6(1 )(a) of the Act. Section 3 of the Act provides that the income of a taxpayer for a taxation year includes his income for the year from an employment and subsections 5(1) and paragraph 6(1 )(a) are as follows:

5. (1) Subject to this Part, a taxpayer’s income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by him in the year.

6. (1) There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable:

(a) the value of board, lodging and other benefits of any kind whatever (except the benefit he derives from his employer’s contributions to or under a registered pension fund or plan, group sickness or accident insurance plan, private

health services plan, supplementary unemployment benefit plan, deferred profit sharing plan or group term life insurance policy) received or enjoyed by him in the year in respect of, in the course of, or by virtue of an office oremployment;

The appellant argues that even if the sum received is not a prize within the meaning of paragraph 56(1 )(n) it is not taxable as income from an employment under subsections 5(1) and paragraph 6(1 )(a), which is the basis for assessment relied on by the respondent.

The Tax Review Board held that the sum received was a prize within the meaning of paragraph 56(1 )(n) and did not, therefore, have to be included in the computation of the appellant’s income. The Trial Division held that it was not a prize, but was a benefit received “in respect of, in the course, of, or by virtue of” the appellant’s employment, within the meaning of paragraph 6(1 )(a) of the Act, and it accordingly allowed the appeal.

The learned trial judge was of the view that the sum received was not a prize because it was not awarded for success in a contest or competition. He said:

In the present case each course was available to all employees of the Insurance Company and each one who successfully passed the examination was entitled to the same amount of $100 for each course in which he was successful. There was therefore no contest or competition among the employees and superiority in the examination played no part in the receipt of such money.’

In support of the requirement of contest or competition he relied on dictionary definitions of “prize” and the judgment of Marceau, J in The Queen v McLaughlin, [1979] 1 FC 470, where, holding that an award for outstanding achievement in agriculture was not a prize within the meaning of paragraph 56(1 )(n), he said at 472:

In my opinion, the word “prize” connotes something striven for in a competition, in a contest, and I don’t think there can be a competition or a contest in the real sense without the participants being aware that they are involved. Moreover, if that is the meaning of the word “prize”, as I believe it is, the achievement contemplated in the enactment must be a specific one, not achievements in the sense of personal merits of a general nature like those for which the defendant was here granted the award.

I agree that the sum received was not a prize within the meaning of paragraph 56(1)(n). In its ordinary meaning, as disclosed by dictionary definitions and used with reference to the results in a course of instruction, the word “prize” connotes a reward for superiority in a contest or competition with others. This is clear, I think, from The Oxford English Dictionary, in which the relevant definitions of “prize” are: “1. A reward, trophy, or symbol of victory or superiority in any contest or competition. b. In colleges, schools, etc.: A reward in the form of money, books, or the like, given to the pupil who excels in attainments, usually as tested by a competitive examination”, and from Webster’s Third New International Dictionary, in which the relevant definitions are: “1: something offered or striven for in competition . . . as a: an honor or reward striven for in a competitive contest: something offered to be competed for or as an inducement to or a reward of effort (a school —) (The —s given at an agricultural show).“ I do not find any definition of “prize” that would apply to a reward for a merely passing a course of instruction, regardless of relative merit in it. The sum that was paid in this case was obviously intended to encourage employees to take a course and successfully complete it but was not intended to reward relative merit in the course. In my opinion the words “for achievement in a field of endeavour ordinarily carried on by the taxpayer” in paragraph 56(1 )(n) do not alter the ordinary meaning of “prize” in this context, but merely indicate the kinds of prize contemplated by the section. The appellant does not, therefore, escape tax liability under the terms of paragraph 56(1 )(n).

I am in respectful disagreement, however, with the conclusion of the learned trial judge that the sum received by the appellant from her employer was income from her employment within the meaning of subsection 5(1), or more particularly, a benefit received by her “in respect of, in the course of, or by virtue of” her employment within the meaning of paragraph 6(1 )(a). To be income from an employment within the meaning of subsections 5(1) and paragraph 6(1 )(a) a payment must in my opinion be for services as an employee. See Estate Phaneuf v The Queen, [1978] 2 FC 564 at pp 570-572. The sum of $100 paid to the appellant for successful completion of a course was not a payment for services rendered as an employee. It was not related in any way to her services as an employee. The courses were taken voluntarily, on her own time. There was no obligation as an employee to take them. The interest of the employer was that the courses would make her a more valuable employer. The payment was in the nature of a gift to encourage employees to take the courses and successfully complete them. The employment was certainly a condition of being able to receive the payment, but the payment was not received by reason of the employment but by reason of the successful completion of the course. See Ball (H M Inspector of Taxes) v Johnson, 47 Tax Cas. 155. The sum received was therefore not taxable as income from an employment under subsection 5(1) and paragraph 6(1 )(a).

For these reasons I would allow the appeal, set aside the judgment of the Trial Division, and vacate the assessment confirmed by the Minister in re- spect of the $300 paid to the appellant by Excelsior Life Insurance Company in the taxation year 1976.

The appellant should have all reasonable and proper costs of the appeal in the Trial Division, in accordance with subsection 178(2) of the Act, and her costs in this court.

Kelly, D J:—I have had the opportunity of reading and considering the reasons for judgment herein of Le Dain, J A and being in agreement that the awards aggregating $300 do not constitute income made subject to tax by sections 3, 5 and 6 of the Act. I concur in the allowance of the appeal and the dismissal of the action.

I do not find it necessary to decide and refrain from deciding whether any or all of the aforesaid awards is a “prize for achievement in a field of endeavour ordinarily carried on by the taxpayer”. Whether or not all or any one of the awards were such prizes, the aggregate of the awards received by the taxpayer in the taxation year in question did not exceed $500. and would not be income within the meaning of section 56(1 )(n).

I concur also in the disposition of costs made by Le Dain, J A.