Her Majesty the Queen v. Elizabeth Joan Savage, [1980] CTC 103, 80 DTC 6066

Grant, DJ:—This is an appeal by the Crown from a decision of the Tax Review Board dated April 5, 1979, whereby the Board allowed the defendant’s appeal from a reassessment of her 1976 income tax return made by the Minister of National Revenue (“the Minister’’) pursuant to the provisions of the Income Tax Act, SC 1970-71-72, c 63 and referred the same back to the Minister for reassessment.

The parties have agreed on the relevant facts which are set out and signed by the solicitors for both parties in the following words:

The parties hereto hereby agree that the herein appeal shall be based upon the following 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 acturial research; such research involved preparing quotations, sending out life insurance briefs and research 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 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.

The respondent defendant also gave evidence to the effect that she had completed three of the courses described in such agreed statement of facts in the year 1976 and in the year 1978 she completed the last of such courses successfully. She took the courses because she wished to extend her knowledge of life insurance management. The taxpayer disclosed the receipt of the said $300 in the year 1976 from her employer by the insertion of the same in box H of her income tax return but did not carry out the same into her taxable income. In his reassessment thereof the Minister increased the amount of her taxable income be adding the said sum of $300 thereto. She relied upon paragraph 56(1)(n) of the Income Tax Act as authority for not so including such amount in her taxable income. Such section reads as follows:

Subdivision d—Other Sources of Income AMOUNTS TO BE INCLUDED IN INCOME FOR YEAR

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

SCHOLARSHIPS, BURSARIES, ETC

(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 acount 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 Minister took the position that such subsection had no application to the facts surrounding the receipt of the $300 by the taxpayer from her employers. I believe he was corrrect in this interpretation. The only words in such subsection that could be helpful to the taxpayer’s contention are “or a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer’’. The key word therein is a “prize”. The decision of the Tax Review Board is found at [1979] CTC 2301; 79 DTC 338. Therein the Board dealt correctly with the definition of the word “endeavour” but gave no consideration to the meaning to be attributed to the word “prize” or as to whether the payment could be interpreted as a prize won by her.

In Black’s Law Dictionary at 1362 the definition given for the word prize is:

anything offered as a reward of contest; a reward of offered to the person who, amoung several persons or among the public at large, shall first (or best) perform a certain undertaking or accomplish certain conditions.

The Shorter Oxford English dictionary defines the word prize as:

a reward, trophy or symbol of victory or superiority in any contest or competition;

a premium offered to a person who exhibits the best specimen of natural production at a competition.

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 therefor no contest or competition among the employees and superiority in the examination played no part in the receipt of such money.

In Her Majesty the Queen v G R McLaughlin, [1978] CTC 602; 78 DTC 6406, the taxpayer was given $10,000 as an award for his achievements as chairman of the Ontario Milk Marketing Board. Judge Marceau upheld the decision of the Tax Appeal Board which held that the award did not come within the terms of such paragraph 56(1)(n) of the Act because it was not a prize for an endeavour ordinarily carried on by the taxpayer. He therein stated at 603 [6407]:

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.

There is no evidence in the present case to indicate whether the taxpayer knew of the provisions of paragraph 56(1)(n) when she took the courses or wrote the examinations. In that respect the present case may differ from the McLaughlin award. The crucial fact common to both cases is that there was no competition to determine the winner of the prize.

Counsel for the taxpayer contends that the $300 payment does not fall within the language of either sections 5 or 6 of the Act. He submits that its taxability is governed entirely by paragraph 56(1)(n) while the point is not crucial to the appeal I must state that I do not agree with such submission. Such sections read as follows:

Subdivision a—Income or loss from an office or employment

Basic Rules

INCOME FROM OFFICE OR EMPLOYMENT

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.

Inclusions

AMOUNTS TO BE INCLUDED AS INCOME FROM OFFICE OR EMPLOYMENT

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:

VALUE OF BENEFITS

(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 or employment;

The purpose of the company in offering such education or training in respect of insurance business and the payment of $100 for each course in which the employee was successful, was that their services would thereby become more learned and valuable in their work with it. The employee took such course to improve her knowledge and efficiency in the company business and for better opportunity of promotion. The employee therefore received such payment ‘‘in respect of, in the course of, or by virtue of her employment’’. G S Buchanan v MNR, [1966] CTC 317; 66 DTC 5257; The Queen v F E Poynton, [1972] CTC 411; 72 DTC 6329.

Paragraph 56(1)(n) is not an exclusionary provision. It only provides for inclusion of that portion of the amount described therein which exceeds $500. Section 8 of the Act sets out the various deductions which may be made in computing a taxpayer’s income from an office or employment. No such deduction as the $300 which is the subject of this appeal is therein contained. Subsection 8(2) provides that except as permitted by the section no deduction shall be made in computing a taxpayer’s income from an office or employment in any taxation year. The effect of accepting the taxpayer’s interpretation of paragraph 56(1)(n) would be to provide an employer with an opportunity of increasing the statutory exemption of each of his employees by the sum of $500 in any year.

The appeal should therefore be allowed and the judgment of the Tax Review Board be set aside and the reassessment made by the Minister be confirmed.

Pursuant to subsection 178(2) of the Act the Minister shall pay to the respondent taxpayer all her reasonable and proper costs in connection with the appeal.