Gilbert v. R., [1999] 2 CTC 2127

Mogan T.C.J.:

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 deduc- tion 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.

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.

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.

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.

Exhibit A-l 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.

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.

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.

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.

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.

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.

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.

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.

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(!)(/?) for the following reasons.

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.

Also, in the case of London (City) v. Ursuline Religious of the Diocese of London (1964), 43 D.L.R. (2d) 220 (Ont. C.A.), 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....

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.

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.

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 )(/?): “... 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.

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.

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”.

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(l)(rz) and (b) lead me to the conclusion that this appeal must be dismissed.

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.

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.

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.

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.

In the circumstances of this case, the Appellant cannot gain any relief. I therefore dismiss the appeal.

Appeal dismissed.