Edwards v. R., [1998] 4 CTC 2906

Bowie T.C.J.:

Mr. Edwards works in a bank. In 1995 he was concerned that he might be laid off, and so he enrolled in a course at an institution which calls itself the Toronto Truck Driving School, which I shall call the “School”, so that he would have training in a field of work that he might fall back on if need be. The School came to his attention through a newspaper advertisement. In that advertisement it was said that fees paid to the School would be tax deductible. Mr. Edwards took this statement on faith; he made no inquiry of Revenue Canada as to the accuracy of it, but simply enrolled, took the course, and in filing his income tax return for the year 1995 claimed a credit under subparagraph 118.5(1 )(a)(ii) of the Income Tax Act (the Act). In due course he was reassessed to disallow the deduction which he had claimed. He now appeals from that reassessment.

Subparagraph 118.5(1)(a)(ii) of the Act, as it appeared for the 1995 taxation year, read as follows:

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

(ii) certified by the Minister of Employment and Immigration to be an educational institution providing courses, other than courses designed for university credit, that furnish a person with skills for, or improves a person’s skills in, an occupation,

an amount equal to....

By S.C. 1996 c. 11 s. 95 it was amended to substitute the words ‘Minister of Human Resources Development’ for the words ‘Minister of Employment and Immigration’, effective on July 12, 1996. I shall refer to them as the Minister of E & I and the Minister of HRD, respectively.

From the pleadings it is apparent that the only issue in this appeal is whether or not the School was, at the relevant time, ‘certified by the Minister’. I ruled at the outset that the onus of proof as to that issue lies with the Crown and not, as is more usual in income tax appeals, with the taxpayer. Briefly stated, these are my reasons for so ruling.

Since the early part of this century the Supreme Court of Canada has held that the onus of disproving the facts upon which an assessment for tax is based, lies with taxpayer. The most frequently cited authority is Johnston v. Minister of National Revenue^[1] The most recent is Hickman Motors Ltd. v. R..^[2] The rationale for placing this burden upon taxpayers is that they are the persons who, in most cases, have knowledge of the relevant facts. This was succinctly expressed by Duff J., as he then was, in the Anderson Logging case:[3]

First, as to the contention on the point of onus. If, on an appeal to the judge of the Court of Revision, it appears that, on the true facts, the application of the pertinent enactment is doubtful, it would, on principle, seem that the Crown must fail. That seems to be necessarily involved in the principle according to which statutes imposing a burden upon the subject have, by inveterate practice, been interpreted and administered. But, as concerns the inquiry into the facts, the appellant is in the same position as any other appellant. He must shew that the impeached assessment is an assessment which ought not to have been made: that is to say, he must establish facts upon which it can be affirmatively asserted that the assessment was not authorized by the taxing statute, or which bring the matter into such a state of doubt that, on the principles alluded to, the liability of the appellant must be negatived. The true facts may be established, of course, by direct evidence or by probable inference. The appellant may adduce facts constituting a prima facie case which remains unanswered; but in considering whether this has been done it is important not to forget, if it be so, that the facts are, in a special degree if not exclusively, within the appellant’s cognizance; although this last is a consideration which, for obvious reasons, must not be pressed too far.

The only fact here in issue is whether the School was, at the relevant time, certified by the appropriate Minister. That, of course, is not in any way a matter as to which knowledge of the true facts lies with the taxpayer. To the contrary, it is a matter as to which the knowledge lies entirely with the Crown, and, as appeared from the evidence, that knowledge is not readily available to taxpayers from any primary source that they may themselves consult. Access to it is apparently available, as a practical matter, only by making an oral request to a Revenue Canada office, in person or by telephone, and then accepting the response given as being accurate.

Counsel for the Respondent called Mr. Chiarotto, a Revenue Canada Appeals Officer, to give evidence as to the matter of certification. Mr. Chiarotto produced a photocopy of a printout which he had obtained from the computer system in the Toronto office of Revenue Canada. His evidence was that he made an inquiry of the computer system as to whether or not the School was certified by the Minister of HRD and the printout indicates that it was not, by the fact that the name of the School is not included. The printout does show a number of other institutions with similar names which, according to the witness, are certified. There are a number of problems with this evidence, quite apart from the usual difficulties involved in establishing the accuracy of computer records, which this witness did not address at all.

First, it is not established that the computer was ever furnished with an accurate and complete list of certified institutions. Mr. Chiarotto was frank to acknowledge that although he uses the computer, and the data which it contains, from time to time to ascertain if institutions are certified, he simply takes it as a matter of faith that the data bank is accurate. He has no idea who put the data in, or when. He did not address the question of maintenance of the list, which certainly changes from time to time. He did give some hearsay evidence about having verified the information which he had obtained through the printout by telephoning a Ms. Thibodeau at the Department of Human Resources Development (DHRD) in preparation for giving his evidence. He knew nothing at all about who she 1s, or what she does in DHRD. He explained that he could not offer the complete list in evidence, because in order to do so it would have been necessary to fax the list, some hundreds of pages, from Ottawa. The only copy of the list in the Revenue Canada offices in Toronto, he said, is out of date. A taxpayer outside the National Capital Region wishing to check whether the institution is certified or not before enrolling for a course could inquire by telephone of Revenue Canada, and would be given the results of a computer search of the same kind that he made for the purpose of testifying. Such a person would not, however, be able to see an accurate list of the certified institutions at the Revenue Canada office.

This evidence falls far short of satisfying me on a balance of probabilities that the School was not, during 1995, certified by the Minister of E & I. Mr. Chiarroto was imprecise about the form of the question which he input to the computer. My impression from his testimony is that he inquired and the computer responded as to certification at the time of making the inquiry, which I gather was this week. He made reference in his evidence to certification by the Minister of HRD, an office which came into existence in 1996. I do not believe that he purported to address the situation in 1995, which of course is the relevant time. The Crown’s Reply refers to certification by the Minister of E & I, not the Minister of HRD. Apart from all the other frailties of his evidence, it is entirely possible that the School was certified by the Minister of E & I at the time Mr. Edwards attended it in 1995, and has since been decertified for some reason.

I should add that no attempt was made by counsel for the Crown to invoke the provisions of the Canada Evidence Act in this case, and that my comments with respect to the evidence should be read in that light.

The Crown has failed to discharge the onus of establishing that the School was not, during 1995, certified by the Minister of E & I for the purposes of subparagraph 118.5(1)(a)(ii). The appeal is therefore allowed, and the reassessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant is entitled to the tuition credit claimed.

Appeal allowed.