The Assistant Chairman:
1 This is the appeal of Dr Emile S Shihadeh from an income tax assessment wherein a tax in the amount of $3,362.70 was levied against the appellant in the 1969 taxation year.
2 The issue in this appeal is whether the appellant qualifies for the exemption from taxation provided for in Article VIIIA of the Canada-US Tax Convention.
3 In 1967 the appellant, who was a resident of the City of Ithaca, in the State of New York, USA, applied to several universities in the United Kingdom, the United States and Canada for a teaching contract. As a result of these applications, he was invited to visit the campus of the University of Alberta and, while there, was offered a two-year teaching contract with the University of Alberta. The appellant had at that time another offer from Cornell University (Exhibit A-2), and although some of his university colleagues advised him not to accept the post in Alberta and although his wife was reluctant about moving to Canada, the appellant eventually decided to accept the teaching position at the University of Alberta.
4 The appellant therefore was appointed Associate Professor in the Department of Business Policies in the Faculty of Business Administration and Commerce, effective July 1, 1967, for an initial probationary period terminating June 30, 1969 (Exhibit A-3) and he in fact taught at the University of Alberta on a full-time basis. In March of 1969, the appellant was offered his tenure at the University and he taught in the same capacity in the months of September, October, November and December of 1969.
5 In 1970 he taught at the same University from January to July 1, 1970, and from September to December of that year. In 1971 the appellant, having taught at that University for over three years, was entitled to a six-month sabbatical leave during which time 80% of his salary was paid by the University. His sabbatical leave, taken in the United Kingdom, expired on July 1, 1971, at which time the appellant resumed teaching at the University of Alberta, where he has been continuously employed as a teacher to the present day.
6 The legal question that the facts of this appeal pose is whether the appellant, having remained and continued to teach at the University of Alberta beyond the two-year limit specified by Article VIIIA, still qualifies for the exemption to tax provided for in that article.
7 Counsel for the appellant went to great pains to prove to the Board that the intention of the appellant when accepting the teaching post at the University of Alberta was to leave his teaching position at the University at the expiration of his probationary period of two years.
8 In order to show that the appellant's intention at the time of coming to Canada was to leave Canada after two years, he filed a series of letters dealing with his application or possible appointment to universities outside of Canada. Exhibit A-4 is an answer to the appellant's application to the University of Birmingham, dated August 29, 1969; Exhibit A-5 is some correspondence dated October 5, 1970, with the University of Tel-Aviv concerning a possible appointment; Exhibit A-6 is an answer to an application for a position at the University of California at Berkeley, dated March 13, 1973; while Exhibits A-7 and A-8 are some correspondence relative to the appellant's application to Villanova University in Pennsylvania and dated March 27, 1973, and April 4, 1973, respectively.
9 In my opinion, regardless of this correspondence and regardless of the fact that the appellant's wife was reluctant to come to Canada and hoped to leave the country in two years' time, and indeed regardless of what the appellant's intention was in accepting the teaching position at the University of Alberta, the fact is that the appellant stayed in Canada and continued to teach at that University beyond the two-year limit specified in the Canada-US Reciprocal Tax Convention.
10 Counsel for the appellant claims that it does not matter if the appellant stayed in Canada beyond the two-year limit, and in support of his contention he filed two letters, Exhibits A-9 and A-10. The first one is an inquiry, dated February 19, 1968, from the appellant to the Taxation Division of the Department of National Revenue concerning his application for the tax exemption provided for in Article VIIIA of the said Reciprocal Tax Convention. The second letter is the Department's answer, dated March 7, 1968, informing the appellant that he would be exempt from tax in Canada for a period not exceeding 24 months. Counsil for the appellant interpreted the Department's answer as meaning that the appellant could be exempt from tax for 24 months regardless of how long he remained and taught in Canada and, on the basis of the case of George L Bowen v Minister of National Revenue, [1972] C.T.C. 2174, 72 D.T.C. 1161, claimed that the Minister, having given the appellant misleading information, is now estopped from imposing the tax which he had previously declared would not be imposed.
11 In my view, even if the Department of National Revenue's answer to the appellant, dated March 7, 1968, was misleading, and I do not believe that it was, all the courts have been consistent in holding that the Minister cannot be estopped from imposing a tax which is payable because of misinformation given by an employee of the Department of National Revenue to a taxpayer. I do not believe that the decision in the George Bowen case (supra) has ever been followed by any tribunal.
12 The second case which the appellant cited, in support of his contention that it does not matter if the appellant stayed in the country after the expiry of the two-year period, is that of Ernest G Stickel v Minister of National Revenue, [1973] F.C. 259, [1973] C.T.C. 202, 73 D.T.C. 5178, a decision of the Federal Court of Appeal, which was confirmed by the Supreme Court of Canada,[1974] C.T.C. 416, 74 D.T.C. 6268.
13 The appeal before us is distinguishable from that of the Stickel case (supra) on one essential point which I believe to be the key to the proper application of Article VIIIA of the Canada-US Reciprocal Tax Convention. The very pertinent difference that exists between the Stickel case and the one presently before us is that, although Stickel remained in Canada beyond the probationary teaching period of two years, he did not continue to teach after that period. In the appeal before us the appellant not only remained in Canada after his probationary teaching period of two years but he continued and is still continuing to teach at the same University.
14 In his reasons for judgment the learned Chief Justice of the Federal Court of Appeal pointed very clearly to the distinction to be made, in the application of Article VIIIA of the Canada-US Reciprocal Tax Convention, between a person who remains in Canada after the expiration of the probationary two-year teaching period but does not continue to teach at the university and the person who remains in Canada and continues to teach at the same university beyond that period.
15 It seems to me that Chief Justic Jackett's words on that point are clear:
The question of interpretation turns on whether the words “for a period not exceeding two years” modify the word “visits” or are an integral portion of the expression “for the purpose of teaching ... at a university ...”.
Once it is appreciated that the words that constitute the second condition precedent to the application of Article VIIIA are
“who temporarily visits the other contracting State for the purpose of teaching, for a period not exceeding two years, at a university ...”
and not merely“who temporarily visits the other contracting State for the purpose of teaching, for a period not exceeding two years,”
we are all agreed that the words “for a period not exceeding two years” are an integral part of the expression “for the purpose of teaching ... at a university ...” and do not relate to the period of the visit as revealed by the actual events.
16 In support of his contention that the appellant qualifies for the exemption under Article VIIIA of the Canada-US Reciprocal Tax Convention, counsel for the appellant often referred to the last part of one of Chief Justice Jackett's remarks in the Stickel case (supra) at pages 261, 203 and 5179, respectively, where he said: “and do not relate to the period of the visit as revealed by the actual events”.
17 It seems to me that the whole point of the Chief Justice's remarks in that case is that a person who remains in Canada after his two-year probationary teaching period has expired but does not continue to teach at a university or other educational institution, if other required conditions are met, qualifies for tax exemption in respect of his income for the two-year teaching period under Article VIIIA. However, if a person remains in Canada and continues to teach in a university beyond that period, he cannot qualify for the exemption.
18 To use counsel for the appellant's own words, it may not matter, for the purposes of Article VIIIA, whether a person remains in Canada beyond the two- year probationary teaching period, but it does indeed matter if he continues to teach at a university beyond that period. In my opinion, it is not the purpose of the legislation to grant a tax holiday for those persons who intend to teach in Canada on a permanent basis, and the distinction to be made between remaining in Canada beyond the two-year period and continuing to teach in Canada beyond that period is necessary for the proper application of the purpose and intent of Article VIIIA of the Tax Convention.
19 I do not believe that the intention that a person may have had at the time of accepting his two-year teaching contract has any bearing or any effect on the mandatory disqualification from tax exemption provided for in Article VIIIA of the Tax Convention if the individual concerned continues to teach at a university in Canada after the expiration of the two-year teaching limit specified in the Tax Convention.
20 For these reasons the appeal is dismissed.
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