Date: 19980205
Docket: 97-1139-IT-I
BETWEEN:
MARTIN REESINK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Lamarre, J.T.C.C.
[1] The Appellant is appealing under the informal procedure an
assessment made under the Income Tax Act (“the
Act”) by the Minister of National Revenue
(“the Minister”) with respect to his 1995 taxation
year. The Appellant himself included in his income for 1995 the
proceeds of two scholarships received by him during that year,
one in the amount of $6 500 (which was declared as an
“employee trust allocation”) and the other in the
amount of $835 of which he declared $335 under “other
income”. The Appellant thus took advantage of the $500
exemption provided for in paragraph 56 (1)(n)
of the Act.
[2] The Appellant now maintains that he is entitled to deduct
from his income the total amount of his scholarships, or in other
words he is asking that these scholarships not be taxed on the
ground that they are not taxable under paragraph 56(1)(n)
of the Act. If I understand correctly the
Appellant’s argument, it is that paragraph 56(1)(n)
applies only to full-time students having no other source
of income. As he was self-employed in 1995, having obtained
contracts from the federal government “Department of
Citizenship and Immigration Canada”, he argues that
paragraph 56(1)(n) cannot apply to him and that his
scholarships are accordingly not taxable. He argues in the
alternative that the scholarships were not granted with respect
to the field of endeavour ordinarily carried on by him and that
as a consequence paragraph 56(1)(n) does not apply.
He closed by asserting that the taxation of his scholarships is
discriminatory in that he is thereby compelled to incur greater
debt than a student who does not work; this results in an
economic loss which, according to the Appellant, violates his
equality rights under section 15 of the Canadian Charter
of Rights and Freedoms (“the
Charter”).
[3] The Minister based his assessment of the Appellant on the
following facts:
(a) during the 1995 taxation year, the Appellant worked for
the federal government, with the department of Citizenship and
Immigration Canada (“CIC”);
(b) the Appellant worked for CIC as a media analyst on
renewable contracts;
(c) the income earned by the Appellant was on account of
business income;
(d) during the 1995 taxation year, the Appellant was also a
full-time graduate student at Carleton University, in Ottawa;
(e) during the 1995 taxation year, the Appellant received from
this university, as scholarship or bursary, the amounts of $835
and $6,500, as indicated on the 1995 T4A slip issued by Carleton
University, for a total amount of $7,335;
(f) the said amount of $7,335 is taxable income, subject to an
exemption of $500, pursuant to paragraph 56(1)(n) of the
Income Tax Act (the “Act”);
(g) the Appellant cannot deduct the net amount (the
“Amount”) of $6,835 ($7,335 - 500) in the computation
of his taxable income; and
(h) the Minister properly calculated the taxes payable on the
Appellant’s reported taxable income for the 1995 taxation
year.
[4] The Appellant, who was the only witness called at the
hearing, admitted subparagraphs (a) to (e) inclusive. He denied
the other subparagraphs.
[5] At the time relevant to this appeal, subparagraph
56(1)(n) read as follows:
56: Amounts to be included in income for
year.
(1) Without restricting the generality of section 3,
there shall be included in computing the income of a taxpayer for
a taxation year . . .
(n) Scholarships, bursaries, etc ¾
the amount, if any, by which
(i) the total of all amounts (other than amounts described in
paragraph (q), amounts received in the course of business,
and amounts received in respect of, in the course of or by virtue
of an office or employment) received by the taxpayer in the year,
each of which is an amount received by the taxpayer 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, other than a prescribed prize,
exceeds the greater of 500 $ and the total of all amounts each
of which is the lesser of
(ii) the amount included under subparagraph (i) for the
year in respect of a scholarship, fellowship, bursary or prize
that is to be used by the taxpayer in the production of a
literary, dramatic, musical or artistic work, and
(iii) the total of all amounts each of which is an expense
incurred by the taxpayer in the year for the purpose of
fulfilling the conditions under which the amount described in
subparagraph (ii) was received, other than
(A) personal or living expenses of the taxpayer (except
expenses in respect of travel, meals and lodging incurred by the
taxpayer in the course of fulfilling those conditions and while
absent form the taxpayer’s usual place of residence for the
period to which the scholarship, fellowship, bursary or prize, as
the case may be, relates),
(B) expenses for which the taxpayer was reimbursed, and
(C) expenses that are otherwise deductible in computing the
taxpayer’s income;
[6] From a simple reading of this paragraph it is quite clear
that a person who receives a scholarship, regardless of whether
he has other sources of income, must include the amount of that
scholarship in his income. He can then deduct the basic exemption
of $500, provided that the scholarship was not received in the
course of business or by virtue of an office or employment, as in
either of those cases it would be taxable as income from a
business or as income from an office or employment and the
recipient would not be entitled to the $500 exemption provided
for in paragraph 56(1)(n).
[7] Moreover, under the said paragraph 56(1)(n) a
taxpayer who receives a prize for achievement is required to
include such prize in his income if the achievement is in a field
of endeavour ordinarily carried on by the taxpayer.
[8] The Supreme Court of Canada has ruled on the meaning of
“prize for achievement” in The Queen v.
Savage, [1983] 2 S.C.R. 428, at pages 442-43:
The word “prize”, in ordinary parlance, is not
limited to a reward for superiority in a contest with others. A
“prize” for achievement is nothing more nor less than
an award for something accomplished. There is no need to pluck
the word “prize” out of context and subject it to
minute philological examination, or to think of
“prize” in the context of the medal or book one may
have won at an earlier date on a field day or at school or in a
music competition.
The word “prize” is surrounded in the Income
Tax Act by other words which give it colour and meaning and
content. I repeat them: “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”.
Three comments. First, s. 56(1)(n) is not
concerned with the identity of the payer or the relationship, if
any, between donor and donee. There is nothing in the section
which renders the scholarship, fellowship, bursary or prize
taxable on the ground that the donor or payer is the employer of
the taxpayer.[1]
Second, the words “scholarship, fellowship or
bursary”, with which the word “prize” is
associated, are normally employed in speaking of educational
attainments, usually in the sphere of advanced studies, and
“polite” learning. Third, the prize must be for
“achievement”, defined in the Shorter Oxford
Dictionary (3rd ed.) as “the action of achieving,
anything achieved, a feat, a victory”. “To
achieve” is variously defined, including “to carry
out successfully”, “to attain”. The
“achievement” must be in a field of endeavour
ordinarily carried on by the taxpayer. This rules out, for
example, prizes won in games of chance or at a costume party or
for athletic achievement.
[9] Dickson J. goes on to say, at page 444:
In my view, a “prize for achievement” does not
necessarily connote an award for victory in a competition or
contest with others. That places too narrow and inflexible a
meaning on the words.
[10] In the instant case, the Appellant suggested at the very
end of the hearing, at the close of argument, that the amount of
$6,500 had been given him by the Defence Department as a prize
for achievement in connection with work he had done. He argued
that this work was not performed in the field of endeavour
ordinarily carried on by him and so the amount in question would
not come under paragraph 56(1)(n).
[11] In the first place, the Appellant had admitted that the
amounts of $835 and $6,500 respectively were scholarships. He
himself made reference to that in his Notice of Appeal. Moreover,
it was the Appellant who had the burden of proving that the
amount received was not a scholarship but a prize for achievement
and that this achievement was not in a field of endeavour
ordinarily carried on by him. To discharge that burden he was
required to adduce the necessary evidence during the hearing and
could not simply change his version of the facts at the close of
argument.
[12] I am therefore of the view that the Appellant has not
shown on a balance of probabilities that the amounts in issue
were not scholarships which should not have been included in his
income under paragraph 56(1)(n) of the Act.
[13] Lastly, nor do I accept the Appellant’s argument
that the taxation of a scholarship, in the case of a person who
works while pursuing his studies and who is by virtue of that
fact also taxable on another source of income, is discriminatory
and an infringement of his equality rights under section 15
of the Charter.
[14] To succeed the Appellant was required first to
demonstrate that paragraph 56(1)(n) treated him
differently by imposing on him a burden not placed on others or
by refusing him a benefit granted to others. He then had to show
that this unequal treatment, if such there was, was
discriminatory.
[15] For one thing, I do not believe that paragraph
56(1)(n) treats students who work differently from other
students. In either case the scholarship is taxable and the
student is entitled to a $500 exemption. The extra burden which
might be imposed on a working student would be higher taxes as
his income is greater than that of a student having no other
sources of income. If in fact there is a distinction it is not
one created by statute and based on one of the grounds set out in
subsection 15(1) of the Charter or on a similar ground. It
is not a distinction based on an immutable personal
characteristic of an individual. In my view, the following
statement by Gonthier J. in Thibaudeau v. Canada,
[1995] 2 S.C.R. 627, at page 696, is apposite here:
. . . In the first place, legislation must be assessed in
terms of the majority of cases to which it applies. The fact that
it may create a disadvantage in certain exceptional cases while
benefiting a legitimate group as a whole does not justify the
conclusion that it is prejudicial. . . . Any inequalities are
peculiar to specific cases, though there may be many of them;
they relate to economic interests . . .
[16] The Charter is concerned primarily with personal
rights. The interests with regard to which the Appellant claims
to have been prejudicially treated are of a strictly financial
nature: freedom and human rights are not at issue. In the instant
case, paragraph 56(1)(n) makes no distinction set out in
section 15 of the Charter nor any distinction based on a
similar ground. Paragraph 56(1)(n) contains no hint of
discrimination, prejudice or stereotyping. I share the view
expressed by Hugessen J.A. in Smith, Kline & French
Laboratories Ltd. v. Canada, [1987] 2 F. C. 359, at
pages 367-68:
The rights which it [section 15 of the Charter]
guarantees are not based on any concept of strict, numerical
equality amongst all human beings. If they were, virtually all
legislation, whose function it is, after all, to define,
distinguish and make categories, would be in prima facie
breach of section 15 and would require justification under
section 1. This would be to turn the exception into the
rule. Since courts would be obliged to look for and find
section 1 justification for most legislation, the
alternative being anarchy, there is a real risk of paradox: the
broader the reach given to section 15 the more likely it is
that it will be deprived of any real content.
[17] Students who work cannot constitute a group within the
meaning of section 15 of the Charter as income level
is not a characteristic attaching to the individual (see
Thibaudeau, supra, page 699).
[18] The appeal is accordingly dismissed.
Signed at Ottawa, Canada, this 5th day of February 1998.
“Lucie Lamarre”
J.T.C.C.
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