Jones v. The Queen, docket 2001-4161(IT)I (Informal Procedure)

Date: 20020627

Docket: 2001-4161-IT-I

BETWEEN:

TIMOTHY S. JONES,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasonsfor Judgment

Margeson, J.T.C.C.

[1]            This is an appeal from the reassessment of the Minister of National Revenue ("Minister") for the 1999 taxation year, notice of which is dated October 1, 2001. In that reassessment the Minister included in the Appellant's income the amount of $15,500 in respect of a scholarship awarded to him to attend Upper Canada College ("College") as a day student. The original scholarship was for the amount of $16,000 but the Minister allowed a reduction in the amount of $500 pursuant to paragraph 56(1)(n) of the Income Tax Act ("Act").

Facts:

[2]            There was no real issue as to the facts in the matter. The Appellant was a 16-year old male, having been born on October 20, 1985 who in the year 1999, after a competitive process open to students across Canada, was awarded a scholarship by the College. The nominal value of the scholarship was $16,000 and it covered the cost of tuition for a day student attending the College.

[3]            The Appellant received no cash in hand. The scholarship could not be converted to cash. Tuition charges were applied to the student's account and it was credited with the amount by way of book entry. The amount could not be transferred to any other party.

[4]            The College was aware of Canada Customs and Revenue Agency's ("C.C.R.A.") position that the amount received was taxable and the students were told the same. The school sent the Appellant a T4A form for the 1999 taxation year indicating, "Other Income" of $16,000 in respect of his scholarship.

[5]            The Appellant objected to the assessment and the Minister reassessed with respect to the amount by including only $15,500 in the Appellant's income for his 1999 taxation year recognizing that the first $500 of the award was not taxable. Other minor adjustments were made to the assessment from which the Appellant does not appeal.

[6]            Patti A. MacNicol was a Chartered Accountant who acted as Director of Finance for Upper Canada College and she was familiar with the scholarship given and the scholarship program there. She described the process for awarding annual scholarships to students who are qualified and yet unable to pay themselves. The net worth position of each applicant is taken into account and this net worth position must be verified. Scholarships are all based on relative financial need. The amount that the Appellant received in the year in question was intended to cover tuition fees and other costs in place at that time. It usually costs about $3,000 or more above the tuition cost for a person to attend the College.

[7]            This is an annual process and each family must re-apply as the amount granted, if at all, may not be the same.

[8]            In the year 1999 no cash was placed in the hands of the Appellant. Ms. MacNicol confirmed that the amount cannot be converted to cash. Tuition charges are applied to the student's account and it is credited with the amount of the scholarship by way of book entry. This amount cannot be transferred to any other party.

[9]            The witness made it clear that the College was aware of C.C.R.A.'s position with respect to this scholarship, that it was taxable in the hands of the recipient and each recipient was told that. This had given them great concern at the College as many good students do not come to the College because they cannot meet the tax burden imposed upon them as a result of the scholarship being taxable in the hands of the recipient. They lose good students and athletes as a result thereof.

[10]          She explained how the selection process worked and the basis of the scholarship, how the amount is credited to the student in his account and in the books of the College. She reiterated that if the Applicant refused the scholarship, it would go to someone else and that would be decided by the College.

[11]          Gordon Jones was an orthopaedic technologist and the father of the Appellant. He explained how the Appellant came to be awarded the scholarship. He identified Tab 2 of Exhibit A-1 which was a letter from the College dated May 13, 1999 advising Mr. Gordon Jones and his wife that the Appellant had been granted a merit scholarship of $16,000 for the year 1999. The letter confirmed that C.C.R.A. considered financial assistance and scholarship awards such as that granted to the Appellant to be taxable benefits. He indicated that the amount of the scholarship award was reported to C.C.R.A. in the Appellant's name. The witness confirmed that he knew it would be taxable. They accepted it. They did not know how much tax would be involved but, as he put it, they believed "that it would be a wash".

[12]          He confirmed Exhibit A-1, Tab 4 which was a statement from the College in the name of the Appellant for the year 1999 indicating how the scholarship amount was credited to the Appellant's account at the College. He also identified Tab 7 of the exhibit which was an application for the school year 2000/2001 regarding an award of $18,000 to the Appellant for that year. Again, in that letter, the College reminded the parents that C.C.R.A. considered financial assistance to be taxable benefits indicating that recent budget proposals could increase the exemption level to $3,000. Again, the College pointed out that the amount of the bursary would be reported to C.C.R.A. in the son's name in the period in which it was applied to his account. Documents at Tabs 8 to 12 were copies of financial statements for the Appellant from the College and a further letter at Tab 10 dated March 6, 2001 indicating that the Appellant had been granted a further scholarship in the amount of $20,000 for the year 2001/2002. Again, the letter reminded the parents that C.C.R.A. considered financial assistance to be a taxable benefit with only the first $3,000 of such assistance received on a tax-free basis. It further indicated that the amount of the bursary would be reported to C.C.R.A. in the son's name in the period in which it was applied to his account.

[13]          Tab 12 of Exhibit A-1 was a copy of the T1 Special return for the year 1999 prepared by this witness on behalf of the Appellant. He included the amount of $16,000 in income but then said, "I thought I had a credit for it". Tab 13 was a letter from the Appellant to C.C.R.A. dated April 23, 2001 objecting to the taxation of the $18,000 amount for the taxation year 2000. He reiterated that 1999 taxation year was the subject matter of an objection. The remainder of the documents in Exhibit A-1 reflected the ongoing dispute between C.C.R.A. assessing tax for the scholarship amount and the Appellant's position that this was not taxable.

[14]          He reiterated that the Appellant never had the amount in question in his hands.

[15]          In cross-examination he said that the Appellant did not receive any amount. He did attend the College and had he not received a scholarship he would have had to pay the $16,000. He was delighted that his son received the scholarship. They could not have paid it themselves.

[16]          In re-direct, he said that if the Appellant had not received the scholarship he would have continued in the public school system.

[17]          Timothy Jones, the Appellant, indicated that he attended the College in the year in question. He started in grade 9 in the Fall of 1999. Following information received from the family about the opportunity which was available to him, he pursued it and ultimately was awarded the scholarship. He did not receive any money in cash and was not eligible to do so. He was questioned with respect to his financial position and he said that his savings amounted to about $4,000, which was reserved for post-secondary education. In 1999, his net worth was $4,500 and it is basically the same today. He has not touched it.

[18]          He has not received any cash or property from the College with respect to the amount in question. He went there without cost to himself with respect to tuition. However, he had to pay for textbooks and uniforms himself. He enjoyed his time at the College and considered it to be a very good school that offered him real opportunities that the public schools did not and he was happy to be there.

[19]          In re-direct he said that if he had not received a scholarship he would have gone to a high school near his home, he would have had to pay for textbooks and field trips but would not have had to pay for tuition.

Argument on behalf of the Appellant

[20]          In oral and written argument counsel for the Appellant said that what are taxable under the Act are not "ephemeral" things but money. The Appellant's scholarships in reality were "mere book entries" in the accounting records of the College. His net worth was not increased in any material way in 1999 by virtue of his scholarship or otherwise. There were two issues to be decided in this appeal: (1) what was the "amount" of the scholarship received by the Appellant in 1999, i.e. "the value in terms of money" of that scholarship? (2) if the "amount" of the scholarship received by the Appellant in 1999 renders him taxable, does this work a fundamental unfairness such that this honourable Court, in its discretion, should recommend to the Minister that a remission order be granted in respect of the tax under the provisions of the Financial Administration Act, R.S.C. 1985, c. F-11?

[21]          Counsel pointed out that scholarships and bursaries are subject to tax under the provisions of paragraph 56(1)(n) of the Act. If there were an actual payment of sums to the scholar then the computation of the tax would be a simple matter but where an institution provides a scholarship in respect of post-secondary education it simply credits an amount to the student's tuition fees. Valuation is somewhat of a moot point since whatever the value of the scholarship, the student is entitled to a matching tuition credit.

[22]          However, a problem arises where the scholarship is in respect of primary or secondary school course tuition because since 1988, no offsetting tuition deduction or credit has been available for such courses.

[23]          The only statutory guidance in paragraph 56(1)(n) of the Act is that the "amount" of the scholarship or bursary received is taxable. "Amount" is defined in subsection 248(1) of the Act to be the "value in terms of money" of the right or thing in question.

[24]          He referred to the case of Wilkins (H.M. Inspector of Taxes) v. Rogerson, 39 Tax Cases, 344 (C.A. (Eng.)) and opined that the value of a right or thing received by a taxpayer is the value to that taxpayer, not the cost to the person providing the right or thing to the taxpayer.

[25]          In the case at bar the scholarship in question had no monetary value to the Appellant even though he presumably enjoyed his time at the College and benefited from its high standards of scholarship. These were purely personal benefits of no pecuniary value.

[26]          The amounts received here were not for room and board even though it might be possible to see where amounts received in respect to those items might have quantifiable pecuniary advantages.

[27]          Similarly, where non-resident students would not otherwise be entitled to a free high school education in Canada, an argument might be made that a scholarship involves a pecuniary advantage; again, that is not the case here.

[28]          Cases that involve discounts and scholarships taxed as income from employment in the hands of a student's parent do not assist us in this case. The charging provision of paragraph 6(1)(a) of the Act is much broader (i.e., "benefits of any kind whatever") than paragraph 56(1)(n). Moreover, it seeks to tax the benefit to the parent/employee, not the child. The policy consideration behind taxing incremental income from employment (i.e. fringe benefits) are completely different than those involved with taxing a child on a non-monetary scholarship based on need. He referred to Detchon v. The Queen, 96 DCT 2032 (T.C.C.) and Guay v. The Queen, 96 DTC 1534 (T.C.C.), in that regard.

[29]          He discussed some of the cases where the Court of Appeal has dealt with the situation of employee benefits based on an analysis as to whether or not an actual economic advantage to the taxpayer had occurred or whether there was merely the maintenance of the status quo; in the case of the latter, there was no taxable benefit. See The Queen v. Hoefele et al., 95 DTC 5602 (F.C.A.).

[30]          In light of these cases, counsel pointed out that the net worth of the Appellant had remained basically the same since 1991. He had slightly more than $4,000 in Canada Savings Bonds and a bit of accrued interest. If the nominal amounts of these scholarships are taxable in his hands, he will have no net worth whatever. It simply makes no economic sense to conclude that these scholarships have conferred an economic advantage while at the same time rendering him insolvent.

[31]          Further, the scholarship did not confer an economic advantage upon the Appellant, it simply allowed him to obtain a free high school education at the College which was something that he was already legally entitled to receive in the Toronto public high schools.

[32]          He was prepared to admit that there may have been some ephemeral advantages (and disadvantages) to having attended the College but these are not, in the instant case at least, the types of advantages that can be expressed in pecuniary terms and taxed: whatever they may be, they are not a "buck".

[33]          In summary, he submitted that the "value in terms of money" of the nominal $16,000 scholarship received by the Appellant in 1999 was either nil, or at least less than his applicable personal exemptions in that taxation year.

[34]          However, in the event that the Court concludes that the Appellant was taxable on the amount of the scholarship received by him, this is an appropriate case for the Court to exercise its discretion and recommend to the Minister that a remission order be granted in respect of that tax under the provisions of the Financial Administration Act. In this regard he cited Moulton v. Canada, [2002] T.C.J. No. 80 (T.C.C.) and Watanabe v. The Queen, 99 DTC 822 (T.C.C.).

[35]          It was his position that in the present case the taxation of the amounts in question would render the Appellant insolvent; this seems a dubious policy at best.

[36]          Further, on a broader policy level, he argued that this rule would simply render needs-based scholarships, such as those awarded by the College, completely nugatory. None of the recipients will be able to afford to accept them. It will be of no assistance to merely suggest that schools such as the College should simply "gross up" their awards to permit students to pay the tax. This would simply amount to imposing an indirect income tax on tax-exempt charities and divert charitable resources from the pursuit of charitable activities.

[37]          In conclusion, he submitted that the taxation of the nominal amount of this scholarship received by the Appellant in 1999 will work a grave hardship and injustice for him and his family and asks that this honourable Court advise the Minister accordingly.

[38]          He suggested that the appropriate relief was to refer the assessment under appeal back to the Minister for reassessment on the basis that the "value in terms of money" of the nominal $16,000 scholarship received by the Appellant in 1999 was either nil, or at least less than his applicable personal exemptions in that taxation year; or, in the alternative, that the Court exercise its discretion and recommend to the Minister that a remission order be granted in respect of that tax under the provisions of the Financial Administration Act.

Argument on behalf of the Respondent

[39]          In written and oral argument, counsel for the Respondent related the facts in the present case to those as considered by the Court in Wilkins, supra, (although in that case the taxpayer was an employee but that is not the case here). Tuition is not the cost of a suit which was involved in that case. It involves a right to attend a school.

[40]          She argued that the provisions of paragraph 56(1)(n) of the Act provide that there shall be included in computing the income of the Appellant for a taxation year:

Scholarships, bursaries, etc. -- 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 . . . .

[41]          Subsection 248(1) of the Act provides that the term

"amount" means money, rights or things expressed in terms of the amount of money or the value in terms of money of the right or thing, except that, . . . .

"Amount" refers to money, or in the case of rights or things other than money, the value in terms of money of the right or thing, or the corresponding figure in money terms.

[42]          She also referred to Blais et al., v. M.N.R., 1989 CarswellNat 474 (T.C.C.), at paragraphs 16 and 17 in support of this position. In that case the Court was dealing with the term "alimony" and believed that it was entirely natural to express that issue in terms of money. She also referred to the definition of the word "receive" and took the position that:

The word "receive" means to get or derive benefits from something or to enjoy its advantages without necessarily having it in one's hand.

[43]          She referred to the cases of Morin v. The Queen, 75 DTC 5061 (F.C.T.D.) at paragraphs 24 to 29; Hoffman v. M.N.R., 85 DTC 5508 (F.C.T.D.) at paragraphs 9 to 16 and Kurisko v. M.N.R., 88 DTC 6434 (F.C.T.D.) paragraphs 13 to 17 in support of this position.

[44]          With respect to the term "scholarship" she took the position that this means a sum of money or its equivalent offered (as by an educational agency, public or private agency, organization or foundation), to enable a student to pursue his studies at school, college or university.[1]

[45]          She referred to The Queen v. Amyot, 76 DTC 6217 (F.C.T.D.) at paragraphs 11 and 12 which she said supported her position.

[46]          Applying the plain ordinary meaning of the language from paragraph 56(1)(n), the merit scholarship in the amount of $16,000 was an amount received by the Appellant in the 1999 taxation year as or on account of a scholarship. She referred to relevant facts such as: T4 slip issued in the name of the Appellant; the Upper Canada College statement of account for 1999/2000 taxation year, which referred to the amounts; a letter from J. Reid Barter, Director of Admission addressed to Mr. & Mrs. G.S. Jones dated May 13, 1999, pointing out that the amount was taxable; the offer of scholarship award dated May 25, 1999 which did likewise; the College's web page on admissions, scholarships and financial aids which did not indicate otherwise and the term "scholarship" as described in the Concise Oxford Dictionary as supporting this position.

[47]          Alternatively, the merit scholarship was a right to attend the College, the value of that right expressed in terms of money was $16,000, received by the Appellant in his 1999 taxation year and the Appellant received the benefit therefrom in that amount without necessarily having it in his hands.

[48]          In support of this position she referred to Hoffman, supra, at paragraphs 9 to 16; Kurisko, supra, at paragraphs 13 and 15 and Blais, supra, at paragraphs 16 and 17.

[49]          The Appellant was excused from paying the tuition. That is the right that is being considered under section 248 of the Act in using the term "amount". You do not have to have it in your hands in order to have received a right or thing. The Act talks about taxing a scholarship and that is what is referred to inAmyot, supra, which applies the plain meaning rule, as should be done in this case.

[50]          What is being taxed here is the Appellant's right to attend a college to pursue his studies even though he did not receive the money in cash. The money was transferred to the foundation and then to the Appellant's account. This is unlike the facts in the case of Detchon, supra, where the trial judge referred the matter to the Minister, pursuant to the Financial Administration Act, for possible remission of the tax and interest assessed on the benefits because an earlier policy had given some comfort to the taxpayers that the Minister would not enforce its published policy. In that case no money was actually transferred. The children of teachers received free or reduced tuition at the schools and colleges at which the parents taught and the Minister taxed the value thereof as benefits.

[51]          She also argued that even though the Appellant could not transfer the amount of the scholarship, it could have been transferred to someone else if the Appellant had not accepted it and therefore must have had a value.

[52]          In rebuttal, counsel for the Appellant said that the cases of Morin, Hoffman and Kurisko, supra, do not help us in the present case in respect of the issue of receipt as those were constructive receipt cases. There was nothing to show, on the evidence before this Court, what the value of the right was but there were three witnesses who said that there was no pecuniary value to the scholarship.

Analysis and Decision

[53]          Counsel for the Appellant, in his opening remarks to the Court, indicated that in his Notice of Appeal the Appellant denied that he actually received any money or property of any kind with respect to the scholarship, but simply received the ability to attend the school without being charged tuition. He took the position that the Minister in his presumptions did not deny this allegation. However, counsel for the Respondent pointed out that in the Reply to Notice of Appeal in paragraph 4, the Minister denied any other allegations of fact contained in the Appellant's Notice of Appeal other than those admitted and those admissions did not include paragraph 5.

[54]          In any event, the Court is satisfied that the Minister assessed the Appellant on the basis that he received the amount of $16,000 with respect to the scholarship from the College and it is with respect to that amount that the appeal from the assessment arises.

[55]          There is no real dispute with respect to the factual situation in this case nor is there any real dispute about what sections of the Act are to be considered.

[56]          Paragraph 56(1)(n) of the Act, under the heading "scholarships, bursaries, etc.", requires the taxpayer to include in his income for a taxation year

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),

[57]          The important words in this section are the words "amounts received" and "scholarship". The words are not further defined with the exception of subsection 248(1) of the Act, which provides that:

"amount" means money, rights or things expressed in terms of the amount of money or the value in terms of money of the right or thing, . . .

The word "amount" was the subject matter of some discussion in Blais, supra, at paragraphs 16 and 17. The Court concluded that "this word refers to money or in the case of rights or things other than money, the value in terms of money of the right or thing, or the corresponding figure in money terms".

[58]          The term "received" has been considered in Morin, supra, and the Court held at paragraph 24:

        We regret to say that this proposition seems to us absolutely inadmissible, because the word "receive" obviously means to get or to derive benefit from something, to enjoy its advantages without necessarily having it in one's hands.

The Court also referred approvingly to the decision in Lucien Gingras v. M.N.R., (Unrep.) at pages 4 and 5, where the Court said:

The expression "touché" (received) does not necessarily mean that the full amount of the salary must be physically received by the payee or be deposited in full in his bank account.

According to the interpretation of section 5 it is sufficient to say that the amount of the salary was paid by the employer either to the employee himself or to his benefit, or that it was handed over to a third party under a federal or provincial statute.

[59]          Hoffman and Kurisko, supra, which were referred to by counsel for the Respondent, unlike Morin, were cases where the amounts were paid to a third party and not directly to the taxpayer who argued that he had not received the amount. However, all of these cases stand for the proposition that one need not actually receive the money in his hand in order for there to be a benefit received by him but it is sufficient that he received moneys' worth and that he derived benefits from something or he enjoyed its advantages.

[60]          The Court has no doubt that what was received by the Appellant here is certainly included in the definition of "scholarship" in subsection 56(1)(n). There can be no doubt that in the case at bar the money represented by the scholarship went into the Appellant's account at the College. The evidence makes it clear that the book entry made in his account sets out the amount of money in issue and this account was debited periodically to reflect the balance of credits given to the Appellant after these amounts were charged to his account. Consequently, the Court is satisfied that whatever the scholarship represented was actually received by the Appellant even though he did not have it in his own hands and at no time did he actually receive cash in that amount nor at no time was he able to control the amount in any way except that charges in his account would be offset by the amount of the scholarship.

[61]          Counsel for the Appellant asked the question "What is the amount of the 'scholarship' received by the Appellant?" His position is that the scholarship had no monetary value to the Appellant except that he may have received purely personal benefits of no pecuniary value. In accordance with Wilkins, supra, he argued that the value of the right or thing received by the taxpayer is the value to the taxpayer, not the cost to the person providing the right or thing to the taxpayer. That leaves the issue as to whether or not the Appellant received anything by way of value as a result of his account being credited with the amount of the scholarship.

[62]          He used as an analogy, the various cases that involve employee benefits and whether or not there has been an actual economic advantage to the taxpayer or merely maintenance of the status quo. In this case he said that there was no material advantage to the taxpayer and consequently there was no taxable benefit.

[63]          He took the position that the Appellant's net worth remained basically the same because at the end of the day after the Appellant had attended the university he had basically the same amount in his savings account as he had before he obtained the scholarship.

[64]          The Court is not satisfied that these cases are of great assistance. In those cases, there can be no doubt that what the taxpayers received was certainly something of money's worth, but at the end of the day because of the fact that they had to pay out monies to the same extent or to a greater extent, they were in no better financial situation than they had been before. In the case at bar counsel relates that to the fact that the Appellant here could have received a free high school education attending public schools. Since he chose not to do so but decided to go to the College, the scholarship merely entitled him to do so without paying out the expenses involved but he was in no better position than he would have been had he gone to the public school where he would not have had to pay.

[65]          Surely, what the Appellant received in the present case was an "amount" as defined in subsection 248(1) of the Act. It is true that he did not receive the money himself but the money was transferred to his own account, it was used to pay his own expenses, which he would have had to pay himself had he not received the scholarship. Therefore, he surely received money, or money's worth or rights or things expressed in terms of the amount of money or the value in terms of money of that right which was to have the scholarship funds credited to his account.

[66]          Again, with respect to the term "received", there is no doubt in the Court's mind that the Appellant received some benefit or advantage from the depositing of the scholarship amount to his account with the College. If he had not received it then he would have had to pay the expenses himself.

[67]          This Court does not agree with the submission of counsel for the Appellant that the scholarship did not confer any economic advantage upon the Appellant. The receipt of the scholarship or its equivalent value entitled the Appellant to attend the College, whatever its advantages might have been, for whatever reason he wanted to be there, without paying the expenses himself or without having his parents pay the expenses. This result is not affected by the fact that he might have obtained a free high school education other than at the College. Likewise, the Court cannot agree with the submission of counsel for the Appellant that the value in terms of money of the scholarship of $16,000 was nil or at least less than his applicable personal exemptions in that taxation year.

[68]          In the case of Detchon, supra, Judge Rip decided that where the taxpayers were employed as teachers at a private school in Quebec and their children attended the school free of paying tuition while other students were required to pay, that each of the taxpayers received an employment "benefit", the value of which was equal to the tuition fees that the parents of other students were required to pay to the school. This is not the exact factual situation before this Court, and again was a case decided upon a benefit received by the parents but it does point out the fact that the learned trial judge concluded that there was a benefit received even though the benefit was in the form of free tuition.

[69]          In the end result, the Court is satisfied that the evidence has established that in the year in question the Appellant received a taxable benefit as a result of receiving the scholarship of $16,000 and that benefit was properly taxable in the hands of the Appellant as set out in the assessment.

[70]          The second issue is whether or not the rendering of the Appellant as taxable for the amount of the scholarship, works a fundamental unfairness such as this honourable Court in its discretion, should recommend to the Minister that a remission order be granted in respect of the tax under the provisions of the Financial Administration Act.

[71]          As counsel pointed out in the case of scholarships for primary and secondary school course tuition the problem arises because since 1988, no offsetting tuition deduction or credit has been available for such courses as may have been the case before 1988. No evidence was introduced as to why this change was made. Suffice it to say that in the year in question there was no such offsetting credit.

[72]          The Appellant has introduced evidence to the effect that had he not received the scholarship his parents would not have been able to send him to that College and he would not have gone because he could have received a free education in the public schools. However, it is clear from the evidence that the Appellant and his parents knew from the beginning that there were going to be tax consequences of accepting the scholarship and they proceeded on the basis that these tax consequences would be negligible, presumably believing that there would be offsetting credits. However, they continued to make application for the scholarship in subsequent years, even thought the amounts of the scholarship were increased each year, presumably the tax consequences would likewise be increased and knowing that the Minister was standing by the position that the amounts received in each year were taxable.

[73]          This case is dissimilar from the factual situation referred to in Detchon, supra, where Judge Rip was prepared to recommend to the Minister that, pursuant to the Financial Administration Act, remission of the tax and interest assessed from the benefits should be granted provided that the situation was brought about because of the practice of C.C.R.A. not to enforce its published policy which resulted in leading the taxpayers to believe that they would not be taxed. Such is not the case here. The case is exactly the opposite because neither the Appellant nor his parents had any right to believe at any time that the Minister would not enforce his interpretation of these sections of the Act and the Appellant and his parents went forward with full knowledge of those facts.

[74]          In Moulton, supra, Judge Bowman expressed the view that this would be an appropriate case for the Minister to issue a remission order in dissimilar circumstances to the case at bar. In that case, the taxpayer had been somewhat prejudiced by information that he had received from officials of C.C.R.A. on a number of occasions and where the taxpayer was acting in good faith by relying on what he considered to be proper advice from officials at C.C.R.A.

[75]          In the case of Watanabe, supra, Judge Bowman expressed a similar view where the Minister had already waived interest otherwise payable as a result of such disallowance, presumably considering it to be unfair to levy interest because the taxpayer relied on C.C.R.A.'s erroneous advice. There again Judge Bowman said at paragraphs 7 and 8 that:

Ms. Watanabe had every reason to rely upon the advice she received and she did so in good faith. Her understanding was that she could deduct $3,500 in 1996 and the remainder of $1,718.37 in 1997, notwithstanding the amount of her current contribution to the college's RPP.

The advice that she received was wrong.

[76]          Again these circumstances are dissimilar from the factual situation in the present case.

[77]          No submissions were made with respect to why no corresponding deduction existed in the income tax legislation following 1988 that may have existed previous to that nor any deduction which corresponded to one available for post-secondary education except that it might have fallen through the cracks. One can only hypothesize that one of the reasons may have been that it was not considered necessary to grant such deductions in the case of secondary education in light of the fact that free education is available out of the public purse. The student here was not forced to attend a private institution where the student or his parents must pay the cost of tuition and where the advantages to the student might be greater or at least perceived to be greater than the education received in the public schools. However, this has nothing to do with the decision in the present case and the taxpayer and his parents made the choice freely in this case without any input from officials at C.C.R.A.

[78]          Neither is the Court placing any great weight upon the evidence given by the Vice-President of Finance of Upper Canada College that the lack of deductibility of the scholarships or the unavailability of any offsetting credit is causing them some difficulty in attracting the students that they want to the College because they cannot afford to advantage themselves of the scholarship due to the tax disadvantages.

[79]          The Court has to read legislation as it finds it. In this case the plain reading of the Statute makes the amount taxable. This is not a proper case for the Court to recommend to the Minister that a remission will be made.

[80]          In the present case the proper remedy would be to attempt to have the legislation changed if the appropriate legislative authorities can be convinced that that is in the best interest of all taxpayers or it is of such widespread significance that it should be changed.

[81]          In the event that this Court should recommend to the Minister that a remission order be granted, any scholarship recipients would be in a position to make the same request and the results might be very significant.

[82]          The Court is satisfied that the Minister has assessed properly. The appeal is dismissed and the Minister's assessment is confirmed.

Signed at Corner Brook, Newfoundland, this 27th day of June 2002.

"T.E. Margeson"

J.T.C.C.

COURT FILE NO.:                                                 2001-4161(IT)I

STYLE OF CAUSE:                                               Timothy S. Jones and The Queen

PLACE OF HEARING:                                         Toronto, Ontario

DATE OF HEARING:                                           April 16, 2002

REASONS FOR JUDGMENT BY:      The Hon. Judge T.E. Margeson

DATE OF JUDGMENT:                                       June 27, 2002

APPEARANCES:

Counsel for the Appellant: William I. Innes

Counsel for the Respondent:              Margaret Nott

COUNSEL OF RECORD:

For the Appellant:                

Name:                                William I. Innes

Firm:                                Thorsteinssons,

Barristers & Solicitors

Toronto, Ontario

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2001-4161(IT)I

BETWEEN:

TIMOTHY S. JONES,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on April 16, 2002 at Toronto, Ontario, by

the Honourable Judge T.E. Margeson

Appearances

Counsel for the Appellant:                             William I. Innes

Counsel for the Respondent:                         Margaret Nott

JUDGMENT

          The appeal from the assessment made under the Income Tax Act for the 1999 taxation year is dismissed and the Minister's assessment is confirmed.

Signed at Corner Brook, Newfoundland, this 27th day of June 2002.

"T.E. Margeson"

J.T.C.C.