Citation: 2010 TCC 147
Date: 20100315
Dockets: 2008-510(IT)I, 2008-2004(IT)I
2008-2011(IT)I, 2008-2278(IT)I
2008-2470(IT)I, 2008-4060(IT)I
2008-4066(IT)I, 2008-4067(IT)I
2008-4068(IT)I,
2008-4069(IT)I
and 2008-4070(IT)I
BETWEEN:
MING PAN, RAFFAELA PROFITI,
ANDREA TODD, AROON YUSUF, ABDELNASIR
BASHIR, INBAL GAFNI, ERIC GREENWALD,
JENNIFER SCHNARR, JEFFREY KWEE,
RICHA MITTAL and NICHOLAS PLASKOS,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Paris J.
[1] The issue in these
appeals is whether the Appellants are entitled to education and post-secondary
textbook tax credits for their 2006 taxation year. This will turn on whether
they were enrolled in a “qualifying educational program” which does not include
any program in respect of which the student receives any “allowance, benefit,
grant or reimbursement for expenses in respect of the program” from a person
with whom the student is dealing at arm’s length.
[2] All of the Appellants
were enrolled as full-time post-graduate medical residents at McMaster University in 2006. Each
of them claimed the educational credit and post-secondary textbook credit for
that year. The Minister of National Revenue (the “Minister”) refused
the Appellants’ claims on the basis that the medical resident program at
McMaster was not a “qualifying educational program”. The Minister assumed that
McMaster paid the Appellants’ tuition for the program.
[3] At the hearing,
evidence presented by the Appellants showed that McMaster did not charge residents
who were Canadian citizens or landed immigrants (“domestic residents”) any
tuition fees for the program. Since all of the Appellants were domestic residents,
they did not pay any tuition to McMaster, and McMaster did not pay any tuition
on their behalf. The Respondent conceded these points.
[4] The Respondent revised
its position, however, to argue that the instruction received by the Appellants
in the program had a value and that by being given that instruction for no
charge they received a benefit in respect of the program.
[5] The Appellants
maintain that they did not receive a benefit from McMaster in respect of the
medical residency program and that, therefore, the Minister erred in refusing
them the credits.
Facts
[6] The Appellants
presented an affidavit sworn by Rhonda Trowell, the Director of Health Policy
at the Professional Association of Interns and Residents of Ontario (“PAIRO”).
PAIRO is the bargaining agent that represents all medical residents in Ontario. The Respondent did not
object to the production of the affidavit and did not take issue with any of
the statements made in it.
[7] The following facts
are taken from Ms. Trowell’s affidavit.
[8] Six Ontario universities offer post-graduate
medical education: the University of Toronto, Queen’s University, the University of Western Ontario, the University of Ottawa, McMaster University, and the Northern
Ontario School of Medicine. Each university is affiliated with a number of
teaching hospitals where residents are employed to engage in clinical training
and to provide clinical services to members of the public.
[9] Residents are both
employees and students: they are physicians employed by the hospitals and they
are post-graduate medical trainees registered in approved university programs
leading to licensing or certification.
[10] Medical residents in
Ontario are categorized into
three different pools, depending on a number of factors, including the
residents’ funding source, immigration status, and where they received their
medical degree.
[11] Pool A residents
received their medical degrees in Canada, are citizens or permanent residents of Canada and are funded chiefly
by the Ministry of Health. The vast majority of residents in Ontario are in Pool A. All of
the Appellants are in Pool A.
[12] Pool B residents are
citizens or permanent residents of Canada who received their medical degrees
outside of Canada or with assistance from
the Department of National Defence. Pool B residents are funded by the Ministry
of Health.
[13] Pool A and Pool B
residents (i.e. domestic residents) are not charged tuition by any of the six
universities. They all pay a registration fee to cover the cost of
post-graduate office administration. In 2006, the registration fee was $325. No
domestic residents were reimbursed by their university for the registration
fees.
[14] Pool C residents (i.e.
foreign residents) received their medical degree outside Canada and are not Canadian
citizens or permanent residents. They are funded entirely by a sponsoring
foreign government. The residency positions they fill are outside the
complement of domestic residents being trained for independent practice in Canada, and the foreign
residents are expected to return to their country of origin upon completion of
their residency. The six Ontario universities charged the foreign funding sponsors tuition
for the foreign residents. In 2006, McMaster charged tuition of $23,150 for foreign
residents.
[15] Foreign residents
constitute a special subset of residents who are not funded by any Canadian
source and whose entire costs, including training, salary and benefits are paid
for by a foreign sponsoring government. The tuition amounts that foreign
government sponsors pay in order to have their medical school graduates obtain
residency training in Canada is determined entirely separately and
independently from any determination made as to the tuition, if any, to be
charged to domestic residents.
[16] Ms. Trowell also
related the history of tuition fees for medical residents in Ontario.
[17] In July 1998,
government policy in Ontario that had previously prohibited universities from charging
domestic residents tuition was changed to allow universities to do so. PAIRO
opposed the change and opposed moves by the universities to introduce tuition
fees for domestic residents. By the spring of 1999, after much debate, each of
the universities had decided not to begin charging tuition. At the University of Toronto, a Task Force
established to study the question strongly recommended that tuition fees not be
implemented.
[18] Ms. Trowell also
referred to the differential in tuition fees charged to domestic and foreign
students in many programs both at the under-graduate and post-graduate level at
Canadian universities, and to the differential in tuition fees charged to in
province and out of province students in Quebec. As an example of the differential
fees, she stated that the average undergraduate arts and science tuition for
full-time domestic students at McMaster in 2006 was $4,319 while foreign
students were charged $12,948.
Relevant Legislative Provisions
[19] The definition of
qualifying educational program is found in subsection 118.6(1):
118.6 (1) For the purposes of sections 63 and 64 and this
subdivision,
“qualifying
educational program” means a program of not less than three consecutive weeks
duration that provides that each student taking the program spend not less than
ten hours per week on courses or work in the program and, in respect of a
program at an institution described in the definition “designated educational
institution” (other than an institution described in subparagraph (a)(ii)
of that definition), that is a program at a post-secondary school level but, in
relation to any particular student, does not include a program if the student
receives, from a person with whom the student is dealing at arm’s length, any
allowance, benefit, grant or reimbursement for expenses in respect of the
program other than
(a) an
amount received by the student 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 student,
(b) a
benefit, if any, received by the student because of a loan made to the student
in accordance with the requirements of the Canada Student Loans Act or An
Act respecting financial assistance for education expenses, R.S.Q., c.
A-13.3, or because of financial assistance given to the student in accordance
with the requirements of the Canada Student Financial Assistance Act, or
(c) an
amount that is received by the student in the year under a program referred to
in subparagraph 56(1)(r)(ii) or (iii), a program established under the
authority of the Department of Human Resources and Skills Development Act
or a prescribed program;
[20] The
education credit is provided for in subsection 118.6(2) and the post-secondary
textbook credit is provided for in subsection 118.6(2.1):
118.6(2) There
may be deducted in computing an individual’s tax payable under this Part for a
taxation year the amount determined by the formula
A × B
Where
A
is the appropriate percentage for the year; and
B
is the total of the products obtained when
(a) $400
is multiplied by the number of months in the year during which the individual
is enrolled in a qualifying educational program as a full-time student at a
designated educational institution, and
(b) $120
is multiplied by the number of months in the year (other than months described
in paragraph (a)), each of which is a month during which the individual
is enrolled at a designated educational institution in a specified educational
program that provides that each student in the program spend not less than 12
hours in the month on courses in the program,
if the enrolment is proven
by filing with the Minister a certificate in prescribed form issued by the
designated educational institution and containing prescribed information and,
in respect of a designated educational institution described in subparagraph (a)(ii)
of the definition “designated educational institution” in subsection (1), the
individual has attained the age of 16 years before the end of the year and is
enrolled in the program to obtain skills for, or improve the individual’s
skills in, an occupation.
118.6(2.1) If
an amount may be deducted under subsection (2) in computing the individual’s
tax payable for a taxation year, there may be deducted in computing the
individual’s tax payable under this Part for the year the amount determined by
the formula
A × B
where
A
is the appropriate percentage for the year; and
B
is the total of the products obtained when
(a) $65
is multiplied by the number of months referred to in paragraph (a) of
the description of B in subsection (2), and
(b) $20 is multiplied by the number of
months referred to in paragraph (b) of that description.
Position
of the parties
Respondent
[21] The Respondent
argued that the Appellants received a benefit in the form of free education from
McMaster, and therefore that the program was excluded from the definition of
“qualifying educational program”. He said that there was a cost involved in
providing the instruction to the residents that was paid by the university
which gave rise to a benefit to the residents.
[22] Counsel submitted
that the Court should look to the Supreme Court of Canada decision in The
Queen v. Savage, for
guidance in interpreting the word “benefit”. In Savage, the question was
whether a $300.00 prize received by the taxpayer from her employer for passing
certain examinations was taxable as a benefit received from her employment. The
Court in that case, held that the meaning of “benefit of any kind” was “clearly
quite broad” Counsel said that the term “benefit” in the definition of
“qualifying educational program” should similarly be given a broad meaning, and
should include free education.
[23] Counsel cited the following
entry in Canada Tax Words, Phrases and Rules
for
“benefits of any kind whatever”:
The Supreme Court of Canada in Savage stated
that the term “benefits of any kind whatever” is clearly quite broad. Nevertheless,
a benefit can be discerned by examining its impact on the employee’s economic
position.
He maintained that not having to
pay tuition had a “strong, positive and calculable impact on the Appellants’
position.” Furthermore, the fact that foreign residents were charged tuition
while domestic students were not was indicative that the latter group had
received a benefit from McMaster.
[24] Counsel also
referred to the CRA administrative policy concerning benefits in the context of
an educational program which is set out in IT Bulletin 515-R2. Courses for
which no tuition is charged are dealt with in paragraph 16 of the Bulletin:
16. Some
post-secondary school level programs are available without payment of any
tuition fees. As described above, receipt of a benefit frequently disqualified
a student from being entitled to an education tax credit in connection with a
program. However, “free tuition” is not considered to be a benefit if the program
is available to the public at large at no cost.
Since the post-graduate medical
residency program at McMaster was not available to the public at large because
admission was limited to those having already obtained a medical degree and
since the foreign residents in the program were charged tuition, the free
tuition for the domestic residents should be considered a benefit.
[25] In concluding, counsel
cited two dictionary definitions of the word “benefit:
Benefit. 1. Advantage; privilege - the benefit of
owning a car. 2. Profit or gain, esp., the consideration that moves to the
promise ‑ a benefit received from the sale. – Also termed legal
benefit; legal value.
Benefit. 1. a favourable helpful factor or
circumstance; advantage, profit; 2. allowance of money to which a person
is entitled from a pension plan, government support program, etc. (unemployment
insurance benefits) 3. an advantage other than salary associated with a
job, e.g. dental coverage, life insurance, etc. 4. a public performance,
sporting event, etc. held in order to raise money for a particular player,
charity, etc.
[26] Counsel said that
the Appellants received an advantage or privilege by attending the residency
program at McMaster and that this was a favourable circumstance, and a “benefit”
from McMaster within the ordinary meaning of the word.
Appellants
[27] The Appellants’
counsel submitted that it could not possibly have been Parliament’s intention
in drafting the definition of “qualifying educational program” to exclude any
university program for which a student pays less than the actual cost of the
program to the university. If that were the intent of the provision, he said
that no student attending university in Canada would be eligible to claim the
education or textbook credit. Counsel argued that the Respondent’s
interpretation of the word “benefit” in this case would result in an absurdity,
and that Parliament should be presumed not to act in an absurd way.
[28] He suggested that,
when read in context, the word “benefit” refers to an identifiable and
quantifiable payment that is received by the student. All of the items in the
phrase “allowance, benefit, grant or reimbursement of expenses” in the
definition of “qualifying educational program” deal with types of payments or
benefits received by an individual, rather than an indirect benefit received by
all students at the institution.
[29] He also pointed to
the tuition fee differential at many Canadian universities for students who are
not citizens of Canada or landed immigrants, or who are from out of province. According to the
Respondent’s arguments, the students who were charged the lower tuition in
these situations would not be eligible for the education or textbook credits.
[30] Counsel also
submitted that the cost of the residents’ education could not be considered to
be born by tuition fees alone, and that, on the facts of this case, it was not
clear what the cost of the Appellants’ education at McMaster was. The residents
were students in the program but also had unpaid duties teaching medical
students and more junior residents. The University of Toronto Task Force on Tuition Fees for
Residents and Other Matters concluded that a resident (referred to as
“trainees”):
provides services of great value to society,
teaches other students and trainees, participates in informal education under a
traditional clinical apprenticeship model and is simultaneously a part-time
student receiving a formal and defined educational curriculum that is delivered
by dedicated University teachers. There is no easy analogy between postgraduate
clinical trainees and any other students in the University system.
Analysis
[31] Before beginning my
analysis, I think it is appropriate to comment on the last minute changes to
the Respondent’s position in these appeals. At the hearing, the Respondent’s
counsel acknowledged that McMaster did not pay tuition on the Appellants’
behalf and argued instead that they received “free tuition” from McMaster. This
new position was raised for the first time in the Respondent’s arguments at the
hearing, after the Appellants’ counsel had presented his arguments based on his
understanding that the Respondent’s position (as set out in the Replies) was
that McMaster had paid tuition for the Appellants. Counsel for the Appellants
was caught off guard by the change, but he did not oppose the Respondent’s
right to make this argument, nor did he seek any adjournment to prepare his
response. It is understandable that the Appellants wished to have the matter dealt
with as expeditiously as possible.
[32] Still, I find it
very regrettable that the Respondent was so slow in appreciating that McMaster
did not pay any tuition fees for or on behalf of the Appellants. This fact was
communicated in letters written to the Appeals Division of the CRA in October
2008 by the Program Administrator of Post-Graduate Education at McMaster.
Those letters were also attached to each of the Notices of Appeal, but even
then, the Respondent maintained that McMaster had paid fees for the Appellants’
tuition. The Respondent’s position was set out in the Replies as follows:
He submits in
respect of the post-secondary education programme that as McMaster University paid the fees for the tuition of the
Appellant, throughout the 2006 taxation year, with whom it was dealing at arm’s
length, the Appellant received a benefit for expenses in respect of the
programme. Therefore, the post-secondary education programme is not
a “qualifying education programme” within the meaning of subsection 118.6(1)
of the Act.
In fact, this position was
maintained until, as I have said, the Respondent’s counsel began his arguments.
[33] I turn now to the
issue to be decided: whether the Appellants received a benefit from McMaster in
respect of the medical residency program that would disentitle them to the
education and post-secondary credits. In order to answer this question, it is
first necessary to ascertain the meaning of the term “benefit” as it appears in
the definition of “qualifying educational program.” Once the meaning of
“benefit” has been established, the meaning must be applied to the facts in
this case.
[34] The relevant parts
of that definition are set out again here for ease of reference:
“qualifying
educational program” means a program of not less than three consecutive weeks
duration that provides that each student taking the program spend not less than
ten hours per week on courses or work in the program and, in respect of a
program at an institution described in the definition “designated educational
institution” (other than an institution described in subparagraph (a)(ii)
of that definition), that is a program at a post-secondary school level but, in
relation to any particular student, does not include a program if the student
receives, from a person with whom the student is dealing at arm’s length, any
allowance, benefit, grant or reimbursement for expenses in respect of the
program other than
(a) an
amount received by the student 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 student,
(b) a
benefit, if any, received by the student because of a loan made to the student
in accordance with the requirements of the Canada Student Loans Act or An
Act respecting financial assistance for education expenses, R.S.Q., c.
A-13.3, or because of financial assistance given to the student in accordance
with the requirements of the Canada Student Financial Assistance Act, or
(c) an
amount that is received by the student in the year under a program referred to
in subparagraph 56(1)(r)(ii) or (iii), a program established under the
authority of the Department of Human Resources and Skills Development Act
or a prescribed program;
[35] The Respondent
contends that I should give “benefit” a broad interpretation, consistent with
the dictionary definitions of “benefit” as “an advantage” or “better position
or favourable circumstance”. Free education would fall within that definition.
[36] The Appellants, on
the other hand, submit that a restrictive meaning is more consistent with the
intention of Parliament, and that “benefit” would only include payments or
advantages received by or directed at individual students. It would not include
any benefit received under a general subsidy of all students by way of
government funding of education.
[37] The principles to be
applied in the interpretation of tax statutes are set out by the Supreme Court
of Canada in Placer Dome Canada Ltd. v. Ontario (Minister of Finance) at paragraphs 21 to 23:
21 In Stubart
Investments Ltd. v. The Queen, this Court rejected the strict approach to
the construction of taxation statutes and held that the modern approach applies
to taxation statutes no less than it does to other statutes. That is, “the
words of an Act are to be read in their entire context and in their grammatical
and ordinary sense harmoniously with the scheme of the Act, the object of the Act,
and the intention of Parliament” (p. 578): see 65302 British Columbia Ltd.
v. Canada. However, because of the degree of precision and detail characteristic of
many tax provisions, a greater emphasis has often been placed on textual
interpretation where taxation statutes are concerned: Canada Trustco
Mortgage Co. v. Canada. Taxpayers are entitled to rely on the clear meaning
of taxation provisions in structuring their affairs. Where the words of a
statute are precise and unequivocal, those words will play a dominant role in
the interpretive process.
22 On the other hand,
where the words of a statute give rise to more than one reasonable
interpretation, the ordinary meaning of words will play a lesser role, and
greater recourse to the context and purpose of the Act may be necessary: Canada
Trustco, at para. 10. Moreover, as McLachlin C.J. noted at para. 47,
“[e]ven where the meaning of particular provisions may not appear to be
ambiguous at first glance, statutory context and purpose may reveal or resolve
latent ambiguities.” The Chief Justice went on to explain that in order to
resolve explicit and latent ambiguities in taxation legislation, “the courts
must undertake a unified textual, contextual and purposive approach to
statutory interpretation”.
23 The interpretive
approach is thus informed by the level of precision and clarity with which a
taxing provision is drafted. Where such a provision admits of no ambiguity in
its meaning or in its application to the facts, it must simply be applied. Reference
to the purpose of the provision “cannot be used to create an unexpressed
exception to clear language”: see P. W. Hogg, J. E. Magee and J. Li, Principles
of Canadian Income Tax Law (5th ed. 2005), at p. 569; Shell Canada Ltd.
v. Canada. Where, as in this case, the provision admits of more than one
reasonable interpretation, greater emphasis must be placed on the context,
scheme and purpose of the Act. Thus, legislative purpose may not be used to
supplant clear statutory language, but to arrive at the most plausible
interpretation of an ambiguous statutory provision.
[38] The tax
jurisprudence has consistently held that the term “benefit” as used in the Act
refers to an economic or material advantage. In R. v. Poynton,
Evans J.A. referred to a benefit as “a material acquisition which confers an
economic benefit on the taxpayer”. This definition was approved of by the
Supreme Court in the Savage case. In Hoefele v. The
Queen, this
court said: “to constitute a benefit, the taxpayer must have realized a
material economic advantage”. Also, according to Professor V. Krishna, in order
to constitute an economic benefit, the advantage or acquisition must be
measurable in monetary terms.
[39] The words preceding
and following “benefit” in the definition of “qualifying educational program”
supports the view that the word “benefit” therein refers to an economic or
material benefit that can be measured in monetary terms rather than an
intangible advantage or favourable circumstance. According to the “associated
words rule” (noscitur a sociss), words in a list must be read in light
of each other, and take colour from one another. The words listed along with
“benefit” - “allowance”, “grant” and “reimbursement” - all refer to different
kinds of transfers or payments of money. Therefore, it is reasonable to
conclude that the word “benefit” is used by Parliament in this instance to
convey the notion of a transfer of money or money’s worth.
[40] This reading of the
definition of “qualifying educational program” is consistent with the purpose
of the exclusion from the definition of “qualifying educational program” of any
program in respect of which a student receives an allowance, benefit, grant or
reimbursement for expenses from an arm’s length party. This wording was added
when the definition of “qualifying educational program” was amended in 2005. Prior
to 2005, students pursuing post-secondary education that was related to their
employment were not eligible for the education credit or textbook credit. Subsection
118.6(1) formerly stated that a “qualifying educational program’ did not
include any program:
(b) if the program is taken
by the student…
(i) during a
period in respect of which the student receives income from an office or
employment, and,
(ii) in connection
with, or as part of the duties of, that office or employment.
[41] The definition of qualifying
educational program was amended in 2005 to allow students pursuing
post-secondary education related to their employment to claim the credits,
unless they were in receipt of any allowance, benefit, grant or reimbursement
for expenses in respect of the program that was provided to them by an arm’s
length party. According to the Department of Finance Technical Notes, the intention
of the limitation in the amendment was to prevent students from claming the
credit if their education costs were reimbursed to them by their employer. The
note released when the amendment was proposed stated:
The education tax credit cannot currently
be claimed by students who pursue post-secondary education that is related to
their current employment [due to 118.6(1) “qualifying educational program” (b)
– ed]. In order to facilitate the pursuit of job-related lifelong learning, the
Budget proposes to remove this restriction provided that no part of the costs
of education is reimbursed by the employer.
Technical Notes have been widely
accepted as aids to statutory interpretation.
[42] A further reason for rejecting the interpretation of
the word “benefit” sought by the Respondent is that it would create absurd
results. If the word “benefit” were interpreted to include benefits that cannot
be readily measured, such as government subsidized education or education for
which a Canadian citizen or landed immigrant paid less than foreign students,
it would, as pointed out by the Appellants’ counsel, render most university students
in Canada ineligible for these credits. This result should be avoided. As Estey J. stated in Berardinelli
v. Ontario Housing Corp.
Where one
interpretation can be placed upon a statutory provision which would bring about
a more workable and practical result, such an interpretation should be
preferred if the words invoked by the Legislature can reasonably bear it.
[43] It seems clear to me then that “benefit” as used in
this case contemplates a material acquisition measurable in monetary terms.
[44] The next step is to
determine whether the free education (to use the words of counsel for the
Respondent) has been shown to be an economic benefit that can be measured in
monetary terms.
[45] Given that none of
the domestic residents are charged for the post-graduate medical residency
program at McMaster or at any of the other five universities in Ontario that
offer the program, there is no apparent means of establishing the monetary
value of the program to residents who are Canadian citizens or landed
immigrants. Since no tuition is charged to anyone in that group at any of the
six universities, it is a reasonable conclusion in my view that the benefit
from attending the program cannot be readily measured in monetary terms. In any
event, the Respondent has not met the onus to show that the program has a
measurable monetary value.
[46] The fact that
foreign residents pay tuition for the program does not lead to the conclusion
that there was a measurable monetary benefit to the domestic residents. Foreign
residents make up around 10% of the total enrolment in the McMaster
post-graduate medical residency program and their situation is presumably quite
different than that of the domestic residents. In the absence of evidence of
how the tuition for foreign residents was calculated and what factors entered
into the calculation, I do not believe it can be taken as determinative of a
value of the program to the domestic residents.
[47] The conclusion that
there was no benefit to the Appellants in this case is largely consistent with
the CRA’s own policy. Paragraph 16 of IT Bulletin 515‑R2 referred to
earlier in these reasons sets out that in cases where no tuition is payable for
a post-secondary program, there is no benefit to the students if the program is
available to the public at large at no cost. In this case, the program was
available free of charge to all Canadian citizens and landed immigrants with
medical degrees. Almost 90% of the residents at McMaster were in this group.
[48] For these reasons, I
find that the Appellants did not receive a benefit by virtue of not being
charged tuition by McMaster University for the post-graduate medical residency program in 2006. They
are therefore entitled to the education and post-secondary tax credits as
claimed.
[49] The appeals are
allowed, with one set of costs to the Appellants.
Signed at Ottawa, Canada, this 15th day of March, 2010.
“B.Paris”
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