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Citation: 2004TCC759
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Date: 20041130
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Docket: 2004-400(IT)I
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BETWEEN:
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MANJIT S. BRAR,
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Appellant,
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And
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: Justine Malone
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench on
October 22, 2004, at London,
Ontario)
McArthur J.
[1] This appeal is from an assessment
by the Minister of National Revenue for the Appellant's 2000
taxation year disallowing the deduction of a purported charitable
donation in the amount of $3,000 which the Appellant submits he
made to Weldon Park Academy in that taxation year. At the
hearing, the Appellant testified as well an auditor on behalf of
the Respondent.
[2] The Appellant is a registered
nurse, married with three children. In addition to his full-time
employment, he has a part-time job and in 2000, earned between
$70,000 and $80,000. During the 2000 year, he and his wife took
their children out of the public school system they had been
attending and enrolled them in grades eight, four and two of the
Weldon Park Academy, a private school. Mrs. Brar in particular
felt their children would receive a better education in a private
school as opposed to the public school system.
[3] Prior to their children's
enrolment, the Appellant satisfied himself that the total cost
for their three children would be $10,000. He found the amount
reasonable and within their budget and paid the full amount by
cheque prior to September 1, 2000. Some weeks later, he received
an invoice from the Academy (Exhibit R-1) which set out the
following for the three children:
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Description
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Total
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Tuition (Option 2)
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$23,200.00
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Ancillary Fees
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1,100.00
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Family Discount
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3,060.00
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Option 1 discount (full payment
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1,010.00
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Option 3 surcharge (monthly)
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Other (Bursary/Scholarship)
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10,500.00
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9,730.00
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Less: deposit ...
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9,909.10
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Bal. Due
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$-179.19
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The details of invoice were a mystery to the Appellant but so
long as the fee was not over $10,000, he did not question it,
although he did ask for a refund of the $179 credit and never
received it.
[4] The problem arises from the
following. The Appellant states that after several weeks of
deliberation, he and his wife decided to make a voluntary
donation of $3,000 in cash to the Weldon Park Academy in addition
to the $10,000. Apparently, Mrs. Brar delivered the $3,000 on or
prior to December 31, 2000 and the Appellant claims that it was
given on a completely voluntary basis without conditions or
consideration.
[5] The Audit Report of Minister's
auditor, Carol Grieve, was filed by the Appellant as Exhibit A-2
and it provides as follows:
The adjustment relates to the donation receipt by Weldon Park
Academy for "capital fund contributions". As indicated
in paragraph 3 of Interpretation Bulletin IT-11OR3, Gifts and
Official Donation Receipts, a gift is a voluntary transfer of
property without valuable consideration or benefit accruing to
the donor or to anyone designated by the donor as a result of the
transfer. We have determined that the amount of the
"donation" was an amount calculated by Weldon Park
Academy for which part of the tuition fee was receipted as a
donation. It was not a voluntary gift. Therefore, the claim does
not fall within the meaning of a charitable donation under
section 118.1 of the Income Tax Act. Any other valid
donation receipts issued by Weldon Park Academy have been allowed
(e.g. Founders Day, Books, Silent Auctions etc.).
This is primarily the position of the Minister, although it
does not appear to be raised in the Reply to the Notice of
Appeal. The Minister's secondary position is that $3,000 in
cash was never paid or donated to Weldon and that the total
amount the Appellant paid to the Academy was $10,000. The $3,000
charitable receipt referred to a portion of the $10,000 paid by
cheque on September 1, 2000.
[6] Upon becoming aware of unorthodox
or illegal charitable donation receipts, Weldon directors fired
their headmaster and financial officer in 2001. Subsequently,
Weldon closed the school, more than likely because of financial
difficulties.
[7] The Appellant's Notice of
Appeal reads in part:
My appeal pertains to a charitable donation made to an
educational institution during taxation year 2000. I was receipt
for $3,000 which I attached to my return. During the audit of
this educational institution by CCRA in 2001, it was found that
the institution did not somehow comply with the donation
guidelines of CCRA which I had no way of knowing or had control
over. Also, there were over 300 enrolled in this school and their
parents also paid donations to the school in a similar way as I
did. None of the parents I have talked to were asked to repay
CCRA for their unqualified charitable donations. Therefore, it is
not fair under the Canadian tax law for CCRA to ask me to repay
this amount and not others. The CCRA is asking me to repay about
$1,500 as an unqualified donation for the 2000 taxation
years.
Before I proceed, I will comment briefly on the fairness
aspect that the Appellant brings attention to. The Appellant is
aware that this is not a Court of equity, but a Court of law and
must follow the legislation as presented. Further, counsel for
the Respondent pointed out through the auditor that in fact, all
of the parents who received similar charitable receipts have been
questioned and the Appellant was not singled out.
[8] The Minister's Reply to the
Notice of Appeal contains the following summary:
the Appellant made no voluntary gift of $3,000 to Weldon in
addition to the tuition fees that the Appellant paid Weldon;
therefore, the disallowed amount is not an amount that can be
included in the amount of "total gifts" as described in
subsection 118.1(1) of the Act.
For the reasons that that follow, I agree with the
Minister's position. The primary thrust of that position is
that if the money was paid, it was not voluntary.
[9] It was important to the Appellant
that the tuition fees not exceed $10,000. There are a number of
anomalies, if not inconsistencies, in his evidence. He indicated
that he and his wife had a reserve of cash at home from which she
took $3,000 to give to someone at Weldon. Yet, the Appellant
claimed impecuniosity for the purpose of obtaining a waiver of
this Court's $100 filing fee, although he presents that he
had a reserve of cash at home. The fact that he claims the
donation was made in cash makes me sceptical.
[10] His wife did not testify, although I
offered to adjourn to another time this week to permit Mrs. Brar
to attend. He declined, explaining that with the care of three
children, it was very difficult for her to take the time. That is
understandable and I believe they live in Sarnia. Nor did the
Appellant have anyone from Weldon testify. Exhibit R-3 is a form
letter from Weldon dated February 26, 2001 enclosing a receipt
for a charitable donation of $3,000. The letter states in
part:
The amount of the receipt is based on the school's annual
expenditures on charitable activities as defined by the Board of
Governors.
[11] This does not sound like a $3,000
voluntary donation was made. Also, Exhibit R-5 which is a Weldon
Board of Governors recommendation explains the donation
philosophy as follows:
For the first time in the 1999/00 school year the school
published fees inclusive of the amount that was ultimately
expected would be considered a donation, then calculated the
amount of the donation based on the school's actual
expenditures on its own charitable activities. This approach was
approved by the Board of Governors as part of its approval of the
1999/00 budget. The total expenditures on charitable activities,
consistently defined since the school started operations, was the
basis of the calculation of the donation, and this calculation
was performed at December 31, 1999 and again at June 30, 2000.
The maximum receipt issued per FTE for the 1999/00 school year
was $1,000, although the average expenditure on charitable
activities was $1,350,665/480 students or $2,814/FTE. The reason
for the difference was to be conservative and comparable with
prior years (where the capital fund portion of fees was
$900/year).
The recommendation is dated February 19, 2001 and the receipt
to the Appellant for the $3,000 is dated February 26, 2001. The
letter enclosing the receipt states:
The use of this receipt indicates your acknowledgement of the
voluntary nature of the gift.
It certainly appears from this that the voluntary gift portion
of the $10,000 fees was a fabrication.
[12] Several of the Respondent's
evidentiary documents are hearsay. The author of the letters from
Weldon and the accounting records were not present to identify
the documents and be cross-examined. I allowed them to be filed
notwithstanding that there is a higher procedural standard for
the Respondent than for the Appellant at an informal hearing.
Compared with the evidence of the Respondent and the Appellant, I
have no difficulty in determining the validity of the
following:
(i) Exhibit R-1 is an invoice
which the Appellant acknowledges having received from Weldon.
(ii) Exhibit R-2 is a letter
from Weldon to Mr. and Mrs. Brar and the Appellant acknowledges
receipt of it as well.
(iii) Exhibit R-3 is a letter
accompanying the receipt for $3,000, also acknowledged as having
been received by the Appellant.
(iv) Exhibit R-4 is the $3,000 receipt
concerning the donation at issue and the Appellant relies on this
document.
(v) Exhibit R-5 is presumably from the
headmaster and the financial officer of Weldon to the Board of
Directors making a recommendation with regard to charitable
donations. I make an inference that the Board of Directors
accepted this recommendation. The auditor obtained Exhibit R-5
during her audit and it ties into the accounting on the first
page of Exhibit R-6 and it also ties into the receipt in Exhibit
R-3.
(vi) Exhibit R-6 is also supported by
the invoice (Exhibit R-1).
[13] I accept the Respondent's position
that the Appellant did not make a voluntary gift of $3,000 to
Weldon and that the $3,000 charitable donation receipt refers to
a portion of the $10,000 tuition fee paid in accordance with
Exhibit R-1. The Appellant was on a restricted budget and it is
inconceivable that he made a voluntary $3,000 donation increasing
the amount paid to Weldon from $10,000 to $13,000. Without solid
corroboration, I do not accept, on the Appellant's evidence
alone, that his wife delivered $3,000 in cash to Weldon. The
$3,000 was part of the $10,000 tuition fees and on a balance of
probabilities, it was not given voluntarily.
[14] To go further, I believe that the
$3,000 referred to in the receipt entered as Exhibit R-4 is part
of the $10,000 cheque paid for tuition fees and was not given in
cash in addition to the $10,000 cheque.
[15] The appeal is dismissed.
Signed at Ottawa, Canada, this 30th day of November, 2004.
McArthur J.
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