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Citation: 2003TCC418
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Date: 20030627
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Docket: 2002-3586(IT)I
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BETWEEN:
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TAL VILENSKI,
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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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____________________________________________________________________
REASONS FOR JUDGMENT
Woods J.
[1] The issue in this appeal under the
Informal Procedure relates to the tax credit provided for
interest on student loans under section 118.62 of the Income
Tax Act, R.S.C. 1985 (5th Supp.), c. 1 (the
"Act"). Mr. Vilenski claims the credit in
respect of interest paid on a loan (the "New Loan")
where the proceeds of the loan were used to repay a loan subject
to the Canada Student Loans Act (the "Original
Loan").
[2] The tax credit in section 118.62
applies to interest on loans made under the
Canada Student Loans Act and certain other statutes
which are not relevant in this appeal. Mr. Vilenski takes the
view that interest on the New Loan should qualify because it is,
in essence, the same money as the Original Loan. The Crown takes
the position that the New Loan is a different loan which does not
qualify since it is not made under the Canada Student Loans
Act.
Facts
[3] For the most part, the facts are
not in dispute. Tal Vilenski attended York University for
undergraduate studies and then pursued an MBA at The Richard Ivey
Business School at the University of Western Ontario. During this
time, he received various student loans, including the Original
Loan which was from the Royal Bank of Canada and subject to the
Canada Student Loans Act.
[4] Through the Western business
school, the Bank of Nova Scotia offered a line of credit at a
rate of interest two per cent less than the rate of interest
payable on the Original Loan. This line of credit was under a
program called the Scotia Professional Student Plan.
[5] Because of the favourable interest
rate with the Bank of Nova Scotia, Mr. Vilenski arranged for
this line of credit and the New Loan in the principal amount of
$24,878 was advanced under it on April 27, 1998. At the same
time, Mr. Vilenski issued a cheque for the same amount to
the Royal Bank of Canada to repay the balance outstanding on the
Original Loan. The New Loan did not qualify for the
provisions of the Canada Student Loans Act or any
other law governing the granting of financial assistance to
students.
[6] In his income tax return for the
2000 taxation year, Mr. Vilenski claimed interest of $4,340 on
the New Loan as qualifying for the tax credit under section
118.62. This amount represented interest paid in 1998, 1999 and
2000. The Crown issued a reassessment for the 2000 taxation year
on the basis that the interest paid on the New Loan did not
qualify for the credit under section 118.62.
Analysis
[7] To qualify for the tax credit,
interest must be paid on a loan made under the Canada Student
Loans Act or another statute governing the granting of
financial assistance to students. Section 118.62 reads as
follows:
118.62 Credit for interest on student loan - For
the purpose of computing an individual's tax payable under
this Part for a taxation year, there may be deducted the amount
determined by the formula
A x B
where
A is the appropriate percentage for the year; and
B is the total of all amounts (other than any amount
paid on account of or in satisfaction of a judgement) each of
which is an amount of interest paid in the year (or in any of the
five preceding taxation years that are after 1997, to the extent
that it was not included in computing a deduction under this
section for any other taxation year) by the individual or a
person related to the individual on a loan made to, or other
amount owing by, the individual under the Canada Student Loans
Act, the Canada Student Financial Assistance Act or a
law of a province governing the granting of financial assistance
to students at the post-secondary school level.
[8] Mr. Vilenski admits that the New
Loan was not subject to the Canada Student Loans Act
but submits that the New Loan is essentially the same money as
the Original Loan which was subject to that statute and therefore
it should qualify in the same manner as if it were interest on
the Original Loan.
[9] The Crown made reference to the
decision of Little J. in Renz v. R., [2003] 1 C.T.C. 2307
(T.C.C.) in support of the position that student loans qualifying
for the tax credit are restricted to loans under statutes listed
in section 118.62. The agent for Mr. Vilenski does not disagree
with this position but notes that the Renz case can be
distinguished since it did not deal with the replacement of a
qualifying loan.
[10] In my view, notwithstanding that the
New Loan is in essence the "same money" as the Original
Loan, the New Loan was not the type of loan described in section
118.62 since it was not a loan under the Canada Student
Loans Act or any other statute providing financial assistance
to students.
[11] Section 118.62 applies to interest paid
on a loan which is made "under" the Canada Student
Loans Act or certain other statutes. The word
"under" can have many meanings, depending on the
context. The following meaning from the Canadian Oxford
Dictionary is apt in this context:
subject or liable to; controlled or bound by ...
[12] In this case, it is not disputed that
the New Loan is not subject to the provisions of the Canada
Student Loans Act.
[13] Mr. Vilenski's position is
essentially an argument based on "economic realities"
and this approach has been rejected by our highest court: See
The Queen v. Singleton, 2001 DTC 5533 (S.C.C.),
in particular the following comment by Major J. stated at
paragraph 32:
It is this "shuffle of cheques" that defines the
legal relationship which must be given effect.
[14] For these reasons, the appeal is
dismissed.
Signed at Ottawa, Canada, this 27th day of June 2003.
J.T.C.C.
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