Montgomery v. Minister of National Revenue, [1996] 1 CTC 2796

Bowman J.T.C.C.: — This appeal is from an assessment for the appellant’s 1988 taxation year and involves the refusal of the Minister of National Revenue to allow a deduction of $475 paid by Mr. Montgomery to the Appraisal Institute of Canada (“A.I.C.”) to maintain his professional membership in that organization.

Mr. Montgomery is an appraiser working for the Department of National Revenue. In addition to belonging to the A.I.C. he is also member of the Royal Institution of Chartered Surveyors.

He makes appraisals of real estate for the Department of National Revenue and from time to time appears in court on behalf of the Department. His membership in the A.I.C. is a necessary qualification if he is to appear as an expert witness in income tax appeals in which the valuation of real estate is in issue.

The A.I.C. is an organization that requires a considerable period of both study and practical experience before a person is entitled to describe himself or herself as an Accredited Appraiser, Canadian Institute (“A.A.C.I.”). The competitions under which Government of Canada appraisers apply for a position in the Appraisal Section of the Department of National Revenue require an A.A.C.I. designation or courses resulting in an equivalent designation by a recognized professional organization. For example, in the competition for Chief, Appraisal Section, in the Toronto District Office, the following appears:

ESSENTIAL QUALIFICATIONS: Successful completion of secondary school and successful completion of a special course of studies set by the Appraisal Institute of Canada with the resulting designation of “Accredited Appraiser Canadian Institute” (A.A.C.I.) or courses resulting in an equivalent designation by a recognized professional organization. Considerable experience in conducting appraisals of a most complex nature. Substantial experience in negotiating. Extensive supervisory experience.

The appellant claims a deduction in computing his income from employment under subparagraph 8( 1 )(i)(i) which provides:

In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:

(i) amounts paid by the taxpayer in the year as (i) annual professional membership dues the payment of which was necessary to maintain a professional status recognized by statute.

That the expense is wholly applicable to the appellant’s source of income is self-evident.

Equally I think that it is clear that the annual membership dues paid by him are “professional” membership dues. We have come a long way from the days when the only recognized professions were the clergy and the military. Somewhat later law and medicine became recognized as “professions”. Since that time the expression has come to cover a vast variety of callings: dentists, land surveyors, artists, ministers, teachers, nurses, secretaries, dancers, therapists, scientists, accountants, professors, social workers, druggists, engineers, computer specialists, and writers to mention only a few that come to mind.

Two of the definitions given in the unabridged Oxford Dictionary of the English Language are the following:

The occupation which one professes to be skilled in and to follow. a. A vocation in which a professed knowledge of some department of learning or science is used in its application to the affairs of others or in the practice of an art founded upon it. Applied spec. to the three learned professions of divinity, law, and medicine; also to the military profession.

b. In wider sense: Any calling or occupation by which a person habitually earns his living.

In the Grand Dictionnaire Encyclopédique Larousse the following definition appears:

PROFESSION n.f. (lat. professio, -onis, de professas, de profiteri, offrir, s'engager). 1. Activité rémunérée et régulière exercée pour gagner sa vie; métier : Nom et adresse des parents, profession du père, de la mère. — 2. Métier de caractère intellectuel, artistique, etc., qui donne une position sociale plus ou moins prestigieuse : La profession d'avocat, de médecin. — 3. Ensemble des personnes exerçant un même métier : Toute la profession est touchée par cette mesure. - 4. Activité rémunératrice, de caractère régulier, mais qui se situe en général en dehors de la loi; source de profit : La profession d'escroc lui irait très bien. — 5. De profession, par état, par métier; professionel : Acteur de profession. Escroc de profession.

Unquestionably the calling of real estate appraiser is a profession and the dues paid are “professional membership dues”. The matter was discussed at some length by Thorson P. in Bower v. Minister of National Revenue [1949] C.T.C. 77, 49 D.T.C. 554 at pages 84-85 (D.T.C. 557-58) and Minister of National Revenue v. Montgomery, [1970] C.T.C. 115, 70 D.T.C. 6080 (Ex. Ct.).

The central question is whether the professional status of membership in the Appraisal Institute of Canada is “recognized by statute”. The French version of subparagraph 8(l)(i)(i) uses the words “reconnu par la loi”, a broader concept than “recognized by statute”.

The question has arisen before in Stewart v. Minister of National Revenue, [1982] C.T.C. 2746, 82 D.T.C. 1767 where the Tax Review Board held that the appraisal institute was not statutorily recognized. In Laithwaite v. Minister of National Revenue, [1995] 2 C.T.C. 2738, 95 D.T.C. 710 (T.C.C.) Watson D.J.T.C.C. denied a deduction of fees paid to the Appraisal Institute of Canada in the 1988 taxation year. He referred to the decision of Rouleau J. in R. v. Mousseau (sub nom. Canada v. Mousseau), [1995] 2 C.T.C. 431, 95 D.T.C. 5089 (F.C.T.D.) where the deduction in 1987 of fees paid to the A.I.C. was denied. At pages 433-34 (D.T.C. 5091) Rouleau J. said:

The issue here is whether the fourth requirement, that the professional status the dues were paid to maintain, was recognized by statute in effect during the 1987 taxation year. The fact is Mr. Mousseau paid the dues in question to maintain his accreditation of A.A.I.C., a registered appraiser, with the A.I.C. It is that professional status therefore, which must have statutory recognition. The legislative enactments in effect in 1987, relied on by the defendant, contain reference to “competent valuators” and “independent appraisers”. However, he was unable to present the Court with any legislation in effect during the relevant taxation year which makes reference to the designation of A.A.C.I. The statutes which do so came into effect after 1987.

In fact the B.C. Expropriation Act referred to appraisals made “by a person who has been accredited by an institute or body prescribed by the Lieutenant Governor in Council”.

In the Laithwaite case Judge Watson was, unlike Rouleau J., dealing with the 1988 taxation year. He dealt with the change in legislation and the jurisprudence as follows:

The Appellant submits that the Expropriation Act, S.B.C. c. 23 at subsection 19(2) states as follows:

(2) The appraisal report shall be prepared by a person who has been accredited by an institute or body prescribed by the Lieutenant Governor in Council....

Paragraph 8(a) of the Expropriation Act General Regulation, assented to on January 28, 1988 states as follows:

8. For the purpose of section 19(2) of the Act, the following persons may prepare appraisal reports:

(a) a person designated A.A.C.I. by the Appraisal Institute of Canada....

Counsel for the Minister referred to the case of Minister of National Revenue v. Montgomery, [1970] C.T.C. 115, 70 D.T.C. 6083 (Ex. Ct.) in which Kerr J. states at page 6083 the following:

The subsection was enacted in a framework of circumstances so as to deal, income tax-wise, with a known state of affairs, and we must try to reach the common sense meaning of the subsection, taken as a whole, in the light of the circumstances with reference to which it was enacted and the object, appearing from those circumstances and the words used, which Parliament had in mind and intended. Parliament had in mind, I feel sure, the present day concept of organized societies and associations of doctors, dentists, lawyers, engineers, chartered accountants and other professional persons, which have been given a special status by statute and have the power to make regulations governing the issue of certificates and licenses to practice the profession, examinations of candidates for membership and the right to practice, discipline of members, and a variety of other matters, including the regulation of the practice and the professional conduct of its members.

Further in the case of Her Majesty the Queen v. Robert B. Swingle, 77 D.T.C. 5301 at page 5307, Collier J. states as follows:

To my mind the defendant has not proved one essential matter, quite necessary before the so-called main issue can be met. The defendant is a chemist or an analyst, or perhaps both. If he is viewed as a chemist, it has not, as I see it, been shown, on the materials before me, that the professional status of a chemist is one “recognized by statute”. I am convinced the defendant has indeed a “professional” status in his particular field - just as much as a doctor or lawyer. But no statutes recognizing that professional status were put before me, nor cited.

Pursuant to the Assessment Authority Act, R.S. c. 22 at subsections 9(b) and (c), the B.C. Assessment Authority may make rules for its own activity. Likewise in subsection 19(2) of the Expropriation Act cited above and paragraph 8(a) of the Regulation mentioned above, deal with the operation of expropriations in British Columbia but do not authorize the setting up of the profession of AACI.

In my view, the Appellant has not established that the “annual professional membership dues the payment of which was necessary to maintain a professional status recognized by statute”. The reference to the AACI in paragraph 8(a) of the Regulation made pursuant to the Expropriation Act of British Columbia is not equivalent to the recognition by statute of the Appellant’s professional status as required by subparagraph 8(l)(i)(i) of the Act.

The view expressed by Watson D.J.T.C.C. in reliance on the views expressed by Kerr J. in Montgomery is that the expression “recognized by statute” (“reconnu par la loi”) is confined only to statutes setting up self governing professional bodies. This interpretation does not appear to be consistent with the approach to statutory interpretation enunciated by the Supreme Court of Canada in Québec (Communauté urbaine) c. Corp Notre-Dame de Bonsecours, [1994] 3 S.C.R. 3, [1995] 1 C.T.C. 241, 95 D.T.C. 5017, which was decided over 20 years after the decision in Montgomery. There is no reason why a professional status that is given statutory recognition by a provincial statute should not be sufficient to confer upon a person the right to deduct under paragraph 8(1 )(i) fees paid to an organization so recognized. The plain wording of the B.C. statute and the regulation compels this conclusion. To deny the deduction is to put a judicial gloss on an obvious legislative intent and to impose a restriction unwarranted by the statutory language.

The appeal is allowed. The appellant is entitled to his costs, if any.

Appeal allowed.