Her Majesty the Queen v. G Grant Amyot, [1976] CTC 352, [1976] DTC 6217

Mahoney, J:—The issue in this case is whether payments totalling $4,500 received by the defendant from the Canada Council in 1972 were on account of a scholarship, fellowship or bursary or on account of a research grant. Subject to any other deductions that may properly be taken, if the former, the entire amount thereof in excess of $500 must be included in his taxable income; if the latter, the expenses incurred in carrying out the research may be deducted. The amount of the expenses so incurred, $1,327.80, is not in dispute.

The Income Tax Act, SC 1970-71-72, c 63, provides:

56. (1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,

(n) the amount, if any, by which

i) the aggregate of all amounts received by the taxpayer in the year, each of which is an amount received by him 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,

exceeds

(ii) $500; and

(o) the amount, if any, by which any grant received by the taxpayer In the year to enable him to carry on research or any similar work exceeds the aggregate of expenses incurred by him in the year for the purpose of Carrying on the work, other than

(i) personal or living expenses of the taxpayer except travelling expenses (including the entire amount expended for meals and lodging) incurred by him while away from home in the course of carrying on the work,

(li) expenses in respect of which he has been reimbursed, or

(lii) expenses that are otherwise deductible in computing his income for the year.

The evidence is that, in the North American academic community, the terms “bursary”, “scholarship” and “fellowship” are mainly to be distinguished by the academic level of eligible recipients. Bursary pertains generally to the undergraduate level; scholarship to the master’s level and fellowship to the doctoral level.

By agreement, the transcript of the proceedings before the Tax Review Board was received in evidence along with the exhibits entered at the hearing. One further exhibit, a book entitled / comunisti a Torino 1919-1972, was received as Exhibit 9. It is entirely in Italian; however, a knowledge of that language is not necessary to the conclusion that the defendant’s work is extensively referred to. That is apparent from the table of contents and index. Finally, the following additional agreed fact was put in evidence:

Ph D programs differ from university to university and several Ph D programs require course work as well as the successful completion of a doctoral dissertation.

Following argument and the conclusion of the hearing, it became apparent that there was a serious gap in the evidence and I therefore availed myself of Rule 496 to reopen the hearing.

The receipts in issue were as a result of renewals, for twelve month periods, commencing April 1 in each of 1971 and 1972, of an award made sometime earlier. The evidence submitted to the Tax Review Board and adopted for purposes of this trial comprised the defendant’s renewal applications and extracts from Canada Council brochures describing its 1971-72 and 1972-73 programs. The original application was not in evidence nor were the terms and conditions prescribed by the Canada Council on which such an award would then be made.

There is now in evidence, in addition to that before the Tax Review Board, the agreed fact as to the variety of Ph D programs, and Exhibit 9, the following:

1. A copy of the defendant’s original application to the Canada Council for a Doctoral Fellowship.

2. A copy of the notification by the Canada Council to the defendant of the award thereof.

3. A document, dated August 1968, entitled Memorandum to: Doctoral Fellowship Candidates, wherein, counsel agree, the terms and conditions of the original award are set out.

4. Two further documents, each also entitled Memorandum to: Doctoral Fellowship Candidates, dated August 1970 and June 1971, which, counsel agree, fully set out the terms and conditions applying to the renewal of the defendant’s Doctoral Fellowship for twelve month periods respectively commencing April 1, 1971 and April 1, 1972.

Of the $4,500 received by the defendant during 1972, $1,350 was received in respect of the April 1, 1971 renewal and $3,150 in respect of the April 1, 1972 renewal.

The authority of the Canada Council to make the payment in question is defined by section 8 of the Canada Council Act, RSC 1970, c C-2, the relevant portion of which follows:

8. (1) The objects of the Council are to foster and promote the study and enjoyment of, and the production of works In, the arts, humanities and social sciences, and, in particular, but without limiting the generality of the foregoing, the Council may, In furtherance of its objects,

(b) provide, through appropriate organizations or otherwise, for grants, scholarships or loans to persons in Canada for study or research in the arts, humanities or social sciences in Canada or elsewhere or to persons In other countries for study or research In such fields In Canada;

The Canada Council clearly has the authority to award a research grant. Its nomenclature: “Doctoral Fellowship, is not, per se, evidence of the nature of the receipt for income tax purposes. That said, what was applied for and what was granted and renewed was, in its terminology, a Doctoral Fellowship.

The pertinent conditions as to eligibility in effect at the time of the Original application, set forth in the memorandum of August 1968, were:

Eligibility: Persons who, by the time of taking up the award can provide evidence that they

1) are registered in a programme of studies leading to a doctoral degree or the equivalent and

2) have no more than two years of course requirements to fulfill.

When the grant was renewed, the conditions required that the applicant

have completed one year of graduate study beyond the Honours BA or its equivalent,

rather than that he have no more than two years of course work remaining. I do not see that change as material to this action. It would appear to apply to initial applications and not to the renewal of grants made under the previous conditions.

On December 4, 1968 the defendant applied for a Doctoral Fellowship of $3,500 tenable for twelve months from October 1, 1969, by which date he anticipated receiving his BA from Oxford University, England. He proposed to undertake a program at Oxford leading to the degree D Phil and: estimated that, after October 1, 1969, he would require three years of doctoral study, none of which would be devoted to course work. His proposed program of study and research was “The left opposition to the Attlee government within the Labour Party”. I note all that because the renewals were granted to permit him to pursue a program of research and study concerning the Italian Communist Party leading to a Ph D from the University of Reading, England. The evidence is that, notwithstanding those manifestly major changes, the receipts in issue were from renewals of the original award, approved March 14, 1969, and did not flow from a new application and award.

The Ordinances of the University of Reading provided that degree of Ph D could be conferred upon the satisfactory completion of a thesis. No course work, examinations or, for that matter, bare attendance, at the University of Reading was necessarily required. The full text of the applicable portion of the Ordinances follows:

(20) The Degree of Ph D may be conferred upon graduates of the University “el of other Universities or upon other persons approved by the Senate who have

(a) undertaken such research as may be approved by the Senate for a period of not less than three academic years after completing the examination requirements for the conferment of the degree of Bachelor or of Master (except as provided by Clauses 21 and 22 of this Ordinance)

(b) fulfilled such other conditions as may be prescribed by regulation and (c) submitted the results of their research in a thesis satisfactory to the Examiners appointed by the University who may at their discretion further examine any candidate in the matter of the thesis submitted or in any matters relating to the research.

The research shall be the responsibility of the Professor of the subject or of the Head of the Department concerned If there is no Professor. The Professor (or Head of Department) may delegate the supervision of the candidate’s work to such extent as he shall determine to another member of the Academic Staff who shall be appointed on his nomination by the Board of the Faculty concerned.

The period of three academic years shall normally be spent In the University but with the permission of the Senate a part or the whole of ft may be spent elsewhere on condition that the research continues to be directed and supervised as provided above and as may be prescribed by regulation.

Clauses 21 and 22 have no application.

It appears that, in 1972 at least, the defendant successfully availed himself of the Senate’s permission to absent himself. He did not set foot in England, much less Reading, at all. He lived in Rome and, except for August when he vacationed in Canada, spent the entire year in Italy. The expenses he claims were not his living expenses in Rome but rather the cost of means and lodging elsewhere in Italy.

i have had recourse to a number of dictionaries,* [1] and have concluded that the appropriate definitions of “scholarship” and “fellowship” in Webster's Third New International Dictionary most closely reflects the ordinary meaning of those words in contemporary North American parlance. I think it reasonable, for this purpose, to ignore the rather particular significance attached to “scholarship” and “fellowship” in Great Britain. The payments in issue were made to a North American scholar by a North American institution and were made taxable by legislation adopted by the Parliament of Canada. Notwithstanding that the activity undertaken was done in Europe it must be concluded that the defendant in applying for the grant, the Canada Council in making it, and Parliament in seeking to tax it, have all acted in a North American frame of reference.

None of the dictionary definitions of “bursary” have any relevance to this action. The Income Tax Act does not, itself, define any of the terms. The following pertinent definitions are from Webster's Third New International Dictionary:

Fellowship: a sum of money offered or granted by an educational institution, public or private agency, or organization, or foundation for advanced study or research or for creative writing.

Scholarship: a sum of money or Its equivalent offered (as by an educational institution, a public agency, or a private organization or foundation) to enable a student to pursue his studies at a school, college, or university.

Just as the Canada Council can make grants for either study or research, so the term “fellowship”, in ordinary parlance, embraces grants for study or research, inter alia. A distinction must, however, be made for purposes of the Income Tax Act.

It is manifest that research is an essential element or ingredient or technique of study. Generally, the more eminent the station in the academic hierarchy of the student, the higher the quality and greater the quantity of research reasonably to be expected of him. I accept, without reservation, that what the defendant was doing, during 1972, in terms of activity, was research and nothing else.

The Act leaves one to search elsewhere for the meaning of the terms “bursary”, “scholarship” and “fellowship” as used in paragraph 56(1)(n) but paragraph 56(1 )(o) is explicit. It refers to “any grant received by the taxpayer . . . to enable him to carry on research or any similar work”. The phrase “or any similar work” may require interpretation on another occasion but it is not material here. As I have said, the defendant’s 1972 activity was research and only research.

In. order to bring the receipts within paragraph 56(1 )(o), the purpose of the grant must have been to enable the defendant to carry on that research. The key question is the purpose of the payments he received from the Canada Council and not the means adopted, by necessity or choice, to achieve that purpose. If the purpose was the research itself, which is to say, in most cases, not research as an activity for its own sake but for the sake of the novel proposition, anticipated or otherwise, that might ensue upon it, then the grant was made for that purpose and fell within paragraph 56(1 )(o). That would be so even if the defendant’s advancement in the academic world was an active, but secondary, objective or an inevitable, but incidental, benefit. On the other hand, if the purpose of the grant was to assist the defendant to advance his academic career and the research undertaken was but a means, however essential, to carry out that purpose then the grant was a bursary, scholarship or fellowship and fell within paragraph 56(1)(n).

Notwithstanding the undisputed quality of the research in this case and the time devoted to it in 1972 to the exclusion of other activities, the object of the grant was not the defendant’s contribution to the general body of knowledge on the Italian Communist Party; t was to assist the defendant toward his doctorate. Having regard to the defendant’s level. of academic attainment in 1972, the grant was a fellowship and the amounts received by him on its account fell within paragraph 56(1 )(n) of the Act.

The appeal Is allowed. Subsection 178(2) of the Act applies to the costs of this action. By agreement, the defendant is allowed his costs which are fixed at $1,500, inclusive of disbursements, in lieu of taxation.