Robert Sweeney v. Minister of National Revenue, [1978] CTC 3239, [1978] DTC 1885

Guy Tremblay:—The present case was heard at Montreal, Quebec, on May 11, 1978.

1. The Point at Issue

The point is whether the appellant is well founded in claiming the expense of $900 as tuition fees, paid to the World Open University Inc during the year 1976. The respondent refuses the expense on the basis of paragraph 60(e) and (f) of the New Act.

2. Burden of Proof

The burden is on the appellant to show that the respondent’s assessment is incorrect. This burden of proof derives not from one particular section of the Income Tax Act, but from a number of judicial decisions, including the judgment delivered by the Supreme Court of Canada in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. The Facts

3.01 During the year 1976, the appellant was a full-time employee of Canadian National Railways Company.

3.02 During the same taxation year, the appellant was registered in a program given by the “World Open University Inc” (WOU).

3.03 The WOU is an organization which provides continuing education to persons who are holding full-time employment. In its publicity, WOU says:

The jet age has made the long-awaited concept of providing guided quality non-resident graduate education a reality. This innovative mode is needed by all those who must stay on a full-time career to cope with the financial obligations in an inflated society almost everywhere . . .

3.04 The WOU is located in South Dakota even if in its publicity it is said that WOU is without walls and a non-resident university.

3.05 For the years 1963 and 1965, the appellant obtained a certificate and a baccalaureat. In 1971, he obtained a master degree in science and engineering at McGill University.

3.06 In 1976, he started studies to become a doctor in science and engineering. He paid $900 as tuition fees.

3.07 The appellant had to follow seven courses (three in 1970). He had to pass the examinations and submit two dissertations: one of 12 to 15 pages and one of 25 pages. He also had to investigate a crack on a steel bridge and write a working paper on it.

3.08 Such investigation is the matter in which the appellant is specializing. His studies indeed are in structural system analysis of steel bridges. He wrote a paper entitled “The Load Spectrum for the Fraser River Bridge at New Westminster, BC”. His paper was published in the Proceedings Bulletin of the American Railway Engineering Association. He was asked to speak in Washington, DC and later in Chicago.

3.09 The professors who are all graduate doctors come from everywhere in the USA and from all over the world as far as Germany.

3.10 The manner of communication with his teachers was by correspondence. He phoned them three or four times altogether. He had not only to study in the specialized books but also to make experimental analysis. The equipment of Canadian National Railways was at the appellant’s disposal for his experimental analysis.

3.11 On June 17, 1977, the respondent issued a notice of assessment disallowing the claim of $900 for tuition fees.

3.12 On July 11, 1977, a notice of objection was filed to the Minister. The latter, on October 24, 1977, notified the appellant that he confirmed the assessment issued on June 17, 1977.

3.13 On November 15, 1977, an appeal was lodged before the Tax Review Board.

4. Law—Jurisprudence—Comments

4.1 Law

Paragraphs 60(e) and 60(f) of the new Act are involved in the present case and reads as follows:

60. There may be deducted in computing a taxpayer’s income for a taxa-. tion year such of the following amounts as are applicable:

(e) Tuition fees—where the taxpayer was during the year a student in full-time attendance at a university outside Canada in a course leading to a degree, the amount of any fees for his tuition paid to the university in respect of a period not exceeding 12 months commencing in the year and not included in the calculation of a deduction under this subsection for a previous year except any such fees

(i) paid in respect of a course of less than 13 consecutive weeks’ duration, or

(ii) paid on his behalf by his employer to the extent that the amount thereof exceeds an amount included in his income for the year in which such payment was made in respect of such payment.

(f) Idem—where the taxpayer was during the year a student enrolled at an educational institution in Canada

(i) that is a university, college or other educational institution providing courses at a post-secondary school level,

(ii) that is a school operated by or on behalf of Her Majesty in right of Canada or a province, a municipality in’ Canada, or a municipal or public body performing a function of government in Canada,

(iii) that is a high school or secondary school providing courses leading to a secondary school certificate or diploma that is a requirement for entrance to a college or university, or

(iv) that is certified by the Minister of Manpower and Immigration to be an educational institution by which courses are conducted that provide or improve the qualifications of a person for employment or for the carrying on of a business or profession,

the amount of any fees for his tuition paid to the educational institution in respect of a period not exceeding 12 months commencing in the year and not included in the calculation of a deduction under this subsection for a previous year, if such amount exceeds $25, but where such amount was paid on his behalf by his employer, only the part thereof that does not exceed the amount included in his income for the year in which such payment was made in respect of such payment.

4.2 Jurisprudence

The following jurisprudence was cited by the parties:

1. Brian William Reilly v MNR, 31 Tax ABC 177; 63 DTC 197;

2. Charles David Moore v MNR, 33 Tax ABC 160: 63 DTC 734;

3. John Paul Reddam v MNR, 35 Tax ABC 344; 64 DTC 382;

4. William Grant Moynes v MNR, [1967] Tax ABC 395; 67 DTC 290;

5. Hart J Levin v MNR, [1968] Tax ABC 1214; 69 DTC 1;

6. Frank Albert Ritchie v MNR, [1970] Tax ABC 630; 70 DTC 1407;

7. MNR v Frank Albert Ritchie, [1971] CTC 860; 71 DTC 5503;

8. Hart J Levin v MNR, [1971] CTC 66; 71 DTC 5047:

9. E A Hunt v MNR, [1977] CTC 2115; 77 DTC 79;

10. Calvin Wesley Greaves v MNR, [1977] CTC 2585; 78 DTC 1017.

4.3 Comments

4.3.1 Paragraph 60(f) has no application in the present case because it applies only to students enrolled at an educational institution in Canada. As WOU is without walls and non-resident university (paragraph 3.04 of the Facts) and has no office in Canada, it is not an educational institution in Canada.

The same reasoning could be applied to USA if the head office were not located in the USA. Consequently, paragraph 60(e) alone may apply in the present case.

4.3.2 Point in dispute

The main points in dispute concerning the application of paragraph 60(e) are the following:

a) Is World Open University Inc a university as contemplated by paragraph 60(e)?

b) Was the appellant “a student in full-time attendance” during the year 1976?

c) Is the degree to which the course leads, a degree contemplated by paragraph 60(e)?

4.3.3 Degree

Concerning the last question, the respondent argued that the degrees of WOU are not recognized by the Order of Engineers of Quebec. The Board states that it is not a requirement of paragraph 60(e). The evidence is to the effect that the appellant studied to become a doctor in science and engineering. This evidence was not contradicted and the Board must accept that evidence, and accept that a doctorate is a degree in the meaning contemplated by paragraph 60(e).

4.3.4 Full-time attendance

The Board agrees with new jurisprudence (Frank Albert Ritchie v MNR, [1970] Tax ABC 630; 70 DTC 1407; E A Hunt v MNR, [1977] CTC 2115; 77 DTC 79; Calvin Wesley Greaves v MNR, [1977] CTC 2585; 78 DTC 1017) that a taxpayer who is a full-time employee can at the same time be ‘‘a student in full-time attendance at a university”.

I quote my learned confrère Roland St-Onge in Frank Albert Ritchie v MNR, [1970] Tax ABC 630; 70 DTC 1407, at 632 [1409]:

I venture to state that “attendance” can be construed as being present when necessary for the purpose of instruction and should not be stretched to mean being physically and permanently present at all times, but only to the extent of enabling the candidate to pursue studies. Any other interpretation would prevent full-time employees from acquiring additional education leading to a degree in order to improve their status and to increase their taxable income and to become more useful citizens. This seems to be the only consistent interpretation of the section referred to.

In the present case, the appellant studied to obtain a doctorate in science and engineering. The studies for a doctorate do not require the same kind of “attendance” as that for obtaining a certificate or baccalaureat. Above all, the appellant does meet the requirements of WOU.

4.3.5 WOU a university?

Is it sufficient to form a company with the word “university” as “Open World University Inc” to be a university in its ordinary meaning as contemplated by paragraph 60(e)? No.

With the evidence submitted, the Board is ready. to admit that WOU is an educational institution as contemplated in paragraph 60(f) but is it a university in its ordinary meaning?

In the opinion of the Board, an educational institution to become a university must be accredited as such.

IS WOU. an educational institution accredited or recognized as such by governmental authority? A document was published by WOU concerning the inception and organization, objectives, faculties and divisions, academic terms and standards, etc, of WOU. At page 6, the titled paragraph “Accreditation” reads:

At present there is no national accrediting agency for graduate schools in science and engineering . . . It can be sure WOU will get accredited in less number of years from founding to accreditation than Cambridge and Harvard Universities.

It seems clear that WOU is an educational institution which is not yet accredited at least as graduate school in science and engineering and as a university.

Does the incorporation of WOU in the State of South Dakota on April 4, 1973, imply that it is recognized as university in that state? The quotation above of the document published by WOU answers by the negative.

4.3.6 Strict interpretation

Unfortunately for the appellant, because of the strict interpretation that must be given to a taxation law, the Board cannot accept the high specialized educational institution which is WOU as being a university in its ordinary meaning as contemplated by paragraph 60(e).

Consequently, as one of the conditions of the said section is missing, the Board must disallow the appeal.

5. Conclusion

The appeal is dismissed in accordance with the above Reasons for Judgment.

Appeal dismissed.