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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. |
____________________________________________________________________
Appeal heard on June 2, 2003 at Toronto, Ontario
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By: The Honourable Judge J.M. Woods |
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Appearances: |
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Agent for the Appellant: |
Peter Edrey |
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Counsel for the Respondent: |
Lorraine Edinboro Rachel Furey, Student-at-Law |
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JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 2000 taxation year is dismissed.
Signed at Ottawa, Canada this 27th day of June 2003.
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"J.M. Woods" |
J.T.C.C.
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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.
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"J.M. Woods" |
J.T.C.C.
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CITATION: |
2003TCC418 |
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COURT FILE NO.: |
2002-3586(IT)I |
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STYLE OF CAUSE: |
Tal Vilenski v. The Queen |
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PLACE OF HEARING: |
Toronto, Ontario |
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DATE OF HEARING: |
June 2, 2003 |
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REASONS FOR JUDGMENT BY: |
The Honourable Judge J.M. Woods |
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DATE OF JUDGMENT: |
June 27, 2003 |
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APPEARANCES: |
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Agent for the Appellant: |
Peter Edrey |
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Counsel for the Respondent: |
Lorraine Edinboro Rachel Furey, Student-at-Law |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |