BETWEEN:
and
___________________________________________________________________
Appeal heard on October 2, 2006, at Vancouver, British Columbia
By: The Honourable Justice A.A. Sarchuk
Appearances:
__________________________________________________________________
JUDGMENT
The appeal from the assessment of tax made under the Income Tax Act for the 2004 taxation year is dismissed.
Signed at Ottawa, Canada, this 7th day of December, 2006.
BETWEEN:
SARAH GOLDBERG,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[1] The parties have admitted the following facts for the purpose of this appeal. The parties have also consented to the admission of the documents listed in the Statement of Agreed Facts.
1. In computing non-refundable tax credits for the 2004 taxation year, the Appellant claimed a Tuition Credit ("Fees") in the amount of $9,750 and claimed an Education Tax Credit ("Education Credit") in the amount of $1,600, calculated at four (4) months of studies at $400 per month.
2. The Minister of National Revenue (the "Minister") initially assessed the Appellant's 2004 taxation year on May 16, 2005 to allow the Fees and the Education Credit in the computation of her non-refundable tax credits.
3. The Minister reassessed the Appellant for the 2004 taxation year by Notice dated September 22, 2005 (the "Reassessment") to disallow the Fees and the Education Credit.
4. The Appellant objected to the Reassessment by serving a Notice of Objection received by the Minister on December 13, 2005.
5. By Notice dated January 1, 2006, the Minister confirmed the Reassessment.
6. The Appellant was enrolled in and attended the London Academy of Music and Dramatic Art ("LAMDA") during the 2004 taxation year.
7. LAMDA is located at 155 Talgarth Road, London, England.
8. The University of Kent ("Kent") is a university located in the United Kingdom.
9. The Appellant was not enrolled at Kent during the 2004 taxation year.
10. The Appellant paid tuition fees of $9,750 (CDN) to LAMDA from September 1, 2004 to December 31, 2004.
11. LAMDA issued the Appellant form TL11A stating that she had four (4) months of full-time attendance for 2004.
12. LAMDA grants certificates and diplomas to its students.
13. Kent validates programs of study at institutions if the program is validated in accordance with its Validation Policy and Procedures (the "Validation Policy").
14. If a program of study is validated pursuant to the Validation Policy, Kent will confer a degree on a student studying in a qualified program of study if the student qualifies for an award of a degree in accordance with the "Credit Framework for Taught Programmes" (the "Framework").
15. Since 2004, Kent has validated the following programmes of study at LAMDA in accordance with its Validation Policy:
(a) BA (hons) Professional Acting;
(b) BA (hons) Professional Acting (2 years top up); and
(c) Diploma in Stage Management.
Documents to be Entered into Evidence on Consent
1. Validation Policy and Procedures for Kent
2. Kent's Validation Profile for LAMDA
3. Framework
4. LAMDA's History and Background
5. LAMDA's Course Description for Three Year Acting Course BA (Hons)
6. LAMDA's Programme Specification for BA (Hons) Professional Acting (Three Years) Full-Time Course
7. LAMDA's Confirmation of Appellant's Enrolment in Three Year Acting Course BA (Hons) commencing September 20, 2004
8. List of UK University Heads
9. Kent's Drama and Theatre Studies Degree Courses - 2007 Undergraduate Calendar
10, Offer of Admission to Appellant from York University, c. June 2004
11. "New Brunswick to get medical school", CMAJ, February 28, 2006, v. 174(5), p. 606.
12. "Accredited" Court List
[2] During the 2004 taxation year, the Appellant was enrolled in LAMDA, described by her representative as an "eminent long-established educational institution, and is widely accepted in the theatre community as one of the leading drama schools in the English-speaking world". He noted that Sarah did not go to study abroad based upon an inability to gain acceptance by a Canadian institution and that in fact, she had received an Offer of Admission to York University in Toronto which, he stated, had one of the leading theatre programs in Canada, with two scholarships to run for the entire four-year program.
[3] The Appellant concedes that LAMDA does not provide an Honours Bachelor degree. However, it is validated by the University of Kent. Thus, a student who completes the three-year acting program satisfactorily at LAMDA is accepted by Kent as meeting its requirements for conferring an Honours Bachelor of Arts degree. Further reference was made to LAMDA's Course Description for three-year acting BA (Hons).[1] This, it was submitted, established the fact that LAMDA, an eminent institution in the United Kingdom was promoting its program as a BA program even though it was not awarding the degree itself. It was further submitted that in the United Kingdom, the integration between an education institution that provides the training and a university that is validating it and provides the degree, is such that the program can be listed in their publications as a degree program. That relationship existed between Kent and LAMDA.
[4] In support of the Appellant's position, reference was made to paragraph 5 of Revenue Canada Interpretation Bulletin IT-516-R2 with respect to the tuition tax credit. It states, in part:
Paragraph 118.5(1)(b) refers to (full-time attendance at) "a University outside Canada in a course leading to a degree". An educational institution located in a country outside Canada is presumed to qualify for the purposes of paragraph 118.5(1)(b) if it is recognized by an accrediting body (that is nationally accepted in that country) as being an educational institution which confers degrees at least at the bachelor or equivalent level.
and it was submitted that the two sentences above quoted create some latitude in the interpretation "that the CRA is providing of a university outside of Canada to the conferring of degrees at the bachelor or equivalent level".
[5] It was further submitted that LAMDA is a "university by proxy" and that it "is the student's performance that determines whether or not they graduate from LAMDA and receive the University of Kent Honours Bachelor degree". Such arrangements, i.e. where one institution provides the education and another the degree, are relatively new and rare but, it was argued, "that because the meaning of legislation at the time of its enactment must be respected, in no way suggests that the statute's effect is confined to the material or social facts or events then existing". In this context, reference was made to Belkin v. Canada,[2] and the following comments of Lamarre Proux J.:
27 However, a statute can apply to situations which did not exist when it was enacted, if justified by its aim and compatible with its wording. I refer to the work of the author Côté, above, at page 269:
But merely because the meaning of legislation at the time of its enactment must be respected in no way suggests that the statute's effect is confined to material or social facts or events then existing. It is necessary to distinguish the meaning of a term from the things that may be included in its ambit.
...
Not only can a statute apply to situations which did not exist when it was enacted, it can also govern phenomena which were virtually unimaginable at the time. If justified by its aim, and compatible with its wording, a statute can apply to inventions subsequent to its enactment. ...
It was submitted that the Court in that case indicated that not only can a statute apply to situations that did not exist when it was enacted, but it can also govern phenomena which were virtually unimaginable at the time. Accordingly, it was argued that the Appellant's claim "is compatible with the aim of the statute" and "that it is also compatible with the wording as it is stated in the CRA Interpretation Bulletin".
[6] The Respondent's position is that LAMDA is no more than a music and dramatic arts academy and that "it is in every sense of the word, an 'academy' and not a University". Counsel noted LAMDA is not to be found in a list of U.K. University Heads, and that is so because it grants nothing more than diplomas and certificates to its students in respect of the LAMDA drama course, albeit it is referred in LAMDA's material as "the B.A. Honours Professional Acting course".
[7] Counsel made reference to the validation policy of the University of Kent and noted that it "clearly provides the students in the validated programs are students of the outside institutions and not students of the University". More specifically, section 11.1 of the policy indicates that candidates who meet the requirements for admission to a validated program may be admitted to the program without reference to the University. Counsel further noted that the relevance of that fact is that Kent, in its validation policy, makes it quite clear that students who ultimately get a degree pursuant to this arrangement are students of the outside institution and have no connection with the University of Kent.
[8] The Respondent submits that the Minister properly disallowed the fees in the computation of the Appellant's non-refundable tax credits for the 2004 taxation year, under subsection 118.5(1)(b) of the Act, because the Appellant was not in full-time attendance at a University outside Canada enrolled in courses leading to a degree. He further contends that the Minister properly disallowed the education credit in the computation of the Appellant's non-refundable tax credits for that taxation year under subsection 118.6(2) of the Act on the basis that the Appellant did not attend a "designated educational institution" as defined in subsection 118.6(1) of the Act, as LAMDA was not a University outside of Canada.
[9] In this context, counsel cited the decision of Mogan J. in Gilbert v. Canada.[3] In that case, the Appellant paid a tuition fee to a school known as the American Musical and Dramatic Academy, an educational institution, for the enrolment of his daughter. The Academy offered a two-year course but did not grant degrees. However, it was affiliated with the New School of Social Research, which granted degrees. The affiliation between the two enabled a person who graduated from the Academy to continue his education at the New School. The claim for the credit on that basis was disallowed and the appeal was dismissed. Counsel made particular reference to the following analysis of the relevant statutory provisions and the conclusion reached by Mogan J. that AMDA was not a University within the meaning of paragraph 118.5(1)(b) of the Act:
14 The word "university" is not defined in the Act, but the Respondent has provided me with three dictionary definitions of the word, all of which have as a condition the granting of a degree. The Dictionary of Canadian Law defines university as follows:
The chief distinguishing characteristic between a university and other institutions of learning is the power and authority possessed by an institution of learning to grant titles or degrees.
In Webster's Third New International Dictionary (an American publication), the word "university" is defined as:
A body of persons gathered at a particular place for the disseminating and assimilating of knowledge in advanced fields of study; an institution of higher learning providing facilities for teaching and research and authorized to grant academic degrees.
And lastly, in Black's Law Dictionary, it is described as:
An institution of higher learning, consisting of an assemblage of colleges united under one corporate organization and government, affording instruction in the arts and sciences and the learned professions, and conferring degrees.
15 Also, in the case of Re City of London and Ursuline Religious of the Diocese of London, (1964), 43 D.L.R. (2d) 220, the Ursuline Order was an order of religious women who sought to achieve an exemption under the Assessment Act, R.S.O. 1960 on the basis that it was a university because it was located on the campus of the University of Western Ontario. The Ursuline Religious Group was affiliated with the University of Western Ontarioand authorized to give courses accepted by the University. Therefore, it sought exemption under the Assessment Act which granted such exemption to any university. The unanimous decision of the Ontario Court of Appeal was delivered by Schroeder J.A. When stating the facts of the case, he said at page 222:
... The appellant has no power to confer degrees but is affiliated with the University of Western Ontario under agreement made in 1919. The appellant teaches classes in subjects approved by the University both to their own students and to other students of the University from different colleges. Examinations are set in accordance with the standards fixed by the University, degrees of Bachelor of Arts are conferred on students so educated by the University of Western Ontario upon those who pass the examinations.
Schroeder J.A. also quoted from Wharton's Law Lexicon and Murray's New English Dictionary in defining "university". Also, at page 228, he states:
The chief distinguishing characteristic between a university and other institutions of learning is the power and authority possessed by an institution of learning to grant titles or degrees such as Bachelor of Arts, Master of Arts or Doctor of Divinity by which it is certified that the holders have attained some definite proficiency. ...
16 Dealing with paragraph 118.5(1)(b) in isolation, I do not have any difficulty in concluding that to be a university within the meaning of those words, it has to be an institution with the power and authority to grant degrees. The fact that a degree-granting institution, New School University in New York state, had an arrangement with AMDA to accept graduates of the AMDA program on the basis that they would be awarded 60 credits towards a degree from New School University does not mean that AMDA, as a stand-alone institution, is a degree-granting university.
[10] With specific reference to the Appellant's claim for a tax deduction pursuant to the provisions of subsection 118.5(1), counsel for the Respondent referred to the following comments of Mogan J.:
20 The second reason for interpreting the statute against the Appellant is in contrasting the words in paragraphs 118.5(1)(a) and (b). Paragraph (b) is described above and paragraph (a) states:
118.5(1) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted,
(a) where the individual was during the year a student enrolled at an educational institution in Canada, that is
(i) a university, college or other educational institution providing courses at a post-secondary school level, or
It is interesting to note the contrast between paragraphs (a) and (b) on the basis that if the person is attending an educational institution in Canada, that institution may be a university or a college or another educational institution providing courses at a post-secondary school level. In other words, if a person wants to deduct a tuition tax credit in Canada, the person paying the tuition does not have to be attending a university. It can be an educational institution other than a university. But if a person wants to deduct a tuition tax credit by going to an educational institution outside of Canada, it is very clear to me that that institution must be a university because of the words in the opening lines of paragraph (b) which state: "where the individual was during the year a student in full-time attendance at a university outside Canada in a course leading to a degree".
Conclusion
[11] There is no dispute that paragraphs 118.5(1)(b) and 118.6(1)(b) make a clear distinction between the students enrolled in Canadian educational institutions and those studying abroad. As was so clearly demonstrated by Mogan J., for the deduction to be made pursuant to paragraph 118.5(1)(b), the claimant must establish that she "was during the year a student in fulltime attendance at a University outside Canada in a course leading to a degree". That has not been done. LAMDA was not a degree-granting institution and accordingly, was not a University. Given the facts before the Court, I have concluded that the relevant requirements for the tuition tax and education credits set out in paragraphs 118.5(1)(b) and 118.6(1)(b) have not been met.
[12] In his closing remarks, the Appellant's representative made further reference to the following comment of Lamarre Proulx J. in Belkin:
28 I believe that for the purpose of giving effect to the legislative provision of paragraph 8(1)(p) of the Act, we have to look at the matter from the musician's perspective. ...
and submitted that "for the purpose of giving effect to the legislative provision of paragraph 118.5(1)(b)" relating to the tuition tax credit for education outside of Canada, "we have to look at the matter from the student's perspective". Accordingly, it was argued that there was no rational explanation why CRA would find the Appellant's potential Honours Bachelor of Arts degree, obtained from an internationally renowned institution, would be any less worthy than other Bachelor of Arts degrees, and failed to allow the deductions.
[13] I am unable to accept that proposition since the application of that approach to the facts in this case would be tantamount to amending the relevant sections. That is the role of the legislators and not of the Court.
[14] For the foregoing reasons, the appeal is dismissed.
Signed at Ottawa, Canada, this 7th day of December, 2006.
"Sarchuk J."
Sarchuk D.J.
COURT FILE NO.: 2006-1265(IT)I
STYLE OF CAUSE: SARAH GOLDBERG AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: October 2, 2006
REASONS FOR JUDGMENT BY: The Honourable Justice A.A. Sarchuk
DATE OF JUDGMENT: December 7, 2006
APPEARANCES:
|
Agent for the Appellant: |
Aron Goldberg |
|
Counsel for the Respondent: |
David Everett |
COUNSEL OF RECORD:
Firm: N/A
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada