Date: 19980205
Docket: 97-1139-IT-I
BETWEEN:
MARTIN REESINK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Lamarre, J.T.C.C.
[1] The Appellant is appealing under the informal procedure an assessment made under the Income Tax Act (“the Act”) by the Minister of National Revenue (“the Minister”) with respect to his 1995 taxation year. The Appellant himself included in his income for 1995 the proceeds of two scholarships received by him during that year, one in the amount of $6 500 (which was declared as an “employee trust allocation”) and the other in the amount of $835 of which he declared $335 under “other income”. The Appellant thus took advantage of the $500 exemption provided for in paragraph 56 (1)(n) of the Act.
[2] The Appellant now maintains that he is entitled to deduct from his income the total amount of his scholarships, or in other words he is asking that these scholarships not be taxed on the ground that they are not taxable under paragraph 56(1)(n) of the Act. If I understand correctly the Appellant’s argument, it is that paragraph 56(1)(n) applies only to full-time students having no other source of income. As he was self-employed in 1995, having obtained contracts from the federal government “Department of Citizenship and Immigration Canada”, he argues that paragraph 56(1)(n) cannot apply to him and that his scholarships are accordingly not taxable. He argues in the alternative that the scholarships were not granted with respect to the field of endeavour ordinarily carried on by him and that as a consequence paragraph 56(1)(n) does not apply. He closed by asserting that the taxation of his scholarships is discriminatory in that he is thereby compelled to incur greater debt than a student who does not work; this results in an economic loss which, according to the Appellant, violates his equality rights under section 15 of the Canadian Charter of Rights and Freedoms (“the Charter”).
[3] The Minister based his assessment of the Appellant on the following facts:
(a) during the 1995 taxation year, the Appellant worked for the federal government, with the department of Citizenship and Immigration Canada (“CIC”);
(b) the Appellant worked for CIC as a media analyst on renewable contracts;
(c) the income earned by the Appellant was on account of business income;
(d) during the 1995 taxation year, the Appellant was also a full-time graduate student at Carleton University, in Ottawa;
(e) during the 1995 taxation year, the Appellant received from this university, as scholarship or bursary, the amounts of $835 and $6,500, as indicated on the 1995 T4A slip issued by Carleton University, for a total amount of $7,335;
(f) the said amount of $7,335 is taxable income, subject to an exemption of $500, pursuant to paragraph 56(1)(n) of the Income Tax Act (the “Act”);
(g) the Appellant cannot deduct the net amount (the “Amount”) of $6,835 ($7,335 - 500) in the computation of his taxable income; and
(h) the Minister properly calculated the taxes payable on the Appellant’s reported taxable income for the 1995 taxation year.
[4] The Appellant, who was the only witness called at the hearing, admitted subparagraphs (a) to (e) inclusive. He denied the other subparagraphs.
[5] At the time relevant to this appeal, subparagraph 56(1)(n) read as follows:
56: Amounts to be included in income for year.
(1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year . . .
(n) Scholarships, bursaries, etc ¾ the amount, if any, by which
(i) the total of all amounts (other than amounts described in paragraph (q), amounts received in the course of business, and amounts received in respect of, in the course of or by virtue of an office or employment) received by the taxpayer in the year, each of which is an amount received by the taxpayer 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, other than a prescribed prize,
exceeds the greater of 500 $ and the total of all amounts each of which is the lesser of
(ii) the amount included under subparagraph (i) for the year in respect of a scholarship, fellowship, bursary or prize that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work, and
(iii) the total of all amounts each of which is an expense incurred by the taxpayer in the year for the purpose of fulfilling the conditions under which the amount described in subparagraph (ii) was received, other than
(A) personal or living expenses of the taxpayer (except expenses in respect of travel, meals and lodging incurred by the taxpayer in the course of fulfilling those conditions and while absent form the taxpayer’s usual place of residence for the period to which the scholarship, fellowship, bursary or prize, as the case may be, relates),
(B) expenses for which the taxpayer was reimbursed, and
(C) expenses that are otherwise deductible in computing the taxpayer’s income;
[6] From a simple reading of this paragraph it is quite clear that a person who receives a scholarship, regardless of whether he has other sources of income, must include the amount of that scholarship in his income. He can then deduct the basic exemption of $500, provided that the scholarship was not received in the course of business or by virtue of an office or employment, as in either of those cases it would be taxable as income from a business or as income from an office or employment and the recipient would not be entitled to the $500 exemption provided for in paragraph 56(1)(n).
[7] Moreover, under the said paragraph 56(1)(n) a taxpayer who receives a prize for achievement is required to include such prize in his income if the achievement is in a field of endeavour ordinarily carried on by the taxpayer.
[8] The Supreme Court of Canada has ruled on the meaning of “prize for achievement” in The Queen v. Savage, [1983] 2 S.C.R. 428, at pages 442-43:
The word “prize”, in ordinary parlance, is not limited to a reward for superiority in a contest with others. A “prize” for achievement is nothing more nor less than an award for something accomplished. There is no need to pluck the word “prize” out of context and subject it to minute philological examination, or to think of “prize” in the context of the medal or book one may have won at an earlier date on a field day or at school or in a music competition.
The word “prize” is surrounded in the Income Tax Act by other words which give it colour and meaning and content. I repeat them: “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”.
Three comments. First, s. 56(1)(n) is not concerned with the identity of the payer or the relationship, if any, between donor and donee. There is nothing in the section which renders the scholarship, fellowship, bursary or prize taxable on the ground that the donor or payer is the employer of the taxpayer.[1] Second, the words “scholarship, fellowship or bursary”, with which the word “prize” is associated, are normally employed in speaking of educational attainments, usually in the sphere of advanced studies, and “polite” learning. Third, the prize must be for “achievement”, defined in the Shorter Oxford Dictionary (3rd ed.) as “the action of achieving, anything achieved, a feat, a victory”. “To achieve” is variously defined, including “to carry out successfully”, “to attain”. The “achievement” must be in a field of endeavour ordinarily carried on by the taxpayer. This rules out, for example, prizes won in games of chance or at a costume party or for athletic achievement.
[9] Dickson J. goes on to say, at page 444:
In my view, a “prize for achievement” does not necessarily connote an award for victory in a competition or contest with others. That places too narrow and inflexible a meaning on the words.
[10] In the instant case, the Appellant suggested at the very end of the hearing, at the close of argument, that the amount of $6,500 had been given him by the Defence Department as a prize for achievement in connection with work he had done. He argued that this work was not performed in the field of endeavour ordinarily carried on by him and so the amount in question would not come under paragraph 56(1)(n).
[11] In the first place, the Appellant had admitted that the amounts of $835 and $6,500 respectively were scholarships. He himself made reference to that in his Notice of Appeal. Moreover, it was the Appellant who had the burden of proving that the amount received was not a scholarship but a prize for achievement and that this achievement was not in a field of endeavour ordinarily carried on by him. To discharge that burden he was required to adduce the necessary evidence during the hearing and could not simply change his version of the facts at the close of argument.
[12] I am therefore of the view that the Appellant has not shown on a balance of probabilities that the amounts in issue were not scholarships which should not have been included in his income under paragraph 56(1)(n) of the Act.
[13] Lastly, nor do I accept the Appellant’s argument that the taxation of a scholarship, in the case of a person who works while pursuing his studies and who is by virtue of that fact also taxable on another source of income, is discriminatory and an infringement of his equality rights under section 15 of the Charter.
[14] To succeed the Appellant was required first to demonstrate that paragraph 56(1)(n) treated him differently by imposing on him a burden not placed on others or by refusing him a benefit granted to others. He then had to show that this unequal treatment, if such there was, was discriminatory.
[15] For one thing, I do not believe that paragraph 56(1)(n) treats students who work differently from other students. In either case the scholarship is taxable and the student is entitled to a $500 exemption. The extra burden which might be imposed on a working student would be higher taxes as his income is greater than that of a student having no other sources of income. If in fact there is a distinction it is not one created by statute and based on one of the grounds set out in subsection 15(1) of the Charter or on a similar ground. It is not a distinction based on an immutable personal characteristic of an individual. In my view, the following statement by Gonthier J. in Thibaudeau v. Canada, [1995] 2 S.C.R. 627, at page 696, is apposite here:
. . . In the first place, legislation must be assessed in terms of the majority of cases to which it applies. The fact that it may create a disadvantage in certain exceptional cases while benefiting a legitimate group as a whole does not justify the conclusion that it is prejudicial. . . . Any inequalities are peculiar to specific cases, though there may be many of them; they relate to economic interests . . .
[16] The Charter is concerned primarily with personal rights. The interests with regard to which the Appellant claims to have been prejudicially treated are of a strictly financial nature: freedom and human rights are not at issue. In the instant case, paragraph 56(1)(n) makes no distinction set out in section 15 of the Charter nor any distinction based on a similar ground. Paragraph 56(1)(n) contains no hint of discrimination, prejudice or stereotyping. I share the view expressed by Hugessen J.A. in Smith, Kline & French Laboratories Ltd. v. Canada, [1987] 2 F. C. 359, at pages 367-68:
The rights which it [section 15 of the Charter] guarantees are not based on any concept of strict, numerical equality amongst all human beings. If they were, virtually all legislation, whose function it is, after all, to define, distinguish and make categories, would be in prima facie breach of section 15 and would require justification under section 1. This would be to turn the exception into the rule. Since courts would be obliged to look for and find section 1 justification for most legislation, the alternative being anarchy, there is a real risk of paradox: the broader the reach given to section 15 the more likely it is that it will be deprived of any real content.
[17] Students who work cannot constitute a group within the meaning of section 15 of the Charter as income level is not a characteristic attaching to the individual (see Thibaudeau, supra, page 699).
[18] The appeal is accordingly dismissed.
Signed at Ottawa, Canada, this 5th day of February 1998.
“Lucie Lamarre”
J.T.C.C.
[1] It should be noted that subsequent to the decision in Savage those amounts under paragraph 56(1)(n) which can be considered as income from an office or employment or from a business have been excluded (see S.C. 1986, c. 6, s. 28(1) applicable with respect to amounts received after May 23,1985).