T-2644-75
The Queen (Plaintiff)
v.
G. Grant Amyot (Defendant)
Trial Division, Mahoney J.—Ottawa, March 3
and May 6, 1976.
Income tax—Deductions—Whether payments received by
defendant from Canada Council on account of scholarship,
fellowship or bursary, or on account of research grant—
Income Tax Act, S.C. 1970-71-72, c. 63, s. 56(1 )(n),(o)—
Canada Council Act, R.S.C. 1970, c. C-2, s. 8(1)(b).
Defendant received $4,500 from the Canada Council in order
to pursue a program of research and study leading to a Ph.D.
from the University of Reading, England. The University
required only the completion of a thesis to qualify for the
degree, and, with permission, defendant absented himself for all
of 1972, spending the entire year in Italy, working on his thesis
on the Italian Communist Party. He claimed that the $4,500
was on account of a research grant, and sought, under section
56(1)(o) of the Income Tax Act, to deduct $1,327.80 for meals
and lodging, not in Rome, where he had lived, but elsewhere in
Italy. Plaintiff appealed the decision of the Tax Review Board,
arguing that the sum was on account of a "scholarship, fellow
ship or bursary", and, under section 56(1)(n), the entire
amount in excess of $500 must be included in income.
Held, the appeal is allowed. What defendant was doing in
1972 was research, nothing else. In order to bring the receipts
within section 56(1)(o), the purpose of the grant must have
been to enable defendant to carry out that research. The crucial
question is the purpose of the payments, not the means adopted,
by necessity or choice, to achieve that purpose. If the purpose
was the research itself, which in most cases means not research
as an activity for its own sake, but for the sake of the novel
proposition which might ensue upon it, then the grant was
made for that purpose. This could be so even if defendant's
academic advancement was an active, but secondary object, or
an inevitable, but incidental benefit. However, if the purpose
was to assist him in advancing his academic career and the
research was only a means, though essential, the grant was a
"bursary etc...." under section 56(1)(n). Here, the object was
not defendant's contribution to the general body of knowledge
on the Italian Communist Party; it was to assist him toward his
Ph.D. Having regard to his level of academic attainment in
1972, the grant was a "fellowship", and the amounts fell within
section 56(1)(n) of the Act.
INCOME tax appeal.
COUNSEL:
O. A. Pyrcz for plaintiff.
D. G. Cunningham for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Cunningham & Little, Kingston, for
defendant.
The following are the reasons for judgment
rendered in English by
MAHONEY J.: The issue in this case is whether
payments totaling $4,500 received by the defend
ant 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' 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,
(ii) expenses in respect of which he has been reimbursed,
or
(iii) expenses that are otherwise deductible in computing
his income for the year.
' S.C. 1970-71-72, c. 63.
The evidence is that, in the North American aca
demic community, the terms "bursary", "scholar-
ship" and "fellowship" are mainly to be distin
guished by the academic level of eligible
recipients. Bursary pertains generally to the under
graduate 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 that
hearing. One further exhibit, a book entitled I
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 addition
al 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 renew
als, 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 pro
grams. The original application was not in evi
dence nor were the terms and conditions pre
scribed 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 Candi
dates, 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 Candi
dates, 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 fellowhip 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 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: "doctor-
al 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.
2 R.S.C. 1970, c. C-2.
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
B.A. 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 B.A. from Oxford Uni
versity, England. He proposed to undertake a pro
gram 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 pro
posed program of study and research was "the left
opposition to the Attlee government within the
Labour Party". I note all that because the renew
als were granted to permit him to pursue a pro
gram 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 PhD may be conferred upon graduates
of the University or 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 con
ferment 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 satis
factory 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 Academ
ic 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 it 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 Senates' permis
sion 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 meals and lodging
elsewhere in Italy.
I have had recourse to a number of
dictionaries 3 , and have concluded that the appro
priate definitions of "scholarship" and "fellow-
ship" in Webster's Third New International Dic
tionary 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 Brit-
ain. The payments in issue were made to a North
3 Webster's Third New International Dictionary and Funk &
Wagnall's New `Standard" Dictionary, both published some
15 years ago, and The Shorter Oxford English Dictionary,
published in 1972.
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 education
al institution, a 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 organiza
tion 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 ele
ment or ingredient or technique of study. General
ly, 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 inter
pretation 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 advance
ment in the academic world was an active, but
secondary, objective or an inevitable, but inciden
tal, 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, scholar
ship 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; it was to assist the defendant
toward his doctorate. Having regard to the defend
ant'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. Section 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.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.