Date: 20040212
Docket: A-488-01
Ottawa, Ontario, February 12, 2004
CORAM: DÉCARY J.A.
NADON J.A.
PELLETIER J.A.
BETWEEN:
EDWARD GHALI
Appellant
and
HER MAJESTY THE QUEEN
Respondent
and
UNIVERSITÉ LAVAL
Intervener
JUDGMENT
The appeal is dismissed with costs payable by the appellant to the intervener, Université Laval.
"Robert Décary"
J.A.
Certified true translation
Suzanne Gauthier, C.Tr., LL.L.
Date: 20040212
Docket: A-488-01
Citation: 2004 FCA 60
CORAM: DÉCARY J.A.
NADON J.A.
PELLETIER J.A.
BETWEEN:
EDWARD GHALI
Appellant
and
HER MAJESTY THE QUEEN
Respondent
and
UNIVERSITÉ LAVAL
Intervener
Hearing held at Montréal, Quebec, on September 18, 2003.
Judgment delivered at Ottawa, Ontario, on February 12, 2004.
REASONS FOR JUDGMENT: NADON J.A.
CONCURRING: DÉCARY J.A.
PELLETIER J.A.
Date: 20040212
Docket: A-488-01
Citation: 2004 FCA 60
CORAM: DÉCARY J.A.
NADON J.A.
PELLETIER J.A.
BETWEEN:
EDWARD GHALI
Appellant
and
HER MAJESTY THE QUEEN
Respondent
and
UNIVERSITÉ LAVAL
Intervener
REASONS FOR JUDGMENT
[1] This is an appeal from a judgment by His Honour Judge Tardif of the Tax Court of Canada, dated August 16, 2001, which dismissed the appellant's appeal against reassessments by the Minister of Revenue (the "Minister") for the 1994 and 1995 taxation years.
[2] The issue before Tardif J.T.C.C. concerned the taxation of sums received by the appellant, a professor at Université Laval in Québec, $5,000 for 1994 and $9,228 for 1995, from his employer while on a sabbatical leave. Tardif J.T.C.C. found that these sums were not research grants within the meaning of paragraph 56(1)(o) of the Income Tax Act (the Act) but instead should be considered a taxable benefit received during these years. Tardif J.T.C.C. also said that in his opinion the expenses incurred by the appellant in the course of his sabbatical year were not deductible under paragraph 8(1)(h) of the Act.
[3] The appeal raises the following questions:
(i) Did Tardif J.T.C.C. err in finding that the sums of $5,000 and $9,228 were not research grants within the meaning of paragraph 56(1)(o) of the Act?
(ii) Did Tardif J.T.C.C. err in finding that these amounts constituted a taxable benefit?
(iii) Did Tardif J.T.C.C. err in finding that the expenses incurred by the appellant during his sabbatical year were not deductible under paragraph 8(1)(h) of the Act?
Legislation
[4] I reproduce herewith the relevant legislation:
| 6. (1) There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable: |
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| 6. (1) Sont à inclure dans le calcul du revenu d'un contribuable tiré, pour une année d'imposition, d'une charge ou d'un emploi, ceux des éléments suivants qui sont applicables :(a) Value of benefits - the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment, except any benefit |
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a) Valeur des avantages - la valeur de la pension, du logement et autres avantages quelconques qu'il a reçus ou dont il a joui au cours de l'année au titre, dans l'occupation ou en vertu d'une charge ou d'un emploi, à l'exception des avantages suivants : |
| (i) derived from the contributions of the taxpayer's employer to or under a registered pension plan, group sickness or accident insurance plan, private health services plan, supplementary unemployment benefit plan, deferred profit sharing plan or group term life insurance policy, |
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(i) ceux qui résultent des cotisations de son employeur à un régime de pension agréé, un régime d'assurance collective contre la maladie ou les accidents, un régime privé d'assurance-maladie, un régime de prestations supplémentaires de chômage, un régime de participation différée aux bénéfices ou une police collective d'assurance temporaire sur la vie, |
| (ii) under a retirement compensation arrangement, an employee benefit plan or an employee trust, |
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(ii) ceux qui découlent d'une convention de retraite, d'un régime de prestations aux employés ou d'une fiducie d'employés; |
| (iii) that was a benefit in respect of the use of an automobile, |
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(iii) ceux qui étaient des avantages relatifs à l'usage des automobiles; |
| (iv) derived from counselling services in respect of (A) the mental or physical health of the taxpayer or an individual related to the taxpayer, other than a benefit attributable to an outlay or expenses to which paragraph 8(1)(l) applies, or (B) the re-employment or retirement of the taxpayer, or |
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(iv) ceux qui découlent de la prestation de services d'aide concernant : (A) soit la santé physique ou mentale du contribuable ou d'un particulier qui lui est lié, à l'exclusion d'un avantage imputable à une dépense à laquelle l'alinéa 18(1)l) s'applique, (B) soit le réemploi ou la retraite du contribuable; |
| (v) under a salary deferral arrangement, except to the extent that the benefit is included under this paragraph because of subsection (11);
[...] |
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(v) ceux qui sont prévus par une entente d'échelonnement du traitement, sauf dans la mesure où l'avantage est visé au présent alinéa par l'effet du paragraphe (11);
[...] |
| 8. (1) In computing a taxpayer's income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto: [...] |
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8. (1) Sont déductibles dans le calcul du revenu d'un contribuable tiré, pour une année d'imposition, d'une charge ou d'un emploi ceux des éléments suivants qui se rapportent entièrement à cette source de revenus, ou la partie des éléments suivants qu'il est raisonnable de considérer comme s'y rapportant [...] |
| (h) Travel expenses - where the taxpayer, in the year, |
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h) Frais de déplacement - lorsque le contribuable, au cours de l'année, à la fois; |
| (i) was ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places, and |
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| (i) a été habituellement tenu d'exercer les fonctions de son emploi ailleurs qu'au lieu d'affaires de son employeur ou à différents endroits,(ii) was required under the contract of employment to pay the travel expenses incurred by the taxpayer in the performance of the duties of the office or employment, amounts expended by the taxpayer in the year (other than motor vehicle expenses) for travelling in the course of the office or employment, except where the taxpayer |
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(ii) a été tenu, en vertu de son contrat d'emploi, d'acquitter les frais de déplacement qu'il a engagés pour l'accomplissement des fonctions de sa charge ou de son emploi, les sommes qu'il a dépensées pendant l'année (sauf les frais afférents à un véhicule à moteur) pour se déplacer dans l'exercice des fonctions de son emploi, sauf s'il a selon le cas |
| (iii) received an allowance for travel expenses that was, because of subparagraph 6(1)(b)(v), (vi) or (vii), not included in computing the taxpayer's income for the year, or |
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(iii) reçu une allocation pour frais de déplacement qui, par l'effet des sous-alinéas 6(1)b)(v), (vi) ou (vii), n'est pas incluse dans le calcul de son revenu pour l'année, |
| (iv) claims a deduction for the year under paragraph (e), (f) or (g);
[...] |
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(iv) demandé une déduction pour l'année en application des alinéas e), f) ou g);
[...] |
| 56. (1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year, [...] |
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56. (1) Sans préjudice à la portée générale de l'article 3, sont à inclure dans le calcul du revenu d'un contribuable pour une année d'imposition : [...] |
| (n) Scholarships, bursaries, etc - the amount, if any by which |
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n) Bourses d'études, de perfectionnement, etc. - l'excédent éventuel : |
| (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 |
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(i) du total des sommes (à l'exception des sommes visées à l'alinéa q), des sommes reçues dans le cours des activités d'une entreprise et des sommes reçues au titre, dans l'occupation ou en vertu d'une charge ou d'un emploi) reçues au cours de l'année par le contribuable à titre de bourse d'études, de bourse de perfectionnement (fellowship) ou de récompense couronnant une oeuvre remarquable réalisée dans son domaine d'activité habituel, à l'exclusion d'une récompense visée par règlement, sur le plus élevé de 500 $ et du total des montants dont chacun représente le moins élevé des montants suivants : |
| (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 |
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(ii) le montant visé au sous-alinéa (i) pour l'année au titre d'une bourse d'études, d'une bourse de perfectionnement (fellowship) ou d'une récompense dont le contribuable doit se servir dans la production d'une oeuvre littéraire, dramatique, musicale ou artistique, |
| (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 |
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| (iii) le total des montants dont chacun représente une dépense que le contribuable a engagée au cours de l'année en vue de remplir les conditions aux termes desquelles le montant visé au sous-alinéa (ii) a été reçu, à l'exception : (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 from the taxpayer's usual place of residence for the period to which the scholarship, fellowship, bursary or prize, as the case may be, relates), |
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(A) de ses frais personnels ou de subsistance, sauf ses frais de déplacement, de repas et de logement engagés en vue de remplir ces conditions pendant qu'il était absent de son lieu de résidence habituel pour la période visée par la bourse d'études, la bourse de perfectionnement (fellowship) ou la récompenses, |
| (B) expenses for which the taxpayer was reimbursed, and |
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(B) des dépenses qui lui ont été remboursées, |
| (C) expenses that are otherwise deductible in computing the taxpayer's income; |
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(C) des dépenses déductibles par ailleurs dans le calcul de son revenu; |
| (o) Research grants - the amount, if any, by which any grant received by the taxpayer in the year to enable the taxpayer to carry on research or any similar work exceeds the total of expenses incurred by the taxpayer in the year for the purpose of carrying on the work, other than [Emphasis added] |
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o) Subventions de recherches - l'excédent éventuel de toute subvention reçue au cours de l'année par le contribuable pour la poursuite de recherches ou de tous travaux similaires sur le total des dépenses qu'il a engagées pendant l'année dans le but de poursuivre ces travaux, à l'exception [Le souligné est le mien] : |
| (i) personal or living expenses of the taxpayer except travel expenses (including the entire amount expended for meals and lodging) incurred by the taxpayer while away from home in the course of carrying on the work, |
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(i) des frais personnels ou de subsistance du contribuable, sauf ses frais de déplacement (y compris le montant entier dépensé pour ses repas et son logement) engagés par lui pendant qu'il vivait hors de chez lui occupé à poursuivre ses travaux, |
| (ii) expenses in respect of which the taxpayer has been reimbursed, or |
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(ii) des dépenses qui lui ont été remboursées; |
| (iii) expenses that are otherwise deductible in computing the taxpayer's income for the year; |
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(iii) des dépenses déductibles, comme il est prévu par ailleurs, dans le calcul de son revenu de l'année; |
Facts
[5] The relevant facts may be summarized as follows. The appellant is an associate professor with the department of mining and metallurgical engineering of the faculty of science and engineering of Université Laval, where he has taught for more than 20 years. During the 1994 and 1995 taxation years, the appellant's relations with his employer and the performance of his professional duties were governed by a Collective Agreement between Université Laval and the Syndicat des professeurs et des professeures de l'Université Laval.
[6] The relevant provisions of the Collective Agreement are as follows:
[translation]
2.1.01 The academic duties are: (1) teaching; (2) research; (3) internal and external participation.
Teaching and research are an intrinsic part of and constitute the fundamental features of the performance of every professor's academic activities.
...
2.1.03 Teaching includes the activities related to the dissemination and criticism of knowledge with a view to an education.
The following in particular are recognized as teaching and supervisory activities:
(a) courses provided in accordance with various teaching formulae, including preparation, correction, evaluation and informational help;
(b) development of educational methods and tools;
(c) assistance to students as an educational counsellor, advisor or practicum supervisor;
(d) direction and collaboration in the direction of essays and masters and doctoral dissertations and theses, and participation in juries for essays, dissertations and theses;
(e) supervision of auxiliary teaching staff.
2.1.04 Research includes activities leading to the expansion and deepening of knowledge and its dissemination and novel use.
The following in particular are recognized as research:
(a) the development of knowledge, that is, the design, establishment and development of scientific undertakings devoted to the systematic pursuit of new knowledge and the steps pertaining to this;
(b) literary or artistic creation, that is, the production of original works or forms of expression;
(c) scientific, literary or artistic criticism, that is, the requisite activities for synthesizing or critiquing skills acquired in a particular area of knowledge;
(d) the presentation of communications and participation in seminars, conventions or other scientific, artistic, literary or professional events;
(e) the publication of articles, manuals or works peculiar to the discipline;
(f) participation in research programs of other universities.
...
4.8 SABBATICAL YEAR
General
4.8.01 A sabbatical year releases professors from their regular activities. It allows them to devote themselves to research work or scientific, artistic or literary activities related to the performance of their academic duties. Its primary purpose is to further the renewal and enrichment of their knowledge.
The work or activities in question are defined in a sabbatical plan.
...
4.8.04 Normally, professors carry out their sabbatical plans outside of the University. If the professor's intention is to carry out his or her sabbatical plan primarily in the University, the professor shall note in the plan the factors that promote the renewal and enrichment of his or her knowledge.
Monetary stipulations
4.8.05 Professors shall receive during the term of their sabbatical year compensation equal to 90% of their salary. However, the contributions of the professor and of the Employer to the group insurance plan and pension plan shall be maintained at a level corresponding to 100% of his or her salary.
4.8.06 Notwithstanding clause 4.8.05, a professor who elects to limit the term of his or her sabbatical year to two complete consecutive sessions, including one summer session, shall receive 100% of his or her salary, as will a professor who has acquired three years of seniority or more than those required by clause 4.8.03.
4.8.07 The Employer shall reimburse professors for the additional expenses they incur in carrying out their sabbatical plans in accordance with the terms and conditions set out in Appendix G.
4.8.08 The professor shall retain the amount of any bursary or financial assistance obtained for the fulfilment of his or her sabbatical plan.
Sabbatical plan
4.8.09 Professors who wish to avail themselves of a sabbatical year shall present their sabbatical plan to the responsible person no later than October 1 for a sabbatical year commencing in the following summer session or at the fall or winter sessions of the following academic year.
...
4.8.11 Professor shall file in their record the documentation needed for the assessment of their plan.
4.8.12 The responsible person may summon the professor to discuss the sabbatical plan and make some suggestions to him or her.
Before recommending refusal of the plan or acceptance accompanied by a postponement of the sabbatical year, the responsible person shall give the professor an opportunity to be heard and to amend the plan.
...
4.8.16 The vice-rector may reject the sabbatical plan of a professor if the responsible person has made a recommendation to that effect, such decision being based on one of the following grounds:
(a) the academic quality of the plan is not sufficient;
(b) the scope of the plan does not justify a sabbatical year;
(c) the plan is incompatible with the responsibilities of the unit;
(d) the professor is clearly incapable of fulfilling the plan.
[7] Appendix G, entitled "[translation] Sabbatical year expenses", sets out the amounts that may be made available to a professor whose sabbatical plan has been accepted, as follows:
[translation]
G.1 The Employer shall make available to the professor the amount of $1,500 for expenses pertaining to the fulfilment of his or her sabbatical plan.
G.2 In addition to the preceding amount, the Employer shall make available to the professor a budget for expenses pertaining to the fulfilment of his or her sabbatical plan. The amount of this budget shall be established on a monthly basis and according to the cumulative duration of the period during which the professor is absent from the Quebec City area, in accordance with the table below. To be eligible for this budget, each period of continuous absence from the Quebec City area must be a minimum of one month.
[TABLE AND EXAMPLES OMITTED]
G.3 The total amount of the expenses reimbursed by the Employer under this appendix is limited to the amount provided in clause G.1, to which is added, where applicable, the amount corresponding to the cumulative duration of the periods of absence from the Quebec City area appearing in clause G.2. These amounts are indexed annually to the CPI, effective June 1, 1991.
G.4 Should the sabbatical year overlap more than one year, the amount referred to in the preceding paragraph shall be established pro rata with the number of months in each of the years.
[8] On September 27, 1993, the appellant wrote to the dean of his faculty to present him with a sabbatical year plan. He informed the dean that he was entering his sixth year as department head and that this would be his final year in this position, since he intended, come September 1, 1995, to return to his strictly academic duties and resume his courses with students.
[9] For the purpose, as he put it, of "recharging his batteries" and "recycling himself" so as to be able to again provide courses of a high standard, and to update himself on recent developments in his area of research, he presented a sabbatical leave plan for the period from September 1, 1994 to August 31, 1995, in accordance with the procedure provided in the Collective Agreement.
[10] As required, he supplied a sabbatical leave plan that included the following features: restructuring of three undergraduate courses, development of a new formula and new content for a graduate level course, consolidation of the research focus of the electrometallurgy and corrosion research group, as well as consideration of new topics, work on ongoing students' theses and scientific and technical visits to various universities and research centres in Canada and abroad. The objectives contemplated by the appellant, as is clearly apparent in his plan, were the following:
(i) restructuring, reviewing and updating of undergraduate courses (3) and masters-level courses (1);
(ii) self-renewal in the area of research: producing a few scientific pieces for publication, designing a new plan, and making visits of an academic nature to a few research laboratories.
[11] Université Laval approved his plan and, in accordance with the relevant provisions of the Collective Agreement, granted him a budget of $14,228: $5,000 for 1994 and $9,228 for 1995. The amount granted to the appellant was calculated in accordance with the terms and conditions established in appendix G of the Collective Agreement, i.e. $1,500 in addition to a certain amount multiplied by the number of months' stay either outside the Quebec City area or outside of Canada. All costs and disbursements incurred by the appellant were to be justified by acceptable vouchers, failing which the appellant might be obliged to repay the amount that had been awarded to him in whole or in part.
[12] During his sabbatical year, the appellant carried on the following activities: he spent one month at the Hydro-Québec Research Institute at Varennes, with which he had a joint project. The month was spent on discussions with the Institute's research officers, an examination of the equipment at their disposal and discussions on the future orientation of the Institute's research.
[13] The appellant then spent some time at the Université de Liège in Belgium, where he saw how that university delivered education in the areas close to his. He then visited numerous research centres and universities in France, meeting colleagues, participating in a doctoral jury and in some teaching activities with students of his colleagues, touring installations and facilities, presenting his research to his colleagues and observing teaching methods.
[14] He did the same in England, then went to Egypt, where he spent four months during which he worked at the Metals Research Institute. He ended his sabbatical year with a visit to Vancouver during which he presented his research. Pursuant to the provisions of the Collective Agreement, the appellant delivered a report on his sabbatical year within the prescribed time. This report was approved by the intervener.
[15] I wish to note that during his sabbatical year, the appellant received 100% of his salary. It is also to be noted that the appellant incurred some expenses that exceeded the $14,228 that had been allocated to him for his plan. He gave the university the supporting documentation demonstrating that he had incurred some travel expenses abroad, which entitled him to the compensation provided in appendix G of the Collective Agreement.
[16] Université Laval gave the appellant some T-4A supplementary slips indicating under "other income" $5,000 for 1994 and $9,228 for 1995. The University characterized these amounts as a "[translation] research grant" and the appellant characterized them identically in his returns.
[17] The appellant reported these additional amounts in his statements of income for the years in question in the section "Other employment income". He also claimed some deductions as employment expenses for amounts equivalent to the sums included as other income.
[18] Following an audit of the appellant, the Minister concluded that expenditures of $3,845.73 for 1994 and $5,344.77 for 1995 had been unlawfully deducted by the appellant, either because they were not reasonable or because they were personal or living expenses of the appellant (at pages 37 and 38 of the respondent's memorandum, there are two summaries of expenses claimed by the appellant, and the reasons why some of these expenses were disallowed). Consequently, on March 11, 1999, Revenue Canada issued notices of reassessment amending the appellant's initial assessments to take into account some disallowed expenses.
[19] The appellant disputed these reassessments. On December 21, 1999, Revenue Canada issued notices of reassessment to correct certain accounting errors in the notices of reassessment dated March 11, 1999. However, Revenue Canada maintained its decision to tax the appellant on the research grant amounts that exceeded the eligible expenses incurred by the appellant during his sabbatical year, i.e. $2,731 in 1994 and $5,084 in 1995.
[20] Those, in brief, are the circumstances that led Tardif J.T.C.C. to conclude as he did.
Position of the parties
[21] The appellant argues that the sums that were paid to him on his sabbatical leave, over and above his professor's salary, are not research grants. He argues that his major achievements during his sabbatical year consisted of an exchange with some Canadian and European colleagues, and that his activities did not include any scientific research, but were exchanges, learning and discussions. He notes that he did not incur any expenses related to research as such. He relies as well on Interpretation Bulletin IR-75F3, October 14, 1993, which is addressed, inter alia, to research grants, and in particular paragraph 21 of the bulletin which, in his opinion, states that the activities that he engaged in during the sabbatical year should be immune to characterization as research activities. See in particular: "... 'research' involves a critical or scientific inquiry aimed at the discovery of new facts, or the development of new interpretations or applications."
[22] During her oral submissions, the respondent abandoned the main argument developed in her memorandum, that the sums received by the appellant from Université Laval were research grants within the meaning of paragraph 56(1)(o) of the Act. The respondent accordingly focussed on what was, at the time of preparation and filing of her memorandum, her alternative argument, that the sums received by the appellant were a taxable benefit under paragraph 6(1)(a) of the Act, and that these sums were not deductible from his income under paragraph 8(1)(h).
[23] The respondent argues that the amounts received by the appellant had to be included by him in the computation of his income as a benefit received from his employer. The expression "benefits of any kind" is sufficiently broad, she says, to include any kind of benefits. The respondent further contends that the amounts paid to the appellant for the fulfilment of his sabbatical plan do not constitute compensation for any loss suffered by him as a result of his employment. The purpose of the amounts received by the appellant, she argues, was to defray living expenses, which are of a personal nature, and the appellant was in no way obliged to incur these expenses in order to complete his plan. The decision to take a sabbatical leave and to incur some expenses pertained to a personal choice and not to an obligation, since the Collective Agreement offered the possibility of a sabbatical leave but in no way imposed it. Finally, the respondent submits that the appellant could not deduct his travel costs under paragraph 8(1)(a) of the Act, because under the Collective Agreement he was not required to pay travel costs incurred in the course of his employment.
[24] Only the intervener argued in this Court that the amounts paid to the appellant were research grants. In its opinion, the expression "research or any similar work" should be broadly construed. In the first place, the intervener notes that the wording of paragraph 56(1)(o) encompasses any grant for research and similar work. In this regard, it notes, academic duties include teaching, research and internal and external participation.
[25] The intervener further argues that the Collective Agreement expressly provides that research includes activities leading to the expansion and deepening of knowledge, as well as its dissemination and novel usage. The sabbatical year allows a professor to devote himself to research work related to the performance of his academic duties. The intervener argues that the appellant's plan consisted of research and similar work: within the context of his sabbatical year, the appellant worked at the Hydro-Québec Research Institute, he visited a number of research laboratories in several countries, and his research enabled him to write two chapters of a monograph in collaboration with an American professor. The intervener concludes that the amounts paid to the appellant for the fulfilment of his sabbatical plan are grants to carry on research or similar work.
Analysis
[26] The major issue raised by this appeal concerns the interpretation of paragraph 56(1)(o) of the Act and, more particularly, whether the funds received by the appellant from the intervener constitute research grants within the meaning of this paragraph. For the following reasons, I find that this question should be answered in the affirmative.
[27] In Scheinberg v. Canada, [1996] T.C.J. No. 1 (Q.L.), His Honour Judge Bowman of the Tax Court of Canada, in paragraph 7, explained the meaning of paragraph 56(1)(o) of the Act as follows:
... Paragraph 56(1)(o) is not a provision that allows a deduction. It requires the inclusion in income of the amount of a research grant to the extent that it exceeds the expenses relating to the research. Where the expenses exceed the grant it does not authorize the deduction of the excess. If those expenses are to be deducted the authority, if it exists at all, must be found elsewhere. . . .
[28] So only the amount by which the research grant exceeds the total eligible expenses will be included in the computation of a taxpayer's income. In this instance, the appellant received $14,228 from Université Laval and incurred expenses of an equivalent amount during his sabbatical year. The dispute originates in the fact that the Minister found that expenses of $2,731 for 1994 and $5,084 for 1995 could not be considered eligible expenses under subparagraph 56(1)(o)(i) because they constituted personal or living expenses. The Minister consequently included these amounts in the computation of the appellant's income for the years in question.
[29] The expression "research grant" in paragraph 56(1)(o) of the Act is not defined. It encompasses two things, a grant and research. The actual text of the provision deals with grants "to carry on research or any similar work".
Grant:
[30] Tardif J.T.C.C. found that the funds received by the appellant could not qualify under paragraph 56(1)(o) because, in his opinion, these funds did not constitute a "grant". Consequently, he did not give further consideration to the concept of "research".
[31] According to the Tax Court judge, for there to be a "grant", the funds to be granted must be granted following a process in which the payer is free to either make or refuse the grant. At paragraphs 21 and 22 of his reasons, the judge states:
21. I do not believe I am distorting reality in affirming that a grant is made following a process in which the grantor is free to either make or refuse the grant. The decision to make or refuse a grant is generally a unilateral process for the granting organization.
22. Is such freedom to make or not to make a grant to be seen in the case at bar? Can it be said that Université Laval had the absolute power, the ability and the authority to refuse the appellant's application? I do not think so.
[32] Since Université Laval was bound by the provisions of the Collective Agreement governing the sabbatical leave, the Judge said, it could not be said that the University was free to grant or refuse the funds required by the appellant.
[33] The word "grant" is not defined. Since it is not a term of art, it must be given its ordinary meaning. The dictionary Le Petit Robert defines "subvention" ("grant") as follows: "[translation] A subsidy asked for or required by the government to meet an unexpected expense (loan, tax). Assistance granted to a group, a person, by the government or an association (public or private)." The dictionary Le Petit Larousse defines "subvention" as follows: "[translation] Financial aid paid by the government or a public entity to a private person with the aim of promoting an activity of general interest in which that person is engaged." Finally, the Termium Plus electronic terminology bank cites the following definition of "subvention": "[translation] An amount paid occasionally or regularly to an individual or a group as assistance, aid or a subvention in payment for certain services, etc."
[34] Clearly, the word "grant" is very broadly defined. It includes any form of financial assistance paid to a person by a public agency in order to achieve an objective of public interest. That was the interpretation arrived at by Mr. Justice Cattanach, in the context of paragraph 20(6)(h) of the Act, in G.T.E. Sylvania Canada Ltd. v. The Queen, (1974) 74 DTC 6315 (F.C.). After reviewing a series of definitions contained in English dictionaries, which were similar to those I reproduced above, Cattanach J. stated, at page 6320:
Again referring to the dictionary meanings of the words "grant" and "subsidy" there is one common thread throughout, that is a gift or assignment of money by government or public authority out of public funds to a private or individual or commercial enterprise deemed to be beneficial to the public interest. Subject to minor refinements the words "grant" and "subsidy" appear from their dictionary meanings to be almost synonymous.
...
As I have said before the constant and dominating feature in the words "grant" and "subsidy" is that each contemplates the gift of money from a fund by government to a person for the public weal. Something concrete and tangible is to be bestowed...
[35] On its face, the allocation by Université Laval of "a budget for expenses pertaining to the fulfilment of his or her sabbatical plan" (Appendix G to the Collective Agreement, art. G.2) constitutes financial assistance paid to a person, the appellant, by a public agency to achieve an objective of public interest. I see nothing in the definitions of "subvention" or "grant" that would warrant the conclusion of Tardif J.T.C.C. that it can only be a grant if the public agency had "absolute power" to accept or refuse the request made to it. In any event, in this case Université Laval had the option of refusing the sabbatical plan.
[36] Two cases of a refusal to apply paragraph 56(1)(o) in a sabbatical context were cited to us: Hot v. M.N.R., (1977) 77 DTC 270, and Mitchell v. R., (1999) 99 DTC 866 (T.C.C.). In my opinion, these cases are not relevant; the taxpayers argued that the salary they had received during their sabbatical leave constituted a research grant.
[37] Accordingly, I think, with respect, that the learned judge erred in concluding as he did. The dictionary definitions and the cases clearly indicate that a "grant" consists of financial assistance paid by an agency to a person or a group. In this case, therefore, the funds received by the appellant may without any difficulty be characterized as a "grant".
Research or similar work
[38] The expression "research or... similar work" in paragraph 56(1)(o) of the Act is not defined, either. The word "research" is already, in itself, particularly inclusive, judging by the dictionary definitions. The addition of the words "similar work" invites an even broader construction.
[39] The dictionaries define the word "research" as follows. Le Nouveau Petit Robert: Dictionnaire alphabétique et analogique de la langue française, Paris, 2001, at page 2114, defines "research" as: "[translation]I. Action of searching, researching. 1. Effort in order to find (something)... 2. ... RESEARCH(ES): the work done to find new knowledge, to study a question. Systematic research on a subject. Abstract, theoretical research.... - Do a search in a library, in archives. - Plastic, theoretical research. 3. RESEARCH. Set of works, intellectual activities that tend toward the discovery of new knowledge and laws (science), means of expression (arts, letters). ..." [Emphasis added]
[40] The Multi dictionnaire de la langue française, Québec Amérique, 3rd edition, at page 1232, proposes the following definitions: "[translation] 1. Action of applying oneself to find something, to obtain it. 2. Work done to study a question. 3. Refinement. EXPRESSIONS. - Research. Set of scientific works tending to the discovery of knowledge. A research centre. - In this sense, the word research is a collective." [Emphasis added]
[41] Finally, the Shorter Oxford English Dictionary, Vol. 2 - N-Z (5th Edition), Oxford University Press, at page 2543, offers the following definitions of the word "research": "1. The action or an instance of searching carefully for a specified thing or person. 2. A search or investigation undertaken to discover facts and reach new conclusions by the critical study of a subject or by a course of scientific inquiry. 3. Systematic investigation into and study of materials, sources, etc. to establish facts, collate information, etc., formal postgraduate study or investigation; surveying of opinions or background information relevant to a project, etc. Also (now rare), aptitude for or application to such investigation." [Emphasis added]
[42] The Collective Agreement, in paragraph 2.1.04, defines the word "research" for the purposes of the Collective Agreement. To facilitate reference thereto, I again reproduce this article:
2.1.04 Research includes activities leading to the expansion and deepening of knowledge and its dissemination and novel use.
The following in particular are recognized as research:
(a) the development of knowledge, that is, the design, establishment and development of scientific undertakings devoted to the systematic pursuit of new knowledge and the steps pertaining to this;
(b) literary or artistic creation, that is, the production of original works or forms of expression;
(c) scientific, literary or artistic criticism, that is, the requisite activities for synthesizing or critiquing skills acquired in a particular area of knowledge;
(d) the presentation of communications and participation in seminars, conventions or other scientific, artistic, literary or professional events;
(e) the publication of articles, manuals or works peculiar to the discipline;
(f) participation in research programs of other universities.
[43] Case law abounds with such meanings. (See Scheinberg, supra; R. v. Amyot (1976), 76 DTC 6217; Taylor v. M.N.R. (1979), 79 DTC 331; Horlings v. Canada (M.N.R.) (1991) TCI No. 948). However, we must be careful not to adhere too literally to the approach adopted by Mr. Justice Mahoney in Amyot, supra, an approach that led him to define the word "research" in a restrictive and technical way. In that case, as in Taylor and Horlings, supra, the issue was whether some sums received by a taxpayer could be characterized as a "scholarship, fellowship or bursary" within the meaning of paragraph 56(1)(n) of the Act. It was common ground that the works in question were research works and the debate was essentially over whether the main objective of such work was the advancement of the beneficiary's career, in which case paragraph 56(1)(n) applied. Mahoney J. acknowledged that he might have given the word "research" a narrower meaning than the one that he would have given it in the context of a paragraph 56(1)(o) analysis. He explained, at page 6220, that "The phrase 'or any similar work' may require interpretation on another occasion but it is not material here."
[44] In light of the above case law and the definitions contained in the dictionaries, I am of the opinion that the words "research or any similar work" in paragraph 56(1)(o) may be defined as follows: a set of scientific, literary and artistic works and activities having as its purpose the discovery and development of knowledge. I am also of the opinion that article 2.1.04 of the Collective Agreement correctly states which activities may constitute research.
[45] There can be no doubt, in this case, that the objective for which the subsidy was granted to the appellant by Université Laval was indeed that of research. On this point, the relevant provisions of the Collective Agreement are clear. In the first place, article 2.1.01 provides that the academic duties are teaching, research and internal or external participation. The article states that teaching and research "are an intrinsic part of and constitute the fundamental features of the performance of every professor's academic activities".
[46] Secondly, as I just said, article 2.1.04 states what research includes. Finally, article 4.8.01 states that the purpose of a sabbatical year is to allow professors to devote themselves to research work or scientific, artistic or literary activities, and to enable them to renew and enrich their knowledge.
[47] I turn now to examining the appellant's sabbatical plan, to determine whether the work and activities undertaken by him during his sabbatical year constitute research within the meaning of paragraph 56(1)(o). As I stated above, the appellant presented a sabbatical plan in September 1993. Two purposes were contemplated by this plan: the restructuring, reviewing and updating of undergraduate and masters programs courses, and self-renewal in the area of research, involving the production of a few scientific pieces for publication, designing new projects, and making visits of an academic nature to a few research laboratories.
[48] To understand the second objective contemplated by the appellant's sabbatical plan, the plan as a whole must be analyzed. At page 2 of his plan, under the heading "Research", the appellant explains the nature of the research currently under way or initiated by his research group in electrometallurgy and corrosion. This research was concerned with three topics: (1) the passivating of impure copper during refining; (2) gold lixiviation; and (3) a study of corrosion and protection. After a summary explanation of the research on these three topics, the appellant indicated that it was necessary "[translation] to consolidate these research orientations and consider some new topics that fit nicely within our occupations...." The new topics that, as the appellant put it, fit nicely within the research projects currently under way were of two types: cathodic protection and environmental considerations in extractive metallurgy.
[49] Later, under the heading "Scientific and technical visits", the appellant indicated why he intended to visit certain universities, research centres and plants during the course of his sabbatical year. Here is what he said, at page 3 of his plan:
[translation]
The visits to certain universities, a few research centres and some plants will be made in relation to the two following areas:
1. extractive metallurgy
2 corrosion and protection of metals.
The interest in these visits is to see the recent developments and possibilities for cooperation and collaboration, examine objectively our orientations and design other approaches to our research plans. In some laboratories, joint participation in the research work and the writing of a few reports may be contemplated.
The suggested visits will be made in terms of the research affinities between our group and the visited group and the possibility of future cooperation in research. They may be limited owing to financial constraints or the time allotted.
[Emphasis added]
[50] To understand clearly the appellant's sabbatical plan, it is also necessary to examine the sabbatical report he filed in November 1995.
[51] The appellant introduced his report with the statement that his sabbatical year "[translation] was research-oriented in order to create the necessary relationships and familiarize oneself with the latest developments in research in a number of research organizations in Canada, Europe and Africa...". On the third page of his report, the appellant lists some lectures he presented during his sabbatical year: 24 lectures, including 15 at Liège, Belgium, concerning the generalities of electrometallurgy with certain new conceptions. He presented a lecture at the University of Paris on the passivating of copper, with particular reference to inhibition and analysis of the passive layer. Another lecture given by the appellant at the University of Paris concerned the anodic dissolution of copper and the different mechanisms involved. Five lectures were presented at the University of Rheims concerning corrosion. Finally, the appellant presented a lecture at Vancouver during the 34th Annual Conference of Metallurgists.
[52] Elsewhere in his report, the appellant lists some research plans examined during his sabbatical year: corrosion and electrochemistry of aluminium and magnesium alloys; caustic embrittlement; electrochemical processes in the recycling of metals and drainage water purification of electrolytes; cathodic protection in oil wells; corrosion of zinc on the basis of impurities; patination, specific surface and chromates in phosphatizing; welding and corrosion, and chalcopyrite.
[53] After this enumeration of the lectures given and research plans examined, the appellant states that he discussed other ideas and approaches with some researchers and professors "[translation] in order to interpret the results obtained or to jointly undertake certain research plans" (page 5 of the report). The appellant adds that three topics made suitable progress: the passivating of copper, the lixiviation of gold and the electrochemical processes in recycling of metals and electrolytes drainage water. Here is how the appellant explains the progress in his research topics:
[translation]
Passivating of copper (role of nickel)
All indications are that the work must be directed toward the role of nickel as discussed with Dr. John Dutrizac of CANMET and other colleagues at the University of Toronto and the University of British Columbia. This topic might be the subject of an industrial research plan for the NSERC. My research grant for the next four years is already directed toward that topic.
Lixiviation of gold
I wrote a report on the influence of lead nitrate on the complexing of gold by cyanide or thiourea. The extraction mechanism might be the subject of a research plan with a mining company and CANMET. Furthermore, the role of the heavy metal ions in the corrosion of precious metals is a subject of substantial importance in the field of corrosion.
Electrochemical processes in the recycling of metals and drainage water of electrolytes
These processes were among the major concerns during my stay in Egypt and at Nancy, France. The plan was approved by the director of the Metals Research Centre at Eltebbin in Cairo, by the Minister of Scientific Research of Egypt (Dr. Aziza Yousef and Dr. Vénice Gouda, respectively). Dr. Fawzy Kishk, the Canadian delegate in Egypt, told us that there must be funding by Egyptian sources equivalent to that granted by the Canadian Centre. We therefore turned to the Egyptian Academy for some funding. Dr. Ahmed Elsaba agreed to be the director and Dr. Saher Shawki a codirector. The studies in France (Prof. Gaballah's Laboratory) concerning the use of lignin in the recycling of heavy metals warrants study at Université Laval. On July 27, I met with the CIDA representative in Egypt, Mr. Robert Fraser, the responsible official at the Canadian embassy. He informed me that there will be a CIDA environmental program for 1996. Also, there is a Canada-Egypt-CIDA industrial cooperation program. Mr. Gamal Ghali in Montréal is familiar with such a program.
[54] At pages 5 and 6 of his report, the appellant concludes as follows:
[translation]
Conclusions
The sabbatical year was very rich in terms of discussions with colleagues in a number of laboratories in Quebec, Europe and Africa. I therefore had an opportunity to see, discuss and above all listen to other points of view and approaches that differ from those of our labs. This year enabled me to take a critical look at our accomplishments and to look ahead to the future with much enthusiasm and determination. There are several things, therefore, that need to be done in terms of teaching and research.
In terms of teaching, major importance is given to problems and practical cases. A part concerning cathodic protection is written, and might be the topic for a graduate course and part of an undergraduate course.
In terms of research, a number of plans are envisaged concerning passivating of copper, extraction of gold, corrosion of magnesium alloys, electrolytic water purification, cathodic protection with impulses and corrosion of zinc. Some partners have already been contacted and are prepared to collaborate on finding sponsors.
The progress of my research work is maintained, two articles, two technical reports and two lectures in conventions are planned. The discussions and relations with professors and researchers working in the field of corrosion, electrometallurgy in aqueous vehicles and in the environmental field, are an asset for the pursuit of my research work.
[55] I can only conclude that the appellant's sabbatical plan fits without any difficulty into the definition of "research or any similar work". I am satisfied that the appellant's work and activities constitute work and activities for the purpose of discovery and development of knowledge. First, it is obvious, from reading the sabbatical plan and report, that the visits the appellant made to universities, research centres and plants had a specific goal, to bridge the research work under way at Université Laval with the work under way in these research centres, and to explore the possibilities for cooperation and collaboration in order to design some new approaches to the research work going on at Université Laval.
[56] Second, the appellant gave a large number of lectures concerning, inter alia, the research topics that were being given special attention by his research group at Université Laval. Furthermore, during the course of his sabbatical year, the appellant planned some articles, technical reports and lectures in relation to his research field. As he himself states in his sabbatical report, the discussions and contacts with professors and researchers working in the field of corrosion, electrometallurgy in aqueous vehicles and the environment, constitute "an asset for the pursuit of my research work".
[57] As I noted earlier, the appellant contends that the sums paid to him by Université Laval do not constitute research grants within the meaning of paragraph 56(1)(o). His contention is based on the fact that, as he put it, he did not do any research during his sabbatical year. At pages 234 and 235 of the Appeal Book (transcript of appellant's testimony before the Tax Court of Canada, on January 17, 2001), the appellant explained his position as follows:
[translation]
Q. Can the sabbatical plan be used for purposes other than doing research?
A. Yes.
Q. What else?
A. Well, in the context, if it is agreed, a research - to be clear on the word "research" - if it is agreed, a research protocol that says at that point that you are doing an experiment from A to Z and you write all the stages and you want to verify this or that aspect, the sabbatical plan may in some cases be a means to update one's research. A person, a career professor, who, after ten years of teaching and research, decides during that year to devote himself to writing a book, O.K., you can't call that research as precisely as a research protocol, O.K. And on the other hand, in the plans that are also presented, there are some professors who make some, in their sabbatical plan there are exploratory plans, in the perspective where a professor goes, for example, a professor in educational sciences who is working on the teaching of French, on techniques for teaching French to pupils and he would like to see now the various techniques they are using in France and Belgium, let's suppose. So, he might go there to explore those aspects. Well, that can't be considered as being, in my view, so much... it's rather an exploratory plan to go and verify, to see if those techniques might be importable or if he could do that. So, that's meant to be a moment of enrichment, while another professor, who is in a field of research that is very, very, if you wish...
Q. Very applied?
A. ... very applied from that standpoint, and he has gone to verify some aspect, some thing. Then, you see it is completely different, isn't it? But you can also characterize what I have just described as being research, as well, but it depends on how you can do it, define it.
[58] It is interesting to read the appellant's comments together with the reply he gave at page 157 of the Appeal Book (transcript of appellant's testimony before the Tax Court of Canada on January 17, 2001) to the question put to him by his counsel, namely, what difference there was between a research plan (in which he was working) and the activities he had pursued during his sabbatical year:
[translation]
A. That is, the people who give me a research plan, for example, I had a strategic plan with three Canadian companies in copper, with the Research Council as well, I must perform what is written in the working paper. And after eighteen (18) months of work, I have to go and do what we call a progress report. And they meet to see my progress, and I had $130,000 for that plan; they can cut the money if my progress doesn't suit them, if it is not in accordance with the direction I took initially. If I change direction, I have to justify, so, that is the research work that I did at Université Laval. During the sabbatical year, it was a year of self-renewal, reading, discussion, giving lectures about my work, listening to others talk. So that's the difference. Those are research costs.
[59] The appellant's remarks indicate that he is attempting to limit the meaning of the words "research or any similar work" to research work that is carried on in the context of a research protocol, i.e. applied research. Notwithstanding this statement, the appellant recognizes that what he characterizes as "exploratory plans" may also constitute research.
[60] In my opinion, the definition of "research or any similar work" proposed by the appellant and the Minister must be rejected. These words must be more liberally construed. The interpretation proposed by the appellant and the Minister is clearly not the one that has been adopted by the courts. One need only examine the research plans under review in those decisions to be persuaded of that.
[61] I conclude, therefore, that the sums of $5,000 and $9,228 paid to the appellant by Université Laval constitute research grants within the meaning of paragraph 56(1)(o) of the Act.
[62] Since the conclusion I have reached effectively upholds the Minister's assessments, I would dismiss the appeal. However, because my reasons support the position of the intervener and reject the position of the respondent, I am of the opinion that the costs, as an exception, should be granted to the intervener instead of the respondent.
"Marc Nadon"
J.A.
"I agree.
Robert Décary J.A."
"I agree.
J.D. Denis Pelletier J.A."
Certified true translation
Suzanne Gauthier, C.Tr., LL.L.
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKET: A-488-01
STYLE: GHALI v. THE QUEEN
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: September 18, 2003
REASONS FOR JUDGMENT: NADON, J.A.
CONCURRING: DÉCARY J.A.
PELLETIER J.A.
DATE OF REASONS: February 12, 2004
APPEARANCES:
Daniel Bourgeois FOR THE APPELLANT
Marie-Andrée Legault FOR THE RESPONDENT
Jacques Côté FOR THE INTERVENER
SOLICITORS OF RECORD:
Pothier Delisle FOR THE APPELLANT
Ste-Foy, Quebec
Morris Rosenberg FOR THE RESPONDENT
Deputy Attorney General of Canada
Ottawa, Ontario
Ogilvie Renault FOR THE INTERVENER
Québec, Quebec