Date: 20030926
Docket: A-497-01
Citation: 2003 FCA 350
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
RODOLFO JOSE SLOBODRIAN
Applicant
and
THE MINISTER OF NATIONAL REVENUE
Respondent
Heard at Quebec, Quebec, on September 17, 2003.
Judgment delivered at Ottawa, Ontario, on September 26, 2003.
REASONS FOR JUDGMENT BY: NOËL J.A.
CONCURRED IN BY: DESJARDINS J.A.
LÉTOURNEAU J.A.
Date: 20030926
Docket: A-497-01
Citation: 2003 FCA 350
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
RODOLFO JOSE SLOBODRIAN
Applicant
and
THE MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR JUDGMENT
NOËL J.A.
[1] This is an application for judicial review of a decision by Archambault J. of the Tax Court of Canada (2002 DTC 3827; [2002] C.T.C. 2089), in which he dismissed the applicant's appeal against assessments issued with respect to his 1996, 1997 and 1998 taxation years.
[2] At issue is whether amounts claimed by the applicant as charitable donations meet that description under the Income Tax Act (the Act). In particular, is the provision of professorial and research services, on a voluntary basis, a gift within the meaning of section 118.1 of the Act?
Background
[3] The applicant, Dr. Slobodrian, is a retired physics professor from Université Laval (the University). During the years in question, he was one of several individuals who carried out research activities pursuant to a contract between Public Works and Government Services Canada (Public Works) on behalf of the Canadian Space Agency and the University.
[4] The applicant agreed to perform his services without remuneration and claimed charitable donation tax credits of $41,160 in 1996, $41,160 in 1997 and $47,040 in 1998 in relation to the services he rendered which he considered gifts. These amounts reflect the value of Mr. Slobodrian's teaching and research services for the benefit of the University, as evaluated each year by a faculty director at the University. The Minister of National Revenue disallowed these credits, a decision which the applicant appealed to the Tax Court of Canada.
Decision Under Review
[5] The Tax Court Judge rejected the applicant's appeal on the primary ground that no property head been gifted to the University or the Canada Space Agency. According to the Tax Court Judge, what the applicant had provided free of charge were his services and services do not constitute property and cannot form the subject matter of a gift.
[6] The Tax Court Judge went on to hold that even if one assumes that some form of intellectual property resulted from the applicant's research efforts, this property could not have been gifted by the applicant as the contract under which the research was conducted provided that any intellectual property resulting from the project would vest in Canada.
[7] Finally, the Tax Court Judge held that in any event, the appeal could not succeed as the applicant had failed to produce the receipts required by subsection 118.1(2) and section 3510 of the Regulations in support of his claim.
Alleged Errors
[8] In support of his application, the applicant asserts that what he donated was "scientific research" and "higher education teaching" and not services. According to the applicant, the Tax Court Judge committed a reviewable error in giving the subject matter of his gift the label of "services" rather than property.
[9] In the alternative, the applicant argues that the Act does not explicitly restrict that which can form the subject matter of a gift to "property." He asserts that what he made was a "donation in kind" (i.e., a donation of goods or labour, not money, Oxfrord Dictionary of Current English, 1993, page 487). In his view, nothing prevents the recognition of a gift of services for income tax purposes.
Analysis and Decision
[10] Dealing first with this last argument, the Act does not define the word "gift" as it is used in section 110.1 of the Act. This provision merely entitles one to claim a tax credit by reference to the "fair market value of a gift" made ... in the year ..." ("la juste valeur marchande d'un don [...] fait au cours de l'année [...]") (my emphasis).
[11] However, the word "gift" ("don" in the French text) in a taxing statute must be taken as referring to what is known to the law as a gift, namely the gratuitous transfer of property (tangible or intangible) (see The Queen v. Littler, 78 D.T.C. 6179 at 6181). More recently, the Supreme Court of Canada had occasion to reaffirm that Parliament is cognizant that certain words have a settled legal meaning, and that in enacting such words, Parliament must be taken as adopting their settled legal meaning (Will-Kare Paving and Contracting v. Canada, [2000] 1 S.C.R. 915).
[12] The term "property" ("bien" in the French text) has a defined meaning under the Act (subsection 248(1)):
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"property" means property of any kind whatever whether real or personal or corporeal or incorporeal and, without restricting the generality of the foregoing, includes
(a) a right of any kind whatever, a share or a chose in action,
(b) unless a contrary intention is evident, money,
(c) a timber resource property, and
(d) the work in progress of a business that is a profession;
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"bien" Biens de toute nature, meubles ou immeubles, corporels ou incorporels, y compris, sans préjudice de la portée générale de ce qui précède :
a) les droits de quelque nature qu'ils soient, les actions ou parts;
b) à moins d'une intention contraire évidente, l'argent;
c) les avoirs forestiers;
d) les travaux en cours d'une entreprise qui est une profession libérale.
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[13] This Court was recently called upon to determine whether this provision had the effect of expanding the definition of property beyond its usual meaning (Manrell v. Canada [2003] F.C.J. No. 408, 2003 FCA 108). The Court first identified the meaning of that word by reference to its accepted legal meaning (paragraph 24):
Property is sometimes referred to as a bundle of rights. This simple metaphor provides one helpful way to explore the core concept. It reveals that property is not a thing, but a right, or better, a collection of rights (over things) and forcible against others. Explained another way, the term property signifies a set of relationships among people that concern claims to tangible or intangible items (Professor Ziss, in Principles of Property Law, 3rd edition, Scarborough: Carswell, 2000 at page 2).
[14] The Court in Manrell went on to hold after an exhaustive analysis (paragraphs 26 to 47) that, with the exception of paragraph (d) (which has no bearing on the present case), the statutory definition in subsection 248(1) does not expand the word property beyond its normal meaning (see also Rapistan Canada Ltd. v. MNR, 74 D.T.C. 6426 where the Court came to essentially the same conclusion with respect to the definition of "property" in subsection 248(1) as it read under the Income Tax Act, R.S.C. 1952, c. 148).
[15] It follows that a gift for income tax purposes must involve the transfer of something known to law as property. The mere supply of services without compensation involves no property and hence cannot form the subject matter of a gift. This is to be contrasted with remunerated services which once performed give rise to rights capable of ownership and which can in turn form the subject matter of a gift. The simplest example of this would be the remunerated worker who assigns gratuitously his right to the remuneration which he has earned. In the present case, it is common ground that the applicant was to render his services without any form of compensation.
[16] The applicant argues in the alternative that as a result of his efforts, the Canadian Space Agency became the proprietor of valuable research. According to him, this research constituted intellectual property which can form the subject of matter of a gift.
[17] I need not decide whether the applicant's efforts gave rise to some form of intellectual property because assuming that it did, the agreement under which the research was conducted specifically provided that any such property would vest in Canada and not the university or any member of the research team. It follows that the applicant could not have become the owner of any intellectual property which he purports to have given.
[18] Finally, the Tax Court Judge was also correct in holding that the receipts submitted by the applicant attesting to the value of his purported gift did not meet the requirements of section 3510 of the Regulations. Quite aside from the fact that the receipts attest to the value of something other than property, contrary to the prescriptions of Regulation 3510, they do not reflect the registration number of the issuer, state that they were issued for tax purposes or certify that the signator is duly authorized to issue such receipts as required by Regulation 3510. According to subsection 188.1(2), a charitable gift cannot be recognized unless it is proven by a receipt reflecting this information.
[19] I would dismiss the application with costs.
"Marc Noël"
J.A.
"I concur.
Alice Desjardins, J.A."
"I agree.
Gilles Létourneau, J.A."
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-497-01
STYLE OF CAUSE: RODOLFO JOSE SLOBODRIAN v. MINISTER OF NATIONAL REVENUE
PLACE OF HEARING: QUÉBEC, QUÉBEC
DATE OF HEARING: SEPTEMBER 17, 2003
REASONS FOR JUDGMENT BY: NOËL J.A.
CONCURRED IN BY: DESJARDINS J.A.
LÉTOURNEAU J.A.
DATED: SEPTEMBER 26, 2003
APPEARANCES:
Mr. Rodolfo Jose Slobodrian FOR HIMSELF
Mr. Bernard Fontaine FOR THE RESPONDENT
SOLICITORS OF RECORD:
Mr. Rodolfo Jose Slobodrian FOR HIMSELF
Québec, Québec
Morris Rosenberg FOR THE RESPONDENT
Deputy Attorney General of Canada
Ottawa, Ontario
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