http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/67062/index.do 
Zailo v. The Queen[1] (February 26, 2014) involved a taxpayer enrolled full-time in 2011 in an Audio Engineering program at the Musicians Institute, a university outside Canada. The program did not lead to a bachelor’s degree, rather it led to certificate. The taxpayer claimed a tuition credit which the Minister denied and the taxpayer appealed to the Tax Court. The taxpayer also claimed a tuition credit in 2012 which the Minister did not disallow.
The Crown’s position was as follows:
[4] The Respondent’s position is that the certificate obtained by the Appellant in 2011 is not a degree as contemplated in paragraph 118.5(1)(b) and therefore that paragraph was not complied with and the tuition credits were correctly denied. Further, the Respondent’s position is that the only taxation year before the Court is 2011, and what the Minister did and did not do with respect to the Appellant’s tuition credits claimed for 2012 is irrelevant and is not a factor to be considered by the Court. Paragraph 118.5(1)(b) of the ITA states as follows:
118.5(1) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted,
. . .
(b) where the individual was during the year a student in full-time attendance at a
university outside Canada in a course leading to a degree, an amount equal to the product obtained when the appropriate percentage for the year is multiplied by the amount of any fees for the individual’s tuition paid in respect of the year to the university, except any such fees . . .
[Emphasis added (by the court).]
The question before the court was whether non-degree courses at universities outside Canada that in fact also offer degrees are eligible for the tuition credit.
The court held that the evident policy behind paragraph 118.5(1)(b) was to include only courses leading to a degree:
[6] In the process of defining “university outside Canada” for the purposes of paragraph 118.5(1)(b) of the ITA in
Klassen v. Canada, the Federal Court of Appeal equated a “degree” to a bachelor’s degree or higher. The Federal Court of Appeal concluded:
21 . . . the expression “university outside Canada” refers to an educational institution which confers degrees usually granted by universities, that is a doctorate degree, a master degree or at minimum degrees at the baccalaureate level or its equivalent. . . .
[8] It should also be noted that, for educational institutions in Canada and for cross-border commuters, the legislation in question extends the benefits of tuition credits common to those enrolled in a “college or other educational institution providing courses at a post-secondary school level”. Therefore, Parliament obviously distinguished between universities and colleges or other post-secondary educational institutions. The distinguishing factor is that universities offer bachelor’s degrees and higher while the others do not. If associate’s degrees are accepted in the definition of “degree”, then universities and other post-secondary institutions are no longer distinguishable and the legislative scheme becomes incoherent.
[9] The Federal Court of Appeal’s decision in
Klassen strongly suggests that an associate’s degree is not eligible for a tuition credit. I find this to be a reasonable conclusion in law, especially in light of the incoherent nature that the legislation would become if associate’s degrees were accepted in the definition of “degree”, in light of subparagraphs 118.5(1)(a)(i) and 118.5(1)(c)(i) and paragraph 118.6(1)(c) of the ITA.
[Footnotes omitted]
Accordingly the appeal was dismissed.
[1] 2014 TCC 60.