Citation: 2012 TCC 324
Date: 20121002
Docket: 2008-2622(IT)G
BETWEEN:
9098-9005 QUEBEC INC,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bédard J.
[1]
By way of assessments
and reassessments dated August 22, 2007, the Minister of National Revenue (the
"Minister") disallowed small business deductions in the amounts of
$16,830, $15,156 and $ 14,475 claimed by the Appellant for the taxation years
ending November 30, 2003, November 30, 2004 and November 30, 2005 respectively.
The Minister concluded that the Appellant was a personal services business
during the taxation years under appeal and consequently disallowed the small
business deductions claimed by the Appellant. The Minister concluded that the
Appellant was a personal services business on the basis that, if it were not
for the existence of the Appellant, Mr. Gitman could reasonably be regarded as
an officer or employee of the entity to which the services were provided. The
Appellant appealed the assessments and reassessments.
[2]
Essentially, the
evidence submitted by the parties revealed the following:
a) The Appellant was wholly owned by
Larry Gitman.
b) During the taxation
years under appeal, the Appellant had fewer than six full-time employees.
c) Mrs. Rywka Gitman
died on December 14, 2002. In her will, she bequeathed her estate (essentially
13 rental properties, cash and a fur business) to her three children
(Larry Gitman, Molly Gruman and Anita Eisenstat) in equal portions. In
January 2004, the assets of Mrs. Rywka Gitman’s estate were transferred to her
three children in equal portions. After the transfer of the said assets, the
three children decided to pool the 13 rental properties and to use them to
develop a real estate business. They also tried to develop together the fur
business which they had inherited. They even attempted to buy a car dealership.
In other words, they were involved in all kinds of businesses or business
ventures. In fact, after the transfer of the said assets, the three children
became partners in a de facto partnership ("De Facto
Partnership").
d) From Mrs. Rywka
Gitman’s death to the transfer of her estate’s assets to her children, the sole
client of the Appellant was Mrs. Rywka Gitman’s estate. After the
transfer of the said assets, the sole client of the Appellant was the De
Facto Partnership.
e) In general, the
services rendered by the Appellant to Mrs. Rywka Gitman’s estate and
the De Facto Partnership consisted of managing the said real estate
assets in order to develop the real estate business, managing and developing
the fur business, and finally finding business opportunities to invest in. More
specifically, the services rendered by the Appellant consisted of:
i)
assessing risk;
ii)
analyzing markets,
including, but not limited to, real estate and furs;
iii)
gathering market data,
including:
(A)
data with regard to
products such as furs;
(B)
data with respect to
real estate pricing, and rentals (which included the review of real estate
listings and the analysis of potential returns); and
(C)
data on construction
costs and availability of labour;
iv)
negotiation and
preparation of contracts (including offers to purchase, renovation contracts,
leases, insurance contracts);
v)
management of rental
properties; and
vi)
record keeping.
f) The services rendered
by the Appellant to Mrs. Rywka Gitman’s estate and to the De Facto
Partnership were essentially provided by its sole shareholder, that is, Mr.
Gitman. Some of the services were also rendered by Mr. Mark Rintoul, who
received from the Appellant for those services consulting fees of $39,750 in
2003, $47,550 in 2004 and $51,500 in 2005. Mr. Rintoul worked under the
supervision of Mr. Gitman.
g) Mr. Gitman’s two
sisters were absolutely not involved in the exploitation and development of
Mrs. Rywka Gitman’s estate and in the operation and development of the De
Facto Partnership’s various businesses. In fact, the only involvement of
Mr. Gitman’s sisters in Mrs. Rywka Gitman’s estate and in the De
Facto Partnership consisted of voting on the sale or acquisition of
properties or businesses. At all relevant times, the two sisters gave no
instructions to their brother concerning the management or development of the
real estate business or other businesses.
h) The Appellant charged
a yearly management fee of $150,000 to Mrs. Rywka Gitman’s estate and,
after the transfer of the estate’s assets, to the De Facto Partnership.
[3]
The issues are the
following:
a)
Did the Minister
correctly conclude that the Appellant was a personal services business during the
taxation years ended November 30, 2003, November 30, 2004 and November 30,
3005, in accordance with subsection 125(7) of the Income Tax Act (the
"Act")?
b)
Did the Minister
correctly disallow the small business deductions in the amounts of $16,830, $15,156
and $14,475 claimed by the Appellant for the taxation years ended November 30,
2003, November 30, 2004 and November 30, 2005 respectively under subsection
125(1) of the Act?
[4]
I note immediately that
the Minister admitted that, if it were not for the existence of the Appellant,
Mr. Gitman could not reasonably be regarded as an employee of the entity to which
the services were provided. I would point out that the Minister contends only
that Mr. Gitman could reasonably be regarded as an officer of the entity
to which the services were provided. Consequently, the only issue to be decided
is the following: if it were not for the existence of the Appellant, could
Mr. Gitman be reasonably be regarded as an officer of the entity to
which the services were rendered?
Analysis
[5]
Subsection 248(1) of
the Act defines “office”, “officer”, “employee” and “employment” as
follows:
|
“office” means the position of an individual entitling
the individual to a fixed or ascertainable stipend or remuneration and
includes a judicial office, the office of a minister of the Crown, the office
of a member of the Senate or House of Commons of Canada, a member of a legislative
assembly or a member of a legislative or executive council and any other
office, the incumbent of which is elected by popular vote or is elected or
appointed in a representative capacity and also includes the position of a
corporation director, and “officer” means a person holding such an office;
“employee” includes officer;
“employment”: means the position of an individual in the
service of some other person (including Her Majesty or a foreign state or
sovereign) and “servant” or “employee” means a
person holding such a position.
|
« charge » Poste
qu’occupe un particulier et qui lui donne droit à un traitement ou à une
rémunération fixes ou vérifiables, y compris une charge judiciaire, la charge
de ministre de la Couronne, la charge de membre du Sénat ou de la Chambre des
communes du Canada, de membre d’une assemblée législative ou de membre d’un
conseil législatif ou exécutif et toute autre charge dont le titulaire est
élu au suffrage universel ou bien choisi ou nommé à titre représentatif, et comprend
aussi le poste d’administrateur de société; « fonctionnaire » ou « cadre »
s’entend de la personne qui détient une charge de ce genre, y compris un
conseiller municipal et un commissaire d’école.
« employé » Sont compris parmi les
employés les cadres ou fonctionnaires.
« emploi » Poste qu’occupe un particulier, au service d’une autre personne (y
compris Sa Majesté ou un État ou souverain étrangers); « préposé »
ou « employé »
s’entend de la personne occupant un tel poste.
|
Clarification
brought by the jurisprudence to the meaning of the terms “office” and “officer”
[6]
Because the Act
simply defines an “officer” as being someone holding an “office”, it is not
surprising to note that the
courts have so far principally analyzed the definition of “office” set out in
the Act. Three key decisions are of as a starting point for our
analysis: Guérin v. M.N.R., 52 DTC 118 (I.T.A.B.); MacKeen v. M.N.R.,
67 DTC 281 (T.A.B.); and Merchant v. The Queen, 84 DTC 6215 (F.C.T.D.).
[7]
In Guérin, the
appellant, a judge of the Court of Sessions of the Peace, temporarily ceased
acting in a judicial capacity to sit as chairman of various arbitration boards
in labour disputes. The appellant’s remuneration was set at $12.50 for each
sitting day. In the discharge of his duties, the appellant incurred travelling
and personal expenses which he sought to deduct from his income as if his
services had been rendered in the course of carrying on a business and not, as
the Minister claimed, in the performance of the duties of an office or
employment. Although Chairman Monet of the Income Tax Appeal Board quickly
determined that the appellant was not an employee, the issue as to whether the
appellant held an office was raised.
[8]
In his decision,
Chairman Monet first noted that the appellant was expressly authorized by the
Attorney General of Quebec to sit on the arbitration boards. Since the
appellant was thus considered to be on leave without pay, he did not sit on the
arbitration boards as a judge. Although the remuneration was a stipulated
amount for each sitting day, the number of sittings the appellant was obliged
to attend was not known in advance. As a result, Chairman Monet held that the
remuneration was neither fixed nor ascertainable from the outset. In this
regard, Chairman Monet wrote as follows, at page 121:
According
to the definition given above, a taxpayer should not be
considered as holding an office merely because he occupies a position. The
position must entitle him to a fixed or ascertainable stipend or remuneration.
Failing this, the position is not an “office” within the meaning of The Income
Tax Act. . . .
By
“position entitling one to a fixed or ascertainable stipend or remuneration”
parliament, in my opinion, meant a position carrying such a remuneration that
when accepting it a person knows exactly how much he will receive for the
services he is called upon to render.
I feel that this is the true meaning that must be given to “office” as defined
in Section 127(1)(aa) quoted above, having regard to the persons listed whose
duties constitute an office. I also believe that “office” as defined, implies continuity
and permanence; it can certainly not be said that there is continuity or
permanence in the duties of a member of an arbitration board.
(Emphasis added.)
[9]
In MacKeen, at issue was whether the appellant, who had been appointed
as a member of a royal commission of inquiry, held an office or employment or whether
he had rather, provided his services as part of a business, as he claimed. Tax
Appeal Board Member Boisvert decided that the appellant was not an employee
and, furthermore, did not hold an office. In his reasons, Board Member Boisvert
wrote as follows, at page 284:
G. S.
A. Wheatcroft in The Law of Income Tax,
Surtax and Profits Tax, (1962), at page 1057, 1-107, says that: “The word
‘office’ denotes a subsisting, permanent, substantive position which has an
existence independent of the person who fills it, and which goes on and is
filled in succession by successive holders.” Acting as a commissioner on a special
and limited commission, royal or other, limited as to terms and duration, has
none of the characteristics of an office or an employment.
(Emphasis added.)
[10]
In Merchant,
Reed J. of the Federal Court, Trial Division, criticized the decisions in both Guérin
and MacKeen. At issue in Merchant was whether the expenses
incurred by a leadership candidate in a political party were deductible.
[11]
Reed J. stated that the
opening words of the definition of “office” in subsection 248(1) of the Act
are not inclusive in nature but impart a mandatory aspect to the definition.
She stressed that in order to be classified as income from an “office” the
remuneration must be fixed and ascertainable.
[12]
Reed J. then commented as
follows on the decision in MacKeen, at page 6217:
. .
. This decision was reached for a number of reasons (e.g. the position
of commissioner was not a permanent one and the taxpayer had agreed, at the
time of his appointment, to the travel expense amounts provided for by the
government). Accordingly, I do not place too much emphasis on that part of the
judgment which held the taxpayer's income not to be ascertainable. Indeed, I
think such income is ascertainable. I take that word to mean that the amount to
be paid is capable of being made certain, or capable of being determined but
not that a definite sum be known by the office holder at the commencement of
holding office. The word has to have some meaning beyond “fixed” or else it is
completely redundant.
[13]
Concerning Guérin,
Reed J. made the following observations at pages 6217 and 6218:
I am
not convinced that at the time of taking office the taxpayer must know how much
he will receive. It seems to me a per diem rate, or a specified amount
per sitting renders the income sufficiently ascertainable to meet the
definition in section 248(1). However, there are other factors in the
Guérin case which make the income unascertainable and in my view should have
served as the focus of that decision:
It
has been established that the appellant must himself pay for the services of a
part-time secretary and that he must also pay for the stationery he needs, for
the use of a typewriter and all other supplies. . . It has been further
established that the appellant is often called upon to pay the transportation
of his secretary and other persons acting as advisers and that often-times he
has to pay for the meals of his assistants and advisers. These it seems to me
are the crucial factors in making the remuneration received, as a result of
holding the position of arbitrator, not ascertainable.
[14]
In Payette v. Canada (Minister of National Revenue), [2002] T.C.J. No. 386 (QL),
Dussault J. heard the appeals of members of a provincial legal aid review committee
and the issue was whether contributions were required under the Employment
Insurance Act because the members held insurable employment. Even though it
was an employment insurance case, Dussault J. meticulously reviewed in his
reasons the previous relevant case law regarding the terms of “office” and
“officer” as used in the Act. After having thoroughly canvassed the
principal guidelines set out in Guérin and MacKeen, Dussault J.
criticized the effect of the judgment of Reed J. in Merchant, and
at paragraph 24 he commented:
However, in commenting on the decision in Guérin (supra), Reed J.
appears to assume that in that case the remuneration was not ascertainable
mainly because of the expenses the appellant was obliged to incur. The
Court does not agree with that position. The words “stipend” and
“remuneration” mean gross income, not income net of expenses. This is clear
from the wording of subsection 5(1) of the Income Tax Act. As well, the
Court considers that the descriptor “ascertainable” must refer to something
that can be ascertained a priori; otherwise it would have no meaning since
everything can be ascertained a posteriori. Thus if the “stipend” or
“remuneration” is not fixed, it must still be ascertainable in advance with at
least some degree of accuracy by using some formula or by referring to certain set
factors. The Court considers that this is the meaning of the decisions in
Guérin and MacKeen (supra).
(Emphasis added.)
[15]
The Tax Court of Canada
has subsequently considered on several occasions the case law cited above. In Guyard
v. Canada (Minister of National Revenue, [2007] T.C.J. No. 183 (QL), the
Court first carefully reviewed the principles enunciated previously in Guérin and MacKeen. Angers J. stated that, in
his view, when Parliament added a list of positions that it would consider to
be offices after the words “entitling him to a fixed or ascertainable stipend
or remuneration” (in the definition of “office” in subsection 2(1) of the Canada
Pension Plan), it stated its intention to include only those taxpayers
whose occupations were permanent in nature or had some element of permanence
and continuity, if not exclusiveness (para. 27). Angers J. emphasized the fact that what really
matters is that the office exist
independently of its incumbents (para. 33).
[16]
Moreover, in Vachon (Estate v. Canada), 2009 FCA 375, [2009] F.C.J. No. 1630 (QL), the Federal Court of Appeal
heard the appeal of 14 appellants who were union officials working for a
central council. The issue involved the tax treatment of certain allowances
paid by their unions, as the Minister had determined that these allowances were
taxable under sections 5 and 6 of the Act. The Tax Court of Canada held
that the allowances were neither taxable nor insurable because they were not
paid in the course of an office or employment but were for the performance of
union duties on a volunteer basis. At paragraph 38, Noël J.A. stated:
There are two
requirements for meeting this second test. The office or position held must
“entitle” the individual to remuneration, and this remuneration must be “fixed
or ascertainable”. The fixed or ascertainable aspect of the remuneration
seems to have been met, since the union officials knew exactly what the
monetary conditions associated with their union leave were when they applied
for a union position (Testimony of Pierre Morel, appeal book, Vol. III, p. 707).
(Emphasis added.)
[17]
The fact that the position must be one “entitling” the
individual to a stipend or remuneration means nothing more than that it be a
position held for pay; see Minister of National Revenue v. Real Estate Council of Alberta,
2012 FCA 121.
[18]
Finally, the problem of
determining whether or not a party is holding an office arose once again in Nuclear
Waste Management Organization v. Minister of National Revenue, 2012 TCC 217.
In that case, the sole issue
was whether the members of the appellant’s advisory council held an office.
[19]
Hershfield J. observed that the definition
of the term “office”, in the Canada Pension Plan, (like the definition
of that same term in the Act) starts off with a broad definition which
is followed by some expressly enumerated examples. Acknowledging that the
presumption against tautology dictates that the legislator never speaks for
nothing, Hershfield J. concluded that the list of positions specifically
enumerated is simply added “for greater certainty to include specific persons
that due to their public service or somewhat unique way of attaining their
position may have been seen as falling outside the initial broad definition of
‘office’” (see paras. 24-26).
[20]
Hershfield J. also
stressed that “the duration of the term that a particular person occupies or
holds [an office] should not, as a general rule at least, be relevant to either
the determination of whether an office exists or whether the holder of it has
the ‘tenure of an office’” (see para. 34).
Distinction
between an “office” and “employment”
[21]
The distinction between an “office” and “employment”
is that the former does not require the individual to be in the service of some
other person, which would imply an employment relationship. For example,
judges, ministers of the Crown, and members of a legislative assembly or
Parliament are “officers” and are not employees for tax purposes: see Vern
Krishna, The Fundamentals of Canadian Income Tax, 8th ed. (Toronto
Thomson Carswell, 2004). The best synthesis of the differences between an
“office” and “employment” as those terms are used in the Act is found in
Hogg, Magee and Li’s comments in Principles of Canadian Income Tax Law,
7th ed. (Toronto : Carswell, 2011), p. 115, which I reproduced in
their entirety:
The
key to the difference is a
phrase in the definition of employment that is missing from the definition of
office, namely, “in the service of some other person”. This requires a
contract of service (or employment) between the taxpayer and an employer; where
such a contract exists, the taxpayer is “employed” and his or her remuneration
will be income from employment. However, where there is a fixed or
ascertainable remuneration but no contract of service, the taxpayer will be an
“officer” and his or her remuneration will be income from an office. The
examples of offices (which are given in the definition of office) are judges,
ministers of the Crown, members of legislative bodies and directors of
corporations. These examples illustrate that an office, unlike employment, is
not created by or dependent upon a contract of service between an employer and
the particular holder. The position is created by statute or
some other instrument, independently of the person who fills the position, and
the position is filled in succession by successive holders.
[22]
In summary, an “office” as defined by the Act:
·
is a position entitling one to a fixed or
ascertainable stipend or remuneration;
·
denotes a subsisting,
permanent, substantive position which has an existence independent of the
person who fills it;
·
does not require the
individual to be in the service of some other person;
·
is created by statute
or some other instrument instead of being created by or dependent upon a
contract of service between an employer and the particular holder of the
position.
[23]
The duration of the term that a particular
person occupies a position is irrelevant.
[24]
The fact that the position must be one “entitling” the
individual to a stipend or remuneration means nothing more than that the
position is one held for pay.
Can a partner be an “officer”
of his own partnership?
[25]
Even though the answer to
that question may seem to be unclear, I believe it must be answered in the affirmative.
[26]
First, it is true that the Act sets out several
rules regarding partnerships
in section 96. In particular in that provision, Parliament
codified the principle that a partnership is not a separate person from its
partners; see paragraphs 96 (1)(a) and (c) of the Act.
Not only was this principle adopted by the common law long ago (see: The
Queen v. Pinot Holdings Limited, 99 DTC 5772 (F.C.A.), at p. 5778; The
Queen v. Lachance, 94 DTC 6360 (F.C.A.), at p. 6362; Metro-Can
Construction Ltd.v. Canada, [1998]
T.C.J. No. 888 (QL), conf. by [2000] F.C.J. No. 994 (QL) (F.C.A.), leave to
appeal to the Supreme Court of Canada refused [2000] S.C.C.A. No. 445 (QL); and Molson Brewery B.C. Ltd. v. Canada.,
[2001] F.C.J. No. 87, (QL) (F.C.T.D.) at para. 9), but it is also accepted now
in Quebec since the decision of the Court of Appeal of Quebec in Québec (Ville
de) c. Compagnie d’immeubles Allard
ltée, [1996] R.J.Q. 1566. Indeed, a number of judges and authors now seem to accept the lack of
legal personality of partnerships in Quebec.
Unlike a joint stock company, a partnership's business is that of the partners and the partnership's
assets belong to the partners.
[27]
Thus, it seems well
established that a partner cannot be an employee in his own partnership. A
contract of employment is a contract by which a person, the employee,
undertakes for a limited period to do work for remuneration, according to the
instructions and under the direction or control of another person, the employer;
see section 2085 of the Civil Code of Quebec. Since he participates in the
decision-making of the partnership in pursuit of the common goal of the
partnership and shares in profits and losses, a partner is automatically in
control and therefore cannot at the same time act as a subordinate to himself,
even if there are several partners. Furthermore, a partner cannot contract with
himself.
[28]
However, the
distinction between an “office” and “employment” is that the former does not
require the individual to be in the service of some other person; see Krishna, supra. and Hogg, Magee and Li, supra,
p. 115. Therefore, one could
reasonably argue that a partner could be an “officer” of his own partnership
since an “office” as defined in the Act is not created by or dependent upon a contract of
employment between an employer and the particular holder of the office. An “office” is created by statute or some other instrument,
independently of the person who fills the position.
[29]
Therefore, as long as
the position occupied by a partner entitles him to a fixed or ascertainable
stipend or remuneration and has a subsisting, permanent, substantive aspect, it
could certainly be considered an “office” as that term is defined in the Act
and interpreted by the relevant case law.
[30]
It is interesting to
note that in drafting the definition of “personal services business” in
subsection 125(7) of the Act, Parliament specified that it was in fact
targeting the business of
providing services where an individual who performs services on behalf of a
corporation (incorporated employee) is a specified shareholder of the
corporation and where the incorporated employee would reasonably be regarded
as an officer or employee of the person or partnership to whom or to which
the services were provided.
[31]
At trial, counsel for the Respondent observed
to this Court that it was curious to see that Parliament had used both the
terms “employee” and “officer” in the aforementioned definition since it is
specified in subsection 248(1) of the Act that the term “employee”
includes “officer”. At first glance, there was no apparent reason
justifying the need for Parliament to distinguish between “officer” and “employee”.
[32]
Counsel for the Respondent reminded this Court of the presumption
against tautology, which states that the legislature never speaks for nothing.
Counsel suggested, therefore, that only for the purposes of subsection 125(7) of the Act, should
a distinction be made between an “employee” and an “officer” notwithstanding
the definition found in subsection 248(1) of the Act.
[33]
Indeed, it is presumed
that the legislature avoids superfluous words and that it does not pointlessly
repeat itself or speak in vain: McDiarmid Lumber Ltd. v. God’s Lake First
Nation, [2006] 2 S.C.R. 846. Every word in a statute is presumed to have
meaning and the Courts should construe statutes so as to ascribe some meaning
to each and every word used by the legislature: M.N.R. v. Kitsch et al.,
2003 DTC 5540 (F.C.A.) ; Trans World Oil & Gas Ltd. v. The Queen, 95
DTC 260 (T.C.C.).
[34]
However, it is also
true that courts should avoid adopting interpretations that render any portion
of a statute meaningless or redundant: Placer Dome Canada Ltd. v. Ontario (Minister of Finance), [2006] 1 S.C.R. 715. It is a subsidiary rule of
statutory interpretation that each part of an enactment must be giving meaning
and that the courts should interpret a disputed provision in the light of
related statutory provisions in order to give a coherent meaning to the whole: Novak
v. Bond, (1999), 172 D.L.R. (4th) 385 (S.C.C.); eBay
Canada Limited et al. v. M.N.R., 2008 DTC 6728 (F.C.A.).
[35]
In Alberta
Wheat Pool et al. v. The Queen., 99 DTC 5198, the Federal Court of Appeal
declined to accept a proposed statutory interpretation which would have rendered
another provision of the enactment ineffectual, stating that Parliament is not
to be presumed to have enacted legislation that is without force and effect.
[36]
In Allcolour
Chemicals Ltd. et al. v. The Queen, 93 DTC 1194 (T.C.C.), Bonner J.
rejected an interpretation of the Act which would have resulted in
either in granting a second right to claim certain deductions or in treating a
section of the Act as superfluous and Bonner J. adopted the following
passage from Construction of Statutes by Elmer A. Driedger:
Not
only must the whole Act be read, but every provision of the Act should,
if possible, be given meaning; hence, if there are rival constructions the
general principle is that the construction that gives effect to the whole of
the statute, or to the provision under consideration, should be adopted in
preference to one that renders part thereof meaningless. (p. 1196)
See Elmer A. Driedger, Construction of Statutes 2nd ed.(Toronto:
Butterworths, 1983) at pages 91–92.
[37]
In Re WykesWill Trusts, [1961] 1 All E.R. 470, Buckley J. made
the following comments at p. 477:
. .
. The intention of the legislature, like the intention of a testator, is
primarily to be ascertained by reading the language employed, and it is not for
this court to corset that intention, if it be clearly expressed, into some
shape which accords better with the fashion of professional legal thought than
the natural meaning of the language employed. More
particularly, I think, this must be so when one is concerned with a definition
section, where one must presume that Parliament would be specially precise and
careful in its choice of language.
[38]
Consequently, it seems to me to be trite law
that an interpretation which does not require treating part of a statute as
redundant is to be preferred over one which does: Shell Canada Resources
Ltd. v. M.N.R., 84 DTC (F.C.A).
[39]
Nevertheless, even if in
interpreting subsection 125(7) of the Act, I refuse to disregard the
definition of “employee” found in subsection 248(1) it should still be stressed
that the use of the word “includes” in a statutory definition does not diminish
the broad scope of other words: Caisse populaire Desjardins de l’Est de
Drummond v. The Queen, 2009 DTC 5951 (S.C.C.).
[40]
According to the standard
rules of interpretation, a definition in an enactment is not exhaustive when
the definition is preceded by the word “includes”: Zellers Inc. v. New Brunswick (Minister of Finance), [1998] 3 C.T.C. 55 (N.B.Q.B.); Séguin v. R.,
[1998] 1 C.T.C. 2453 (T.C.C.).
[41]
While the definition of
“employee” states that it includes officers, the inclusion is not limited only to
officers, but extends to such other things as the word signifies according to
its natural meaning: Storrow v. The Queen, 78 DTC 6551 (F.C.T.D.).
[42]
Consequently, as has
been explained above, there is a difference between an “officer” and an
“employee”, the former being simply an inclusion in the definition of the
latter. If Parliament had used only the word “officer” in the wording of its provision,
then an “employee” hired under a regular contract of employment would not have fallen
within the ambit of that provision.
[43]
Therefore,
I conclude that the definition of “employee” in subsection 248(1) of the Act
has to be taken into consideration in reading subsection 125(7) of the Act.
However, one should keep in mind that there is indeed a distinction between an
“officer” and an “employee”.
[44]
That being said, if it
were not for the existence of the Appellant, could Mr. Gitman reasonably
be considered as an officer of the entity to which the services were
provided, considering the evidence submitted?
[45]
To summarize once
again, an "officer" as defined in the Act:
(i) is a position
entitling one to a fixed or ascertainable stipend or remuneration;
(ii) denotes a subsisting,
permanent, substantive position which has an existence independent of the
person who fills it;
(iii)
does not require the
individual to be in the service of some other person;
(iv)
is created by statute
or some other instrument instead of being created by or dependent upon a
contract of service between an employer and the particular holder of the
position.
[46]
I would also point out that
the duration of the term that a particular person occupies a position is
irrelevant and that the fact that the position must be one “entitling” the
individual to stipend or remuneration means nothing more than that the position
is one held for pay.
[47]
I am of the opinion
that if it were not for the existence of the Appellant, Mr. Gitman could
reasonably be regarded as a person appointed by the partners to manage the
affairs of the De Facto Partnership, as provided for in articles 2212
and 2213 of the Civil Code of Quebec, which read as follows:
2212. The partners may
enter into such agreements between themselves as they consider appropriate with
regard to their respective powers in the management of the affairs of the
partnership.
2213. The partners may appoint one or more
fellow partners or even a third person to manage the affairs of the
partnership.
The manager, notwithstanding the
opposition of the partners, may perform any act within his powers, provided he
does not act fraudulently. The powers of management may not be revoked without
a serious reason during the existence of the partnership, except where they
were conferred by an act subsequent to the contract of partnership, in which
case they may be revoked in the same manner as a simple mandate.
The function held by Mr. Gitman in the De Facto
Partnership was of the same nature as the function held by a director of a
company.
[48]
Could the function held
by Mr. Gitman in the De Facto Partnership be considered as an office as
defined by the Act? I am of the opinion that, if it were not for the
Appellant, Mr. Gitman could reasonably be regarded as an officer of the De Facto
Partnership for the following reasons:
(i) Mr. Gitman was
entitled to a fixed remuneration (a yearly fee of $150,000).
(ii) The function he held
in the partnership was a subsisting, permanent, substantive position which had
an existence independent of the person who filled it.
(iii) The function was
created by the partnership contract.
[49]
I am also of the
opinion that, if it were not for the existence of the Appellant, Mr. Gitman
could reasonably be regarded as the person appointed by the two co‑liquidators
of Mrs. Rywka Gitman's estate to manage the affairs of the estate. The function
held by Mr. Gitman in relation to the estate was also of the same nature as the
function held by a director of a company.
[50]
Could the function held
by Mr. Gitman in relation to the estate be considered as an office as defined
by the Act? I am of the opinion that, it were not for the existence of
the Appellant, Mr. Gitman could reasonably be regarded as an officer of the
estate for the following reasons:
(i) Mr. Gitman was
entitled to a fixed remuneration (a yearly fee of $150,000).
(ii) The function he held
in relation to the estate was a subsisting (for the duration of the estate) and
substantive position which had an existence independent of the person who
filled it.
(iii) The function was created
by the will.
[51]
Consequently, I am of
the opinion that the Minister correctly concluded that the Appellant was a
personal services business for the taxation years ended November 30, 2003,
November 30, 2004 and November 30, 2005 respectively, in accordance with
subsection 125(7) of the Act. Consequently, the Minister correctly
disallowed the small business deductions in the amounts of $16,830, $15,156 and
$14,475 claimed by the Appellant for the taxation years ended November 30,
2003, November 30, 2004 and November 30, 2005 respectively under subsection
125(1) of the Act.
[52]
For these reasons, the
appeals are dismissed with costs.
Signed at Ottawa, Canada, this 2nd day of October 2012.
“Paul Bédard”
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