The Queen v. Chrapko, 88 DTC 6487, [1988] 2 CTC 342 (FCA)

Urie, J.:—Two issues are raised in this appeal from a judgment of the Associate Chief Justice of the Trial Division.

The first issue arises from the practice of the Ontario Jockey Club, by which the respondent was employed as a pari-mutuel teller, whereby he and others similarly employed had deducted from their wages the amounts of cash shortages occurring in the course of their work in selling pari-mutuel betting tickets and the payment off of winning tickets. The respondent's employment was governed by the terms of a collective agreement entered into between the employer Jockey Club and the respondent's union. In our view, paragraph 8(c) of that agreement explicitly made such cash shortages, debts owing by the employee to the employer. While the agreement did not specify how such indebtedness was to be repaid, as a matter of practice, it was usually withheld from the employees' pay cheques although, if they wished, the indebtedness might be satisfied by cash payments to the employer. Contrary to what was submitted by counsel for the respondent, the deductions from the pay cheques do not constitute a reduction in salary. Not only is no such reduction recognized by the collective agreement but, as already noted, paragraph 8(c) provides that "each and every employee shall pay, as and when required by the Employer any and all shortages for which he may be responsible". Moreover, the evidence (at pages 23 and 24 of the transcript) that cashiers, of which the respondent was one, were paid more than mere sellers of tickets, primarily because of the risks of cash shortages arising from the nature of their duties indicates to us, as well, that the relationship was that of debtor-creditor.

It is our conclusion, therefore, that the respondent was required to include in his income, for taxation purposes, pursuant to section 5 of the Income Tax Act, the amounts of cash shortages contractually owing and withheld by the employer from the respondent's salary, in accordance with the accepted practice of the parties. To that extent, accordingly, the appeal will be allowed and the Minister’s assessment will be restored.

The second issue relates to the travelling expenses of the respondent who resided at Niagara Falls, Ontario, incurred in attending at one or other of the Jockey Club’s three tracks — Woodbine and Greenwood in Toronto and Fort Erie at Fort Erie, Ontario — in order to discharge his duties of employment. The appellant disallowed all such expenses claimed by the respondent. The learned Trial Judge, however, found that they were properly deductible pursuant to paragraph 8(1)(h) of the Income Tax Act.

This Court in Healy v. The Queen, [1979] C.T.C. 44; 79 D.T.C. 5060 observed at page 48 (D.T.C. 5064) that the objective of paragraph 8(1)(h) is:

. . . to enable employees who are required by their employment to work from time to time away from the places at which they usually work, to deduct their out- of-pocket expenses in so doing. Subsection 8(4) is designed to prevent abuses in the application of paragraph 8(1)(h) but not to prevent the legitimate deduction of expenses properly incurred while working at different places.

Consistent with that view we would restrict allowable travel expenses in this case to expenses incurred by the respondent in travelling to a place of work away from the places at which he usually worked, namely, Woodbine and Greenwood in Toronto at which, the evidence discloses, he worked 75 per cent of his working time. Therefore, the deductible travel expenses for the respondent in the taxation years in question are those incurred while working at Fort Erie notwithstanding that he chose to reside at Niagara Falls, which is closer in proximity to Fort Erie, at which he worked only approximately 25 per cent of his working time, than to Toronto.

The appeal on the second issue will accordingly be allowed, in part, the judgment of the Trial Division on that issue will be set aside and the matter will be referred back to the Minister of National Revenue for reassessment in a manner not inconsistent with these reasons.

The respondent seeks an award of costs pursuant to subsection 178(2) of the Act. This precise request was sought in an appeal in this Court, concluded yesterday, in The Queen v. Dresden Farm Equipment Limited upon which judgment was reserved. Formal pronouncement of judgment in this appeal will, therefore, be reserved pending a decision as to the award of costs in the Dresden Farm Equipment appeal. Costs in this appeal will be awarded in accordance with the decision in that case.

Appeal allowed in part.