Citation: 2011TCC145
Date: 20110308
Docket: 2009-3763(IT)I
BETWEEN:
LARRY ZEMBAL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan J.
[1]
The issue in this
appeal is the deductibility of motor vehicle expenses incurred by the Appellant, Larry Zembal, for the 2005 and 2006 taxation years.
[2]
In determining the
Appellant’s tax liability for the 2005 and 2006 taxation years, the Minister of
National Revenue assumed the facts set out at paragraph 23 of the Reply to the Notice of Appeal:
i)
at all material times, the Appellant was employed by Con-Drain Company
(1983) Ltd. (“Con-Drain”) as a Bulldozer driver;
ii)
under his contract of employment with Con-Drain, the Appellant was required
to pay his own motor vehicle expenses and did not receive any allowance or
repayment;
iii)
the Appellant’s area of travel for employment related purposes in 2005
and 2006 was the Southern Ontario Area;
iv)
the Appellant was required to report to a specific job site to which he
was assigned to work for as long as he was required to work at that site;
v)
the disallowed expenses were not made and incurred or, if incurred, they
were not incurred by the Appellant for the purpose of earning income from
employment with Con-Drain;
vi)
the tools, material and equipment required by the Appellant to perform
his work tasks were generally prepositioned at the specific job site he was
required to work at;
vii)
the Appellant was not ordinarily required to carry out his duties of employment
away from his employer’s place of business or in different places;
viii)
the Appellant did not travel between work sites in the course of the
day;
ix)
the Appellant claimed motor vehicle expenses for the 2005 and 2006
taxation years, in the amounts of $4,099.37 and $6,267.08, respectively, which
were computed by him as being travel from his home to each work site location,
and travel from that work site to his home;
x)
if the disallowed expenses were incurred, they were personal or living
expenses of the Appellant.
[3]
The Appellant had the
onus of proving wrong these assumptions. He took particular issue with subparagraphs 23(vi), (vii) and (viii).
Notwithstanding the assumption in subparagraph 23(v) that “the disallowed
expenses were not made and incurred”, I did not understand that to be the
Minister’s position at the hearing. Nor did the Respondent dispute that the
Appellant was ordinarily required to work away from his employer’s place of
business or at different places, as had been assumed in paragraph 23(vii).
[4]
The only question is whether, on
the facts, the Appellant can satisfy the criteria in subparagraph 8(1)(h.1)(ii)
of the Income Tax Act, the relevant portions of which read:
Motor
vehicle travel expenses – where the taxpayer, in the year,
a.
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
b.
was required under the contract of employment to pay motor vehicle
expenses incurred in the performance of the duties of the office or employment,
amounts
expended by the taxpayer in the year in respect of motor vehicle expenses
incurred for travelling in the course of the office or employment …
[5]
The Appellant is an experienced
bulldozer operator. In 2005 and 2006, he was working on Con-Drain projects for
the installation of sewer mains and water service pipes in residential
developments north of Toronto. He resided in Kleinburg, Ontario, a 15-minute drive from his employer’s business
office but the accepted practice was for him to go directly to a job site as
and when instructed by Con-Drain’s foreman. He travelled from his home to the
various job sites in his truck.
[6]
As a bulldozer operator, the
Appellant’s duties included clearing the land for construction, building and keeping
roads open for the vehicles on the site, covering the newly installed sewer and
water systems, and smoothing the terrain. As a senior operator with many years
experience in heavy machinery, the Appellant was also called upon to assist
Con-Drain’s junior operators at the company’s other projects in the area.
[7]
While his employer provided the
bulldozers he used, the Appellant was responsible for their care and
maintenance; primarily, keeping the machine clean and lubricated as well as
maintaining its oil and fluid levels. For these tasks, the Appellant required a
shovel to keep the bulldozer tracks free of the mud and other debris picked up
while in operation and a grease gun for its daily lubrication. The Appellant
was responsible for replacing his tools if they were stolen. Although there
were trailers on site, these were for the labourers, for storing small non‑valuable
items or eating their lunch. As a heavy equipment operator, the Appellant was
not part of that group. His “lunchroom” was the cab of his bulldozer. For that
reason and because he spent some 10 hours a day in what was a very small space,
he preferred not to store the shovel and grease gun in the cab. Another was
that the heavy equipment left on the construction site was often broken into or
vandalized. Theft was a constant risk on the job site; with no secure storage
facility available to him, the Appellant had no option but to keep his tools in
his truck. Furthermore, the Appellant needed to have the tools with him in the
event he was required to go to a different job site. Thus, while the Appellant
admitted that his employer never directly told him he had to carry his tools
around with him, as a practical matter, it was a job requirement.
Analysis
[8]
The Appellant was the only witness
to testify. I found him to be a straight‑forward witness and have no
reason to doubt his testimony. I am satisfied that his situation fell within
the criteria of subparagraph 8(1)(h.1)(ii) of the Act.
[9]
Counsel for the Respondent argued
that in driving from his residence to the various job sites the Appellant was
in the same position as any other employee travelling from his residence to his
place of employment and accordingly, his expenses ought not to be deductible, Hogg
v. R., 2002 FCA 177. Counsel urged the Court to follow Colavecchia v. R.,
2010 TCC 194, another Informal Procedure appeal involving an employee of
Con-Drain in which the taxpayer’s appeal was dismissed.
[10]
In my view, however, the present
case is readily distinguishable from Colavecchia. Firstly, Margeson, J.
had difficulty with the taxpayer’s credibility. There is no such concern here. There
are also significant factual differences: the taxpayer in Colavecchia
was a “pipe‑layer helper” who was able to eat his lunch and change his
clothes in the trailer provided, from which I infer he was a labourer rather
than a skilled operator. Other than having been assigned “specific tasks”,
it is not clear what his duties were. There is no mention of any tools.
Margeson, J. noted at paragraph 76 that “… there was no evidence that the
taxpayer was doing anything apart from travelling from home to his place of
work” during which he was not “performing any service for his employer”.
[11]
In the present case, there was
clear evidence of the specialized nature of the Appellant’s duties which
expressly required him to be available, upon his employer’s request, to travel
to different job sites to assist other bulldozer operators employed by
Con-Drain. The fact that this rarely occurred in the two years under appeal
does not detract from the Appellant’s obligation to be prepared to do so. I am
also satisfied that he was under an implied obligation to keep with him his
shovel and grease gun. In the circumstances, the only reasonable means of
transporting and storing such equipment was in his truck.
[12]
In this regard, the present case
is more in keeping with the facts in Evans v. R., [1999]
1 C.T.C. 2609, an Informal Procedure decision in which the motor vehicle
expenses of an itinerant school psychologist were allowed. She, like the
Appellant, was required to keep certain materials used in her employment in the
trunk of the car she used to travel from her home to the schools in her
assigned area, but for her employment duties, she would have had no reason to
do so. The Appellant was in the same position. In having to provide his own
transportation to the employer’s other work sites during the working day and to
keep with him the tools necessary for his employment, the Appellant’s travel “…
actually involved the performance of some service as compared to simply getting
[himself] to the place of work”. O’Neil, above, at paragraph 24; cited
with approval by the Federal Court of Appeal in Hogg at paragraph 11.
[13]
In these circumstances, I am
satisfied that the Appellant is entitled to a motor vehicle deduction under
subparagraph 8(1)(h.1)(ii). However, I agree with the Respondent’s
alternative position that the total amount claimed by the Appellant ought to be
reduced to reflect the distance he would have travelled between his residence and
his employer’s place of business. The Appellant estimated his travel time from
his home to Con-Drain’s business office at 15 minutes; to the various job
sites, approximately 45 minutes, depending on the traffic. Based on these
figures, the Appellant ought to be allowed 2/3 of the totals claimed in 2005
and 2006.
[14]
For the reasons set out above, the
appeals of the reassessments of the 2005 and 2006 taxation years are allowed
and the matters are referred back to the Minister for reconsideration and
reassessment in accordance with these Reasons for Judgment.
Signed at Ottawa, Canada, this 8th day of March 2011.
“G. A. Sheridan”
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