Citation: 2012 TCC 313
Date: 20120904
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Docket: 2012-507(IT)I
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BETWEEN:
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ROBERT ELWOOD,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
(Edited from the transcript of
Reasons for Judgment delivered orally from the Bench on July 6, 2012 at Toronto, Ontario)
Campbell J.
[1]
Thank you to both
Counsel for coming back in this morning. Let the record show that I am
delivering reasons in the appeal of Robert Elwood which was heard yesterday.
[2]
The Appellant is
seeking a deduction pursuant to paragraph 8(1)(g) of the Income Tax Act
(the “Act”) for lunches he consumed while flying as an Air Canada pilot.
The appeal is in respect of the 2010 taxation year. The Appellant claimed an
amount of $3,264 for expenses incurred and paid for these meals.
[3]
Mr. Elwood is suffering from a disease called hemochromatosis,
which requires that he eat low‑iron food. Air Canada was unable to
provide the appropriate meals in 2010 but began to provide them recently. Therefore,
the Appellant in 2010 made alternative lunch arrangements to ensure he met
those dietary requirements in order to control the disease and maintain his
health. He is attempting to claim the special meals
that he must supply for himself during those times when he is flying for his
employer, Air Canada.
[4]
On flights over four
hours, the crew, including the pilots, are provided in‑flight meals. However,
the Appellant had no choice as to the content of those meals in 2010 and could
not eat the meals that were supplied due to his disease. The Appellant therefore either purchased suitable meals or brought his
own packed lunch from his home. He is also reimbursed for meals along with
lodging on a per diem basis for those meals that he must purchase on layovers
away from his home base in Toronto. He is making no claim for deductions in
respect of these meal expenses.
[5]
On cross‑examination,
the Appellant testified that he would not be able to eat some of the food
supplied in the Air Canada meals because they would be fortified with iron, a
substance he must avoid to limit the over‑absorption of iron by his body.
He gave as an example fortified breakfast cereal served in the Air Canada
breakfasts. When asked why he could not eat a vegetarian meal, he stated that
this would generally suit his condition, but it might not always be available
to him on board a flight. He is able to eat the fruit, yogurt, chicken and fish
that come with regular Air Canada meals, but could not eat the main meals if
they came with a side dish such as pasta or rice, as it could be iron‑fortified.
[6]
In the Notice of Appeal,
the Appellant initially attempted to claim a deduction as a medical expense
based on the fact that celiac disease has similarities to his disease. However,
this argument was abandoned at the outset of the hearing. Instead, the Appellant
wants to deduct the in‑flight meal expenses pursuant to paragraph 8(1)(g). This provision allows employees of transport businesses to deduct their
meals and lodging expenses for which they were not compensated by their
employer. The Appellant relied on the decision in Kasaboski et al. v The
Queen, 2005 D.T.C. 846, 2005 TCC 356, particularly the comments of Justice
Bowie at paragraph 9. He argued that he would still be eligible for this
deduction under that provision even though he did not make a lodging expense
claim.
[7]
The Respondent's
primary argument is that the Appellant is not incurring meals and
lodging expenses since the in‑flight meal expenses are not connected to
the lodging expenses. The Respondent contends that based on the decision in Crawford,
et al. v Canada, 2003 D.T.C. 5417, 2003 FCA 251, the word "and"
used in this provision must be read conjunctively, meaning both must be
incurred during a trip.
[8]
Paragraph 8(1)(g)
provides relief to those individuals employed in the transportation industry
who are regularly required to be away from their home municipality. It states:
8.(1)
Deductions allowed. In computing a taxpayer’s
income for a taxation year from an office or employment, there may be deducted
such of the following amounts as are wholly applicable to that source or such
part of the following amounts as may reasonably be regarded as applicable
thereto:
…
(g) Transport employee’s expenses - where the taxpayer was an employee of a person
whose principal business was passenger, goods, or passenger and goods transport
and the duties of the employment required the taxpayer, regularly,
(i) to
travel, away from the municipality where the employer’s establishment to which
the taxpayer reported for work was located and away from the metropolitan area,
if there is one, where it was located, on vehicles used by the employer to
transport the goods or passengers, and
(ii)
while so away from that municipality and metropolitan area, to make
disbursements for meals and lodging,
amounts so disbursed
by the taxpayer in the year to the extent that the taxpayer has not been
reimbursed and is not entitled to be reimbursed in respect thereof.
[9]
The preconditions, that
must be met if paragraph 8(1)(g) is to be applied, are: (1) The employer's
principal business must be transporting passengers, goods or a combination of
passengers and goods. (2) The taxpayer is required by his or her duties of
employment to regularly travel away from the municipality where the employer's
establishment, to which the taxpayer reported to work, was located. (3) The
taxpayer must be travelling on vehicles used by the employer to transport those
goods or passengers. (4) The taxpayer is required by his or her duties of
employment to regularly travel away from the metropolitan area, if there is
one, where the employer's establishment, to which the taxpayer reported to work,
was located. (5) Finally, the taxpayer is required by his or her duties of
employment to make disbursements for meals and lodging while so away
from that municipality and metropolitan area. If
these preconditions are met, a taxpayer may deduct amounts disbursed to the
extent the taxpayer was not reimbursed and is not otherwise entitled to be
reimbursed in respect thereof.
[10]
Most meal deductions
under the Act are limited by section 67.1 to 50 per cent of the lesser
of amounts expended or what is reasonable. The overall statutory context and
language of paragraph 8(1)(g) was considered by Justice Bonner in the 1980
decision of Derrien v Minister of National Revenue, 80 D.T.C. 1751. At
page 1753, Justice Bonner stated the following:
In my view the solution becomes apparent when paragraph 8(1)(g)
is read as a whole within its statutory context. The approach of the Income
Tax Act to deductions from salary or wages in the process of computing
income from office or employment is generally restrictive. In this regard,
reference should be made to subsection 8(2) of the Act. The exceptions in
subsection 8(1) are not to be regarded as having been inserted capriciously.
The exception made for transport employees by paragraph 8(1)(g)
recognizes that the nature of the work often involves substantial trips away
from the area where such employees live and report for work. Such trips impose
a burden of expense for meals and lodging not borne by the ordinary worker who
can sleep and eat, at least most of the time, at home. The “while so away”
qualification and the use of the word “and” in the phrase “disbursements for
meals and lodging” tend to support this conclusion. The cost to the ordinary
worker of food and shelter is a personal expense. The cost to a transport
worker of meals and lodging necessitated by travel in the course of his duties
is much more directly related to the income earning process.
[11]
The Federal Court of
Appeal interpreted paragraph 8(1)(g) in Crawford, at paragraph 1 of
those reasons, in the following manner:
[1] … The context of paragraph 8(1)(g)
of the Income Tax Act, which requires that employees be away from their
municipality or metropolitan area, necessarily implies that “meals and lodging” must be read conjunctively. The
deduction contemplated is only available when there are disbursements for both
meals and lodging.
[12]
In the decision in Kasaboski,
truck drivers travelled away from home in a truck owned by their employer, for
two‑week periods. They brought meals on the road but were not reimbursed.
They slept in the bunk of the truck and took showers at truck stops. Since they
did not pay for the lodging and therefore had no disbursements for meals and
lodging, the Minister denied the claim for the deduction.
[13]
Justice Bowie allowed
the truckers' appeal, and at paragraph 9 addressed his decision and reasons in
the Crawford case. Paragraph 9 is lengthy. It states:
[9] Mr. Penney argued that as the
word "and" in paragraph 8(1)(g) is conjunctive, there can be
no claim to deduct an amount for meals without an accompanying claim for a
deduction for amounts expended for lodging. He relies on my decision in Crawford
v. the Queen. In that case four employees of B.C. Ferries claimed to be
entitled to deduct amounts for meals that they were required to eat while
working away from the municipality where they reported to work. They worked on
ferries that carried passengers across the Strait of Georgia, or at least some
part of it. None of them were required to spend a night away from home in the
course of their employment, although some of them worked quite long days. In
that context, I concluded that they were not entitled under paragraph 8(1)(g)
to a deduction for their meals, and that decision was affirmed by the Federal
Court of Appeal, whose reasons for judgment end with the sentence
The deduction contemplated is only available when there are
disbursements for both meals and lodging.
The facts of that case are materially
different from the present case. The taxpayers in Crawford did not spend
a night away from home, whereas the present Appellants are away from home for
weeks at a time. That a transport driver sleeps in her vehicle rather than in
paid accommodation does not affect the fact that it is impossible for her to
eat meals at home during the trip, requiring her to incur the expense of
restaurant meals. Clearly the purpose of the conjunctive "and" is to
limit the meal deduction to persons whose work requires them to stay away from
home overnight, so that the expression "... required ... to make
disbursements for meals and lodging", interpreted according to its
purpose, is satisfied where the taxpayer is required to eat and to sleep away
from home, and has to make disbursements for either of those purposes. In any
event, the taxpayers here were required to make disbursements for lodgings. The
evidence was that when their rig was being repaired they stayed in a motel, and
they were reimbursed by the employer for doing so. Even the most literal
reading of paragraph 8(1)(g) does not require that the taxpayer bear the
cost of the lodging for it to qualify as being a disbursement for lodging that
he was required to make; the concluding words limit the deduction to that which
is not reimbursed or to be reimbursed, but it is nonetheless a disbursement
that he was required to make, even if it has since been recovered. There also
was evidence that the Appellants very occasionally paid for a motel themselves,
even though they could not recover it from TransX. The Act does not
specifically require that there be a claim for a disbursement for lodging for
every day that there is a disbursement for meals claimed. Finally, the claims
in respect of the use of showers, which I shall come to presently, is a
recurring claim in respect of disbursements for lodging: see Hiscoe v. The
Queen.
[14]
What Justice Bowie is
saying is that the word "and" in paragraph 8(1)(g) is meant to limit
the meal deduction to those transportation employees who have to eat and sleep
away from home overnight. A taxpayer will still qualify for a deduction where
there was reimbursement because paragraph 8(1)(g) references the deduction to
only that part which is not reimbursed. Finally, Justice Bowie stated that the
cost for the use of the showers at truck stops was a lodging expense and based
his finding on his definition of "lodging" from the case of Hiscoe
v The Queen, 2002 D.T.C. 3894, [2002] T.C.J. No. 435.
[15]
Appellant counsel
referred me to CRA's administrative position contained in Information Circular
1C73‑21R9. According to this bulletin, CRA is willing to accept a claim
for meals only if there were other lodgings used, such as a sleeper cab for a
trucker, and will allow a deduction for lunch where a journey of ten hours or
less is expected.
[16]
Paragraph 8 of that
bulletin discusses meals that are brought from home. It states that the cost of
a meal may only be claimed if it has been paid for, and lunches brought from home
would not qualify. This policy seems to be implicitly contending that
"meal" and "lunch" are two different concepts; a meal being
prepared in a restaurant, while a lunch is prepared at home.
[17]
I do not agree with
such a refined distinction, and I believe it is simply incorrect. The common
sense approach is that lunch is a meal regardless of whether it is prepared in
a restaurant or elsewhere. In fact the Oxford Dictionary defines
"lunch" as "a light meal at any time of the day."
Therefore, if a lunch is prepared while travelling, this could qualify
under paragraph 8(1)(g).
[18]
I agree with the Respondent's
contention that the word "and" in paragraph 8(1)(g) must be
interpreted as conjunctive. This is approved by the Federal Court of Appeal in Crawford,
and it simply aligns with common sense and the plain meaning of the wording.
[19]
However, the Respondent's
argument fell short when Counsel argued that the meals must be connected in
some way to the lodging. Such a requirement is not contained in the legislation.
Justice Bowie rejected such a position in paragraph 9, in Kasaboski,
where he stated:
[9] The Act does not specifically require
that there be a claim for a disbursement for lodging for every day that there
is a disbursement for meals claimed.
[20]
To obtain a deduction
under paragraph 8(1)(g), there is no requirement that a taxpayer must establish
a connection between meal disbursements and lodging disbursements. Simply put,
all an employee is required to show for the deduction are meal disbursements
and lodging disbursements. Consequently, if an employer reimburses for only the
meal or the lodging expenses, relief is available for the meal or lodging
expenses not so reimbursed, under paragraph 8(1)(g). Again, the only
requirement is that meal and lodging disbursements have been made.
[21]
If an employee is
reimbursed for lodging, for example, but not for meals, paragraph 8(1)(g)
allows the employee to deduct those meal expenses not so reimbursed. Theoretically,
an employee may qualify for a deduction under paragraph 8(1)(g) regardless of
whether there was full reimbursement.
[22]
However, this does not
get the Appellant out of the woods with his appeal when I turn my attention to
the physical place where he made those meal disbursements. Paragraph 8(1)(g)
does not require a taxpayer to eat while travelling, but only to make
disbursements for meals while travelling.
[23]
I accept that the Appellant
made meal disbursements; also that lunch is a meal contrary to CRA policy
statements and that there is no particular requirement that the food be
prepared in a restaurant to qualify as a meal, even while travelling. However, paragraph
8(1)(g) imposes two important conditions in respect to this appeal: the
requirement to make disbursements for meals; and to make those disbursements
while travelling.
[24]
If the Appellant brings
food to the flight in the municipality or metropolitan area where he resides,
then he has not made disbursements while away from the municipality. This is an
important precondition in this appeal.
[25]
Theoretically, it would
be possible for the Appellant to stay in a hotel while travelling, purchase
food in a grocery store, prepare it prior to flying, bring it to the flight,
eat it mid‑flight and still qualify for this deduction. This is so
because he has made the disbursement away from the municipality or metropolitan
area. Where the food is consumed is not a precondition to obtaining this
deduction. The Appellant could obtain a deduction while travelling for meals
purchased from a restaurant before a flight if the employer did not reimburse
him and also a deduction for a lunch purchased from a grocery store during his
travels.
[26]
However, I do not have
sufficient evidence before me that would allow me to distinguish or parse
between the meals bought in restaurants or grocery stores while travelling,
from the expenses that were associated with the food prepared and brought from
home. If I had that evidence before me, then I would have
allowed the appeal with respect to the restaurant and grocery store amounts
expended by the Appellant while travelling. Since I have no such
evidence, I cannot establish which food was purchased while away during travel,
as required by the provision.
[27]
In summary, paragraph
8(1)(g) does require that disbursements be made for both meals and lodging,
although the two items need not be connected. Also, the disbursements must be
made while travelling.
[28]
In this appeal, the Appellant
makes both meal and lodging disbursements. Since paragraph 8(1)(g) relies on
disbursements for meals made while travelling, the Appellant's packed lunches
from home were likely acquired by disbursements he made in his home/municipality
or metropolitan area. Again, what is important is where the disbursements took
place.
[29]
Unfortunately, I do not
have the specifics before me that would allow me to determine whether the food
was purchased, from restaurants or grocery stores, while away on travel, which
would then qualify under paragraph 8(1)(g) or purchased in his home/municipality
or metropolitan area, which does not qualify under paragraph 8(1)(g).
[30]
For these reasons, I
must dismiss the appeal without costs.
Signed at Summerside,
Prince Edward Island this 4th day of September 2012.
“Diane Campbell”
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