Citation: 2012 TCC 37
Date: 20120213
Docket: 2010-3680(IT)I
BETWEEN:
MARTIAL MORISSETTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
(Delivered orally from the bench on January
12, 2012)
Tardif J.
[1]
This is an appeal from an
assessment made in respect of the appellant by the Minister of National Revenue
(the Minister) under the Income Tax Act for the 2009 taxation year regarding
$2,040 received as a taxable allowance from an office or employment.
[2]
First, I think it is
important note that the underlying facts of the case, which the Minister took
into account to explain and justify the assessment being appealed from, have
been admitted.
[3]
The dispute mainly
involves the interpretation of the admitted and available facts.
[4]
The facts admitted by
the appellant are as follows:
(a)
During the taxation year at issue, the appellant
was an employee of the St. Lawrence Seaway Management Corporation (the employer);
(b)
The employer's collective agreement provides a fixed amount of $20 per meal when
the appellant;
·
works more than two hours overtime;
·
works outside of his regularly assigned place of
work;
·
does not have access to the place where he
normally eats;
(c)
During the taxation year at issue, the appellant
received $2,040 as meal allowances from his employer;
(d)
The employer included this amount as income from
an office or employment on the "Statement of
Remuneration Paid T4" form.
[5]
The judgment was
delivered orally from the bench. Moreover, the transcript is attached to this
judgment and is an integral part thereof. Since the judgment could have an
impact or effects on some other cases, I take the liberty of briefly summarizing
the judgment from the bench.
[6]
The appeal raises two
issues: the first is whether the fact that the employer identifies a meal
allowance as a taxable benefit is a relevant, serious and valid indication to
bind the Agency in that it must validate the employer's interpretation.
[7]
The answer is negative,
particularly if it is the product of a superficial and arbitrary analysis.
[8]
In this case, it would appear
that the allowance was treated differently over the years. At the beginning,
the expenses were simply reimbursed according to disbursements. As this process
entailed an administrative burden, the employer suggested a simplified
management process, which the workers endorsed.
[9]
Subsequently, then the
allowances were made payable and deemed non-taxable. Lastly, after a directive
was issued stating that an allowance of more than $17 per meal would be considered
unreasonable, the employer unilaterally concluded that this was a taxable
benefit. Thus, after this directive was issued, the employer modified its
approach; it then included the amount on the workers' T-4 slips; including the
appellant's form.
[10]
The second issue is
whether or not the allowance is a reasonable amount.
[11]
Whether the amount was
reasonable must be determined for the period in issue and not in relation to contemporary
conditions. I do not believe that the amount of such an allowance should be a
set amount. Several factors can and must be taken into consideration. I would include
in particular salaries, the region, the cost of an average normal meal, which obviously
must include tax and tip.
[12]
In the case at bar, I
do not believe that the exercise requires an in-depth analysis, especially
since I have noted that the appellant often had to pay that amount to have
ordinary, reasonable meals with no extras.
[13]
The respondent's determination that the amount is unreasonable is not based on any
evidence or relevant factor; it is based on an essentially arbitrary approach. I
thus decide that the allowance of $20.00 was entirely reasonable in that it
corresponds to the real costs incurred, which, moreover, were clearly proven by
the evidence.
[14]
As a result, the appeal
is allowed and the assessment under appeal is vacated.
Signed at Ottawa,
Canada, on this 13th day of February 2012.
Tardif J.
Translation certified true
on this th day of September 2012
François Brunet, Revisor
APPENDIX
[OFFICIAL ENGLISH
TRANSLATION]
TAX COURT OF CANADA
RE: INCOME TAX ACT
2010-3680(IT)I
BETWEEN: MARTIAL
MORISSETTE
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Held before the Honourable Justice ALAIN TARDIF, Tax
Court of Canada, in the offices of the Courts Administration Service, Montréal,
Quebec,
on January 12, 2012.
--------------------
REASONS FOR JUDGMENT
APPEARANCES:
CATHERINE
SAINT-GERMAIN
For the appellant
Marie-France
Dompierre
For the respondent:
Registrar/technician: Julie Lafrenière
RIOPEL, GAGNON, LAROSE & ASSOCIÉS
215 Saint-Jacques St.
Suite 1020
Montréal, Quebec
H2Y 1M6
IT-5577 JEAN
LAROSE, O.S.
HIS
HONOUR: Listen, I am ready to render my decision immediately, which means, in
my opinion, that there is no doubt whatsoever in my mind as to the decision
required under the circumstances.
In
the light of the introductory remarks of the parties, it was very easy to narrow
the issue in dispute in the sense that… it was then confirmed by the admissions
that specifically addressed, involved and focused on, the presumptions of fact
that the Agency made in making the assessment. Moreover, all of the
presumptions of fact were admitted. Thus, as far as I am concerned, there is very
little ambiguity with respect to the facts available on the basis of which a
decision can be rendered in this case.
The
Court will add some nuances and precisions, but which, in my opinion, do not in
any way change the facts that were presumed in the reply to the notice of
appeal. In particular, the evidence shows that the employer, at one time,
reimbursed those expenses and that it had become complicated and complex in
that the prices on the invoices varied, there were often taxi fares added to
that and I do not think it is an exaggeration to state that under similar
circumstances, for an organization like that of the appellant's employer, it had become,
in a way, monstrous with respect to administration.
Indeed,
it is a phenomenon that is seen increasingly such that employers who obviously aim
to reduce management and administrative costs, to use methods that are easier, less
expensive and more efficient and that, in some way, will deal with problems.
Thus,
in this case, the two parties agreed that, in specific circumstances, there
would be an allowance paid to employees of the employer.
I
understood from the introductory remarks and the documentary evidence filed that
if the $20 amount at issue had been $16, $17 or $18, the case probably would
have never ended up in the Tax Court of Canada.
Thus,
we have to ask whether between $18 and $20 there is enough room to deem unreasonable
something that was considered reasonable in June 2009. Starting at $17 in 2009 and
extrapolating what it could represent, this would imply an increase of more or
less five percent (5%) per year.
That
seems to me… Listen, as far as I’m concerned, that seems completely,
completely, completely, in line with what could be called or deemed reasonable.
It is most certainly not unreasonable to be allocated $20 to cover the cost of
a meal and related expenses. I mean, the example was well chosen, the appellant
in the circumstances was not working overtime but he was working more than
fifty kilometres (50 km) outside of his region. He was quite right to refer to
everything surrounding the situation in some way. The morning and afternoon coffee
break, lunch, I don’t think it’s splitting hairs, as a whole it involves
considering whether $20 is excessive and unreasonable.
With
respect for the contrary view, I conclude that it seems entirely, entirely within
the accepted standards of reasonableness, especially since it is something that
was negotiated; it is something that the employer agreed to; it is something
that the employer, for reasons that concern him, and I have to comment on the
statements made by Counsel for the Agency, namely, that the that the main
witness this morning should have been the employer.
In
this regard, I would state that not necessarily because of the fact that the
employer is not an appellant; it is the individual affected by the decision who
appeared in court this morning. I mean, the employer, in my view, of course, could
have testified, but the appellant bears the burden of proof, but that does not
prevent the respondent from also submitting evidence, if the respondent is of
the opinion that the evidence to be filed by the appellant will be contrary to
the respondent's claims. That does not prevent her from calling a witness to
contradict in this case, in particular, the appellant.
The
employer, according to the appellant’s explanations, reimbursed the actual
expenses at one time. Then it changed its way of doing things, way of
operating, method of managing expenses and it would appear that for a given
period there were no problems, it was seen as reasonable and respecting the
applicable standards. But suddenly, probably after reading the document issued
by the Agency dated June 11, 2009, the employer decided to change its way... its
way of dealing with that matter by unilaterally deciding that $20 was not the
amount indicated in a paragraph in which in fact... an amount of up to $17 will
be regarded as reasonable.
It's
true, 2009 is the period covered by the assessment in issue, but $20, $17, is in
any event, in my opinion, and we're in the Montréal area, that seems to me, as
far as I am concerned... Of course it is not something that can be resolved the
same way as a simple mathematical exercise, but $20 in 2009-2010-2011, in the
circumstances, seems to me to be quite, quite appropriate.
So
that answers the question or the aspect of reasonableness. As for the way in
which the amount was treated by the employer, listen, the employer was likely
acting in good faith, it did not … I assume that it did not act in bad faith,
but in my opinion, it was not up to the employer to decide unilaterally what
the ultimate tax treatment of this amount should be.
The
approach should have been that both parties, and if that had been the case
these two parties in a common approach had referred to Revenue Canada, at that
point they would have received a notice that would have probably satisfied both
parties, that would have had the effect of probably ensuring that the
Department could have more quickly and easily worked with them to assess the versions
of the two parties at issue and would have been able to make a decision that I
am convinced would have probably been acceptable to both parties.
While
the employer decided unilaterally to describe this amount as a taxable benefit,
in my opinion, that does not bind the Court in any way.
For
all of these reasons, obviously, I would allow the appeal, and vacate the
assessment and I ask the Department to review the file so that it is restored
to... or such that the amount that was treated as taxable be treated as non-taxable.
END OF REASONS FOR
JUDGMENT: 11:13 a.m.
Translation certified true
on this18th day of October 2012
François Brunet, Revisor
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