Savoidakis v. MNR, 91 DTC 1463, [1991] 2 CTC 2599 (TCC)

Couture, CJ.T.C.:—This is one of those appeals that reaches the Court in the absence of reasonable efforts to settle what is in dispute. There is not a single legal principle involved in these appeals, merely an appreciation of the quantum of expenses claimed by an appellant as a deduction in computing income.

In civil matters the standard of proof is one based on the balance of probabilities which is determined by the Court after considering all the relevant evidence adduced by the parties. The Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") does not require a taxpayer to submit receipts in support of expenses claimed as deductions in computing income. If Parliament had wanted that such a practice be followed by taxpayers, enactments to that effect would have been included in the Act in the same fashion as receipts must be provided to support a charitable donation. However, while it is not a statutory requirement, the practice of supporting deductions with receipts should Le followed by taxpayers whenever feasible as it facilitates discussions as to their validity with officials of the respondent and if the parties could not reach a settlement of the problem in issue, it is most helpful to a presiding judge in appreciating the evidence submitted by the appellant regarding his claim for deductions.

The present appeals dealt with the 1986 and 1987 taxation years. The appellant acted on his own behalf.

In his income tax returns the appellant claims that he is an investment consultant and reports income of $100,774 for the 1986 taxation year of which $84,629 is from commissions and for 1987 income of $149,165 of which $116,892 is from commissions.

The appellant is of Greek origin and the bulk of his clientele is made up of individuals belonging to ethnic minorities. A long list of his clients filed at the hearing confirms this. While he had the use of an office at his employer's place of business, he stated that a large number of his clients were not the sophisticated types who would normally see him in his office. He met regularly with some of them at his home in a den which he used as an office. He filed with the Court a copy of letters signed by different clients confirming this.

The appellant impressed me as a sound and honest business man and I accept his testimony without question. The evidence about his employers during the taxation years under appeal is not as precise as one would like, but it is established that he was selling securities on a commission basis for stockbrokers.

The expenses that are in issue are listed in schedules prepared by the respondent as follows:

ANNEXA

MR. GEORGE SAVOIDAKIS Taxation Year 1986

Automobile Expenses	Claimed Claimed Allowed Refused
Gasoline	$ 3,121	$ 3,121	$
Maintenance and repair	3,101	3,101		—
Insurance	521	521		—
Permit	213	213		—
Parking	1,380	500		880
Capital cost allowance	441	441		—
Subtotal	$ 8,777	$ 7,897	$	880
Less:
Personal use	$ 1,755	$ 3,948	$(2,193)
Total	$ 7,022	$ 3,948	$ 3,073

Other Expenses
Promotion	$8,434	$4,217	$4,217
Advertising	2,040	2,040	—
Professional development	1,076	—	1,076
Telephone	240	—	240
Stamps	480	480	—
Office	1,320	—	1,320
Total	$13,590	$ 6,737 $ 6,853
Grand Total	$20,612	$10,686 $ 9,926

Personal use is revised at 50%

ANNEX B

MR. GEORGE SAVOIDAKIS Taxation Year 1987

Automobile Expenses	Claimed Claimed Allowed Refused
Gasoline	$ 3,272	$ 3,272	$
Maintenance and repair	4,118	4,118	—
Insurance	504	504	—
Permit	213	213	—
Parking	1,475	500	975
Capital cost allowance	720	309	411
Subtotal	$10,302	$ 8,916 $ 1,386
Less:
Personal use	$ 2,060	$ 4,458	$ (2,398)
Total	$ 8,242	$ 4,458	$ 3,784
Other Expenses
Promotion	$14,991	$ 7,495 $ 7,496
Advertising	2,107	2,107	—
Professional development	699	—	699
Telephone	240	—	240
Stamps	180	180	—
Office	1,326	—	1,326
Total	$19,543	$ 9,782 $ 9,761
Grand Total	$27,785	$14,240	$ 13,545

Personal use is revised at 50%

The appellant said his clients were not the type that purchased large blocks of shares like financial institutions, but they would buy shares in small lots and needed constant advice with regard to these investments. To supervise and maintain his large clientele in this highly competitive field required his close attention which was done by meeting with them, attending social functions, participating in community activities and making himself seen and available to them. He stated for instance that in the Greek community alone there were 68 different associations which were available to the members for social and fraternal purposes.

The reply to the notice of appeal indicates that the expenses disallowed were so disallowed because it was assumed by the respondent that they were either unreasonable as to their quantum or not required to earn income.

As I mentioned before the appellant was straightforward in giving his evidence. However, certain of his explanations were somewhat vague or lack- ing precision. For this reason I find that some of the items claimed appear high to me in the circumstances. I have no doubt that the appellant did not earn the amount of commissions he reported by sitting at a desk in an office waiting for clients to contact him. He had to work and work hard to earn the amount of income he reported. Accordingly, I make the following findings:

In conclusion I repeat that a reasonable attempt to settle this litigation should have been made which if successful would have saved the time and expense of a trial.

When I inquired why no such attempt had been made, I received this reply from counsel for the respondent: “If I may, Your Honour, what happened is that Mr. Savoidakis did phone me, but at the time I did not have the file, and by the time I got the file back it was only a week away from trial and, as such I did not have the time to work the appeals and work with him some kind of settlement." Emphasis added.

What I find surprising with this answer is that the reply to the notice of appeal is dated May 23, 1991 signed by this same counsel and was received by the registry on May 24, that is nearly a month before the hearing which was held on June 19, 1991. Furthermore, the notice of appeal was filed on May 22, 1990. Surely during that period there was sufficient time to at least attempt to meet the appellant or his agent and discuss a settlement.

The appeals are allowed and the matters are referred back to the Minister for reassessment in accordance with these reasons. The appellant is entitled to his costs on a party-party basis if any were incurred.

Appeals allowed.