Date: 19981123
Docket: 97-2588-IT-I
BETWEEN:
FRANCES J. EVANS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Porter, D.J.T.C.C.
[1] The Appellant received notices of reassessment dated March
14, 1996 relating to the taxation years 1992 and 1993, with
respect to travel expenses she had claimed against her employment
income, as a school psychologist with the Calgary Board of
Education ("C.B.E.").
[2] The Appellant filed the appropriate Notice of Objection
with the Minister of National Revenue (the "Minister")
on June 7, 1996. On June 11, 1997 a Notification of Confirmation
of the reassessment by the Minister was sent to her. She has now
appealed that reassessment to this Court.
[3] The appeal was heard under the informal procedure at
Calgary, Alberta on September 23, 1998.
[4] The issue revolves around her claim to deduct from her
income, motor vehicle travel expenses which she had incurred in
the respective amounts of $3,697.26 in 1992, and $5,569.12 in
1993. She claimed that pursuant to paragraph 8(1)(h.1) of
the Income Tax Act (the "Act") these
expenses had been incurred for travel in the course of her
employment and that she was required under her contract of
employment to incur these in the performance of her duties. In
short, she was required as a term of her employment, to travel
between various schools in the school district for which she was
reimbursed. However, she received no reimbursement with respect
to travel between her residence and the first and last schools
that she visited in a day. It is with respect to this latter
travel that she has made her claim.
[5] The Minister confirmed the reassessment on the following
basis:
"you received an allowance of $274.09 and $465.24 in 1992
and 1993 respectively for motor vehicle expenses you incurred to
travel for work. Under subparagraph 6(1)(b)(vii.1), this amount
was not included in income. Accordingly, you cannot claim a
deduction of $3,869.26 and $5,714.12 for 1992 and 1993
respectively from income under paragraph 8(1)(h.1). Also,
subsection 8(2) does not allow a deduction for this amount in
calculating your income from an office or employment."
The Facts
[6] In his Reply to the Notice of Appeal, counsel for the
Minister set out the following:
"2. He admits:
(a) that the Appellant is employed with the Calgary Board of
Education (the "Employer") as a psychologist;
(b) that the Appellant is required to use a motor vehicle in
the performance of her duties;
(c) that pursuant to her duties, the Appellant is required to
visit some 20 to 30 schools on an irregular, itinerant and
rotational basis;
(d) that the Appellant receives no reimbursement for trips
between the Appellant's residence and her place of employment
with the Employer; and
(e) that in calculating her claim for motor vehicle expenses
for 1992 and 1993, the Appellant has deducted the allowance
received from the Employer
as stated in the Notice of Appeal.
3. In computing income for the 1992 and 1993 taxation years,
the Appellant claimed as employment expenses, inter alia,
motor vehicle travel expenses in the amount of $3,697.26 for 1992
and $5,569.12 for 1993, calculated as follows:
1992
ITEM AMOUNT
Fuel and Oil $ 988.21
Maintenance and Repairs 718.43
Insurance 1,431.00
License and Registration 58.00
Capital Cost Allowance 3,129.11
Subtotal $ 6,324.75
Less: Personal Use
(8,000 Km/21,500 Km x $6,324.75)= 2,353.40
Subtotal $ 3,971.35
Less: Non Taxable Allowance $ 274.09
Allowable Motor Vehicle Expenses $ 3,697.26
1993
ITEM AMOUNT
Fuel and Oil $ 874.00
Maintenance and Repairs 1,942.79
Insurance 1,815.00
License and Registration 106.00
Capital Cost Allowance 5,319.48
Subtotal $10,057.27
Less: Personal Use
(10,600 Km/26,500 Km x $19,057.27)=4,022.91
Subtotal $ 6,034.36
Less: Non Taxable Allowance $ 465.24
Allowable Motor Vehicle Expenses $ 5,569.12
4. The original notices of assessment in respect of the 1992
and 1993 taxation years were dated and mailed to the Appellant on
April 28, 1993 for 1992 and May 9, 1994 for 1993.
5. In reassessing the Appellant for the 1992 and 1993 taxation
years, the Minister of National Revenue (the
"Minister"), inter alia, disallowed the claim
for motor vehicle travel expenses for each year.
6. In so reassessing the Appellant, the Minister made the
following assumptions of fact:
(a) the facts admitted supra;
(b) at all material times, the Appellant was employed by the
Employer in the position of a psychologist;
(c) the Appellant travelled no more than 978 kilometres
in 1992 and 1,661 kilometres in 1993 in respect of the
performance of her duties of office or employment with the
Employer;
(d) the Appellant was in receipt of a reasonable allowance in
the amount of $0.28 per kilometre for each year from her Employer
in respect of the use of a motor vehicle for travelling in the
performance of the Appellant's duties of office or
employment;
(e) the allowance stated in paragraph 6(d) supra
that was received in each year by the Appellant was not included
in computing the Appellant's income for the 1992 and 1993
taxation years by reason of paragraph 6(1)(b) of the
Income Tax Act (the "Act");
(f) the Appellant was not required under her contract of
employment with the Employer to pay any motor vehicle travel
expenses;
(g) the Appellant's claim for motor vehicle travel
expenses includes those expenses incurred for travelling between
the Appellant's residence and her place of employment with
the Employer and, in respect of this, the kilometres claimed by
the Appellant as those incurred for employment purposes that are
in excess of the kilometres for which the Appellant received an
allowance were in respect of such travel between the
Appellant's residence and her place of employment;
(h) travel between the Appellant's residence and her place
of employment with the Employer is personal in nature.
9. He submits that the Appellant is not entitled to claim a
deduction for motor vehicle travel expenses in respect of the
1992 and 1993 taxation years as:
(a) the Appellant was not required under the contract of
employment to pay any motor vehicle travel expenses; and
(b) the Appellant was in receipt of an allowance for motor
vehicle travel expenses that was, by reason of paragraph 6(1)(b)
of the Act, not included in computing the income of the
Appellant for each year
within the meaning of paragraph 8(1)(h.1) of the Act
and is, therefore, prohibited by subsection 8(2) of the
Act from deducting the expenses claimed from employment
income.
10. He further submits that travel between the Appellant's
residence and her place of employment with the Employer is
personal and, therefore, the Appellant is not entitled to a
deduction in respect such travel in accordance with paragraph
8(1)(h.1) and subsection 8(2) of the Act."
[7] The Appellant agrees with most of the above but disagrees
specifically with items 5(c), (f), (g) and (h).
[8] The Appellant gave evidence about her situation. She was a
school psychologist during the years in question, engaged by the
Calgary Board of Education for a salary, on a full-time basis.
Her duties comprised of providing psychological assessments,
testing and counselling for students at the various schools
throughout the school district. She was part of a team of
eight.
[9] Although she had space available to her at a central
administrative office at Parkdale to do her administrative work,
on the whole she spent very little time there, as the facility
was small and crowded and she had to share the space with other
personnel. It was not conducive to her work nor was it near the
schools at which she generally attended and thus there was no
need for her to attend there on any regular basis.
[10] Her daily duties in essence required her to travel from
her residence in the north west of Calgary directly to her first
appointment at a school somewhere in the school district. She did
her work there and then moved on throughout the day to other
schools, returning at the end of the day directly from the last
school to her home. She often had to be at a school before
regular school hours and wait after those hours to conduct
interviews with parents and teachers.
[11] The policy of the C.B.E. was to reimburse her for travel
between the first school at which she attended in the day and the
various other schools to which she went in the district up to the
last school of the day. There is no dispute that this was a
reasonable allowance for that part of the travel, and was not
taxable pursuant to paragraph 6(1)(b) of the Act.
However, she received no reimbursement for travel between her
home and the first school of the day nor between the last school
of the day and her home. It made no difference whether these
first and last schools were closer or further away from her
residence than the administrative office. They could have been
next door to her home or on the other side of the city.
[12] In addition to the above, the Appellant gave evidence
that throughout the school year the trunk of her car was full of
large briefcases and boxes which contained papers and evaluations
and assessment forms relating to her professional duties. She
produced photographs showing that the trunk of her car was full
with these things and had no room for any personal items. She
said in evidence that they remained there permanently throughout
the school year as they were too heavy to lift in and out on a
daily basis. She simply restocked any supplies as they
diminished. The secondary aspect of her claim therefore related
to the necessity of having a car to cart these documents and
papers around on a daily basis as part of her employment,
including to and from her residence.
[13] Credibility was not an issue and I have no hesitation in
accepting the evidence of the Appellant as to how she went about
her duties. It is the implication of what she did that is the
issue. Counsel for the Minister conceded that the reasonableness
of the amounts claimed is not in issue.
[14] I have no difficulty in finding that the Appellant was
required to carry out her duties away from the employer’s
place of business or in different places. The first question is
whether the expenses which she incurred daily, driving between
her residence and the first school of the day and returning from
the last school to her residence were expenses, which she was
required under the terms of her contract of employment to incur,
in the performance of the duties of her employment or whether
they were personal in nature. The second question is whether, if
they were part of her employment duties, she was barred from
claiming them under paragraph 8(1)(h.1) of the Act by
virtue of the exception in subparagraph (iii) as a result of
having received a non taxable allowance, under paragraph
6(1)(b) of the Act, from her employer with respect
to the inter school travel.
[15] The Minister, whilst conceding that the Appellant was
required to use her motor vehicle in the performance of her
duties, that these duties required her to visit some twenty to
thirty schools on an irregular itinerant and rotational basis and
that she was only reimbursed by her employer for inter school
travel, specifically denied that any of the travel between the
first and last schools of the day and her residence, were
expenses that she was required to pay under her contract of
employment. He maintained that these expenses were personal in
nature and thus not deductible from her employment income.
[16] Lastly, I make mention of the fact that I received in
evidence a letter from Don Andrews, Director of School, Student
and Parent Services at the C.B.E. Although dated February 24,
1997, the evidence was that it applied equally to the years in
question. The letter confirmed the duties and responsibilities of
the school psychologists generally. It concluded with the
following words:
"...The volume and weight of records and testing
materials necessitates the use of a motor vehicle.
In summary, school psychologists working on behalf of the
Calgary Board of Education must have access to a personal motor
vehicle to undertake and complete their assignments in accordance
with their job description."
I have no reason not to accept this evidence and I do accept
it.
The Law
[17] The pertinent parts of subsection 8(1) of the Act
read as follows:
"Deductions allowed.
(1) 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:
...
(h.1) Motor vehicle travel expenses. – where the
taxpayer, in the year,
(i) was ordinarily required to carry on the duties of
employment away from the employer's place of business or in
different places, and
(ii) 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
employment, except where the taxpayer
(iii) received an allowance for motor vehicle expenses that
was, by reason of paragraph 6(1)(b), not included in
computing the taxpayer's income for the year, or
..."
[18] The relevant parts of subsection 6(1) read as
follows:
"6. Amounts to be included as income from
office or employment.
(1) There shall be included in computing the income of
a taxpayer for a taxation year as income from an office or
employment such of the following amounts as are applicable:
...
(b) Personal or living expenses. – all amounts
received by him in the year as an allowance for personal or
living expenses or as an allowance for any other purpose,
except
...
(vii.1) reasonable allowances for the use of a motor vehicle
received by an employee (other than an employee employed in
connection with the selling of property or the negotiating of
contracts for the employer) from the employer for travelling in
the performance of the duties of the office or employment,
..."
[19] The Minister made mention of paragraph 18(1) in the Reply
to the Notice of Appeal. However, in view of counsel’s
concession that reasonableness was not an issue, I need not
consider this further; similarly with section 7306 of the
Regulations.
[20] I have specifically considered the following cases on
subject:
Rozen v. The Queen, 1986 1 C.T.C. 50, 85 DTC 5611
Hoedel v. The Queen, 1986 2 C.T.C. 419, 86 DTC 6535
The Queen v. Mina and Jacobi, 1988 1 C.T.C. 380
[21] The Minister has taken the position that the allowance
paid to the Appellant by her employer, for inter school travel
and claimed by her as non taxable pursuant to subparagraph
6(1)(b)(vii.1) of the Act, acts per se, as a bar to
her claiming any further motor vehicle expenses under paragraph
8(1)(h.1) in relation to that employment. With respect, in my
view, the Act does not go that far.
[22] It is clear that if a taxpayer travels 1,000 kilometres
in the course of his or her employment and receives an allowance
of say 25 cents per kilometre, which by reason of section
6(1)(b) is not included in income, he or she cannot then
claim that allowance to be insufficient in respect of the same
travel and that he or she should be entitled to claim, as a
deduction, further expenses in relation to that travel, unless it
falls into the ‘woefully inadequate’ category
referred to in the Mina case (above). The exception in
paragraph 8(1)(h.1)(iii) is clearly a bar to this.
[23] However, the argument advanced by the Minister that such
an allowance acts as a bar to a claim for expenses relating to
different travel not covered by that allowance, could lead to
absurd results, which clearly would not be within the
contemplation of the legislation and is not supported by the case
law on the issue. Say for example, the taxpayer was required as
part of his or her employment to drive his own vehicle some
40,000 kilometres in a year and for whatever reason was only
reimbursed by the employer for 100 of those 40,000 kilometres.
Could it be said, that allowance should act as a bar to claiming
as an expense against the employment income, the cost of
travelling the remaining 39,900 kilometres. That would be an
absurd result, which should be avoided. The allowance might be
perfectly reasonable as it relates to the travel for which it was
paid but it should have no bearing upon the travel for which it
was not paid.
[24] The same principle was dealt with in the Rozen
case (above), that if a taxpayer is required to use his vehicle
for employment purposes, both within a city and outside the city,
but is only reimbursed for travel outside the city by way of a
non taxable allowance under subparagraph 6(1)(b)(vii.1),
that taxpayer is still entitled to claim his or her expenses
against employment income, for the travel within the city, as
long as it meets all the other relevant criteria.
[25] In my view, the section makes complete and adequate sense
if given the interpretation that if a taxpayer receives an
allowance for motor vehicle expenses which, by reason of
paragraph 6(1)(b), is not included in his or her taxable
income, he or she can claim no further amounts in respect of
motor vehicle expenses expended with respect to that same travel
(unless "woefully inadequate" as per the Mina
case above), even if the actual expenses exceeded the allowance
for that travel. However, if he or she incurs expenses for
travel, other than that covered by the allowance, done in the
performance of duties under the contract of employment, express
or implied, then the existence of that allowance is not a bar to
a claim to set off those other expenses against employment income
pursuant to subparagraphs 8(1)(h.1)(i) and (ii). In short,
the exception under subparagraph 8(1)(h.1)(iii) relates only
to the expenses of travel for which the allowance was paid and is
not a bar to a claim for expenses relating to travel for which it
was not paid.
[26] I am fortified in this approach by the words of Strayer
J. in the Rozen case (above) where at page 52 he says:
" The fact that there was some reimbursement based on a
mileage rate fixed by the employer, with respect to out-of-town
use does not prevent the taxpayer’s automobile expenses
from being within subparagraph 8(1)(h.1)(ii): see Faubert v.
M.N.R., [1979] C.T.C. 2723: 79 D.T.C. 641 (T.R.B.);
Cival v. The Queen, [1981] C.T.C. 392 at 399; 81
D.T.C. 5311 at 5316-17 (F.C.T.D.) (reversed on other grounds by
the Federal Court of Appeal [1983] C.T.C. 153; 83 D.T.C.
5168)...."
A little later in the same judgment he said:
"I believe also that subparagraph 8(1)(h)(ii) can be
interpreted somewhat more broadly. Even if the plaintiff were not
specifically required to use his car, he was required to pay his
travelling expenses incurred by him in the performance of his
duties and this would also bring him within the subparagraph. The
evidence was clear that to do his job the plaintiff had to go to
the offices of a variety of clients. No provision was made for
reimbursement for transportation for getting to those offices
except with respect to those outside of Vancouver where at least
car mileage was allowed. If an employee is obliged to travel to
do his work and his employer is not prepared to pay the exact and
total cost of transportation, then he must come within the
requirements of subparagraph 8(1)(h)(ii). This question was not
under consideration before the Federal Court of Appeal in
Cival. On this basis, it is not really very important
whether the plaintiff here was obliged to use his car or not; he
was obliged to get himself and his papers to the firm's
clients and there was no arrangement, at least in the
circumstances relevant to this case, whereby the employer
undertook to pay the total transportation costs."
[27] The Rozen case was cited with approval by Jerome
A.C.J. in the Mina case (above), when he said at page
385:
"...I endorse Mr Justice Strayer’s remarks in
Rozen that where an employee is obliged to travel to do
his work, if his employer is not prepared to pay the exact and
total costs of transportation, then he must come within the
requirements of subparagraph 8(1)(h)(ii). It remains to be seen
whether the reasonable costs in this situation were covered by
the mileage allowance. If not, they are properly deductible under
paragraph 8(1)(h)."
[28] Whilst it is clear that in the normal case a taxpayer may
not deduct as an expense against his or her employment income,
the costs incurred for travel between home and employer’s
place of business, albeit that he or she might take work home on
a more than infrequent basis, as this is generally considered to
be a personal expense, the question that arises in this case is
whether the travel between the residence and the first and last
schools at which she attended were expenses she could claim under
paragraph 8(1)(h.1). In order to do so, the Appellant must
show:
a) that she was ordinarily required to carry on her duties of
employment away from the employer’s place of business or in
different places
b) that she was required to pay motor vehicle expenses under
her contract of employment and
c) that they were incurred in the performance of the duties of
the employment.
[29] It is clear from the Rozen and Mina cases
(above), that it may be an actual or implied term of the
contract. If it is an expectation of the employer that the
employee will use personal transportation or if it is clear that
the employee could not do the job properly without the use of his
or her car, then it is an implied term of the contract.
[30] Whether or not the travel in question was done in the
performance of the duties of the employment seems to me to be a
question of fact.
[31] In considering that question of fact, it seems relevant
to consider the decision of the Federal Court of Appeal in
Hoedel (above). This case was also considered favourably
by Jerome A.C.J. in the Mina case (above), when he
summarized it as follows:
"...the taxpayer was a member of the Canine Division of
the Regina City Police Department. He was required by his
employment to take his dog with him when off-duty and he
attempted to deduct the costs of transporting the dog to and from
his home. He was paid an allowance by the Department for expenses
connected with looking after the dog, but this did not cover his
transportation costs. The Court allowed the deduction, although
they found that non-compliance with the condition of keeping the
dog with him at all times would not necessarily lead to
disciplinary action. The fact that it would result in an
unfavourable work performance evaluation was enough to make it a
duty of his employment, so expenses of transporting the dog were
found to be covered by paragraph 8(1)(h)."
I believe that this is an important case when I come to
consider the effect, if any, that the transportation by the
Appellant of the voluminous papers and materials in the trunk of
her car, on a permanent basis, had on the situation.
Conclusion
[32] First, I am not of the view that a reasonable allowance
paid by an employer to an employee for travel in the course of
his or her employment is an automatic bar to a claim by that
employee to deduct from employment income, automobile expenses
incurred in the course of the employment, required under the
contract of employment in actual or implied terms, if those
expenses relate to travel other than that covered by the
allowance. If nothing else, the Court might hold that the
allowance was not reasonable with respect to the latter travel.
However, I do not think it is necessary to take that tack, as it
seems to me to be clear from the language of the Act that
an allowance (if reasonable) is only a bar to any further claim
with respect to the same travel for which it is paid. If
Parliament had intended otherwise it could have said so quite
clearly. In my view, with the words it used, it did not do so.
Even this bar is subject to the ‘woefully inadequate’
doctrine expressed in Mina (above). The position of the
Minister where he argues otherwise is incorrect in law. The fact
that the Appellant received an allowance from the C.B.E. for
inter school travel is not, per se, a bar to her claim for
expenses incurred for other travel, provided it meets all the
other relevant criteria.
[33] Secondly, it is clear that the Appellant was ordinarily
required to carry on her duties of employment away from the
employer’s place of business, which I would hold to be the
administrative office at Parkdale, or in different places.
[34] Thirdly, I am of the view that, if not a specific term of
her contract of employment with the school board, it was
certainly an implied term that the Appellant was required to pay
automobile expenses incurred in the performance of her duties of
employment. It is clear to me from the evidence of the Appellant,
supported as it was by the letter from the official at the school
board, that she was expected to have a car available to get
herself from school to school, along with all the materials she
needed to do her professional work. She was not expected to go to
her administrative office each day. To have done so would have
been a complete waste of time and effort. Moreover, it would have
impeded her work, meeting with people before and after regular
school hours.
[35] To the extent that the Appellant had to travel to or from
schools which were further away than the administrative office at
Parkdale, it would seem manifestly unfair that she should not be
able to claim expenses for the additional distance either from
the school board as a non taxable allowance under
paragraph 6(1)(b)(vii.1) or as a claim against her
employment income under paragraph 8)(1)(h.1). These were clearly
expenses incurred in the performance of her duties and simply
because she did not attend at the administrative office first
should not mean that she is not entitled to claim them.
[36] If the Appellant had simply to get herself between
her residence and the various schools where she started and
finished her days, it would seem to me that her travel expenses
would properly be limited to the cost of such travel less the
amount that she would have expended to travel on a daily basis to
and from the administrative centre. In the normal course of
events, her cost of travel between her residence and the
administrative centre would be considered personal in nature. It
is only the excess that she should be able to claim. Thus, if for
example in a day she travelled 20 kilometres to the first school,
30 kilometres throughout the day up to the last school and 15
kilometres from the last school to home, and if the distance
between her residence and the administrative centre was say 10
kilometres, she would in this scenario be entitled to claim the
total of the 20 kilometres and the 15 kilometres, namely 35
kilometres (the total between the first and last schools and her
residence) minus the 20 kilometres that she would normally have
travelled going to work if she had gone first to the
administrative centre. Thus, she would be able to claim the
expenses for 15 kilometres for that day against her employment
income and of course she would be reimbursed by the employer for
the 30 kilometers that she travelled between the various
schools.
[37] However, it seems to me that there is a further wrinkle
in this particular case as it relates to the requirement to
transport the voluminous amount of paper and materials around to
her various work places requiring the exclusive use of the trunk
of her car on a permanent basis throughout the school year. In my
opinion, she had no alternative as part of her duties but to
transport these back and forth between her residence and the
first and last schools she visited on a daily basis. I have no
hesitation in finding that it was an implied term of the contract
not only that she had to have a car available to transport
herself around, but also that she had to have all these materials
on hand in order to carry out her duties. There was no other
practical way in which she could do this but to take them back
and forth to her residence. The situation seems to me to be no
different in principle from that in the Hoedel case
(above), involving the police officer who had to transport his
police dog back and forth to his residence. As in that case,
the Appellant was required to keep the materials in question with
her at all times and to have them available at each of her
appointments, including the first of the day. The evidence was
clear that she could transport them in no other way, nor could
she physically load and unload them on a daily basis.
[38] I find therefore that the cost of transportation by
automobile of the materials back and forth at the start and close
of each day, was a necessary expense incurred in the performance
of her duties. This was an ongoing requirement and expense. Thus
in my opinion she should not be required to reduce the amount of
her claim for expenses by the equivalent amount of the cost of
transportation to and from the administrative centre as would
have been the case without this additional responsibility.
[39] For these reasons, I find that the travel expenses
incurred by the Appellant between her residence and the first and
last schools that she visited on a daily basis were not personal
as claimed by the Minister. She was required under the terms of
her contract of employment to pay motor vehicle expenses for this
travel, which were incurred in the performance of the duties of
her employment and they were expended by her for travelling in
the course of her employment. They did not fall into the
exception specified in paragraph 8(1)(h.1)(iii) of the
Act. They were in my view, expenses which, she was
entitled to claim against her employment income pursuant to
paragraph 8(1)(h.1) of the Act.
[40] In the result, the appeal is allowed and the reassessment
is vacated.
Signed at Calgary, Alberta, this 23rd day of November
1998.
"M.H. Porter"
D.J.T.C.C.