Citation: 2011 TCC 510
Date: 20111116
Docket: 2010-1944(IT)I
BETWEEN:
DENIS PARÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1]
These are appeals
concerning the 2004, 2005 and 2006 taxation years. On October 5, 2006, the Minister of National Revenue (the
Minister) issued reassessments and added $22,500 to the appellant’s income as employment
benefits for the 2004 taxation year. On June 29, 2007, the Minister added $26,000 to the
appellant’s income for the same reason, but for the 2005 taxation year.
[2]
On May 29, 2008, the
appellant filed an adjustment request for the 2004, 2005 and 2006 taxation
years in order for the Minister to allow automobile expenses of $9,917, $13,225
and $15,995 respectively.
[3]
On November 10, 2008, the
Minister issued notices of reassessment; he added $17,000 to the appellant’s
income for the 2006 taxation year as employment
benefits and allowed
deductions of $7,316, $11,504 and $8,962 respectively as employment‑related
expenses for the 2004, 2005 and 2006 taxation years.
[4]
The late filing penalties
of $474.23 and $118.72 were imposed on the appellant for his 2004 and 2005 taxation
years respectively. The reassessments were confirmed by the Minister on March
27, 2010.
[5]
At the beginning of the
hearing, the appellant informed the Court that he would not be submitting
evidence. He presented his evidence during the cross‑examination of the
auditor assigned to his file and submitted into evidence the respondent’s
documents in support of his appeal.
[6]
According to the Reply
to the Notice of Appeal, the appellant was, over the course of the years in
question, the sole shareholder of the company Les consultants de la Vallée des
Forts inc. (the company), a civil engineering consulting business. The
appellant was also an employee of the company and personally owned three vehicles,
a Jeep Wrangler, a GMC pickup truck and a Toyota FJ Cruiser.
[7]
The company was audited
as the employer and during that audit, no expense record was available. With
his adjustment request, the appellant submitted documents as well as the
“Statement of Employment Expenses” form for each year in question. The total
distance traveled by the three vehicles was 132,310 kilometres for the periods
in question.
[8]
According to the
documents submitted, the company had paid the appellant a fixed allowance of
$22,500 in 2004, $26,000 in 2005 and $22,000 in 2006, but the notice of assessment
indicates $17,000 in error. These allowances obviously do not appear in the
appellant’s income tax returns for the three years in question, but the
Minister found them unreasonable, resulting in unreported employment income.
[9]
The Minister found that,
according to the insurance policies, only the Jeep Wrangler was being used for
business purposes. According to those policies, no employee was listed as an
occasional driver for the appellant’s vehicles. The Minister therefore disallowed
the expenses claimed for the GMC and Toyota vehicles and allowed all of the
expenses claimed for the Jeep, that is, $7,316, $11,504 and $8,962 respectively
for the three taxation years.
[10]
The Reply to the Notice
of Appeal and the documentary evidence reveal that the appellant’s income tax
return for the 2004 taxation year was filed on May 4, 2006, whereas
it should have been filed no later than April 30, 2005, and that the income tax
return for the 2005 taxation year was filed on May 18, 2006, whereas it should
have been filed no later than April 30, 2006.
[11]
The auditor of the
appellant’s file provided a summary of the adjustments made to the appellant’s
income tax returns. The auditor allocated amounts as allowances in accordance
with subparagraph 6(1)(b)(x) of the Income Tax Act (the Act).
Section 6 of the Act identifies the amounts that a taxpayer must include as income
from employment. Among the inclusions in a taxpayer’s income from employment
are the amounts received by the taxpayer in the year as an allowance for personal
or living expenses or as an allowance for any other purpose, except:
v) reasonable allowances for travel expenses
received by an employee from the employee’s employer in respect of a period
when the employee was employed in connection with the selling of property or
negotiating of contracts for the employee’s employer.
[12]
Therefore, the
allowances must be reasonable for them not to be included in income. In the
case of motor vehicle expenses, the use of the vehicle must only be assessed
according to the number of kilometres driven in the course of employment. If
this is not the case, the allowance is deemed unreasonable. I cite the
following provision:
. . . and for the purposes of subparagraphs 6(1)(b)(v), 6(1)(b)(vi)
and 6(1)(b)(vii.1), an allowance received in a taxation year by a taxpayer for
the use of a motor vehicle in connection with or in the course of the
taxpayer’s office or employment shall be deemed not to be a reasonable
allowance:
(x) where the measurement of the use of the
vehicle for the purpose of the allowance is not based solely on the number of
kilometres for which the vehicle is used in connection with or in the course of
the office or employment, or, . . .
[13]
This is exactly what
happened in this case. The company paid the appellant round and fixed amounts
almost every month during the three taxation years in question. It is
impossible to believe that the appellant drove an exact number of kilometres
each month. Furthermore, the documentation he provided to the auditor at the
various stages of the audit and of the objection demonstrates that the monthly kilometrage
varied and that the kilometres stated in Exhibit A-1, at tabs 13, 15 and 17, were
different from those in Exhibit A-2, at tabs 2 and 4. Therefore, there was
evidently a difference in the reconstitution of the appellant’s kilometrage. It
is also important to note that the appellant’s comments to the auditor on this issue
at the beginning of her audit were that he had no evidence and that he could
not prove his kilometrage. The appellant also did not submit evidence at the
hearing.
[14]
The auditor therefore
reviewed the expenses attributed to the use of the appellant’s personal
vehicles. However, expenses were allowed for one vehicle only because that
vehicle was the only one insured for commercial use. Furthermore, the insurance
policies listed the appellant as the primary driver of each vehicle and none of
the names of the company’s employees were listed.
[15]
The appellant did not
testify. However, I note that he mentioned to the auditor that some of the
company’s employees had used his personal vehicles. None of the employees of
the company in question were called as witnesses on their use of the
appellant’s vehicles and I deduce from that that their testimony would not have
been favourable to the appellant.
[16]
The auditor found the
appellant’s submissions on the issues relevant to his case unreliable, and I make
the same finding. Because he chose to not submit evidence, the appellant did
not satisfy the burden of proof and the documentation submitted in the record
is insufficient to warrant the Court’s intervention. In my opinion, the late
filing penalties are justified in this case.
[17]
The appeals are
dismissed.
Signed at Ottawa, Canada, this 16th day of November
2011.
“François Angers”
Translation
certified true
on this 5th day of
December 2011
Janine Anderson,
Translator
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