Date: 20020125
Docket:
1999-1110-IT-G
BETWEEN:
DENIS
RIOUX,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasonsfor
Judgment
Tardif,
J.T.C.C.
[1]
This is an appeal concerning the 1996 taxation year.
[2]
The issue is whether the appellant received benefits amounting to
$12,820 resulting from the personal use of an automobile put at
his disposal by the company for which he worked.
[3]
In 1996, the appellant was employed by Usinage de Rimouski Inc.
as its chief executive officer. As president of that same
company, he ran the business and assumed all responsibilities
pertaining to day-to-day affairs and to the planning of all the
company's orientations.
[4]
The business specialized in metal machining and the manufacture
of various parts. The plant was very dynamic and had
sophisticated high-tech equipment. Business flourished to the
point where the plant operated on two shifts, that is, with two
work crews.
[5]
The appellant was the directing mind of the business. In addition
to administration, he performed a number of manual tasks,
including certain fine tuning and adjustment operations, which
often required him to go to work outside regular day schedules.
In other words, the appellant was concerned with ensuring that
the very high-precision work done at the plant was performed to
customers' satisfaction, that being the sole guarantee of the
success and development of the business.
[6]
In 1996, Usinage de Rimouski Inc. put a vehicle, a Jeep Grand
Cherokee, at the appellant's disposal, and that vehicle
travelled 19,255 kilometres that year.
[7]
The appellant contended that the Jeep Grand Cherokee was put at
his disposal for the purpose of carrying out the duties and
responsibilities he had taken on for the company solely with
respect to administration and to the management of the
performance of manual work.
[8]
The appellant stated that the company operated out of two
separate places of business 6.6 kilometres apart. The plant
was located in the Rimouski industrial park. This was where all
the manufacturing, processing and machining work was performed.
It was a very busy, dusty and noisy place. Performing
administrative and clerical work there was most difficult,
particularly since it was for all practical purposes impossible
to work there effectively and maintain confidentiality; there was
no space suited for offices for the performance of clerical
work.
[9]
Thus, for the reasons stated above, a second place of business
was set up in the appellant's private residence where the
clerical work and administration were mainly done.
[10]
The company's accountant repeated the appellant's
arguments in explaining and justifying the relevance of the place
of business in the private residence. She stated that the
accounting and clerical work were done there by the
appellant's wife, who, for that purpose, had all the
conventional and usual equipment. She also mentioned that the
Minister of National Revenue (the "Minister") had, as a
result of the audit, accepted, after negotiation, that there were
in fact two places of business.
[11]
The appellant testified that he regularly had to travel between
the two places of business at all hours of the day and even of
the night and that he also often had to go to the plant on
weekends to deal with emergencies and to do certain
checks.
[12]
According to the appellant, all the travel done between his
private residence and the plant in the Rimouski industrial park
had been done solely in the performance of his duties and was in
no way private in character. He thus concluded that he had
derived no benefit from the use of the Jeep Grand Cherokee even
when that use was for his daily trips in the morning, at noon and
in the evening.
[13]
The Minister for his part does not dispute the kilometrage
travelled for emergencies or each time the appellant's
presence was required outside the regular daily schedule.
However, the Minister claims that the 6,000 kilometres of
daily travel from the residence to the plant located in the
Rimouski industrial park had nothing to do with his employment
with the company, but represented essentially private and
personal transportation comparable to that which any person must
do in order to go to work every day.
[14]
As the appellant paid the company nothing for the use of the
Grand Cherokee, the Minister concluded that he had enjoyed
benefits constituting income from his employment, which had to be
included in his personal income tax return.
[15]
For 1996, the regular daily trips between the personal residence
and the plant in the industrial park totalled
6,000 kilometres. That is the figure on which was based the
calculation of the amount the respondent included in the
appellant's taxable income as a benefit from the use of a
vehicle.
[16]
It is not impossible that the appellant performed some minor work
at the administrative centre located in his residence. In this
regard, the evidence mainly showed that he brought there the
documents his spouse needed in order to carry out her
administrative and clerical responsibilities.
[17]
Place of business status was given to the personal residence
following negotiations subsequent to the audit of the file. Did
that acknowledgement have the effect of effacing the private
nature of the family residence? I do not believe so. Those
premises continued to be a residence, with all the attributes
thereof.
[18]
Is the fact of having transported certain documents having to do
with administrative follow-up sufficient to turn personal
transportation into business transportation?
[19]
The appellant's daily trip from his residence to the plant
was something essentially personal. That kilometrage is not
different from the kilometres travelled by any person who
occasionally takes work home with him.
[20]
This situation has become all the more frequent and widespread
since the advent of portable computers, on which it is possible,
in some instances, to transport all the files used in connection
with one's duties. In the instant case, the weight of
evidence suggests that the appellant's duties and tasks were
performed mainly at the plant in the Rimouski industrial
park.
[21]
The office was fitted up in the residence for reasons of economy,
efficiency and necessity. The work done there was done chiefly by
the appellant's spouse. The fact that the appellant worked
there sporadically, as circumstances dictated, and that he
brought various pieces of paperwork there is definitely not a
sufficient basis for concluding that his presence there was
essential to the point that personal transportation became
business transportation.
[22]
On the weight of evidence, the appellant's place of work was
the place of business located in the industrial park more than
six kilometres from his residence. Like any employee, the
appellant had to travel there to perform his work.
[23]
In accordance with the judgment in Cumming v. M.N.R.,
67 DTC 5312, the respondent did not question the number of
kilometres travelled between the residence and the plant for
emergencies or exceptional trips as such travel was done outside
normal and usual schedules. There is therefore no reason to
analyze this aspect, which is not in issue.
[24]
I repeat that the dispute essentially concerns the
appellant's daily travel from his residence to the plant,
five days a week.
[25]
The appellant maintained that in 1996 he had made very limited
use, for personal purposes, of the Jeep Grand Cherokee owned by
his employer, evaluating such use at less than 10 percent.
To show that that use was quite limited, the appellant resorted
to a log describing the use of the vehicle; he also said that he
had preferred to drive the other vehicle, a Passat.
[26]
These were very unconvincing arguments, particularly since I find
it rather odd that the record was found hours before the
trial.
[27]
As to the appellant's preference for driving the Passat, I do
not think it useful to comment thereon.
[28]
The evaluation of the benefit represented by the use for personal
purposes need not be dealt with to dispose of this appeal since
that is not a matter in dispute. The only question is whether the
regular daily travel by the appellant from his residence to the
plant constituted personal use or whether it was rather
professional or business use. In other words, it falls to be
decided whether the 6,000 kilometres travelled by the
appellant in the Jeep Grand Cherokee in 1996 was travel for
private or personal purposes or travel forming part of his office
or employment with the company he ran.
[29]
In answering this question, I think it useful to consider a
passage from the judgment by Robertson J.A. of the Federal
Court of Appeal in Canada v. Adams, [1998] F.C.J.
No. 477 (Q.L.). Robertson J.A. wrote as follows:
17 In
summary, the broad wording used in both linguistic versions of
paragraph 6(1)(e), coupled with its legislative history,
support the Minister's position. In my respectful view,
unrestricted or exclusive use of an employer's automobile is
not a condition precedent to the imposition of a standby charge.
Nor is actual usage required, whether it be for personal or
business purposes. What is required is that an employer have made
an automobile available to, or at the disposition of, an employee
and, correlatively, that he or she have had a right to use it.
This is only logical since subsection 6(2) deems an employee
to have made personal use of an employer's automobile,
irrespective of whether this is so. . . . That being said the
harsh consequences which flow from a deeming provision are
tempered by the "minimal personal use" exception
grafted on to subsection 6(2) in response to this
Court's decision in Harman. This is the point in time where
actual usage and the purposes for which the automobile was made
available become relevant considerations.
[30]
The Jeep Grand Cherokee was at the appellant's disposal for
his personal use; this is quite clear from the following excerpts
from his testimony:
Yvan Bujold
questioning Denis Rioux:
[TRANSLATION]
Q.
In 1996, could you tell the Court what use you made of the Grand
Cherokee for personal purposes?
A.
We used the Grand Cherokee as little as possible
to . . . but I will tell you that, if we were
going to go down to Saint-Simon to my parents' place in
the middle of the winter, on New Year's Eve, we took the
Grand Cherokee. I admit that, and . . .
Q.
To Saint-Simon; it was your parents who were
there . . .
A.
Yes.
Q.
. . . Saint-Simon. How far is that from
Rimouski?
A.
It's 50 kilometres away.
Q.
O.K.
A.
That may have happened a few times during the year.
Q.
O.K.
A.
Maybe about five times.
Q.
You say you used the Grand Cherokee for personal purposes to go
see your parents, who live in Saint-Simon, which is located
some 50 kilometres from Rimouski?
A.
Yes.
Q.
Five times during the winter?
A.
Yes.
. . .
Q.
And apart from those trips to Saint-Simon to visit your
parents five or so times in winter, what other personal use did
you make of the Grand Cherokee?
A.
My brother and sister-in-law live in Bic, and sometimes we often
took a trip to Bic on Sundays, but again, as I say, it was a few
times during the year because . . .
Q.
And how many times might you have travelled to Bic in the Grand
Cherokee? How far is Bic from Rimouski?
A.
About 10 kilometres, and perhaps seven, eight,
ten times a year, mostly in winter.
[31]
If the matter of the limited nature of the use had been in
dispute, it would have been useful to assess the quality of the
record or log discovered by the appellant's spouse. That
matter is, however, not at all in issue.
[32]
According to the appellant, the round trips between the two
places of business were considered necessary and essential for
the performance of his duties; he took no account of the fact
that the place of business set up in the family residence was
first and foremost his personal residence. I do not believe that
the creation of a space for business or professional purposes is
sufficient to completely obscure the primary purpose of the
premises, which moreover remain a private residence.
[33]
With the advent of computers and the possibility of having
gigantic volumes of data in one's possession in a very small
space, virtually all personal residences could be transformed
into places of business.
[34]
While that is theoretically possible, and indeed acceptable, I do
not believe that it is sufficient to override the primary
purpose.
[35]
In support of his arguments, the appellant also referred to
Cumming, supra.
[36]
The judgment in Cumming, supra, is based on very
different facts in that the concerned party could not perform his
work anywhere other than at the office located in his residence.
This is apparent from the following passages at pages 5318
and 5319:
. . .
It was, however, admitted in the course of argument that the
appellant conducted part of his practice at his home, that the
nature of the business was such that the bookkeeping and
financial activities had to be carried on at a location different
from that where the patients were treated and that there were no
office facilities available to him at the hospital where he might
have carried out this part of his business.
While I think
it might be said in a particular sense that the appellant
exercised his profession at the hospital, as I see it, he had no
base of his practice there. . . .
In my opinion
the base of the appellant's practice, if there was any one
place that could be called its base, was his home.
. . .
It seems to
me that if the appellant had not found it convenient to carry out
at his home that part of the work of his practice in fact done
there and had maintained an office for the purpose, whether near
to or at some distance from the hospital, there could have been
little doubt that such office was the base of his practice and
that both the reasonable expense of maintaining it and the
expense of travelling between it and the hospital would have been
expense of his business. The result is, I think, the same where
the office, such as it was, was at his home and the work was done
there. In the present case it seems to me to be the only single
place which could be regarded as the base from which his
professional operation was carried on.
[37]
The benefit relating to the use of an automobile is specifically
set out in paragraph 6(1)(e) of the Income Tax
Act (the "Act"), which reads as
follows:
(e)
Standby charge for automobile —
where the taxpayer's employer or a person related to the
employer made an automobile available to the taxpayer, or to a
person related to the taxpayer, in the year, the amount, if any,
by which
(i) an
amount that is a reasonable standby charge for the automobile for
the total number of days in the year during which it was made so
available
exceeds
(ii) the
total of all amounts, each of which is an amount (other than an
expense related to the operation of the automobile) paid in the
year to the employer or the person related to the employer by the
taxpayer or the person related to the taxpayer for the use of the
automobile.
[38]
As to the determination of what constitutes a reasonable standby
charge for an automobile, and for the purpose of computing the
benefit, reference must be made to subsection 6(2) and
paragraphs 6(1)(k) and (l) of the Act.
Subsection 6(2) reads as follows:
(2) Reasonable
standby charge. For the
purposes of paragraph (1)(e), a reasonable standby
charge for an automobile for the total number of days (in this
subsection referred to as the "total available days")
in a taxation year during which the automobile is made available
to a taxpayer or to a person related to the taxpayer by the
employer of the taxpayer or by a person related to the employer
(both of whom are in this subsection referred to as the
"employer") shall be deemed to be the amount determined
by the formula
A
B
|
×
[(2 % × (C × D) +
|
2
3
|
×
(E - F)]
|
where
A
is the lesser of
(a) the
total number of kilometres that the automobile is driven
(otherwise than in connection with or in the course of the
taxpayer's office or employment) during the total available
days, and
(b) the
value determined for B for the year under this subsection in
respect of the standby charge for the automobile during the total
available days,
except that
the amount determined under paragraph (a) shall be
deemed to be equal to the amount determined under
paragraph (b) unless
(c) the
taxpayer is required by the employer to use the automobile in
connection with or in the course of the office or employment,
and
(d) all
or substantially all of the distance travelled by the automobile
in the total available days is in connection with or in the
course of the office or employment;
B
is the product obtained when 1,000 is multiplied by the quotient
obtained by dividing the total available days by 30 and, if the
quotient so obtained is not a whole number and exceeds one, by
rounding it to the nearest whole number or, where that quotient
is equidistant from two consecutive whole numbers, by rounding it
to the lower of those two numbers;
C
is the cost of the automobile to the employer where the employer
owns the vehicle at any time in the year;
D
is the number obtained by dividing such of the total available
days as are days when the employer owns the automobile by 30 and,
if the quotient so obtained is not a whole number and exceeds
one, by rounding it to the nearest whole number or, where that
quotient is equidistant from two consecutive whole numbers, by
rounding it to the lower of those two numbers;
. . .
Paragraphs 6(1)(
k) and (l) read as follows:
(k)
Automobile operating expense benefit —
where
(i) an
amount is determined under subparagraph (e)(i) in
respect of an automobile in computing the taxpayer's income
for the year,
(ii) amounts
related to the operation (otherwise than in connection with or in
the course of the taxpayer's office or employment) of the
automobile for the period or periods in the year during which the
automobile was made available to the taxpayer or a person related
to the taxpayer are paid or payable by the taxpayer's
employer or a person related to the taxpayer's employer (each
of whom is in this paragraph referred to as the
"payor"), and
(iii) the
total of the amounts so paid or payable is not paid in the year
or within 45 days after the end of the year to the payor by
the taxpayer or by the person related to the taxpayer,
the amount in
respect of the operation of the automobile determined by the
formula
A -
B
where
A
is
(iv)
where the automobile is used primarily in the performance of the
duties of the taxpayer's office or employment during the
period or periods referred to in subparagraph (ii) and the
taxpayer notifies the employer in writing before the end of the
year of the taxpayer's intention to have this subparagraph
apply, 1/2 of the amount determined under
subparagraph (e)(i) in respect of the automobile in
computing the taxpayer's income for the year, and
(v)
in any other case, the amount equal to the product obtained when
the amount prescribed for the year is multiplied by the total
number of kilometres that the automobile is driven (otherwise
than in connection with or in the course of the taxpayer's
office or employment) during the period or periods referred to in
subparagraph (ii), and
B
is the total of all amounts in respect of the operation of the
automobile in the year paid in the year or within 45 days
after the end of the year to the payor by the taxpayer or by the
person related to the taxpayer; and
(l) Idem
— the
value of a benefit in respect of the operation of an automobile
(other than a benefit to which paragraph (k) applies
or would apply but for subparagraph (k)(iii))
received or enjoyed by the taxpayer in the year in respect of, in
the course of or because of, the taxpayer's office or
employment.
[39]
The appellant argues that the personal use of the vehicle put at
his disposal by the company was so limited that the Minister
should not consider it.
[40]
In coming to this conclusion, the appellant assumes that his
daily travel between his residence and the plant in the
industrial park was not personal, but was necessary to the
performance of his duties.
[41]
That daily travel totalling 6,000 kilometres annually is the
sole basis of the calculation of the benefit, since the Minister
conceded that the kilometrage travelled in response to emergency
calls or any other trip made outside the regular schedule was
part of the performance of his duties or was for
non-personal purposes.
[42]
However, the evidence showed beyond a doubt that the
appellant's place of work was mainly the plant, although he
might perform certain duties at the office set up in his
residence. His primary duty was to run the plant and, for that,
his constant presence was required there.
[43]
To conclude that none of the travel between the two places of
business was personal in nature would be to completely disregard
the fact that the place of business at the residence was first
and foremost the appellant's personal residence.
[44]
It is possible that some trips were exclusively related to the
appellant's employment; indeed, they were determined to have
been so related, since the calculation of the benefit in issue
was based solely on the daily trips.
[45]
It is not enough that one accommodate one's employer by
running a few errands on one's daily travel from home to
one's place of work and by devoting, while at home, a certain
amount of mental energy to preparing and planning one's work
to justify a conclusion that such travel is for business
purposes; if that were the case, a very large number of taxpayers
could claim that there is nothing personal about their own daily
travel between home and work.
[46]
I think it useful to reproduce a passage from the decision by
Mr. M. J. Bonner of the Tax Review Board in
Verner v. M.N.R., 83 DTC 289, at
page 291:
I
can find nothing in the evidence which would support a conclusion
that the Appellant, when at home, was there in order to carry on
the operations of the business. It follows that the cost of
driving between home and work is not deductible. A distinction is
to be drawn between driving in the course of carrying on a
business and driving from home to a place where the business
operations commence.
[47]
I find on the evidence adduced that what is involved in the case
at bar is kilometres travelled for personal purposes in the Jeep
Grand Cherokee put at the appellant's disposal by the company
for which he worked. Consequently, that travel constituted a
benefit that must be included in the appellant's personal
income. As the method used and the calculations were not
challenged, there is no reason to intervene with respect to
them.
[48]
The appeal is therefore dismissed, with costs.
Signed at Ottawa, Canada, this
25th day of January 2002.
"Alain
Tardif"
J.T.C.C.
Translation certified
true on this 16th day of July 2002.
[OFFICIAL ENGLISH
TRANSLATION]
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
1999-1110(IT)G
BETWEEN:
DENIS RIOUX,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on August 9, 2001, at
Rimouski, Quebec, by
the Honourable Judge Alain Tardif
Appearances
Counsel for the
Appellant:
Yvan Bujold
Counsel for the
Respondent:
Annick Provencher
JUDGMENT
The appeal from the assessment made under the Income Tax
Act for the 1996 taxation year is dismissed, with costs, in
accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 25th day of January
2002.
J.T.C.C.
Translation certified
true
on this 16th day of July
2002.
Erich Klein, Revisor
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