[OFFICIAL ENGLISH TRANSLATION]
Date: 20020118
Docket: 1999-3710(IT)I
BETWEEN:
ALAIN BEAULIEU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] The appeals are for the 1995, 1996
and 1997 taxation years. The notices of reassessment resulted
from the addition of $9,820, $9,000 and $8,100 in employment
benefits to the appellant's income for those years.
[2] In issuing the notices of
reassessment that were confirmed on May 27, 1999, the
Minister of National Revenue ("the Minister") assumed
the following facts:
[TRANSLATION]
(a) the employer,
Saint-Romuald Construction inc., did not consider the
appellant to be an employee governed by the construction decree
during the years at issue;
(b) during the years
at issue, the appellant worked for Saint-Romuald
Construction inc. primarily as a civil engineering technician at
work sites; he also prepared estimates at the head office for the
purpose of making bids and assessing the cost of work;
(c) during the years
at issue, the appellant's residential address was in Estrie
while the employer's head office was in a suburb of
Québec;
(d) during the years
at issue, the appellant received $300 a week from
Saint-Romuald Construction inc. as a board and lodging
allowance regardless of whether he performed his duties at the
work sites or the head office;
(e) during the years
at issue, only the board and lodging allowance paid to the
appellant while he was working at the head office of
Saint-Romuald Construction inc. was added to his income for
the following reasons:
(i) the
appellant's duties at the head office of Saint-Romuald
Construction inc. were not of a temporary nature but were part of
that company's normal activities;
(ii) the head office
of Saint-Romuald Construction inc. is not a work site or a
special work site;
(iii) during each of the
years at issue, the appellant worked at the head office of
Saint-Romuald Construction inc. for periods of close to 30
weeks.
[3] The issue is whether the amounts
received by the appellant in 1995, 1996 and 1997, that is,
$9,820, $9,000 and $8,100, were taxable income on the basis that
they were employment benefits.
[4] The appellant explained that he
and his family had their home in
Notre-Dame-Des-Bois, a municipality more than
100 kilometres away from Québec.
[5] The appellant, a civil engineering
technician, explained that he had to leave that area in 1995,
1996 and 1997 to obtain a job corresponding to his experience and
knowledge. He said that he was involved in carrying out many work
projects, ranging from road construction to the management of
wastewater and aqueduct water.
[6] His work also involved preparing
bids to obtain contracts. He explained that the company that had
hired him generally had to submit several bids for each contract
it obtained because of the aggressiveness of the competition.
[7] To prepare the bids, he had to go
to the place where the work was to be performed; he analyzed the
soil composition, verified the extent of the constraints of all
kinds and identified the various companies that could provide the
equipment and the materials, such as sand, gravel and chippings.
He assessed the scope of the work on the basis of the place and
the region where the work was to be performed, while taking
account of the advantages and constraints.
[8] All of the information gathered
was then put through a computer program that did the appropriate
calculations and provided the final data needed to prepare the
bid and submit it to the interested parties.
[9] The appellant explained that he
worked primarily outside the office, directly on the work sites;
he was at the office very occasionally. In answer to a question
by the Court, he estimated that about 10 percent of his time was
spent at the office.
[10] The appellant did not have an assigned
office; he used one of the three or four offices that had been
set up for various visiting employees at the company's
headquarters.
[11] The respondent filed a long list of
companies (Exhibit A-1) to which a bid had been submitted;
they were mainly companies in the Québec area, where the
appellant's employer had its headquarters.
[12] The appellant argued that during the
years at issue, he spent the vast majority of his time at the
various work sites either to prepare a bid or to supervise the
performance of the work.
[13] Denis Otis also testified; he was the
labour relations manager at the company where the appellant
worked; he was responsible primarily for applying the decree
concerning the field of economic activity that consists of
infrastructure works, such as road networks and the organization
of water and sewer system work.
[14] He described how complex the
application of the decree was, emphasizing the many fine points
and the numerous data he had to take into account to ensure
compliance with the decree.
[15] Like the appellant, he said that the
construction industry was very unusual in that there was no job
security for the workers; they were often laid off with a few
hours' notice. According to the witness, the jobs were quite
temporary, since their duration depended on the length of the
contracts or the number of contracts to be performed.
[16] Mr. Otis said that good employees were
in especially great demand and were highly valued by employers,
which tended to do everything possible to keep them.
[17] The appellant and Mr. Otis stressed
that construction was an unstable, precarious field of economic
activity; everything depended on the contracts obtained, which
were generally few in number because of the many companies
interested in doing the same work.
[18] Moreover, the economy was not at its
best during the years at issue. As a result, some companies cut
prices, while others, including the appellant's employer, bid
on work in more remote areas to get away from competitors that
were less interested in those contracts because of the greater
number of constraints involved.
[19] Companies working in that field of
economic activity very commonly had to lay off workers
periodically while waiting to obtain a contract. Very often,
employees had to leave home to go where there was work to be
done. Finally, construction workers had to change employers
regularly.
[20] The appellant often referred to work
stoppages, the instability in the industry and the need to work
for several employers. However, the evidence showed that he
worked continuously over long periods of time. I therefore noted
a considerable difference between the theory that emerged from
the testimonial evidence and the appellant's actual working
conditions during the taxation years at issue.
[21] The evidence was also specific as
regards the consistency in the identical amounts the appellant
received each week for travelling to the work sites.
[22] The appellant argued that those amounts
were a minimum travel allowance; if his costs were lower, he
benefited; however, he explained that if his costs were higher
than the allowance, he could be reimbursed for the difference by
his employer, provided that he submitted vouchers. In other
words, he systematically received a certain amount that he did
not have to justify.
[23] In point of fact, it has been shown on
the balance of evidence that all expenses were paid by his
employer; he had a car and a credit card to pay the costs he
incurred when using the car. The other expenses-meals,
accommodation and so on-were paid in full either out of petty
cash or simply by reimbursing the appellant when he submitted
vouchers.
[24] In concrete terms, the appellant was
away from Québec for a long time only very rarely; the
evidence referred to a work site in Senneterre. Generally
speaking, he had to work mainly in the Québec area.
[25] For the appellant to support and
reinforce his arguments, it would have been important to adduce
persuasive evidence that the $300 corresponded to the
reimbursement of actual expenses incurred in and for the
performance of his duties. He did not submit any documents,
records or vouchers in this regard. On the contrary, the evidence
showed that he had a car and a credit card and that he could be
reimbursed for certain expenses if he submitted vouchers.
[26] Accordingly, there is good reason to
believe that the $300 the appellant received from his employer
every week had nothing to do with the reimbursement of expenses
that were actually incurred. It was a kind of bonus or premium or
simply a benefit.
[27] The many questions put to Denis Otis
when he testified revealed that he considered the appellant to be
an employee subject to the decree because his residence was not
in the Québec area. In other words, the Québec
area, where the appellant worked, was considered to be the
location of a job site far from the appellant's place of
residence in Notre-Dame-Des-Bois.
[28] That was a rather liberal, not to say
highly flexible, interpretation of the decree. Such an
interpretation does not hold up since, on the basis of such
logic, the appellant could have received two premiums, that is,
the same amount he was paid every week regardless of where he
worked in the immediate Québec area and another premium
covering his expenses when he was outside the Québec
area.
[29] Such a conclusion may, prima
facie, seem unreasonable; no responsible, serious employer
ever pays its employees' expenses twice; on the contrary,
employers generally establish all sorts of mechanisms to verify
and monitor expenses to avoid abuses and ensure that they pay
solely what is provided for in decrees, agreements or
contracts.
[30] In this case, what may seem unlikely on
the face of it becomes, on the contrary, very coherent if one
considers Mr. Otis' testimony. He said unequivocally that
very good land survey technicians were indispensable employees
who were in great demand by companies because they were essential
to the preparation of bids and the performance of work. Such
employees could therefore differentiate between making a profit
or incurring a loss and obtaining or losing a contract.
[31] In other words, the evidence showed
that the appellant had a strategic job and expertise that was
quite indispensable; he was an employee who was essential to the
efficient operation of the company.
[32] Given this premise, it becomes very
easy to understand an employer's interest in such a
strategic, essential employee. Since the decree provides for the
same hourly wage and similar working conditions for all those
with the same classification, it is natural or even essential,
and fair enough, that companies use all kinds of tactics to
increase and sustain the interest of qualified people in order to
ensure their loyalty, which is in the companies' best
interests.
[33] The appellant's employer had the
idea of using the decree, enhanced by the use of a car, to
strengthen the employment relationship between the appellant and
the company. The method was no doubt worthwhile for both parties,
since the appellant was loyal in that he almost never had any
wasted time and always worked for the same group.
[34] However, such an agreement has no
effect against the respondent. It has been shown on the balance
of evidence that the allowance the appellant received was
basically employment income that was disguised as a premium paid
under the decree to serve as an allowance for expenses incurred
in the course of an office or employment outside the immediate
area of his residence.
[35] The evidence showed that the appellant
was unquestionably an employee who had qualifications and, above
all, exceptional experience. His employer therefore arranged
things so as to interest him in remaining its employee by
providing him with various benefits, including the use of a car
and a company credit card, continuity in his employment and,
finally, a regular weekly allowance of $300 to serve as
compensation for duties performed mainly in the Québec
area.
[36] In this regard, the appellant referred
to Interpretation Bulletin IT-91R4, which lists the
conditions that must be complied with:
· the
employee must have worked at a special work site, being a
location at which the duties performed by the employee were of a
temporary nature;
· the
employee must have maintained at another location a
self-contained domestic establishment as the employee's
principal place of residence;
· the
self-contained domestic establishment must have been, throughout
the period, available for the employee's occupancy and not
rented by the employee to any other person;
· the
self-contained domestic establishment must have been one to
which, by reason of distance, the employee could not reasonably
be expected to have returned daily from the special work site;
and
· the period
while the employee was required by his or her duties to be away
from the employee's principal place of residence, or to be at
the special work site, must have been at least 36 hours.
[37] With regard to duties of a temporary
nature, the appellant adduced theoretical evidence concerning the
practices and customs that exist in the construction industry. I
have no doubt that such things are common in that field of
economic activity; however, the appeals relate exclusively to the
appellant's situation, and only the facts applicable to the
appellant himself are relevant.
[38] To avoid the taxation of the weekly
premium that amounted to $9,820 for 1995, $9,000 for 1996 and
$8,100 for 1997, the employer and the employee described it as an
allowance that was paid and owed under the decree to which they
were both subject.
[39] To show that their interpretations were
sound, the appellant and the paymaster indicated that for the
appellant, the Québec area was a different location than
his place of residence in Notre-Dame-Des-Bois
and that, as a result, he had to leave his place of residence to
work.
[40] In other words, the appellant argued
that he worked during the years at issue at a special work site
or a location away from his ordinary residence.
[41] The general principle that income from
an office or employment is included in computing a taxpayer's
income is found in subsection 5(1) and
paragraphs 6(1)(a) and (b) of the
Act.
[42] However, subsection 6(6) of the
Act sets out an exception for the value of expenses or an
allowance for board and lodging:
(6) Employment at special work site or remote location.
Notwithstanding subsection (1), in computing the income of a
taxpayer for a taxation year from an office or employment, there
shall not be included any amount received or enjoyed by the
taxpayer in respect of, in the course or by virtue of the office
or employment that is the value of, or an allowance (not in
excess of a reasonable amount) in respect of expenses the
taxpayer has incurred for,
(a) the
taxpayer's board and lodging for a period at
(i) a special
work site, being a location at which the duties performed by the
taxpayer were of a temporary nature, if the taxpayer maintained
at another location a self-contained domestic establishment as
the taxpayer's principal place of residence
(A) that was, throughout
the period, available for the taxpayer's occupancy and not
rented by the taxpayer to any other person, and
(B) to which, by reason of
distance, the taxpayer could not reasonably be expected to have
returned daily from the special work site, or
(ii) a location at
which, by virtue of its remoteness from any established
community, the taxpayer could not reasonably be expected to
establish and maintain a self-contained domestic
establishment,
if the period during which the taxpayer was required by the
taxpayer's duties to be away from the taxpayer's
principal place of residence, or to be at the special work site
or location, was not less than 36 hours; or
(b)
transportation between
(i) the
principal place of residence and the special work site referred
to in subparagraph (a)(i), or
(ii) the location
referred to in subparagraph (a)(ii) and a location in
Canada or a location in the country in which the taxpayer is
employed, in respect of a period described in paragraph
(a) during which the taxpayer received board and lodging,
or a reasonable allowance in respect of board and lodging, from
the taxpayer's employer.
[43] The appellant did not work for several
employers during various periods that were interrupted by periods
without work. The situation in this case was quite different: the
appellant worked regularly and was laid off very exceptionally.
He always worked for the same employer or for a related or
affiliated group.
[44] With regard to the nature of the
duties, the estimated total duration of a project and, finally,
the agreed period for which the appellant was hired, I consider
it important to reproduce the appellant's argument
word-for-word:
[TRANSLATION]
Nature of the duties:
It must be recalled that the appellant is a civil engineering
technician, that his trade comes into play only during a certain
phase (Phase A) of a project and that such duties are usually
considered to be of a temporary nature, like those of a
carpenter.
Estimated total duration of a project:
The evidence shows that the appellant was hired either to make
bids or to work at a construction site. Accordingly, for each of
those duties, he was given specific instructions for a definite
period of time.
Agreed period for which the employee was hired
under the contract of employment or other employment terms:
It has been put in evidence that the appellant never received
any guarantees with regard to his employment; he was a
full-time employee and did not receive any benefits under
the Act respecting labour standards. It has also been
shown that the employer had no work to give him other than the
work associated with his trade, that is, work as a civil
engineering technician.
[45] In actual fact, unlike the various
operators, the duration of whose work basically depended on the
use of machinery, the appellant had a special status, primarily
in terms of the benefits he received but also in terms of
continuity, since he was directly associated with and involved in
the activities that generated work.
[46] The appellant put forward several
hypotheses and referred to situations that were more theoretical
than practical. Such evidence may have been useful in defining
the context in which the appellant worked, but it was not
sufficient to dispose of the appeal.
[47] The issue in the case at bar must be
resolved by considering only the facts, terms and conditions and
circumstances that existed for the appellant. Hypotheses,
generalities and even customs have nothing to do with the factors
that must be considered to dispose of the appeal.
[48] Theoretically, the appellant had no
contractual or formal guarantee with regard to the duration of
his employment. However, given the conditions he was granted
(car, credit card, reimbursement of expenses, various premiums),
he was no doubt aware that his employer was doing everything
possible and leaving absolutely nothing to chance to provide him
with stability and continuity. Moreover, if the appellant's
arguments were valid, the vast majority of jobs would be of a
temporary nature.
[49] Very few people can claim to have
absolute job security. All jobs are dependent on the economic
situation of the company doing the hiring. The appellant
certainly did not have job security, but this does not
automatically mean that his duties were of a temporary nature,
like those of a machine operator; rather, his status was
comparable to the status of the people who had administrative
responsibilities in the company. Was he not one of the main
architects of most of the bids, which were the very foundation of
the company's existence?
[50] I am not sure that the carpenters,
machine operators and all the company's other workers
benefited from a car, a credit card and such long, continuous
periods of work.
[51] The evidence shows that he had a
strategic job that was highly valued by the employer, which did
everything possible to keep him in his job. There is no doubt
that this concern was entirely legitimate; however, the employer
could not disguise the facts by characterizing a considerable
part of the income payable to the appellant as allowances payable
under the construction decree.
[52] Given the various benefits he received,
the appellant could or even had to consider his employment to be
stable, regular and dependable, and his decision to leave his
family in Notre-Dame-Des-Bois was a personal
decision, although it may have been legitimate. However, he could
not turn his personal choice to his advantage and, above all,
rely on that choice to consider himself a worker who was obliged
to travel long distances to perform his duties.
[53] The evidence shows that there were no
reasonable or valid grounds to explain or support the
appellant's choice to keep a residence in
Notre-Dame-Des-Bois so as to be able to
establish that his residence in Québec was required for
the performance of his duties.
[54] The amounts received by the appellant
were basically income received in connection with his employment;
the appeals must therefore be dismissed.
Signed at Ottawa, Canada, this 18th day of January 2002.
J.T.C.C.
Translation certified true
on this 3rd day of April 2003.
Sophie Debbané, Revisor
Email this Content