Citation: 2010 TCC 194
Date: 20100409
Docket: 2009-2418(IT)I
BETWEEN:
GUISEPPE COLAVECCHIA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Margeson, J.
[1]
For the taxation years 2005 and 2006, the
Appellant deducted motor vehicle expenses in the amounts of $4,198.18 and
$4,241.78 respectively. These expenses were disallowed by the Minister of
National Revenue (the “Minister”) and the disallowance was confirmed by
notification of confirmation on May 22, 2009. The taxpayer appealed to
this Court.
Evidence
[2]
Exhibits R-1, A-1 and A-2 were admitted by
consent.
[3]
The Appellant, during the years in question, was
employed by Con-Drain Company (1983) Limited (the “Company”). He was told where
to report to work by the foreman. Sometimes he was told by telephone the night
before. During the work day he might be told to go to another work site. He
used his own vehicle going from home to the job-site.
[4]
During the years in question, he had two family
vehicles which he used. There was a trailer at the work site which he could use
to change his clothes and eat his dinner.
[5]
In cross-examination, he agreed with the
Minister’s presumptions contained in paragraph 8(a), (b), (c), (d), (e), (h)
and (i). He disagreed with paragraph 8(f), (j) and (k). With respect to
paragraph (g), he said that he would take a shovel or cement if the foreman
directed it.
[6]
He did not remember the various locations where
he worked and the specific dates when he worked but he did recall the various
work sites referred to in paragraph 8(d) of the Reply.
[7]
He disagreed with paragraph 8(f) and said that
he did travel to different work sites in the same day.
[8]
He denied that he did not incur the expenses
claimed and would not agree that they were his personal or living expenses.
[9]
He was a pipe-layer helper. There were five to
six people in his group and each one did specific tasks.
[10]
He usually drove the Oldsmobile Achieva to work.
His wife drove this vehicle as well as the Plymouth Voyager.
[11]
The foreman used the trailer to eat in but there
was a separate trailer used for company business.
[12]
He did not have any receipts for his claimed
expenses and said that he had lost them. He used no credit cards, only cash.
[13]
He identified his income tax return for 2006
found at Exhibit R-1 at Tab 2. He signed it but did not read it. He signed it
because he believed what the bookkeeper did.
[14]
With regard to his statement of motor vehicle
expenses, he said that some of the figures were minimum figures and some were
guesstimates, such as those claimed for gasoline and maintenance.
[15]
He gave the bookkeeper a number based upon the
small pieces of paper that he kept and then calculated the final figure. He no
longer has the pieces of paper.
[16]
He identified his statement of motor vehicle
expenses for 2005 as found in Exhibit R-1 at Tab 1. He had the declarations
read to him.
[17]
The information for the employment expenses for
that year followed the same format as for 2006. The figures represented minimum
guesstimates for the fuel and he relied on the little pieces of paper for the
total kilometres driven. Again, he did not have them any longer.
[18]
He confirmed the affidavit he swore on March 6,
2008 which was found in Exhibit R-1 at page I-24.
[19]
He did oil changes at every 5,000 kilometres and
wrote down the mileage. He also changed the oil filter.
[20]
Likewise he confirmed the information found in
Exhibit R-1 at pages I-25, I‑26 and I-27 with respect to his two
vehicles. These were referred to as his “log”. He confirmed the information at
pages I-37, I-38, I-44, and I-45 with respect to maintenance and oil changes on
his two vehicles.
[21]
He said that the mileage figures referred to
looked right. The bookkeeper must have made a mistake in the calculations for kilometres
because in his return he claimed 33,000 kilometres and at page I-18 he claimed
only 24,005 kilometres. He did not know which one was correct.
[22]
The claim for 11,555 kilometres found at page
I-34 was about right but that the tax return showed 23,000 kilometres for 2006.
The figure of 11,555 kilometres was not correct.
[23]
He was referred to Exhibit R-1 at page I-36
where he said that he travelled 15,716 kilometres but he testified that only
4,160 kilometres was for personal use.
[24]
When he does an oil change, he writes down the
word filter but when shown page I-19 of Exhibit R-1 where the word filter is
not indicated, he said that he did not know whether there was an oil change or
not and then he said that he could not remember what that entry signified.
[25]
He was referred to an entry found in Exhibit R-1
at page I-38 in reference to the Plymouth Voyager under date of December 31,
2006 but the document said that the Plymouth Voyager was scrapped in March of
that year.
[26]
He agreed that he did not keep a detailed log
for every day. He admitted that the mileage figures were not 100% accurate for
2005 and 2006. He could not find the receipts for his oil and filters.
[27]
Nunzio Bitondo was the Chief Executive Officer
of the Company whose head office is in Cochrane,
Ontario. The workers are directed by the Company where
they are to work. They have scheduled work. The foreman will call the workers
and tell them where they are to work. They are called the day before or the
night before.
[28]
They have one hundred sites which are mainly in
southern Ontario, Orillia, Oshawa and Hamilton. The work sites are owned by third parties.
[29]
He referred to Exhibit A-1, Tab 4, which sets
out the Company policy regarding the requirement to own a car if you are a
Company worker. There are usually two trailers at the work sites, one to be
used by the union staff and one to be used by the Company staff. The union
staff use the trailer for changing, for storing valuables, and for eating
lunch.
[30]
In cross-examination, he said that he signed the
T-2200s. He sent a letter to the Canada Revenue Agency on January 15, 2008
indicating the Company’s policy regarding the necessity of an employee to own a
car.
Argument on behalf of the Appellant
[31]
The agent for the Appellant argued that there
was no need for the workers to go to the Company’s normal place of business. He
referred to the case of Chrapko v. Canada, [1988] 2 C.T.C. 342
(F.C.A.) in support of his position that the deductions sought by the Appellant
should be allowed. He concluded that the case stood for the proposition that
the intent of paragraph 8(1)(h) was to allow employees like Chrapko, who
are required to perform their duties in different places, to deduct the cost of
travel to such secondary locations as though they were expenses incurred in the
course of employment.
[32]
He further relied upon the decision of Paris J.
in Rousseau v. Her Majesty the Queen, 2006 TCC 552, where the Court
allowed the expenses to be deducted if the worker was required to carry out his
duties at different places.
[33]
Further, he relied upon Royer v. Canada,
[2000] 1 C.T.C. 2688, where Lamarre Proulx J. accepted the reasoning in Her
Majesty the Queen v. Merten, 90 DTC 6600 (F.C.T.D.) and in Chrapko
and allowed such expenses on the basis that the Federal Court – Trial Division
and the Federal Court of Appeal had modified the words in the statute
recognizing the travel to be “in the course of the office of employment”.
[34]
In respect of the calculations of the expenses, he
argued that he had calculated the total kilometres travelled on the basis of
Mapquest as to where these work sites were, using the work attendance records
of the Company. He also used the average price of gas as obtained from the
Minister. He revised the final claim submitted by the Appellant by decreasing
it. He also claimed capital cost allowance for the automobiles on the basis of
information obtained from the Government website for the value of the
automobile and used standard fuel consumption ratings for these automobiles.
[35]
This method of calculation is efficient and
should be allowed.
[36]
The agent argued that the Minister ignored the fact
that there was no normal place of business for the Appellant.
[37]
The Appellant did report to different places and
as such did incur motor vehicle expenses for travelling in the course of his
employment.
[38]
There was no usual place of work, only a
principal place of business to which the employee is not required to go but he
is required to go to different places. Therefore, he cannot control his costs. This
brings him within the factual situation referred to in Royer and
therefore within the intentions of Parliament to establish an allowance for
those who may be in a position to control the cost of travelling to the
principal place of employment, but because they are required to report to
different places, are not in the same position.
[39]
The appeal should be allowed with costs.
Argument on behalf of the Respondent
[40]
Counsel argued that there are two conflicting
lines of cases, the Hogg v. Her Majesty the Queen, 2002 FCA 177,
line of cases and the Chrapko line of cases. In the Hogg
line of cases, a worker must be travelling and working and in the Chrapko
line of cases the worker does not have to be working.
[41]
He referred to Potter v. Canada, 2008 TCC 228, where Boyle J.
followed the decisions in O’Neil v. Her Majesty the Queen, 2000 DTC
2409, which was affirmed in the Hogg case by concluding that the
phrase travelling in the course of employment involves “the performance of some
service as compared to simply getting oneself to the place of work”.
[42]
In the case at bar, the Appellant confirmed in
paragraph 8(e) of the Reply that he was simply getting himself to the work
site.
[43]
He also relied upon Daniels v. Canada (Attorney General), 2004 FCA 125, where the Federal Court of Appeal established that
there must be costs incurred in the course of the taxpayer’s duties rather than
merely enabling him to perform them.
[44]
In O’Neil, Rip J., as he then was, stated
at paragraph 23:
23 … The English cases have drawn a sharp
distinction between an expenditure incurred in the performance of the duties of
an office or employment and expenditure incurred in order to enable oneself to
do the job initially or to enable oneself to perform the duties of that office
more efficiently. …
[45]
Counsel opined that in Chrapko the Court
was being charitable in allowing the expenses because it failed to consider the
words of the statute when it referred to travelling in the course of
employment. He argued that the later cases are more authoritative in requiring
the travel to be in the course of employment.
[46]
Royer was decided
one and a half years before O’Neil and McDonald v. Her Majesty
the Queen, 98 DTC 2151, was decided before O’Neil.
[47]
Counsel obviously disagreed with the decisions
in Rousseau and Homsy v. Canada, [2004] 2 C.T.C. 2871. With
respect to Rozen v. Canada, [1986] 1 C.T.C. 50 (F.C.T.D.), the Act
was worded differently. With respect to the calculations of the expenses,
counsel said that the odometer readings do not match up with the claimed
mileage.
[48]
The Respondent, as part of his submissions,
referred to the records of the Appellant with respect to oil change records,
total miles driven during each period and compared this to the purported
driving distances to the construction sites. He used the information
provided by the Appellant with respect to both vehicles.
[49]
Comparing the odometer readings and records
shows thousands of kilometres of personal driving. The odometer readings and
estimates are not credible. The assumptions have not been rebutted.
[50]
These calculations show that the Appellant did
not drive from home to construction sites that he claimed. These records, when
dissected, show that the kilometres claimed were not actually driven.
[51]
From October 5, 2005 to December 31, 2005,
3,408.1 kilometres were claimed but could not have been driven. Between October
14, 2006 and December 31, 2006, 1,010.8 kilometres claimed were not actually
driven.
[52]
With respect to the estimated fuel expenses,
maintenance costs, insurance costs, licenses and registrations and other costs
such as car washes, these amounts claimed by the Appellant have been
exaggerated greatly.
[53]
In calculating fuel consumption, the Appellant
claimed as if it were all city driving by using city driving averages. His
driving was not all city driving.
[54]
The appeal should be dismissed with costs.
Rebuttal
[55]
In rebuttal, the agent for the Appellant said
that the Chrapko case was intended to come to the aid of workers like
the Appellant who had to travel to different work sites and that line of cases
should be followed.
[56]
There was no normal place of business and
therefore the Appellant could not cut down his costs.
[57]
The intent of Parliament as outlined by Jerome
J. in the Chrapko case was to enable the worker to cut back on his
travel costs where he was required to travel to many different work sites.
[58]
The Appellant did not maintain adequate records,
so that estimates were used.
[59]
In the revised claim, he did not claim repairs
because he did not have receipts.
[60]
The Appellant’s claims for travel were based
upon information provided by the Company. This is a more reasonable way to
calculate expenses than by using receipts.
[61]
The facts in this case are more in line with
those in the Chrapko case.
[62]
The most important factor was that the intent of
Parliament was to allow the Appellant to claim his expenses in these
circumstances.
Analysis and Decision
[63]
The Minister disallowed the claimed expenses
under the provisions of subsection 248(1) of the Act, arguing that they
were personal or living expenses of the Appellant and therefore he was not
entitled to deduct them under paragraph 8(1)(h.1) of the Act, as
they were not incurred in the performance of his duties with the employer but
were incurred to travel from home to his workplace. Further, the employee was
not ordinarily required to carry out the duties of his employment away from the
employer’s place of business or in different places.
[64]
Paragraph 8(1)(h.1) states as follows:
(h.1) where the taxpayer, in the year,
(i) was ordinarily required to
carry on the duties of the office or 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, …
[65]
According to the agent for the Appellant, this
creates four requirements that the Appellant must fulfill in order to claim the
deductions:
(1) The employee must be required to work away from the
employer’s place of business or in different places.
The agent contends that this condition has been satisfied.
(2) The employee must be required under the terms of his
employment to pay for his employment-related car expenses.
The agent contends that this requirement has been met.
(3) The employer must certify on the prescribed form that these
conditions were met.
The agent contends that this requirement has been met as can be seen
from the T2200 form submitted.
(4) The expenses must have been incurred for travelling in the
course of his employment.
According to the agent, this was the only condition that was not met
and that was agreed upon by Ming C. Fu on behalf of the Canada Revenue Agency
in his letter dated May 23, 2008.
[66]
It has to be noted that the only expenses in
issue are those allegedly incurred by the Appellant when travelling from his
home to the work place. The evidence indicated that he also travelled from one
workplace to another and incurred expenses. However, those expenses are not in
issue because the Appellant is not claiming them because he could not establish
them.
[67]
The Court agrees that the only issue in this
case is essentially that set out in condition (4) referred to in paragraph 65 above.
[68]
The Court agrees that there are two different
lines of cases on this point. One line of cases following the Chrapko
decision and the other following the Hogg decision. The Court does not
believe that these cases can be reconciled or distinguished with respect to
point four above.
[69]
In the Chrapko case, the Federal Court of
Appeal considered both racetracks to be the normal place of work, even though
they were some distance apart. Further, the Court did not refer to “travelling
in the course of employment” or “motor vehicle expenses incurred in the
performance of the duties of the office or employment”. Perhaps as counsel for
the Respondent indicated, the Federal Court of Appeal may have been charitable.
[70]
This Court can see nothing in the legislation
that would indicate the intention of Parliament as outlined in the Chrapko case.
No evidence was given here to support that position and the section does not
speak of a person being in the position of controlling costs of travelling to
their principal place of employment because they are required to report to
different places. It clearly refers to expenses incurred in the performance of
the duties of the office or employment.
[71]
This Court finds it difficult to determine that
because one has to report to different work sites that that requirement has
anything to do with the performance of the duties of the office or employment.
[72]
Surely on the facts of the case at bar, the Appellant
had not commenced any duty on behalf of his employment until after he has
arrived at the first work site, wherever that might be. Until then, he was
merely travelling from home to the first place of work for the day.
[73]
Clearly these facts parallel those referred to
in the Hogg case, where the Federal Court of Appeal in referring to the
Court’s reference in the House of Lords in Ricketts v. Colquhoun,
[1926] AC 1, concluded that the expenses incurred by the taxpayer in travelling
to and from his home to his place of work were not expenses incurred in the
course of the taxpayer’s performance of his duties but rather expenses incurred
to allow him to perform his duties.
[74]
Further at paragraph 13 of the Hogg
decision, the Federal Court of Appeal said:
13 Thus, in my view, a plain reading of both
the French and English texts of paragraph 8(1)(h.1) of the Act
makes it clear that the words “motor vehicle expenses incurred for travelling
in the course of the office…” necessarily require that these expenses be
incurred by the taxpayer while performing the duties of his office.
[75]
Clearly, in the case at bar, when the taxpayer
was incurring the expenses in issue, he had not commenced any duty on behalf of
the employer.
[76]
Recently, Boyle J., in the Potter case
above, concluded at paragraph 11 that:
11 … These cases make it clear that traveling
in the course of employment necessarily involves the performance of some
service as compared to simply getting oneself to the place of work. In this
case, there is no evidence or suggestion that Mr. Potter took any crew or
supplies with him to Fort
McMurray for the benefit of
his employer.
[77]
In the case at bar, there was no evidence that
the taxpayer was doing anything apart from travelling from home to his place of
work, wherever that might have been, and at those times he was not performing
any service for his employer.
[78]
This finding is sufficient to dispose of this
appeal but the Court will also consider the second aspect of the case dealing
with the adequacy of proof of the amounts expended.
[79]
The evidence of the Appellant in that regard was
wholly unsatisfactory. His records were incomplete, inaccurate, and based
on presumptions, at best. He obviously made claims for amounts in excess
of what he might have been entitled to if he were successful on the first issue
and such evidence brings into question whether any of his evidence can be
relied upon.
[80]
The agent tried valiantly to calculate his
expenses on a more objective basis, but his calculations as well were based to
a large extent upon what the Appellant told him and therefore his results
cannot be accepted as proof of the total value of expenses claimed.
[81]
The Appellant has not rebutted the presumptions
contained in the Reply and they must stand.
[82]
The appeal is dismissed and the Minister’s reassessment
is confirmed.
[83]
The Respondent is entitled to his costs, to be
taxed on a party and party basis.
Signed at Ottawa, Canada, this 9th day of April 2010.
“T.E. Margeson”
Email this Content