Citation: 2007TCC369
Date: 20070620
Docket: 2006-3024(IT)I
BETWEEN:
PIERRE BOUCHARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
O'Connor, J.
[1] The issue in this
appeal is revealed in the following extracts from the Reply to the Notice of
Appeal:
13. By Notices of
Reassessment dated February 25, 2005, the Minister reassessed the Appellant’s
tax liability for the 2001 and 2002 taxation years by including employment
income as follows:
|
|
2001
|
2002
|
|
Automobile benefits
|
$10,621
|
$13,346
|
|
Other taxable benefits
|
3,346
|
5,129
|
|
Adjustments to employment income
|
$13,967
|
$18,475
|
14. The Appellant
served on the Minister a Notice of Objection on May 20, 2005 for the 2001 and
2002 taxation years regarding the automobile benefits component of the
reassessments in the amounts of $10,621 and $13,346 respectively.
15. By Notice of
Confirmation dated June 9, 2006, the Minister confirmed the Appellant’s income
tax liability for the 2001 and 2002 taxation years.
16. In so
reassessing and confirming the Appellant’s income tax liability for the 2001
and 2002 taxation years, the Minister relied on the following assumptions of
fact:
a) During the 2001
and 2002 taxation years, the Appellant was employed by General Bearing Service
Ltd. (the “GBS”);
b) During the 2001
and 2002 taxation years, the Appellant was the Vice-president of GBS;
c) GBS had its
Head Office located at 490
Kent Street; Ottawa, Ontario;
d) GBS had 23
points of sale;
e) The Appellant
had an office at the GBS Head Office;
f) For the 2001
and 2002 taxation years, the Appellant did not maintain a logbook to support the
breakdown of business and personal usage of the GBS provided automobiles;
g) GBS leased a
2000 Lincoln Continental at a cost of $1,087.72 per month, including Goods and
Services tax (GST);
h) GBS made the
2000 Lincoln Continental available to the Appellant for 365 days in the 2001
taxation year;
i) During the
2001 taxation year, the Appellant drove the 2000 Lincoln Continental for a
total of 34,415 kilometers;
j) During the
2001 taxation year, the Appellant’s personal use of the 2000 Lincoln
Continental was 12,000 kilometers;
k) During the 2001
taxation year, the operating costs for the Appellant were calculated at $0.16
per kilometre for the personal use of the 2000 Lincoln Continental;
l) GBS made the
2000 Lincoln Continental available to the Appellant for the first 6 months in
the 2002 taxation year;
m) During the 2002
taxation year, the Appellant drove the 2000 Lincoln Continental for a total of
17,207 kilometers;
n) During the 2002
taxation year, the Appellant’s personal use of the 2000 Lincoln Continental was
6,000 kilometers;
o) During the 2002
taxation year, the operating costs for the Appellant were calculated at $0.16
per kilometre for the personal use of the 2000 Lincoln Continental;
p) During the 2002
taxation year, GBS purchased a 2002 Lincoln Continental at a cost of
$58,965.10, including GST;
q) GBS made the
2002 Lincoln Continental available to the Appellant for the last 6 months in
the 2002 taxation year;
r) During the
2002 taxation year, the Appellant drove the 2000 Lincoln Continental for a
total of 17,207 kilometers;
s) During the 2002
taxation year, the Appellant’s personal use of the 2000 Lincoln Continental was
6,000 kilometers; and
t) During the
2002 taxation year, the operating costs for the Appellant were calculated at
$0.16 per kilometre for the personal use of the 2000 Lincoln Continental.
B. ISSUES TO
BE DECIDED
17. The issue is
whether the Appellant received the taxable automobile benefits of $10,621 and
$13,346 from GBS for the 2001 and 2002 taxation years respectively.
C. STATUTORY
PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT
18. He relies on
sections 3 and 4, subsections 6(2), 230(1) and 248(1), and paragraphs 6(1)(a),
6(1)(e) and 6(1)(k) of the Income Tax Act, R.S.C., 1985, c.1 (5th
Supp.) as amended (the “Act”);
19. He submits that
the said vehicle is an “automobile” as defined in subsection 248(1) of the Act;
20. He further
submits that the Appellant should have included in his employment income for
the 2001 and 2002 taxation years, standby charges and operating expense
benefits pursuant to paragraphs 6(1)(e) and 6(1)(k) of the Act in the amounts
of $10,621 and $13,346 for the 2001 and 2002 taxation years, respectively as
the said additional benefits were derived by the Appellant from the personal
use and availability of the automobiles provided to him by the employer, GBS.
ANALYSIS AND DECISION
[2] The
relevant provisions of the Income Tax Act are as follows:
6(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:
…
(e) - where the taxpayer's
employer ... made an automobile available 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 …
...
6(1)(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 … 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
...
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
...
6(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 … 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.
(There follows a complex formula which in simple terms
provides that the reasonable standby charge is 2% of the cost of the vehicle or
2/3 of the lease costs times the number of months the vehicle is made
available.)
[3] The Respondent
relied on subsection 6(2) to establish the standby charges. Also, there is no
dispute as to the $0.16 per kilometre rate used to calculate the operating
costs. The only dispute relates to the percentages of personal versus business
use of the automobiles.
[4] The Appellant,
assisted by his agent, Bruce Johnston, C.A., produced an original log which the
Respondent considered inadequate and although the absence or inadequacy of a
log is not in all cases determinative, it must be considered. The Appellant,
again with the assistance of Mr. Johnston, prepared a reconstructed log related
to the 2004 and 2005 years and sought to use this as a sample of the personal
and business kilometres travelled in the years in question, namely 2001 and
2002.
[5] Canada Revenue
Agency at first appeared to be willing to consider the reconstructed log as
indicative of the travel in 2001 and 2002 but both the original log and the
reconstructed log raised so many questions that the Agency decided that those
logs could not be relied upon.
[6] The position of an
Appellant who wishes to prove business travel as opposed to personal travel or
use is an extremely difficult one if an adequate log has not been kept. The
jurisprudence is relatively consistent on this point.
[7] In this appeal, the
logs and the testimony of the Appellant, although not conclusive nor
consistent, are helpful to a certain extent.
[8] It was also the
evidence that attempts were made at settling the differences between the
Appellant and the Respondent but the differences were large enough that a
settlement was not reached.
[9] In my opinion, on
the basis of the documents submitted and the testimony of the Appellant, I am
satisfied that the personal travel was not as extensive as the Respondent
assumed. It is extremely difficult to precisely calculate what the exact
percentages of business versus personal travel were but I have concluded that
the proper amounts of taxable automobile benefits were $9,600 in 2001 and
$12,300 in 2002. I have been assisted in arriving at that conclusion by Exhibit A‑3,
which contains a Schedule A, being an extremely detailed calculation by Canada
Revenue Agency of business versus personal travel in the years 2001 and 2002.
[10] Consequently the
appeal is allowed to the foregoing extent only. There shall be no costs.
Signed at Ottawa, Canada this 20th day of June, 2007.
"T. O'Connor"
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