Citation: 2007TCC513
Date: 20070926
Docket: 2007-35(IT)I
BETWEEN:
STÉPHANE GARIÉPY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1] This appeal, heard
under the informal procedure, is from an assessment made by the Minister of
National Revenue ("the Minister") in respect of the Appellant for the
2002 taxation year. Under that assessment, the Minister added the following
amounts to the Appellant's income from his employment by Abbott Laboratories
Limited ("the Employer"): $3,641 as a standby charge for an
automobile under paragraph 6(1)(e) of the Income Tax Act
("the Act"); and $1,120 as an automobile operating expense benefit
under paragraph 6(1)(k) of the Act.
[2] In making and
confirming the reassessment of March 23, 2006, in respect of the 2002 taxation
year, the Minister relied on the following assumptions of fact:
[TRANSLATION]
(a) As part of a
taxable employment benefit audit program, the Minister's auditor (hereinafter
"the auditor") audited the Appellant's file. (admitted)
(b) The Appellant
began his employment with the Employer in June 2002. (admitted)
(c) The Employer
supplied automobiles, which it owned, to some of its employees, including the
Appellant. (admitted)
(d) For the 2002
taxation year, the calculation of the initial benefit reported on the
Appellant's T4 (Statement of Remuneration Paid) indicated $298.44. (admitted)
(e) The auditor
analysed the documents and information that the Appellant provided in relation
to his daily business and personal travel for the 2002 taxation year. (admitted)
(f) During his
audit, the auditor found as follows:
(i) Based on the
Minister's records, in 2002, the Appellant lived at 1276 Chanoine‑Morel Avenue in Sillery, Quebec, and then at 1600 De Champigny Street East in Ste‑Foy,
Quebec. (admitted)
(ii) The type of
vehicle that the Employer provided to the Appellant was a 1998 Chevolet Astro (hereinafter
"the vehicle"). (admitted)
(iii) The Appellant's
travel log recorded business trips daily, but personal trips were only
compiled weekly. (admitted)
(iv) The distances
entered in the log appeared to be estimates, and full addresses were not
always recorded. (admitted)
(v) The odometer
readings at the beginning and end of the year were not entered in the
Appellant's travel log. (admitted)
(vi) The Appellant's
travel log was not consistent with the information stated on the invoices
submitted to the Employer in connection with his expense account. (no
knowledge)
(vii) An odometer
reading was entered weekly in the expense account submitted to the Employer,
but the single vehicle maintenance invoice found in the expense account was
inconsistent with these entries. (no knowledge)
(viii) The Appellant's
travel log indicated an annual total of 16,563 km driven, 15,539 km
of which were on business. (no knowledge)
(ix) The information
declared to the Employer was that a total of 10,556 km were driven, 9,905 km
of which were on business. (no knowledge)
(g) Since the
travel log did not reflect the actual number of kilometres driven, and
therefore did not reflect the number of kilometres driven for personal
purposes, the auditor calculated the automobile benefit as follows:
|
STANDBY CHARGE
$20,013 x 2% 7 months
=
|
$3,641.82
|
|
OPERATING EXPENSE
1000 km* x $0.16/km
x 7 mos. =
TOTAL
*kilometre
|
$1,120.00
$4,761,82
|
(admitted)
(h) The cost of the
vehicle supplied by the Employer was $26,013 (no knowledge)
(i) The total
number of kilometres driven in the vehicle was determined to be 16,563 km
per year. (no knowledge)
(j) The number of
kilometres driven for personal purposes was determined to be 7,000 km (1000
km per month for 7 months). (no knowledge)
(k) The Appellant
was granted no reduction for the standby charge because it was shown that the
employee drove 1000 km per month for personal purposes. (no knowledge)
(l) The parking
expense benefit was calculated based on the prescribed rate for the year 2002,
namely $0.16 per kilometre (no knowledge)
(m) The Minister
therefore added $4,463 ($4,761 – $298) to the Appellant's income as a taxable
benefit for the Appellant's 2002 taxation year. (admitted)
The
Appellant's testimony
[3] The Appellant stated as follows during his testimony:
(i) He
started working for his Employer's diagnostic products division on June 17, 2002.
(ii) His
job consisted in repairing, installing and maintaining various medical analysis
devices used in hospital laboratories.
(iii) He
covered the following territory as part of his duties: the North Shore to Blanc‑Sablon;
the Gaspé
Peninsula;
the Beauce region, the Saguenay region, and the Mauricie–Bois-Francs region. In
addition, he occasionally travelled to Montréal and Ottawa to help out his colleagues.
(iv) As part of his duties, he had to transport various
tools and replacement parts in the automobile (a minivan) that his employer
made available to him. The automobile had been customized for this purpose.
For example, a steel cage with sliding shelves had been installed in the
automobile and the middle bench seat had been removed. The automobile had
a maximum of two seats, including the driver's seat.
(v) The
employer's diagnostic division, in which he was employed, was located in Mississauga, in the province of Ontario.
(vi) His
employer sent calls to his cellular phone with service orders.
His schedule could change at any time.
(vii) His
work schedule was as follows: The normal schedule was eight hours a day from
Monday to Friday. In addition, he was on call every five weekends. He explained
that he occasionally helped out colleagues during weekends that he was not on
call. Lastly, he added that he did not take any vacations in 2002.
(viii) He
owned a car.
(ix) He
did not know that he was responsible for keeping a log that recorded the use of
the motor vehicle supplied by his employer in order to distinguish between the
kilometres driven for personal purposes and the kilometres driven for
work-related purposes during the period in issue. He added that he did not know
that such a log had to include the following details for each trip: date,
destination address, name of customer visited, and kilometres driven. He also
admits that he recorded his trips during the period in issue in a log
(Exhibit I-2) and that he provided that log to the Canada Revenue Agency
(CRA) after it asked him to send him such a log on August 24, 2005
(Exhibit I-1). It should be noted that the Appellant admits to having
prepared the log (Exhibit I‑2) based on information in his agenda,
which contained only the names of the customers of his employer that were
visited during the period in issue.
The testimony of Daniel Couture
[4] Daniel Couture,
an auditor with the Canada Customs and Revenue Agency, testified that he
carefully examined the travel log that the Appellant sent him.
His testimony was essentially an explanation of the numerous anomalies and
inconsistencies in the log that he noted in his audit report (Exhibit I‑3).
He added that, based on his examination of the travel log, he determined that
it did not reflect the actual distances driven by the Appellant in the minivan
during the relevant period or the actual breakdown between personal and
employment-related use.
The Appellant's position
[5] The Appellant in
the case at bar is not disputing the fact that his employer made an automobile
available to him during the period in issue. He also admits that he was unable
to refute the assumptions of fact set out in clauses (f)(iii), (f)(iv),
(f)(v),(f)(vi), (f)(vii),(f)(viii) and (f)(ix)
and in subparagraph 14(h) of the Reply to the Notice of Appeal, on which
the Minister had relied in making the assessment against him.
[6] Rather, the
Appellant is essentially arguing that I should allow his appeal because, in Anderson, a case decided on facts similar to
those in the instant appeal, the Court held that the taxpayers involved had derived
no benefit from the use of the cars that their employers had made
available to them. Lastly, the Appellant submitted that two of his co-workers,
who worked in Ontario and had exactly the same job as he did, succeeded in
having the CRA's Appeals Division
cancel the assessments made against them under paragraphs 6(1)(e) and 6(1)(k)
of the Act based on the Court's decision in Anderson, supra.
The law
[7] The relevant
provisions of the Act read as follows during the period in issue:
6(1)(a) Value of
benefits — the value of board, lodging and other benefits of
any kind whatever
received or enjoyed by the taxpayer in the year in respect of, in the course
of, or by virtue of an office or employment, except any benefit
. . .
(iii) that was a benefit in respect of the use of an automobile;
. . .
6(1)(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;
6(2) Reasonable standby charge -- For the purposes of paragraph 6(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
(a) the
lesser of 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 the value
determined for the description of B for the year in respect of the standby
charge for the automobile during the total available days, if
(i) the taxpayer is required by
the employer to use the automobile in
connection with or in the course of the office or employment, and
(ii) the distance travelled by the automobile in the total available days in primarily
in connection with or in the course of the office or employment, and
(b) the value determined for the
description of B for the year in respect of the standby charge for the
automobile for the total available days, in any other case;
B is
the product obtained when 1,667 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 for 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;
E is
the total of all amounts that may reasonably be regarded as having been payable
by the employer to a lessor for the purpose of leasing the automobile
during such of the total available days as are days when the automobile
is leased to the employer; and
F is
the part of the amount determined for E that may reasonably be regarded as
having been payable to the lessor in respect of all or part of the cost
to the lessor of insuring against
(a) the loss of, or damage to, the automobile, or
(b)
liability resulting from the use or operation of the automobile.
6(1)(k) Automobile operating expense
benefit – where
(i) an amount is determined under
subparagraph 6(1)(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 6(1)(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 6(1)(k)(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
248(1) "automobile" means
(a) a motor vehicle that is
designed or adapted primarily to carry individuals on highways and streets and
that has a seating capacity for not more than the driver and 8 passengers;
but does not include
(b) an ambulance,
(b.1) a clearly marked
emergency-response vehicle that is used in connection with or in the course of
an individual's office or employment with a fire department or the
police;
(c) a motor vehicle acquired
primarily for use as a taxi, a bus used in a business of transporting
passengers or a hearse used in the course of a business of arranging or
managing funerals,
(d) except for the
purposes of section 6, a motor vehicle acquired to be sold, rented or leased
in the course of carrying on a business of selling, renting or leasing
motor vehicles or a motor vehicle used for the purpose of transporting
passengers in the course of carrying on a business of arranging or
managing funerals, and
(e) a motor vehicle
(i) of a type commonly called a van or
pick-up truck, or a similar vehicle, that has a seating capacity for not more
than the driver and two passengers and that, in the taxation year in
which it is acquired or leased, is used primarily for the transportation of
goods or equipment in the course of gaining or producing income,
(ii) of a type commonly called a van or
pick-up truck, or a similar vehicle, the use of which, in the taxation year
in which it is acquired or leased, is all or substantially all for the
transportation of goods, equipment or passengers in the course of gaining or
producing income, or
(iii) of a type commonly called a pick-up
truck that is used in the taxation year in which it is acquired or
leased primarily for the transportation of goods, equipment or passengers in
the course of earning or producing income at one or more locations in Canada
that are
(A) described, in respect of any of the
occupants of the vehicle, in subparagraph 6(6)(a)(i) or (ii), and
(B) at least 30 kilometres outside the
nearest point on the boundary of the nearest urban area, as defined by the last
census dictionary published by Statistics Canada before the year, that
has a population of at least 40,000 individuals as determined in the last
census published by Statistics Canada before the year.
Analysis and conclusion
[8] Based on the relevant provisions of the Act, it
appears that the initial question to be answered is this: Was the minivan
supplied to the Appellant by his employer an automobile within the meaning of
subsection 248(1) of the Act? Indeed, the relevance of this question is
that, if the minivan does not come within that definition, the Minister
incorrectly added $3,641 to the Appellant's income on account of a standby
charge for an automobile under paragraph 6(1)(e) of the Act, and incorrectly
added $1,120 to that income on account of an automobile operating expense
benefit under paragraph 6(1)(h) of the Act.
[9] Paragraph (a) of the definition of
"automobile" set out in subsection 248(1) of the Act states that
an automobile is a motor vehicle that is designed or adapted primarily to carry
individuals and that has a seating capacity for not more than the driver and eight
passengers. Thus, a contrario, if a motor vehicle is not designed
("conçu" in the French version) or adapted ("aménagé"
in the French version) primarily to carry individuals, it will not be
considered an automobile within the meaning of subsection 248(1) of
the Act. I should immediately note that, in defining
"automobile", Parliament has not specified when, or by whom, the
vehicle must have been designed or adapted primarily to carry individuals.
[10] Was the minivan adapted primarily to carry
individuals? Since the word
"adapted" ("aménagé" in the French version) is not
defined in the Act and has no established and accepted legal meaning, the
ordinary and grammatical meaning of these words must be determined. The Oxford
English Dictionary (1989) and Le Robert, dictionnaire de la langue
française (1988) define the words "adapted" and "aménagé",
respectively, as follows:
Oxford
English Dictionary
Adapted
1. Fitted; fit, suitable
. . .
2. Modified so as to suit new conditions.
Le Robert
Aménagé
1. Disposé, distribué, et préparé méthodiquement
(une construction, un espace organisé par l’homme) en vue d’un usage déterminé
[…] Organisé.
[…]
Vx ou régional. Installé, préparé en vue d’une
installation (une chose concrète).
[…]
4. Adapté pour rendre plus efficace, plus adéquat.
[11] Based on the common and grammatical meanings of the
words "adapted" and "aménagé", I find that a thing
is "adapted" and "aménagé" if it has been changed or
modified. In the case at bar, the evidence discloses that the rear bench was
removed and that a steel cage with sliding shelves was installed in its place
so that various tools and replacement parts could be carried. The evidence also
discloses that, following these modifications, the minivan had seating capacity
for no more than the driver and one passenger. It can therefore be concluded that
the minivan was adapted, and that it was not adapted primarily to carry
individuals.
[12] The other question to be asked is whether the minivan
was primarily designed to carry individuals. Since the word
"designed" ("concevoir" in the French version) is
not defined in the Act and has no established and accepted legal meaning, the ordinary
and grammatical meaning of the word must be determined. The Oxford English
Dictionary (1989) and Le Robert, dictionnaire de la langue française
(1988) define the words "designed" and "concevoir",
respectively, as follows:
Oxford English Dictionary
Designed
Marked out, appointed . . . Planned, purposed, intended . . . Drawn,
outlined; formed, fashioned, or framed according to design.
Le Robert
Concevoir
. . .
3. Créer par
l’imagination, former, imaginer, inventer.
Concevoir un projet, un dessein
[13] These definitions
seem very broad (though Parliament has not specified who is considered to have
designed the vehicle or when) but they appear to imply that the designer of the
minivan is the one who gave it life or is responsible for its creation. In the
case at bar, in the absence of evidence to the contrary, I must presume that the
entity that originally designed the minivan is General Motors, its manufacturer,
and that the minivan was originally designed by its manufacturer primarily to
carry individuals.
[14] I should note that,
based on a contrario reasoning, paragraph (a) of the definition
of automobile provides that if a motor vehicle is neither designed nor adapted
primarily to carry individuals, then it is not an "automobile". In
the case at bar, the evidence has very clearly shown that the minivan was
adapted primarily to carry goods and that the adaptation resulted in seating
capacity for no more than the driver and one passenger. Moreover, since I have
already determined that it was designed by General Motors to carry
individuals, it is difficult for me to conclude that the minivan is not an
automobile by virtue of paragraph (a) of the definition of that term.
[15] It is certainly true
that subsection 248(1) of the Act defines the term "automobile" as a
motor vehicle designed or adapted to carry individuals . . . and having seating capacity for
no more than the driver and eight passengers. In addition, such a vehicle is
excluded from the definition of "automobile" if it is of a type
commonly called a van that has a seating capacity for not more than the driver
and two passengers and if, in the taxation year in which it is acquired or
leased, it is used primarily for the transportation of goods or equipment in
the course of gaining or producing income. Moreover, a van the use of which, in
the taxation year in which it is acquired or leased, is all or substantially
all for the transportation of goods, equipment or passengers in the course of
gaining or producing income, is also excluded from the definition of the word
"automobile". Thus, even if a vehicle was originally designed to seat
more than three, but was later adapted to seat three at the most, and it
fulfils the other conditions set out in subparagraphs (e)(i) and (e)(ii)
of the definition in subsection 248(1), the vehicle will not be considered
an "automobile" within the meaning of the Act. In the case at bar,
the Appellant has proven that the minivan was adapted to provide a seating
capacity for not more than the driver and two passengers. He did not prove that
the minivan fulfilled the other conditions set out in subparagraphs (e)(i)
and (e)(ii) of the definition set out in subsection 248(1) of the
Act.
[16] Since I have concluded that the minivan is an
automobile within the meaning assigned to the term in subsection 248(1) of
the Act, we will consider paragraph 6(1)(e) and
subsection 6(2) of the Act, which deal with standby charges for an automobile,
and paragraph 6(1)(g) of the Act, which deals with the automobile
operating expense benefit.
[17] Essentially, paragraph 6(1)(e) and
subsection 6(2) of the Act provide that where an employer has made an
automobile available to an employee during the year, the employee must include,
in computing his income from employment for that year, 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. That charge is generally fixed
at 2% per month of the initial cost of the automobile (or two-thirds of the
lease payment). It may be reduced only if the personal use of the automobile
supplied by the employer is less than 1000 km per month, and 90% of the
use of the automobile is in the performance of the duties of the employee's
employment. In order to receive such a reduction, the employee must provide
clear, explicit evidence of the actual use of the automobile in terms of
kilometres. Thus, to be entitled to such a reduction, the employee must
clearly and expressly show the number of kilometres driven during the year in
the performance of the duties of his employment, and the number of kilometres
driven for personal reasons.
[18] In my opinion, the
Appellant did not provide such evidence. The Appellant's evidence in this
regard essentially turned on a travel log that he prepared and provided to the
CRA after that agency asked him, on August 24, 2005, to provide it with
such a log. I found the log unreliable, not only because it contained numerous
anomalies and inconsistencies, but also because the annual total and
work-related distances set out in it are completely inconsistent with previous
statements that the Appellant made to his employer. As I noted earlier, the
Appellant told his employer that he drove 10,556 km in the minivan during the
relevant period, 9,905 km of which were in the performance of the duties
of his employment, yet the log indicated a total distance of 16,563 km for
the same year, 15,539 km of which were for business purposes.
[19] Since the Appellant
was unable to prove that the personal use of the minivan supplied by the
employer was less than 1000 km per month, and that 90% or more of the use
of the minivan was in the performance of the duties of his employment, I find
that the Minister correctly added to the Appellant's income, for his 2002
taxation year, an amount on account of a standby charge for an automobile,
equal to 2% per month (seven months in the instant case) of the cost of
the minivan ($26,013 in the instant case).
[20] The gist of paragraph 6(1)(g) of the Act is
that if, in a given year, an employer pays any fraction of the operating
expenses of an automobile that it owns and has made available to an employee,
the employee must include, in computing his income from employment for that
year, an amount equal to a fixed number of cents per kilometre ($0.168 in 2002)
for personal use. Since the Appellant was unable to rebut the assumption of
fact in the Notice of Appeal to the effect that the distance driven in the
minivan for personal purposes in 2002 was 7,000 km, I am of the opinion
that the Minister correctly added $1,120 to the Appellant's 2002 employment
income toward operating expenses.
[21] As I have stated, the Appellant submits that I should
allow his appeal because, in Anderson, supra, the facts of which are, in
his view, similar to the facts of the instant appeal, the Court held that the
taxpayers concerned derived no benefit from the use of the vehicles that had
been made available to them by their employer.
[22] In Anderson, supra, the Minister assessed the
employees under paragraph 6(1)(a) of the Act, adding to their
income a standby charge for the use of a vehicle commonly known as a pickup
truck. The issue for determination was whether the appellants had received or
enjoyed a benefit in respect of, in the course of, or by virtue of an office or
employment, in the form of their use of the vehicle (specially equipped
for their job) to travel from their home to their workplace and back in 1999.
In his decision, Judge Beaubier, who had also determined that the vehicles were
not automobiles within the meaning of subsection 248(1) of the Act because
they had seating for no more than two persons, also held that the employees derived
no benefit from the use of an automobile because they were under their
employers' control when they were in their vehicle, and therefore, that it was
only the employers who obtained a benefit.
[23] In my opinion, the decision in Anderson, supra,
is of no assistance in the case at bar because the very brief reasoning on the
question of whether the pickup trucks were automobiles within the meaning of
subsection 248(1) of the Act was erroneous.
[24] I have already noted that, in
Anderson, the Minister assessed the employees concerned under
paragraph 6(1)(a) of the Act, not under paragraphs 6(1)(e) and
6(1)(g) of the Act, because he was of the view that the pickup trucks in
question were not automobiles within the meaning of subsection 248(1) of
the Act. I would emphasize that, under subparagraph 6(1)(a)(iii) of the
Act, benefits in respect of the use of an automobile are excluded from the
application of paragraph 6(1)(a) of the Act. And, in the case at
bar, I have determined that the minivan was an automobile within the meaning of
subsection 248(1) of the Act. Consequently, paragraphs 6(1)(e)
and 6(1)(k) of the Act set out the way in which benefits in respect of
the use of an automobile are to be included in computing a taxpayer's
employment income.
[25] For these reasons,
the appeal is dismissed.
Signed at Ottawa, Canada, this 26th day of September 2007.
"Paul Bédard"
Translation
certified true
on this 8th day of
November 2007.
Brian McCordick,
Translator
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