Citation: 2006TCC439
Date: 20060810
Docket: 2005-4265(IT)I
BETWEEN:
GÉRALD BOUCHER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers J.
[1] The Appellant is
appealing two reassessments, one dated July 28, 2003 and the other January
28, 2005. In the first reassessment, the Appellant’s employment income was
raised by $5,989 for the 2000 taxation year and by $6,026 for the 2001 taxation
year, and in the second reassessment, his employment income was raised by
$6,443 for the 2002 taxation year and by $1,890 for the 2003 taxation year. The
two reassessments were confirmed by the Minister of National Revenue on December 1, 2005. Additional employment
income was determined to take into account the benefit of the use of an
automobile supplied to the Appellant by his employer.
[2] During the years in
issue, the Appellant was the sole shareholder and employee of Les Éditions
Atlas Inc. ("the Company"). The Company put an automobile at the
Appellant's disposal. The annual mileage of this vehicle came to around
15,000 kilometres. During the years in issue, the Appellant was also the
owner of a personal car. According to the Appellant, the average annual mileage
of this vehicle was only about 3,000 kilometres and part of this distance was
for travel on Company business.
[3] The Company
publishes annually a booklet entitled "Le Passe-Partout, services et bonne
chère" in the Québec region. The booklet contains advertisements and
coupons offering substantial discounts in certain restaurants and bistros.
[4] The Appellant and
his agent at the hearing acknowledged that the Company’s vehicle had been used
for personal purposes during the taxation years in issue. The Appellant
mentioned a proportion of 9% while his agent evaluated it at around 5%. One
thing is certain, both of them acknowledged that the vehicle in question was at
the Appellant’s disposal. The Appellant therefore could use it for personal purposes.
The standby charge for an automobile is set out in paragraph 6(1)(e) and
subsection 6(2) of the Income Tax Act ("the Act") and those
provisions read 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.
6(2) Reasonable standby charge for automobile — 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 x [2% x (C x D) + 2/3 x (E - F)]
where
A is
(a) the lesser of the
total 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 is 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 during 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 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;
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) loss
of, or damage to, the automobile, or
(b) liability
resulting from the use or operation of the automobile.
[5] These two
provisions were analyzed by Robertson J. of the Federal Court of Appeal in Adams
v. R., [1998] 3 F.C. 365, 98 D.T.C 6266. At paragraphs 14, 15 and 17
of this decision, Robertson J. concludes that their application requires that
the employee be entitled to use the automobile for personal purposes. The strict
consequences of their application can be tempered by the "minimal personal
use" exception added on to subsection 6(2). The relevant passages of these
paragraphs read as follows:
[14] Against this
background, it is apparent that both paragraph 6(1)(e) and subsection
6(2) are unconcerned with whether in fact an employee made use of an
employer's automobile. Paragraph 6(1)(e) makes no reference
to the purposes for which the automobile is made available and, in particular,
no longer makes reference to personal use by an employee. . .
.
[15] . . . It is actual usage which is of significance not
whether an employee had unrestricted or exclusive use of an employer's
automobile. It is also important to note that actual usage only
becomes relevant within the context of the minimal personal use exception
articulated in subsection 6(2).
. . .
[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. In my view, the standby provisions were carefully
crafted with the object of promoting certainty at the expense of
flexibility. 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.
[6] Therefore there is
a presumption that once the right to use an automobile is granted, 12,000
kilometres per year are driven for personal use. This presumption can be
overturned by clear and express evidence of the actual use in terms of mileage,
as explained by Tardif J. in Tremblay v. R., 2000 D.T.C. 2414. In this
decision, Tardif. J. quoted an excerpt from the decision of Dussault J. in Lavigueur
v. the Minister of National Revenue, 91 D.T.C. 445, on this obligation to
provide evidence and to do so in a precise manner. Here is the excerpt:
Thus the appellant admitted having had the automobile available to
him in the evening and on weekends, but stated that he used it for personal
purposes only exceptionally. He further stated that he had another automobile
for that purpose, which, while it was much older and more modest, fully
sufficed for the limited needs of going out in the evening or on weekends. The
appellant, however, was not very specific in terms of the total kilometres
travelled for business purposes; he stated that the total might be 40,000 to
60,000 kilometres per year, but that he had kept no record of this.
. . .
In order to control the benefit arising from the use for personal
purposes of an automobile owned or leased by an employer, Parliament believed
it advisable to establish a presumption that personal use amounts to 1,000
kilometres per month or 12,000 kilometres per year, as soon as an employer
makes an automobile available to an employee. This presumption may be rebutted
by the employee, and the Act imposes an obligation on him do so in a specific
manner, "in the prescribed form", when there is less use for personal
purposes. In that case, the application of the arithmetic formula in subsection
6(2) operates to reduce the amount to be included in the employee's income
proportionately. If an employee does not comply with the obligation thus
imposed by the Act, how can he later argue that the Department of National
Revenue was wrong to include in his income the amount set out in subsection
6(2) of the Act, which results from the application of the presumption
established therein?
[7] In this case, the
Appellant did not keep a record of his travel that would make it possible to
calculate precisely the mileage and use of the automobile for personal purposes.
The Appellant did however attempt to put together such a record based on a list
of the Company's clients that he visited in 2003-2004 by calculating the
distance between the clients' places of business and the Company's place of
business using the Internet site Mapquest. According to this information, the
distance travelled to visit the Company's clients totals 3,860 kilometres there
and back. The Appellant estimates that he visits clients on average four times
a year for a total of 15,440 kilometres a year. One of the Company's clients testified
that he met with the Appellant six or seven times a year. However, he
acknowledged that he considered himself a particularly difficult client and
that he had no idea of the number of visits made by the Appellant to his other clients
nor of the number of clients he had to visit. On cross-examination, he even
reduced his estimate of the number of visits he received from six or seven a
year to five or six a year.
[8] The Appellant
alleges that he goes to the Beauce region approximately 6 times per year
to have the booklet printed, that he goes to Montréal about twice a year and,
on occasion, meets with the graphic designers hired by the Company. This travel
adds more than 2,000 kilometres to the estimate made by the Appellant in the
previous paragraph.
[9] The Appellant
produced repair bills for the Company’s automobile for the period from November
18, 1999 to March 11, 2002. The total mileage indicated comes to 31,026 kilometres for a period of
27 months, or 1,149 kilometres per month. This makes for a 12-month average of
13,788 kilometres. The Appellant made a similar calculation for his personal
car since it is sometimes used for business purposes. The annual mileage on his
own car is 3,240 kilometres. The total for the two cars is 17,028 kilometres
per year. According to the Appellant, the average yearly distance travelled for
business, calculated using Mapquest, represents 91% of the total annual
mileage.
[10] The Appellant filed
his agendas and copies of contracts from 2001, which show that the contracts
were signed during visits to the clients. However, the agendas specify only the
time of each appointment and not whether it was the Appellant who was
travelling. Certain appointment pages indicate that the Appellant met with
several people in one day (I counted up to ten in one day) and other pages
(several) show no appointments at all.
[11] The Appellant argues
that he did not use the automobile for personal purposes as often as the
Minister claims, as he often travelled outside the country. As for his personal
car, he claims that he used it year round. In support of this last claim, he
filed repair invoices for his car, but they date from 1990, 1991 and 1998. One
of them was even billed to the Company.
[12] There is no doubt
that the estimates of personal use versus business use made by the Appellant
are unreliable and far from accurate. The premise that the Appellant relies on
to determine his annual mileage percentage, i.e. four visits for each client
having signed a contract, based on a return trip, is not plausible. In any
case, these cannot be return trips for each client. The agendas filed in
evidence show successive appointments and enable us to deduce that the
Appellant visited more than one client per trip.
[13] Choosing at random,
I reviewed two contracts, signed on May 11, 2001. Going over the period during
which these contracts were signed in the Appellant’s agendas allowed me to
determine that, for one of the contracts, only one visit is indicated, on May 11, 2001, date on which the
contract was signed. The client was contacted by telephone three times, on
April 17, May 1 and May 8, 2001. As for the second contract, there were three appointments,
on May 3 and 7 and on the date of signing of the contract. That represents an
average of two appointments per client, which, in my opinion, seems more
realistic, since there are clients who only sign a renewal and often more than
one client is seen during one trip. This exercise allows me to conclude that
the Appellant’s personal use of the Company’s vehicle was much more significant
than his estimate indicates. In my opinion, the Minister’s estimate, which
evaluated the personal use at 25%, is closer to reality.
[14] The repair bills on
which the mileage is indicated give only a yearly average and not the exact
mileage for each year. It is therefore difficult to determine anything precise
that would allow one to conclude that these data reflect reality. On the
contrary, this is imprecise and circumstantial evidence that fails to meet the
requirements of the Act.
[15] The Appellant was
unable to discharge his burden of proof. For these reasons, the reassessments
are upheld and the appeals are dismissed.
Signed at Edmundston,
New Brunswick, this 10th day
of August 2006.
“François Angers”
on this 16th day
of January 2007.
Gibson Boyd, Translator
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