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Citation: 2004TCC562
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Date: 20040813
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Docket: 2001-1441(GST)G
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BETWEEN:
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HELMUTH MULLER,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Bell, J.
ISSUE
[1] Whether the Minister of National
Revenue ("Minister") was correct in denying the
Appellant an Input Tax Credit ("ITC") in the amount of
$1,273.61 for his reporting period from December 1, 1997 to
December 31, 1997 on the basis that the truck purchased by the
Appellant, a 1998 Ford 150 x 18 extended cab truck
("truck"), was a passenger vehicle within the meaning
of section 123(1) of the Excise Tax Act
("ETA"), Part IX and on the basis that the truck
was not used exclusively in the course of his commercial
activities pursuant to section 202 of the ETA.
FACTS
[2] The Appellant is a farmer who in
the period in question farmed approximately 650 acres. His
farming operation was given as of "now", not as of the
date of the truck purchase. The Appellant described the truck as
having a four-wheel drive, a feature that he wanted because:
We farm off-road and we're isolated and I feel much safer
with a 4x4 and with the use I have, a 4x4 is very handy.
He said further that if he wanted to pull something a 4x4 has
a low range
...where you can go slow, which you can't on a
two-wheel drive and that is one of the main reasons for a
4x4.
He also said that:
It has another seat in the back with another door so you can
put things in the back, or whatever, other than just the straight
one seat.
[3] He then said that the truck had a
5-speed manual transmission, a feature he desired, having used
one all his life. He said that if he wanted to back up to a
trailer "or whatever", he could use his clutch to back
up and did not have to put his foot on the break and the gas
pedal "like with an automatic". He also described the
8-ply rated tires as being "all terrain" tires. He then
said that the 6,000 pound GVW package also had two hooks. He
described the use of these as follows:
Well, if you were stuck or if you wanted to pull somebody out
and drive up to it was....it's some place to hook onto
the front end, if you want to hook a train or tow rope onto the
front you had a hook to hook it onto.
[4] The Appellant then stated that he
wanted a regular cab but could not find one and, having purchased
an extended cab truck, stated that he would not want to be
without it. His reason for that was:
...if I want to haul parts or feed or whatever is
necessary, I can keep it inside where it's secure. ...I
can leave things, clothes, different things in the truck and keep
it locked and have it secure.
He stated that there was a bench seat in the back of the cab
and that:
The seat folded down and left me sort of a level floor.
He testified that the truck had a third door on the passenger
side, not being a regular door but one that:
I guess they called them suicide doors at one time, it swung
back".
He then said that the passenger door had to open first and
then the back door could be opened in the opposite direction.
When asked if he carried passengers in the back seat he replied
"very seldom". He said that he rode in the back seat
once and that it was not comfortable because there was not enough
leg room. He said that he was lucky that he was by himself and
was able to stretch his legs out on the seat. He said further
that he took his daughter-in-law to an agricultural show in
Brandon, that she rode in it on the way to Brandon but sat in the
front on the return voyage because it was too uncomfortable. He
said that on the odd occasion his grandchildren were in the back
seat. He described the cargo portion of the truck as being used
for hauling seed, cases of chemicals and, sometimes, fuel, and
whatever was necessary. He described hauling a pallet of canola
seed wrapped in plastic which would have been 1,500 or 2,000
pounds. He stated that the truck did not have a towing package
but that he added a hitch that bolted onto the frame at the back.
He said that with this he pulled a combine header, which had its
own wheels, pulled a trailer, a hopper box, grain augers and
whatever needed to be towed.
[5] The Appellant said that he and his
wife also owned a 1993 Oldsmobile Cutlass Sierra, that he used
the truck most of the time to farm, that the car was at home for
his wife to use as necessary and that she used it for "going
for groceries". He testified that they used the car when
going on trips together. He said they took the truck to Edmonton
within the first year, moving furniture for his daughter.[1] He also stated that he
and his wife took the truck to Winnipeg one time when she had a
medical appointment a snow storm having been forecast. This storm
took place, leaving them stranded for half a day in Winnipeg.
[6] The Appellant also stated that
they had some isolated land and
The roads are - leave a little bit to be desired.
[7] Mr. Bryne McKay,
("McKay") who had been an auto dealer for 31 years,
managed car dealerships, sold new cars, new pick-ups and used
vehicles and had been actively involved in car service, rentals
and leasing in all aspects of the industry. When asked by
Appellant's counsel what his experience was and why people
wanted extended cabs he stated:
I found that extended cabs, super cabs, king cabs, those kinds
of vehicles, the main intent they were buying them to use as a
truck. Because it had the extended cab or super cab that was a
real benefit because it gave them secured storage inside, they
could lock things up, they could keep things out of the weather
and if they did need it to haul passengers they could also do
that.
[8] He said, with respect to the first
"king cab" which had two seats in the back his
customers:
...were excited about...they had somewhere to put
things behind the seat. They didn't seem to be that thrilled
with the seats in the back, it was having that inside
storage....
[9] The witness then testified that he
was 5 feet 11 inches tall and after stating that he would be
comfortable in the back seat of a Taurus automobile, said:
... the extended cab usually has less room, like less
knee room, you're usually....because the vehicle
wasn't designed primarily for that purpose, it's sort of
an added feature, so you'll find that you'll have less
leg room. You're usually sitting lower down in the vehicle so
your knees are usually higher up and it's a more confined
space and most people, you know, they don't mind going a short
distance in a super cab but they don't want to go on a trip
or anything.
[10] The witness then said that a pickup
truck has a separate frame as compared to most passenger cars. He
said that they have what they call a uni-body which is just a bit
of a frame at the front and then the tub or the metal of the car
basically makes up the strength of the rest of the vehicle. He
then said:
So they don't have an actual frame running from the front
of the vehicle all the way through the back, which a pickup truck
has and that allows - gives a truck more strength so that it can
haul cargo, heavier cargo and also gives it more towing capacity
whereas what that does is if you have a fifth wheel you can
attach it to the frame through the box or you could pull a
trailer, cattle trailer, whatever, by putting a hitch onto the
back, which is attached to the frame. A passenger vehicle
normally doesn't have that capability.
The witness then stated that those pickup trucks are designed
to haul and tow.
[11] On cross examination the witness said
that the backseat of such a pickup could carry three passengers,
albeit not comfortably.
[12] The third witness for the Appellant was
Denis Kowal ("Kowal"), a chartered accountant. He
produced a video which contained, as he described it,
...a visual portrayal of a vehicle similar to the one,
like Mr. Muller's, in question here. It's a model
identical to it in terms of its features and presentation.
Kowal said that he had taken the video himself. He added that
there was no neck rest in the backseat, that there were lap
belts, no shoulder belts, that the space between the back of the
backseat and the back of the front seat was 26 inches, that there
was only 5 inches between a passenger's head and the rear
window glass, that it was hard to get out of, that there was no
door on the driver's side at the back and that the front seat
must be moved forward in order to gain access and egress from the
driver's side.
ANALYSIS AND CONCLUSION
[13] The appropriate portions of section
202(2) of the ETA read as follows:
(2) Input tax credit on passenger vehicle or aircraft -
Where a registrant who is an individual ... acquires
... passenger vehicle ..., the tax payable ... by
the registrant ... shall not be included in determining an
input tax credit ... unless the vehicle ... was
acquired ... for use exclusively in commercial activities of
the registrant.
[14] Section 123 of the ETA provides
that "passenger vehicle" has the meaning assigned by
subsection 248(1) of the Income Tax Act
("ITA").
[15] Section 248 of the ITA defines
"passenger vehicle" to mean:
...an automobile acquired after June 17, 1987
...
[16] The word "automobile" is
defined in section 248 of the ITA as meaning:
"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,
(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 of a type commonly called a van or pick-up truck or a
similar vehicle
(i) that has a
seating capacity for not more than the driver and 2 passengers
and that, in the taxation year in which it is acquired, is used
primarily for the transportation of goods or equipment in the
course of gaining or producing income, or
(ii) the use of
which, in the taxation year in which it is acquired, is all or
substantially all for the transportation of goods, equipment or
passengers in the course of gaining or producing income;
[17] Appellant's counsel said:
Our position is that we are excluded from 202(2) by virtue of
the definition of passenger vehicle. We stand or fall by that
position.
He clarified that by that he meant that the pickup truck in
question was not a passenger vehicle. Appellant's counsel
also, during his submission, advised the Court that the claim for
an ITC was denied under section 202(2) but that a restricted ITC
was allowed under subsection 202(4). It is not necessary to
analyse subsection 202(4) because if the Appellant fails in his
argument respecting subsection 202(2) the assessment will stand
on the basis described.
[18] Appellant's counsel stated that his
case was very simple, namely that the pickup truck was not an
"automobile" within the meaning of that expression
contained in paragraph (a) of the definition of
"automobile". Whereas that definition refers to a motor
vehicle as being designed primarily to carry individuals, counsel
submitted that the pickup is designed primarily to haul and to
tow, the fact that it carries passengers being secondary.
[19] Respondent's counsel submitted that
the pickup truck was designed primarily to carry individuals on
highways and streets he argued further that:
... these vehicles do carry individuals on highways and
streets. They carry the Appellant, the Appellant's wife and
family on long distance trips.
He then said that they (pickup trucks) are equipped with all
the safety features one would find in an automobile.
... I am using that word not in the definition of the
Act, but in the plain and ordinary meaning that is necessary to
have in accordance with highway traffic laws. A vehicle that is
not designed to carry individuals on highways and streets would
not have to comply with any safety regulations.
[20] Respondent's counsel also said that
automobile design is something that requires evidence and expert
testimony as to what that vehicle was designed primarily to do.
He said:
You need more evidence than was given in Court today with
respect to the design of that automobile.
ANALYSIS AND CONCLUSION
[21] I cannot accept Respondent's
counsel's submission that expert evidence is required to
determine the purpose of the design of an automobile. In common
understanding and usage, the purpose of an automobile, and
consequently the reason for its design, is to carry individuals.
Accordingly, without reading more than paragraph (a) of
the definition of "automobile", a pickup truck is not
included therein because, again, in common understanding and
usage, its purpose and, therefore, the purpose of its design, is
to transport goods and equipment. Its adjectival design and
purpose is "pick-up truck".
[22] It is interesting to note that the
definition of "automobile" as it read prior to its 1994
amendment applicable to taxation years and fiscal periods
beginning after 1987 was as follows:
"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, and
(b) a motor
vehicle that is
(i) of a type
commonly called a station wagon or van or a similar vehicle if it
is equipped in a reasonably permanent way to carry more than the
driver and 2 passengers but not more than the driver and 8
passengers, or
(ii) of a type
commonly called a van or pick-up truck or a similar vehicle
unless it is designed or adapted to carry not more than the
driver and 2 passengers and is used primarily for the
transportation of goods or equipment in the course of a business
or for the purposes of earning income,
but does not include
(c) an
ambulance,
(d) a motor
vehicle acquired primarily for use as a taxi or in connection
with funerals, or
(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.
That definition clearly included a pick-up truck but that
clear inclusion disappeared in the definition applicable to the
period in question. That applicable definition of
"automobile" is found in paragraph (a). The
definition formerly, in conjunctive fashion, included a pick-up
truck. Now the positive part of the definition is limited to:
a motor vehicle that is designed ... primarily to carry
individuals on highways and streets and that has a seating
capacity for not more than the driver and eight passengers.
[23] It then seeks to exclude certain types
of motor vehicles including a pick-up truck "that has
seating capacity for not more than the driver and 2
passengers." The present definition not only invites but
commands the reader to query whether any kind of truck would fall
within the meaning of paragraph (a) because a truck
generally, and the pick-up truck under examination in this appeal
was clearly not
designed ...primarily to carry individuals and
their personal luggage.
(emphasis added)
[24] Going beyond paragraph (a) we
read that the automobile as defined therein does not include, as
set out in paragraph (e) a "motor vehicle"
commonly called a pickup truck that has a "seating capacity
for not more than the driver and 2 passengers and ... is
used primarily for the transportation of goods or equipment in
the course of gaining or producing income". Even if a
"pick-up truck" could be said to be a motor vehicle
while "designed ... primarily to carry individuals and
their personal luggage" it is excluded from the definition
of automobile by virtue of its "seating capacity".
[25] The existence of paragraph
(e)(i) presupposes that a pickup truck is an automobile
within the meaning of (a). It then appears to contemplate
that a pickup truck would normally be an automobile but will not
be an automobile if it has "seating capacity" for not
more than the driver and two passengers. Even if one were to
conclude that a pickup truck is an "automobile" under
paragraph (a) the question of what is meant by
"seating capacity" under (e)(i) arises. Surely
that term must be interpreted in the context of common language
usage. That term, not being defined, an ordinary reasonable
person would likely conclude that it is seating capacity in the
sense of a normal comfortable automobile. This is not the case
respecting the vehicle in question. Access to the back of its
extended cab is not easy, there are no shoulder belts, there is
limited space for legs and knees, there is no protection for the
head which is, as demonstrated, five inches from the glass at the
rear of the truck. There would be no expectation that this would
amount to satisfactory seating capacity for someone taking a
journey of some distance. The evidence indicated that sitting
there was an uncomfortable experience. There may be vans which
have a number of seats which could be described as fitting the
description of normal "seating capacity". I will not
venture into an examination of what is meant by "similar
vehicle" as those words are used in paragraph (e). It
is my conclusion that the pickup truck in question, if this
discussion were even necessary, does not have a "seating
capacity for more than the driver and 2 passengers".
[26] The other condition in (e)(i) is
that "in the taxation year in which it is acquired" the
pickup truck is used "primarily for the transportation of
goods or equipment in the course of gaining or producing
income". It must be remembered that the period in question
is the month of December in 1997 and that that is the period
under examination in this appeal. Although there is no evidence
as to its specific use in that month there is ample evidence that
the truck was purchased for use in the conduct of the farming
operation, the Appellant and his wife owning a passenger car at
the time of such purchase.
[27] With respect to paragraph
(e)(ii) I am faced with the same lack of evidence as to
the use of the pickup in 1997. In respect of both paragraphs (i)
and (ii) even in the absence of evidence as to physical use, it
is my conclusion that, it having been purchased for the farming
operation its use for the part of the month of December 1997 was
that purpose, no evidence as to any other purchase existing.
[28] Accordingly, the appeal will be allowed
with costs.
Signed at Ottawa, Canada this 13th day of August, 2004.
Bell, J.
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