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Citation: 2004TCC455
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Date: 20040916
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Docket: 2003-4377(IT)I
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BETWEEN:
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LESLIE GILLIS,
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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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____________________________________________________________________
AMENDED REASONS FOR JUDGMENT
Beaubier, J.
[1] This appeal pursuant to the
Informal Procedure was heard at Calgary, Alberta, on June 17,
2004. The Appellant testified. The Respondent called Mike
Simmerson, auditor respecting this matter.
[2] Paragraphs 7 to 19 of the Reply to
the Notice of Appeal outline the matters in issue. They read:
7. In
computing income for the 2001 taxation year, the Appellant
reported:
(a) income from
employment received from Houlihans Restaurant (1993) Ltd. (the
"Employer") in the amount of $7,431.29; and
(b) income from tips
received through her employment with the Employer in the amount
of $743,00, being 10% of the employment income received from the
Employer.
8. The
original Notice of Assessment for the 2001 taxation year was
dated and mailed to the Appellant on April 8, 2002.
9. By letter
dated January 16, 2003, the Appellant was requested to disclose
the full amount of tips received by her in the 2001 taxation
year.
10. By letter dated
January 26, 2003, the Appellant submitted a letter stating she
received additional tips in the amount of $5,555.00 for the 2001
taxation year, being in addition to tips in the amount of $743.00
previously reported.
11. In reassessing the
Appellant for the 2001 taxation year on July 14, 2003, the
Minister of National Revenue (the "Minister") increased
income from tips received through her employment with the
Employer by $9,703.00, from $743.00 to $10,446.00.
12. On August 11, 2003,
the Appellant served on the Minister a Notice of Objection to the
reassessment dated July 14, 2003.
13. By Notification of
Confirmation dated September 26, 2003, the Minister
confirmed the reassessment dated July 14, 2003.
14. In so reassessing the
Appellant for the 2001 taxation year and in so confirming the
reassessment, the Minister made the following assumptions of
fact:
(a) during the 2001
taxation year, the Appellant was employed in the hospitality
industry with the Employer;
(b) the Worker was
employed as part of the service of staff of the Employer;
(c) the Appellant
was paid at a rate of $6.75 per hour during the 2001 taxation
year;
(d) the Appellant
received employment income from the Employer in the amount of
$7,431.29 for the 2001 taxation year;
(e) included in the
Appellant's employment income was vacation pay calculated at
a rate of 6% of $420.67;
(f) the
Appellant worked 1,039 hours for the Employer during the 2001
taxation year, calculated as follows:
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Employment Income
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$7,431.29
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Less: Vacation Pay
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420.67
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Employment Income Before Including Vacation Pay
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$7,010.62
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Divided By: Hourly Rate of Pay
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6.75
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Hours Worked in 2001 (rounded)
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1,039
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(g) during the 2001
taxation year, the Employer made cash or debit cards sales in the
amount of $56.65 per hour and credit card sales in the amount of
$54.00 per hour for each hour worked by one of its service
staff;
(h) during the 2001
taxation year, the service staff of the Employer received tips
from customers at a rate of 10.49% on credit card sales and 10%
on cash or debit card sales;
(i) the
Appellant paid a charge of 2.5% on credit card tips in respect of
paperwork, extra money for the cooks on weekends and a walkout
fund;
(j) 10% of the
tips received by the Appellant were paid out to the support
workers of the Employer;
(k) the Appellant
received net tips through her employment with the Employer in the
amount of $10,446.00 in the 2001 taxation year as calculated in
Schedule A attached to and forming part of the Reply to the
Notice of Appeal;
(l) in
computing her income for the 2001 taxation year, the Appellant
did not include into income tips received through her employment
with the Employer in the amount of $9,703.00; and
(m) the amount of tip
income received by the Appellant as determined by the Minister
was reasonable.
B.
ISSUE TO BE DECIDED
15. The issue to be
decided is whether the Minister properly reassessed the Appellant
for the 2001 taxation year to include into income addition income
from tips in the amount of $9,703.00, being in addition to the
tip income originally reported by the Appellant in the amount of
$743.00.
C. STATUTORY
PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT
16. He relies on section 3
and subsection 5(1) of the Income Tax Act, R.S.C. 1985
(5th Supp.) c. 1, (the "Act") as amended for the
2001 taxation year.
17. He submits that the
Appellant received income from tips through her employment with
the Employer in the amount of $10,446.00 for the 2001 taxation
year.
18. He further submits
that the Minister properly assessed the Appellant for the 2001
taxation year to include into income additional income received
from tips, which was not previously reported, in the amount of
$9,703.00 in accordance with section 3 and subsection 5(1) of the
Act.
19. In the alternative, he
submits that if the Court should find that Appellant did not
receive additional tip income in the amount of $9,703.00 as
assessed by the Minister, which is not admitted but is denied,
the Appellant did not receive additional tip income
in the amount of at least $5,555.00 as voluntarily
disclosed by the Appellant in her letter dated January 26,
2003.
[3] Assumptions 14 (a), (b), (c), (d),
(e), (f), (i) and (j) were not refuted. As to the remainder:
(g) and
(h):
These figures were based on the total amount of credit card
reported tips for all employees at Houlihan's Restaurant in
Red Deer, Alberta. The cash sales' tips were calculated based
on the credit card numbers. As the Appellant pointed out and the
auditor admitted, they will vary with each employee - waitress or
waiter.
(i) and
(j):
The Appellant also paid a sum to the cook and was liable to
"walk-out" charges which should reduce the amount in
question. "Walk-out" charges are levied against
her by Houlihan's respecting customers who walk out without
paying their bills.
[4] The Appellant submitted Exhibit
A-1, dated January 26, 2003, to the Respondent in the course of
the audit. In it she admitted an extra $5,555 in tips received,
based on credit card amounts. She testified that her cash tips
amount to about 10% more, but that these were off set by her
various payments or charges respecting support staff, cook,
et cetera as previously itemized.
[5] Except for the global calculations
arrived at in the course of the audit, the Appellant's
statements described in paragraph [4] were not contested. The
Court accepts her testimony as a true experience. She was a
part-time worker and income will vary by shift, by cash or credit
sales, and by the personalities of the worker and the customers
he/she attracts or attends upon.
[6] For these reasons, the appeal is
allowed and the matter is referred to the Minister of National
Revenue on the basis described in paragraph 19 of the Reply to
the Notice of Appeal.
[7] The amount found in favour of the
Appellant exceeds one-half of the amount assessed. Therefore the
Appellant is entitled to her costs of prosecuting the appeal in
Calgary. She had to travel from Red Deer and back, a distance of
about 320 kilometres round-trip. She is awarded her out-of-pocket
disbursements incurred in prosecuting her appeal, which the Court
fixes at $250.
These
Amended Reasons for Judgment are issued in substitution for the
Reasons for Judgment dated June 28, 2004.
Signed at Vancouver, British Columbia, this 16th day of
September, 2004.
Beaubier, J.
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