Date: 20010712
Docket: 2000-5177-IT-I
BETWEEN:
JON A. BEKKERS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Hamlyn, J.T.C.C.
FACTS
[1]
These appeals arise as a result of a Notice of Reassessment dated
May 3, 1999 in which the Minister of National Revenue (the
"Minister") included in the Appellant's income
additional automobile benefits for the 1996 and 1997 taxation
years in the amounts of $2,115.90 and $6,374.76 respectively.
[2]
Commencing on July 2, 1996 and thereafter and throughout 1997,
the Appellant received remuneration as an employee of Lakeview
Shopping Centre Limited ("Lakeview Ltd.") from Access
Communications Incorporated (the "Company"), a sister
company of Lakeview Ltd. The Appellant was employed by Lakeview
Ltd. but for pension reasons was paid by the Company and the
Company was reimbursed by Lakeview Ltd. The Appellant was the
President of Lakeview Ltd. At all material times, commencing July
2, 1996 and thereafter, the Appellant had the use of an
automobile provided by the Company ("Company car"), as
agent for its sister company, Lakeview Ltd. At all times during
1996 and 1997, the Appellant's spouse had the use of a Toyota
Tercel automobile. The Toyota Tercel automobile is not in
issue.
[3]
The Appellant states that he used the Company car for personal
driving less than 1,000 kilometres a month, representing
less than 10% of the total usage of the Company car during 1996
and 1997. He also states that all or substantially all of the
distance driven by the Company car during 1996 and 1997 was in
connection with or in the course of the Appellant's office or
employment with Lakeview Ltd. The Appellant states that the above
assertions are corroborated by a travel log kept by himself
during the first six months of 1999 in which year he had the same
work duties and travel schedule as in each of 1996 and 1997. As a
result, the Appellant contends that he is entitled to a reduced
standby charge pursuant to paragraph 6(1)(e) of the
Income Tax Act (the "Act") and a
consequential adjustment of the assessed operating expense
benefit pursuant to paragraph 6(1)(k) of the
Act.
[4]
The Minister states that the Appellant did not use the Company
car all or substantially all of the time for employment purposes.
The Minister states that the Appellant did not maintain a record
of kilometres driven during 1996 and 1997.
ISSUE
[5]
The issue is whether the Appellant is entitled to a reduced
standby charge and corresponding adjustment to the automobile
operating expense benefit assessed for his 1996 and 1997 taxation
years.
STATUTORY FRAMEWORK
[6]
The relevant provisions are:
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 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;
(k) 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 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, ½ 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;
6. (2) 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 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 the lesser of
(a) 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
(b) the value determined for B for the year under this
subsection in respect of the standby charge for the automobile
during the total available days,
except that the amount determined under paragraph (a)
shall be deemed to be equal to the amount determined under
paragraph (b) unless
(c) the taxpayer is required by the employer to use
the automobile in connection with or in the course of the office
or employment, and
(d) all or substantially all of the distance
travelled by the automobile in the total available days is in
connection with or in the course of the office or
employment;
B
is the product obtained when 1,000 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.
230. (1) Every person carrying on business and every
person who is required, by or pursuant to this Act, to pay
or collect taxes or other amounts shall keep records and
books of account (including an annual inventory kept in
prescribed manner) at the person's place of business or
residence in Canada or at such other place as may be designated
by the Minister, in such form and containing such information as
will enable the taxes payable under this Act or the taxes or
other amounts that should have been deducted, withheld or
collected to be determined.
[emphasis added]
DAILY ROUTINE
[7]
On typical workdays during 1996 and 1997 the Appellant drove the
Company car from his Dartmouth residence and travelled two
kilometres to his Dartmouth office or 2.5 kilometres from his
residence to his infant daughter's daycare and then on to
work, all of which is considered by the Appellant to be personal
travel.
[8]
The Appellant drove the Company car extensively beyond the
Dartmouth office for work-related purposes for the Keating Group
of Companies. The evidence in relation to the Appellant's
work-related duties was clear, straightforward and did involve
driving with respect to other Keating companies. I have concluded
this driving was part of his duties with respect to Lakeview
Ltd.
THE KEATING GROUP OF COMPANIES
[9]
Lakeview Shopping Centre Limited, Access Communications Inc. and
Altimax Developments, a division of Lakeview Shopping Centre
Limited., are all
part of the Keating Group of Companies. The Appellant's
father-in-law held the controlling interest in each one of the
companies in the group. The Appellant's work duties were
primarily related to Lakeview Shopping Centre, however these
duties also involved other companies of the Keating Group.
THE ABSENCE OF A "LOG"
[10] The
Appellant, for 1996 and 1997, did not maintain a travel log.
Prior to to his employment with Lakeview Ltd., the Appellant
worked for Proctor & Gamble and was familiar with the
maintenance of a travel log.
[11] For the
first six months in 1999 the Appellant maintained a travel log of
the kilometres travelled. The Appellant stated he had the same
work duties and responsibilities and travel schedules in 1996 and
1997 as he had in the first six months of 1999.
ANALYSIS
AUTOMOBILE STANDBY CHARGE
[12] Paragraph
6(1)(e) provides for a standby charge for an automobile
that is made available to a taxpayer by the taxpayer's
employer or a person related to the employer in a given taxation
year. The standby charge brings into income the value of the
benefit derived by a taxpayer from a company car that is made
available for the taxpayer's personal use. Subsection 6(2)
provides a formula for determining the value of such benefit. The
definition of "A" found in subsection 6(2) provides for
a reduction in the standby charge that is to be included in a
taxpayer's income, if certain conditions are met. In The
Queen v. Adams et al.,[1]Robertson J. reviewed the conditions required to
qualify for a reduced standby charge. He stated at
page 6271:
The so-called "minimal personal use"
exception is contained within the definition of "A"
set out in subsection 6(2). Essentially, the exception enables
an employee to obtain a reduction in the amount of the standby
charge, otherwise applicable, if the following
conditions precedent are satisfied. First, the employer must
require the employee to use the automobile in the performance of
his or her duties of employment. Second, "all or
substantially all" of the distance travelled by the
automobile during the time it was made available to the employee
must be in connection with or in the course of his or her
employment. In this regard, the Minister has adopted the policy
that at least 90% of the automobile's use must be for
employment purposes: see IT-63R4. Third, personal use of the
automobile must be less than 12,000 km per year. Thus, employees
who use an employer's automobile exclusively for business
purposes are not required to include in income a standby charge.
This is so because "A" will equal zero. Employees who
make personal use of their employer's automobile are entitled
to a reduction in the standby charge, provided that such use is
minimal; that is to say all three conditions precedent are
met.
[13] The
Appellant has argued that he meets all of the above conditions
required to qualify for a reduced standby charge. The issue then
becomes whether the Appellant is able to substantiate that he in
fact has met the required conditions.
[14] In
Tremblay v. The Queen,[2] Judge Tardif enunciated that with respect to
claiming a reduced standby charge, it is not sufficient for an
appellant to merely allege repetitively that their personal use
of a company car was less than 10%. Also, Judge Tardif stated
that while there is no obligation to keep a log book, the
decision not to maintain one compounds the evidentiary problem
faced by a taxpayer having to prove with precision the personal
content in the total kilometres involved.
[15] Section
230, as it applies to this case, provides that every person that
is required by the Act to pay taxes must keep records at
the person's place of residence in Canada in such form and
containing such information as will enable the taxes payable
under the Act to be determined.
[16] In
Archambault v. Canada,[3] Judge Archambault reviewed the jurisprudence
relating to section 230 and stated at paragraph 44:
Associate Chief Judge Christie provided a very good summary of
the state of the law on that issue [s.230] in Kay v.
Canada, [1994] T.C.J. No. 487, para. 9:
It may be appropriate to say something about taxpayers keeping
records and books of account. Under subsection
230(1) of the Income Tax Act every person carrying on
business and every person who is required to pay taxes shall keep
records and books of account in such form and containing such
information as will enable the taxes payable under the Act to be
determined. Failure to comply with the subsection will not, of
itself, result in the dismissal of an appeal against a
reassessment of liability to income tax. But it could interfere
with an appellant's ability to discharge the burden of proof
on him of showing that, on a balance of probability, the
reassessment is in error. This was recently dealt with by the
Federal Court of Appeal in Sidhu v. M.N.R., 93 D.T.C. 5453
(F.C.A.). Mahoney J.A. in delivering the judgment of the Court
said at page 5454-5:
Associate Chief Judge Christie provided a very good summary of
the state of the law on that issue [s.230] in Kay v.
Canada, [1994] T.C.J. No. 487, para. 9:
It may be appropriate to say something about taxpayers keeping
records and books of account. Under subsection
230(1) of the Income Tax Act every person carrying on
business and every person who is required to pay taxes shall keep
records and books of account in such form and containing such
information as will enable the taxes payable under the Act to be
determined. Failure to comply with the subsection will not, of
itself, result in the dismissal of an appeal against a
reassessment of liability to income tax. But it could interfere
with an appellant's ability to discharge the burden of proof
on him of showing that, on a balance of probability, the
reassessment is in error. This was recently dealt with by the
Federal Court of Appeal in Sidhu v. M.N.R., 93 D.T.C. 5453
(F.C.A.). Mahoney J.A. in delivering the judgment of the Court
said at page 5454-5:
The law places the onus on the taxpayer in such cases to prove
wrong the Minister's reassessment on the basis that the
taxpayer is in a better position to prove what actually happened,
if he chooses and is able to do so. Unfortunately, the plaintiff
has not
been willing or able to particularize in any way the purchases
made by him. He has confirmed on many occasions that the figures
provided by his accountant as to his total purchases were
correct. If he had made any effort to corroborate this and his
oral evidence had seemed forthcoming and credible, it might have
been possible to find in his favour even in the absence of any
vouchers, receipts or other written records. Unfortunately
neither of these requirements were met.
[emphasis added]
[17] The
Appellant does not have any records pertaining to his use of the
Company car for the 1996 and 1997 taxation years. However, this
does not necessarily bar him from claiming a reduced standby
charge. Despite a lack of records kept, corroborating oral and
other evidence, if credible, can nevertheless discharge the
Appellant's evidentiary task of proving on a balance of
probabilities that he used the Company car more than 90% for
employment purposes.
CONCLUSION
[18] The
Appellant's evidence was credible and uncontroverted. I am
satisfied he established on a balance of probabilities that for
the periods in question the personal use kilometres was less than
10% of the total kilometres travelled in the Company car that was
made available to him and this personal use was less than 12,000
kilometres per year. From the evidence I conclude that his
employer required him to use the vehicle in the performance of
his duties of employment and all or substantially all of the
distance travelled by the Company car during the time the vehicle
was made available to him was in connection with and in the
course of his employment. Thus, the Appellant is entitled to a
reduced standby charge and corresponding adjustment to the
automobile operating expense benefit assessed in relation to the
Company car.
DECISION
[19]The appeals for 1996 and 1997 are allowed, with costs, and
the assessments are referred back to the Minister of National
Revenue for reconsideration and reassessment on the basis that
all or substantially all of the distance travelled in the Company
car in the total available days was in connection with the
Appellant's employment with Lakeview Shopping Centre
Limited.
Signed at Ottawa, Canada, this 12th day of July 2001.
"D. Hamlyn"
J.T.C.C.
COURT FILE
NO.:
2000-5177(IT)I
STYLE OF
CAUSE:
Jon A. Bekkers and
Her Majesty the Queen
PLACE OF
HEARING:
Halifax, Nova Scotia
DATE OF
HEARING:
June 27, 2001
REASONS FOR JUDGMENT BY: The
Honourable Judge D. Hamlyn
DATE OF
JUDGMENT:
July 12, 2001
APPEARANCES:
Counsel for the Appellant: Bruce S. Russell
Counsel for the
Respondent:
Marcel Prevost
COUNSEL OF RECORD:
For the
Appellant:
Name:
Bruce S. Russell
Firm:
McInnes Cooper
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-5177(IT)I
BETWEEN:
JON A. BEKKERS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the
appeals of
Gregory J. Keating (2000-5178(IT)I), on
June 27, 2001 at Halifax, Nova Scotia,
by the Honourable Judge D. Hamlyn
Appearances
Counsel for the
Appellant: Bruce
S. Russell
Counsel for the Respondent: Marcel
Prevost
JUDGMENT
The appeals for 1996 and 1997 are allowed, with costs, and the
assessments are referred back to the Minister of National Revenue
for reconsideration and reassessment in accordance with the
attached Reasons for Judgment.
Signed at Ottawa, Canada, this 12th day of July 2001.
J.T.C.C.
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