Date: 19990216
Docket: 98-707-IT-I
BETWEEN:
YVON ROYER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for judgment
Lamarre Proulx, J.T.C.C.
[1] This appeal under the informal procedure concerns the
1994, 1995 and 1996 taxation years.
[2] The issue is whether the appellant is entitled to deduct
motor vehicle expenses under paragraph 8(1)(h.1) of the
Income Tax Act (“the Act”).
[3] The facts on which the Minister of National Revenue
(“the Minister”) relied in making his assessments are
set out as follows in paragraphs 9 and 11 of the Reply to the
Notice of Appeal (“the Reply”):
[TRANSLATION]
9. In computing his income for the 1994, 1995 and 1996
taxation years, the appellant claimed, inter alia, motor
vehicle expenses of $5,842.95 for the 1994 taxation year,
$5,361.52 for the 1995 taxation year and $6,150.68 for the 1996
taxation year.
. . .
11. In making the reassessments dated June 2, 1997, for the
1994, 1995 and 1996 taxation years, the Minister assumed,
inter alia, the following facts:
(a) during the years at issue, the appellant was employed by
the Canadian National Railway Company (hereinafter “the
Company”);
(b) during the years at issue, the appellant received from the
Company a non-taxable allowance for motor vehicle expenses
based on the number of kilometres he drove;
(c) during the years at issue, the appellant’s place of
business was in the different places where he had to go to carry
out the duties of his employment;
(d) the motor vehicle expenses claimed by the appellant in his
tax returns for the taxation years at issue were accordingly not
deductible, since the appellant received a non-taxable
allowance from the Company.
[4] The appellant testified at the request of his agents. Yves
Côté, a Revenue Canada appeals officer,
testified at the request of counsel for the respondent.
[5] The appellant is a heavy equipment operator. He explained
that his employer told him on Friday or over the weekend where
his services would be required during the following week. The
places in question were his employer’s various railway
yards. They included the Turcot yard in Montréal and other
yards in such places as Coteau, Drummondville, Richmond,
St-Lambert, Ste-Hélène, Windsor Mills and
Ottawa.
[6] The appellant’s tax returns for each of the years at
issue were filed as Exhibits I-1 and I-2. Form T2200, Declaration
of Conditions of Employment, shows, for example, that in 1995 the
appellant received $.1305 a kilometre for driving 34,480
kilometres, for a total of $4,499.64. The form also
shows—and this may seem contradictory—that the
appellant was required to pay his own motor vehicle expenses. For
the years at issue, the appellant did not consider his
employer’s travel allowances sufficient. He therefore
calculated his transportation expenses and deducted his
employer’s allowances.
[7] Exhibit A-2 is the appellant’s logbook. He was
reimbursed by his employer based on the number of kilometres
entered. Exhibit A-5 is an excerpt from the collective agreement
dealing with travel allowances.
[8] The Minister’s position is difficult to determine.
On the one hand, by not including the motor vehicle allowances in
the appellant’s income, he is admitting that the travel
allowances received by the appellant were received for travelling
in the course of his employment. However, paragraph 11(c) of the
Reply alleges that the appellant was merely going to his
employer’s places of business, which would imply that the
travel expenses were personal expenses. In such circumstances,
the allowances received should be included in the
appellant’s income as an employee benefit.
[9] The appeals officer explained to the Court that each of
the employer’s work sites is a place of business of the
employer and that the appellant therefore cannot avail himself of
paragraph 8(1)(h.1) of the Act. He told the Court
that in theory the allowance the appellant received from his
employer should have been taxable as a personal benefit under
paragraph 6(1)(b) of the Act. He did not give any
specific reasons for why this was not done.
[10] The notice of confirmation filed as Exhibit A-1 sets out
another concept, namely proof of the claimed expenses. That
notice reads as follows:
[TRANSLATION]
You have not shown that the travel expenses you incurred in
the performance of your duties were greater than the allowance of
$4,045.00 for 1994, $4,499.64 for 1995 and $2,785.00 for 1996
that you received from your employer. You therefore cannot deduct
the amounts of $5,842.95 in 1994, $5,361.52 in 1995 and $6,150.68
in 1996 as motor vehicle expenses under paragraph 8(1)(h).
Moreover, according to subsection 8(2), you cannot deduct those
amounts in computing your income from an office or
employment.
[11] Counsel for the respondent’s written argument
echoes the Minister’s ambiguous position:
[TRANSLATION]
15. The respondent’s position is that the appellant is
not entitled to deduct the expenses he incurred in travelling
from his home to his place of work.
16. The respondent submits that, from the appellant’s
point of view, the employer’s place of business can be
considered to be each of the work sites listed in the
appellant’s logbook.
17. The evidence showed that the appellant’s work
required him to travel in the St. Lawrence area.
18. Although it is admitted that the travel expenses were
incurred, the fact remains that the Minister of National Revenue
considers the appellant’s travel between his home and his
place of work to have been personal in nature. Unquestionably,
personal expenses are not deductible.
[12] If the allowances were for personal expenses, they should
have been included in the appellant’s income under
paragraph 6(1)(b) of the Act. Yet they were not
included. I do not think that this was merely an oversight by the
Minister. The fact is that, according to the logic of the
Act, those allowances were not for personal expenses, as
we shall see below.
[13] Counsel for the respondent referred to Madsen v.
M.N.R., 70 DTC 1475, and Davey v. M.N.R., 61 DTC 531,
to show that a work site is a place of business and that an
employee is not entitled to deduct travel expenses incurred in
getting there. The former case involved a construction worker who
was steadily employed at a single site, while the latter case
involved a taxpayer who worked for three employers but at a
single site for each employer. The facts are, on their very face,
different from those of this case, in which the employee must
work at a number of sites located far from one another.
[14] Counsel also referred to Viitkar v. M.N.R., 76 DTC
1073. The facts of that case are the same as those in the instant
case: the employee had to work at a number of his
employer’s sites. However, I believe that that decision has
been modified by recent decisions of the Federal Court (Trial
Division) and the Federal Court of Appeal: The Queen v.
Chrapko, 84 DTC 6544 (F.C.T.D.), The Queen v.
Chrapko, 88 DTC 6487 (F.C.A.), and The Queen v.
Merten, 90 DTC 6600 (F.C.T.D.). I refer to the
comments of Jerome A.C.J. in Chrapko (F.C.T.D.),
supra:
. . . Rather, it seems to me to have been the intention of
Parliament to establish an allowance for those who may be in a
position to control the cost of travelling to their principal
place of employment, but because they are required to report to
work at different places, are not in the same position with
respect to the other locations. . . .
I refer also to those of Strayer J. in Merten,
supra:
. . . On appeal the Court of Appeal has implicitly qualified
those words by recognizing that a taxpayer can deduct expenses
for travelling from his home to a place of work as long as that
place of work is other than the place at which he
“usually” works. . . .
[15] Paragraph 8(1)(h.1) of the Act reads as
follows:
(1) In computing a taxpayer’s income for a taxation year
from an office or employment, there may be deducted such of the
following amounts as are wholly applicable to that source or such
part of the following amounts as may reasonably be regarded as
applicable thereto:
. . .
(h.1) Motor vehicle travel expenses –
where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of the
office or employment away from the employer’s place of
business or in different places, and
(ii) was required under the contract of employment to pay
motor vehicle expenses incurred in the performance of the duties
of the office or employment,
amounts expended by the taxpayer in the year in respect of
motor vehicle expenses incurred for travelling in the course of
the office or employment, except where the taxpayer
(iii) received an allowance for motor vehicle expenses that
was, because of paragraph 6(1)(b), not included in
computing the taxpayer’s income for the year, or
(iv) claims a deduction for the year under
paragraph (f).
[16] On the basis of the case law already cited, it is my view
that paragraph 8(1)(h.1) of the Act provides
for two situations: the first is where an employee is ordinarily
required to carry on his or her duties away from the
employer’s place of business, and the other is where an
employee is ordinarily required to carry on his or her duties in
different places. I believe that the first situation covers
individuals who report to one place, which is a place of
business, and who must ordinarily carry on their duties away from
that place.
[17] As for the second situation, I do not think that the
expression “different places” excludes a place of
business. I accept the position of counsel for the respondent,
which is supported by the above-mentioned case law, that a work
site is a place of business. If an employee must carry on his or
her duties at several places of business, those places of
business come precisely within the meaning of “different
places”. If the employee ordinarily works at one of those
different places and works at the others at the employer’s
discretion, travel to the usual place of business will be
personal expenses. The conditions of employment are important in
being able to determine which is the usual place of work and
which constitute the different places. The distance from one
place to another and changes in the place of work based on the
employer’s needs will have as a consequence, inter
alia, that the places of work will be different places.
[18] Counsel for the respondent referred to Interpretation
Bulletin IT-522R, paragraph 33 of which reads as
follows:
33. Concerning ¶ 31(b) above, the requirement will be met
where the following conditions are satisfied:
. . .
(b) the employee’s reasonable travel costs must not be
fully reimbursed by the employer. In determining the
reasonableness of the amount claimed by the employee for travel
costs, consideration will be given to the mode of transportation
used by the employee versus the mode of transportation that could
be used to satisfy the requirement to travel.
[19] In her written argument, counsel for the respondent
submitted the following:
[TRANSLATION]
36. In this regard, we submit to the Court that this is
exactly what the collective agreement refers to. The employer
grants the public transport rate as it considers that its
employees could use that mode of transportation.
[20] In my view, under the usual rules of pleading it is too
late to make this type of argument. It should have been made in
the Reply. For the exception set out in subparagraph
8(1)(h.1)(iii) of the Act to be applicable, the
Reply should have been based on the fact that the allowance
received by the appellant was reasonable. Under subparagraph
6(1)(b)(vii.1), reasonable allowances for the use of a
motor vehicle received by an employee from the employer for
travelling in the performance of the duties of his or her
employment are not to be included in computing income from
employment. To be eligible for the deduction provided for in
paragraph 8(1)(h.1) of the Act, the taxpayer would
then have had to prove that the allowances were not
reasonable.
[21] The agents for the appellant have requested the
reimbursement of the expenses the appellant incurred in obtaining
professional advice on this matter. Section 10 of the
Tax Court of Canada Rules (Informal Procedure)
(“the Rules”) reads as follows:
10(1) Costs on an appeal shall be at the discretion of the
judge by whom the appeal is disposed of in the circumstances set
out in subsection 18.26(1) of the Act which reads as
follows:
“18.26 (1) Where an appeal referred to in section
18 is allowed and the judgment reduces the aggregate of all
amounts in issue or the amount of interest in issue, or increases
the amount of loss in issue, as the case may be, by more than one
half, the Court may award costs to the appellant in accordance
with the rules of Court.”
(2) A judge may direct the payment of costs in a fixed sum, in
lieu of any taxed costs.
[22] In The Queen v. Munro, 98 DTC 6443, the Federal
Court of Appeal determined that the only costs that may be
awarded are those provided for in the Rules. I cite the
following from paragraph 14 of that decision:
Costs permissible under the Informal Procedure Rules are of
two kinds: an award of a fixed sum, in lieu of any taxed
costs (rule 10(2)); or an award of taxed costs, which are
payable by one party to another. These taxed costs are
classified, for all practical purposes, under two headings: costs
as between party and party and costs as between solicitor and
client. . . .
[23] The appeal is allowed with payment of a fixed sum of $600
to the appellant.
Signed at Ottawa, Canada, this 16th day of February 1999.
“Louise Lamarre Proulx”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
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