REASONS
FOR JUDGMENT
Favreau J.
[1]
The appellant filed an appeal before this Court
to challenge the validity of the reassessments dated October 28, 2013, with
respect to the 2010 and 2011 taxation years and the initial assessment dated October
31, 2013, with respect to his 2012 taxation year, which were made by the Minister of National Revenue (the Minister) under the Income Tax Act, R.S.C.,
1985, c. 1 (5th Supp.) as it read in its application to the taxation
years at issue (the Act).
[2]
In making the reassessments dated October 28,
2013, the Minister disallowed the appellant’s employment expenses of $30,300 for
each of the 2010 and 2011 taxation years.
[3]
Under the initial assessment dated October 31, 2013,
the Minister disallowed the appellant’s employment expenses of $30,750 for the 2012
taxation year.
[4]
In determining the tax payable by the appellant for
the 2010, 2011 and 2012 taxation years, the Minister assumed the following facts:
(a)
During the taxation years at issue, the
appellant was employed with the Ministère du Revenu du Québec and then the
Agence du Revenu du Québec (the employer);
(b) The appellant has been working at its employer’s offices in Toronto without
interruption since at least 2005;
(c) Since August 9, 2004, the appellant has been renting an apartment located
at 1003-62 Wellesley Street West, Toronto;
(d) The appellant lives there with his wife;
(e) The monthly rent paid by the appellant for this dwelling was $2,525 per
month for the period from October 1, 2009, to June 30, 2012, and $2,600 per
month for the period from July 1, 2012, to September 30, 2014;
(f) In filing his income tax returns for the 2010, 2011 and 2012
taxation years, the appellant reported the following employment income:
(i)
2010: $133,564, including $74,129 in employment income,
as well as an amount of $59,435 received from his employer as taxable allowances
and benefits;
(ii) 2011: $135,769, including $75,204 in employment income, as well as
an amount of $60,528 received from his employer as taxable allowances and
benefits;
(iii)
2012: $136,534, including $75,623 in employment
income, as well as an amount of $60,900 received from his employer as taxable
allowances and benefits;
(g) The respective amounts of $59,432, $60,528 and $60,900 received by the
appellant during the 2010, 2011 and 2012 taxation years were reported by the appellant’s
employer T4 slips (Statement of Remuneration Paid) as taxable allowances and
benefits;
(h) The respective amounts of $59,432, $60,528 and $60,900 received by the
appellant from his employer during the taxation years at issue, covered expenses
incurred for his dwelling in Toronto, as well as a provision for additional
taxes related to that allowance;
(i)
In filing his income tax returns for the 2010,
2011 and 2012 taxation years, the appellant claimed a deduction for the
respective amounts of $30,300, $30,300 and $30,750, as other employment
expenses;
(j)
The amounts claimed by the appellant as employment
expenses reflect the rents he paid for his apartment in Toronto during the
taxation years at issue.
[5]
At the outset of the hearing, the appellant amended
the relief sought. He withdrew his challenge to the deductibility of expenses
related to his employment and is now arguing that the allowance in respect of
lodging received from his employer should not have been included in computing
his income pursuant to subsection 6(6) of the Act.
[6]
Subsection 6(6) of the Act provides as follows:
Employment at
special work site or remote location.
Notwithstanding subsection 6(1), in computing the income of a taxpayer for a
taxation year from an office or employment, there shall not be included any
amount received or enjoyed by the taxpayer in respect of, in the course or by
virtue of the office or employment that is the value of, or an allowance (not
in excess of a reasonable amount) in respect of expenses the taxpayer has
incurred for,
(a) the
taxpayer’s board and lodging for a period at
(i) a
special work site, being a location at which the duties performed by the
taxpayer were of a temporary nature, if the taxpayer maintained at another
location a self-contained domestic establishment as the taxpayer’s principal
place of residence
(A) that was, throughout the period,
available for the taxpayer’s occupancy and not rented by the taxpayer to any
other person, and
(B) to which, by reason of distance,
the taxpayer could not reasonably be expected to have returned daily from the
special work site, or
(ii) a
location at which, by virtue of its remoteness from any established community,
the taxpayer could not reasonably be expected to establish and maintain a
self-contained domestic establishment,
if the period during which the taxpayer was
required by the taxpayer’s duties to be away from the taxpayer’s principal
place of residence, or to be at the special work site or location, was not less
than 36 hours; or
(b) transportation between
(i) the
principal place of residence and the special work site referred to in
subparagraph 6(6)(a)(i), or
(ii) the
location referred to in subparagraph 6(6)(a)(ii) and a location in
Canada or a location in the country in which the taxpayer is employed,
in
respect of a period described in paragraph 6(6)(a) during which the
taxpayer received board and lodging, or a reasonable allowance in respect of
board and lodging, from the taxpayer’s employer.
[7]
The appellant testified at the hearing. Mr. Rio
is an official of the Ministère du Revenu du Québec (the MRQ) who agreed to accept a deployment to the Toronto office
to perform his duties as an auditor of large companies. He moved to Toronto with
his wife in May 1992 and he lived there until August 1, 1999, the year in which
all auditors working in Toronto were transferred back to Quebec. From 1999 to 2004,
the appellant worked at the Montréal office of the same ministry. In 2004, he
was once again assigned to the Toronto office by his employer. The appellant and
his wife moved to Toronto again.
[8]
During the 2004 to 2010 taxation years, the
appellant was still working for the MRQ under an initial three-year contract
renewable every two years for a period of two years. According to the appellant,
the contract could have been cancelled at any time. During that period, the
appellant maintained residence status in Quebec so as not to be taxed on the lodging
allowance in Toronto to which he was entitled.
[9]
On April 1, 2011, the appellant became an
employee of the Agence du Revenu du Québec (the ARQ) and his contract was renewed every two years, although it could
have been cancelled at any time. In 2011, the appellant and his wife became Ontario
residents.
[10]
From 2004 to
2012, the appellant obtained an allowance in respect of lodging provided for in
the Directive concernant les indemnités et les allocations versées aux
fonctionnaires affectés à l’extérieur du Québec. Despite the change in
employers on April 1, 2011, the directive applicable to the 2004 to 2010 years continued
to be applied after April 1, 2011.
[11]
In his testimony, Mr.
Rio put in evidence the renewal letters for his contract of employment in
Toronto for the 2007 to 2012 years and a T4A issued by Revenu Québec for 2008 indicating
that the [Translation] “other income” found in box 28
was taxable at the federal level only.
[12]
When the appellant moved to Toronto in 2004, he signed
a first lease on August 9, 2004, for an apartment at 62 Wellesley Street West,
Toronto, which was renewed a number of times until September 30, 2014. The
monthly rent paid was $2,525 for the period from October 1, 2009, to June 30,
2012, and $2,600 for the period from July 1, 2012, to September 30, 2014.
[13]
Although they moved to Toronto in 2004, the
appellant and his wife kept their residence in Montréal of which they were co-owners.
They did renovations and rented it out. The rental income was duly reported.
[14]
On cross-examination, the respondent adduced in
evidence the T-4 slips issued by the Canada Revenue Agency for the 2010 and
2012 taxation years showing an amount of $59,435.54 received in 2010 as other taxable
allowances and benefits and an amount of $60,826.21 received in 2012 under the
same heading. The federal tax returns of the appellant and his wife for the 2011
and 2012 taxation years were also adduced in evidence.
Analysis
[15]
The sole issue is whether the amounts received
by the appellant from his employer during the 2010, 2011 and 2012 taxation
years, in respect of his lodging in Toronto, constitutes a taxable allowance to be included in computing
the appellant’s income from an office or employment.
[16]
Paragraph 6(1)(a) of the Act provides
that the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer, or a person who does not deal
at arm’s length with the taxpayer, in respect of, in the course or by virtue of
the office or employment, except any benefit listed in
subparagraphs (i) to (vi) that do not apply in this case, shall be included in computing the income of a taxpayer for a taxation year from an
office or employment.
[17]
There is no doubt in this case that the
allowance in respect of lodging received by the appellant during each of the
2010, 2011 and 2012 taxation years should have been included in computing the appellant’s income for each of
the taxation years in question. T-4 slips were issued to him in that regard by
his employer and the appellant himself added the allowance in respect of
lodging in his income tax returns.
[18]
Mr. Rio challenged an assessment with respect to
the 1999 taxation year in which the Minister disallowed an expense of $10,500
he claimed in computing his income relating to the rent he paid for an appartment
in Toronto. At that time, Judge Archambault of this Court dismissed Mr. Rio’s
appeal and determined that the allowance he received from his employer constituted
an allowance for personal and living expenses that had be included in his
income pursuant to paragraph 6(1)(a) of the Act.
[19]
The decision of Judge Archambault was affirmed
by the Federal Court of Appeal in a decision rendered on October 24, 2003 (2003
FCA 396).
[20]
All that remains to be determined is whether the
appellant could avail himself of the exception in subsection 6(6) of the Act.
[21]
Unfortunately for the appellant, subsection 6(6)
of the Act cannot be of any assistance to him. The Toronto office of the Ministère
du Revenu du Québec cannot be considered a special work
site, being a location at which the duties performed by the appellant were of a temporary nature. Contrary to the appellant’s submissions, I do not believe that the
appellant’s work was of a temporary nature. The duration of the initial contract
was three years and the subsequent contracts were renewable every two years for
a period of two years. The duration of the appellant’s contract of employment
with the MRQ and the ARQ was eleven years without interruption, from 2004 to
2015.
[22]
Furthermore, it should be noted that Mr. Rio did
not maintain at another location a self-contained
domestic establishment as his principal place of residence that was, throughout
the period, available for his occupancy and not rented by him to any other
person, and to which, by reason of distance, he could not reasonably be
expected to have returned daily from the special work site. This condition could certainly not be met by the appellant because
the appellant’s principal place of residence was Toronto, the same city where his employer’s office was located.
Consequently, he could reasonably be expected to have
returned daily to his principal place of residence. In
this case, there is no remoteness factor between the appellant’s place of work
and his principal place of residence.
[23]
The fact that the appellant maintained ownership
of his residence in Montréal is not relevant for the purposes of this case
because he rented it out while he was working in Toronto.
[24]
For all these reasons, the appellant’s appeal is
dismissed.
Signed at Montréal, Canada, this 19th day of November 2015.
“Réal Favreau”
Translation certified true
on this 4th day of January 2016
Daniela Guglietta,
Translator
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