Date: 19971127
Docket: 96-3687-IT-I
BETWEEN:
LAURIN CARON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
TRemblay, J.T.C.C.
Point at Issue
[1] The point at issue is whether the appellant was correct in
claiming the amounts of $3,501, $4,542 and $480 in respect of
meal, accommodation and ferry expenses in computing his income
for 1992, 1993 and 1994 respectively.
[2] The appellant was a site superintendent for Beauvais &
Verret Inc., and his work was to supervise two current job sites
in two isolated locations.
[3] According to the respondent, the appellant had to
supervise only one site, which was his place of business. The
appellant was merely a temporary employee. Moreover, the
appellant received a travel allowance from his employer which was
not included in his income.
[4] The respondent further disallowed a refund of amounts of
$178.66 in 1992 and $171.55 in 1993 paid for employee services in
respect of disallowed expenses.
Burden of Proof
[5] The burden is on the appellant to show that the
respondent's assessments are incorrect. This burden of proof
arises from a number of judicial decisions including a judgment
by the Supreme Court of Canada in Johnston v. M.N.R.[1]
[6] In that same judgment, the Court held that the facts
assumed by the respondent in support of assessments or
reassessments are also assumed to be true until proven otherwise.
In the instant case, the facts assumed by the respondent are set
out in subparagraphs 4a. to f. and paragraph 5a. to c. of the
Reply to the Notice of Appeal. Those paragraphs read as
follows:
[TRANSLATION]
4. In making these reassessments, the Minister made in
particular the following assumptions of fact:
a. during the 1992, 1993 and 1994 taxation years, the
appellant was a site superintendent for the company
Beauvais & Verret (the "employer");
[admitted]
b. the employer supervised the construction sites of the
Sobey's chain of food stores; [admitted]
c. the appellant received an allowance for travelling expenses
from his employer for the years in appeal, and those allowances
were not included in computing his income under subparagraph
6(1)(b)(v); [admitted with an explanation]
d. the appellant did not show that the allowances he received
from his employer were not reasonable; [denied]
e. consequently, the appellant's expenses in issue, $3,501
in 1992, $4,542 in 1993 and $480 in 1994, were disallowed;
[admitted that they were disallowed, though
improperly]
f. in addition, the goods and services tax rebate for
employees for the 1992 and 1993 taxation years was revised to nil
under subsection 253(1) of the Excise Tax Act.
[admitted that it was revised to nil, though
improperly]
5. At the objection stage, the Minister obtained certain
information from the employer and made the following assumptions
of fact:
a. during the 1992, 1993 and 1994 taxation years, the
appellant worked strictly in the supervision of one work site in
particular, and one site at a time; [denied]
b. for the appellant, the employer's place of business was
the particular work site where he was working at the time;
[denied]
c. the appellant was merely a temporary employee of the
employer; [being only on a specific work site]
Evidence of Facts
[7] In addition to the above admissions, the evidence was
supplemented by the appellant's testimony and the filing of
Exhibits A-1 to A-3.
[8] The appellant admitted that he had claimed the following
expenses in computing his net income for the 1992, 1993 and 1994
taxation years:
a. meal expenses (80%) $2,218 $4,542 $480
b. accommodation expenses 1,225 0 0
c. ferry expenses 58 0___ _
0__
$3,501 $4,542 $480
As Exhibit A-3, he filed proof of his expenses, except the
ferry expenses, which were included in the $500 amount received
weekly in respect of transportation expenses.
[9] For 11 years, the appellant has worked for Beauvais &
Verret, whose place of business is at 2181 rue
Léon-Harmel, in Québec. As Exhibit A-1, the
appellant filed a number of letters from his employer concerning
his work and travelling expenses, meal expenses and accommodation
expenses.
A letter dated March 21, 1990, addressed "To whom it may
concern" reads in part as follows:
[TRANSLATION]
Mr. Caron is employed by us as [a superintendent]; he is not
governed by the Construction Decree as regards to his wage rate
and the definition of his duties.
He has worked for us since 1987 and has worked on a number of
work sites (Rimouski, Matane, Rivière-du-Loup,
Campbellton, Québec, St-Apollinaire and St-Casimir). The
length of time these sites operated varied with their size.
He has also travelled to prepare estimates for the purpose of
bidding on new contracts.
He regularly reports to head office, submitting analyses of
the operation of his sites, as well as his reports for bidding
purposes.
A letter dated June 3, 1991, reads as follows:
[TRANSLATION]
... This is to confirm that the amounts paid to you have been
paid to defray your expenses for travel to our sites as a
superintendent of our company and that you are responsible for
room and board.
A letter dated September 24, 1997, reads as follows:
[TRANSLATION]
We hereby confirm that Laurin Caron has been employed by us
for a number of years as a site supervisor on various contracts
throughout the province of Quebec and New Brunswick for three to
six months at a time, varying from contract to contract. In that
capacity, his duties were to supervise and coordinate
construction work. However, on all the contracts to which he was
assigned, there has never been an administrative office of any
kind on site. Administrative tasks such as the following were
performed from our Québec office:
- project management,
- accounting,
- secretarial work,
- purchase orders,
- billing,
- payment,
- solicitation,
- contract negotiation.
Yours sincerely,
[10] A judgment by the Small Claims Court, Montmagny District,
issued by Judge André Verge of the Court of Quebec on
January 8, 1992, in accordance with sections 59 and 63 of the
QuebecTaxation Act was filed as
Exhibit A-2.
[11] The learned judge granted the application by the
appellant Laurent Caron respecting an amount of $4,901 for
substantiated accommodation and meal expenses for 1988.
[12] In brief, the Court did not accept the argument by the
Quebec Department of Revenue that, since the appellant had
received an allowance for travelling expenses, he could not be
allowed the deduction for food and accommodation expenses. On
this point, the Court relied among other things on a decision by
the Supreme Court of Canada in Johns-Manville Canada
Inc.[2]
The Court allowed the appeal.
[13] The payer performed work mainly as a contractor for
Sobey’s in the construction of supermarkets. He also hired
subcontractors for this purpose, but the appellant was hired as a
superintendent to supervise work.
[14] According to the appellant, he had mainly worked in
Baie-Comeau in 1992. He went there to make a bid in
Ste-Anne-des-Monts.
[15] In 1993, he worked in Rimouski on a $3,000,000 contract
to expand a supermarket. He went to Ste-Anne-des-Monts again to
make a bid.
[16] In 1994, he mainly worked in Ste-Anne-des-Monts and made
a bid in Baie-Comeau.
[17] According to the appellant, when he worked as a
supervisor, a trailer on the site was used for meetings with
subcontractors, etc.
[18] According to the appellant, average travelling expenses
of $500 were paid each week.
Act - Case Law - Analysis
[19] Act
The provisions of the Income Tax Act (the Act)
invoked were ss. 6(1), 6(1)(b)(v), (vi), (vii), 8(1),
8(1)(e), 8(1)(f), 8(1)(g) and
8(1)(h), some of which do not apply, as indicated
below:
6. Amounts to be included as income from office or
employment.
(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:
(b) Personal or living expenses— all
amounts received by him in the year as an allowance for personal
or living expenses or as an allowance for any other purpose,
except
. . .
(v) reasonable allowances for travelling expenses by an
employee from his employer in respect of a period when he was
employed in connection with the selling of property or
negotiating of contracts for his employer,
(vi) reasonable allowances received by a minister or clergyman
in charge of or ministering to a diocese, parish or congregation
for expenses for transportation incident to the discharge of the
duties of his office or employment,
(vii) reasonable allowances for travelling expenses (other
than allowances for the use of a motor vehicle) received by an
employee (other than an employee employed in connection with the
selling of property or the negotiating of contracts for the
employer) from the employer for travelling away from
(A) the municipality where the employer's establishment at
which the employee ordinarily worked or to which he ordinarily
made his reports was located, and
(B) the metropolitan area, if there is one, where that
establishment was located,
in the performance of the duties of his office or
employment,
8. Deductions allowed.
(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:
. . .
(4) Meals. An amount expended in respect of a meal
consumed by an officer or employee shall not be included in
computing the amount of a deduction under paragraph (1)(f)
or (h) unless the meal was consumed during a period while
he was required by his duties to be away, for a period of not
less than twelve hours, from the municipality where the
employer's establishment to which he ordinarily reported for
work was located and away from the metropolitan area, if there is
one, where it was located.
Provisions not Applicable
8(1)(e) railway company employees;
8(1)(f) salesman's expenses;
8(1)(g) transport employee's expenses.
8(1)(h) Travelling expenses — where the
taxpayer, in the year,
(i) was ordinarily required to carry on the duties of his
employment away from his employer's place of business or in
different places, and
(ii) under the contract of employment was required to pay the
travelling expenses incurred by him in the performance of the
duties of his office or employment,
amounts expended by the taxpayer in the year (other than motor
vehicle expenses) for travelling in the course of the
taxpayer's employment, except where the taxpayer
(iii) received an allowance for travelling expenses that was,
by reason of subparagraph 6(1)(b)(v), (vi) or (vii), not
included in computing the taxpayer's income for the year,
or
(iv) claimed a deduction for the year under paragraph
(e), (f) or (g);
[20] Case Law
The parties cited the following cases:
1- Laurin Caron v. Department of Revenue Quebec, Small
Claims Division, Court of Quebec, Civil Division 3.03;
2- Lorne Nelson v. The Minister of National Revenue, 81
DTC 190 (Tax Review Board);
3- Her Majesty the Queen v.. Merten, 90 DTC 6600
(Federal Court, Trial Division);
4- David Campbell Davey v. The Minister of National
Revenue, 61 DTC 531 (Tax Appeal Board);
5- Evald Viitkar v. The Minister of National Revenue,
76 DTC 1073.
[21] Analysis
[22] Travelling Expenses
The travelling expenses are not in issue. The appellant
received $500 a week and that was not for room and board [9]
(letter of June 3, 1991).
[23] Meal Expenses
Subsection 8(4), supra, is clear. Meal expenses may not
be deducted:
. . ., unless the meal was consumed during a period while he
was required by his duties to be away, for a period of not less
than twelve hours, from the municipality where the employer's
establishment to which he ordinarily reported for work was
located and away from the metropolitan area, if there is one,
where it was located.
[24] The payer has its place of business in Québec [9].
The appellant performed his duties as a construction site
superintendent [14, 15, 16]. The question is which of the two
sites must be considered.
[25] All the cases cited above heard by the Tax Review Board
(Nelson and Viitkar), the Tax Appeal Board
(Davey) and the Federal Court (Merten) were decided
in circumstances similar to those of the instant appeal, in that
the employer's establishment to which the taxpayer ordinarily
reported for work was the construction site, not the
employer's principal place of business.
[26] Accordingly, meal expenses may not be deducted.
[27] Accommodation Expenses
Accommodation expenses are not defined as such in the
Act except through the definition of "travelling
expenses" in paragraph 8(1)(h), which excludes motor
vehicle expenses.
[28] These expenses are deductible "except where the
taxpayer":
(iii) received an allowance for travelling expenses that was,
by reason of subparagraph 6(1)(b)(v) [employed to
negotiate contracts: not applicable], 6(1)(b)(vi) [for a
minister: not applicable], and
6(1)(b)(vii) reasonable allowances for travelling
expenses (other than allowances for the use of a motor vehicle)
received by an employee (other than an employee employed in
connection with the selling of property or the negotiating of
contracts for the employer) from the employer for travelling away
from
(A) the municipality where the employer's establishment at
which the employee ordinarily worked or to which he ordinarily
made his reports was located, and
(B) the metropolitan area, if there is one, where that
establishment was located,
in the performance of the duties of his office or
employment,
[29] Subparagraph 6(1)(b)(vii) is applicable to the
appellant as regards the application of paragraph 8(1)(h)
because he did not receive reasonable allowances for
accommodation expenses.
[30] In short, there is no single class of travelling
expenses. If meal expenses were not specifically addressed by
subsection 8(4), they could also have been included in paragraph
8(1)(h) through the operation of subparagraph
6(1)(b)(vii).
[31] In Johns-Manville Inc. v. Her Majesty the Queen,
[1985] 2 S.C.R. 46, Estey J. writes, at page 67:
On the other hand, if the interpretation of a taxation statute
is unclear, and one reasonable interpretation leads to a
deduction to the credit of a taxpayer and the other leaves the
taxpayer with no relief from clearly bona fide
expenditures in the course of his business activities, the
general rules of interpretation of taxing statutes would direct
the tribunal to the former interpretation.
This interpretation is applicable to the accommodation
expenses in the instant case.
[32] Conclusion
The appeal is dismissed in respect of the meal expenses and
granted in respect of the accommodation expenses.
"Guy Tremblay"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 19th day of May
1998.
Mario Lagacé, Revisor
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