Pier-Yves Dallaire v. The Minister of National Revenue, [1993] 2 CTC 2773, [1992] 1 CTC 2456, [1992] DTC 2148

Lamarre Proulx, T.C.C.J.:—The appellant is appealing from a tax assessment made by the respondent, the Minister of National Revenue (the Minister"), for 1982.

The point at issue is whether the appellant is entitled to deduct the sum of $2,544.99 for travelling expenses pursuant to paragraph 8(1)(h) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act").

Paragraph 8(1)(h) of the Act reads as follows:

8. (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) 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,

(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, and

(iii) was not in receipt of an allowance for travelling expenses that was, by virtue of subparagraph 6(1)(b)(v), (vi) or (vii), not included in computing his income and did not claim any deduction for the year under paragraph (e), (f) or (g),

amounts expended by him in the year for travelling in the course of his employment;

Subparagraph 6(1)(b)(v) of the Act reads as follows:

(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) 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 received 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,

The facts on which the respondent relied in assessing the appellant are described in paragraph 6 of the reply to the notice of appeal and are as follows:

In making and confirming his assessment the respondent, the Minister of National Revenue, relied, inter alia, on the following presumptions of fact:

(a) during the 1982 taxation year the appellant was employed by Bell Canada as a representative;

(b) during the year at issue the appellant was also president of the Bell Canada telecommunications advisors union, a position for which he received no pay from the union;

(c) during the taxation year at issue, the appellant was required to perform the duties of his employment away from his employer Bell Canada's place of business;

(d) during the taxation year at issue, the appellant was reimbursed by his employer Bell Canada for all the expenses incurred in performing his duties;

(e) with respect to travelling expenses, the appellant used his automobile for business purposes, covering 7,538 km in 1982;

(f) Bell Canada paid the appellant the sum of $1,971.29 to compensate him for fixed and variable costs incurred in covering the 7,538 km mentioned above;

(g) this amount is very reasonable and consisted of a fixed allowance of $41 per month and a variable allowance of 20.5 cents/km, and the respondent did not tax these amounts;

(h) as to the expense for office rental, the appellant was not employed by the Bell Canada telecommunications advisors union and received no pay from them;

[Translation.]

At the very start of the hearing solicitor for the appellant informed the Court that the appellant was no longer claiming the deduction of $421 for office expenses.

It was admitted that the employee was not expressly required by his contract to provide his own car. However, in a memorandum to the appellant from a sales director dated January 9, 1986, Exhibit A-1, it states: ”. . despite the fact it is not provided in the company procedure that a car is necessary, we feel it is a necessity to operate adequately at a reasonable cost" [translation]. The note goes on to state that the company will reimburse "by an expense account the amounts approved in accordance with existing directives” [translation].

Under clause 28 of the collective agreement between the Canadian Telephone Employees' Association and Bell Canada, regarding communications services salesmen, Exhibit 1-1, the employer must pay travelling expenses which the employee has to incur in carrying out his duties.

An official of the employer testified at the respondent's request as to the facts taken into account in calculating allowances given to employees for travelling expenses when they use their own cars. From his testimony, the allowances given compare favourably with those given by other employers and take into consideration operating costs as well as fixed costs of persons providing their cars.

The appellant did not really present any evidence that the allowances were not reasonable in the circumstances.

The appellant submitted to the Court Exhibit A-2 dealing with his automobile expenses, and I set it out below in its entirety:

The 68 per cent use for business was determined by the appellant on the basis of his diary, which he filed as Exhibit A-3. There was no evidence of the total number of kilometres compared with the kilometres travelled for work. I quote the appellant at pages 35 and 36 of the transcript:

Q. In what way was this amount of 68 per cent compiled?

A. This amount is based on the nearly seven thousand six hundred (7,600) to seven thousand eight hundred (7,800) kilometres, I think, for Bell Canada directly, plus an almost equivalent amount of travel for the union, and at the same time other travel which I was not reimbursed for by Bell: O.K.? — and the balance — it came to sixty-eight (68 per cent) — the balance was my personal travel to go and see my parents in Saint-Jean-sur-Richelieu, that sort of thing.

Q. How . . . how could you be certain of the expenses? Did you keep a record?

A. I have a record which was at the time a very brief record. It was my diary for each day, I indicated where I was going, the telephone number, the specific location and the approximate number of kilometres, necessary for travel, which was connected with it in general.

And you have here all the details, including a part reimbursed by Bell and the other part which was not. There is the employer's part, the union’s part, travel not reimbursed by Bell and so on. They are all identified.

Q. You have all this in your diary?

A. I have all this in my diary here, from A to Z.

Q. Is this a Nineteen eighty-two (1982) diary?

[Translation.]

The appellant also had duties as president of the communications advisors union which meant that he had to travel. He included these expenses in his application for a deduction as well as other expenses which his employer did not reimburse him for, as he stated in his testimony above. These latter expenses were for the use of his car to assist in his work although they could not be specifically claimed from his employer.

Solicitor for the appellant referred to two cases, namely Schnopel v. M.N.R., [1979] C.T.C. 2766, 79 D.T.C. 654 (T.C.C.) and Faubert v. M.N.R., [1979] C.T.C. 2723, 79 D.T.C. 641 (T.C.C.). Solicitor for the respondent referred to the following cases: The Queen v. Cival, [1983] C.T.C. 183, 83 D.T.C. 5168 (F.C.A.); Mireault v. M.N.R., [1985] 1 C.T.C. 2167, 85 D.T.C. 170 (T.C.C.); Slawson v. M.N.R., [1985] 1 C.T.C. 2075, 85 D.T.C. 63 (T.C.C.) and Denson v. M.N.R., [1985] 2 C.T.C. 2249, 85 D.T.C. 585 (T.C.C.).

The appellant's position is that it is implicit in his contract of employment that he will have to use his own car in his work and that the allowance given by his employer was not sufficient to cover all the expenses of his car, in particular those incurred for his duties as president of the communications advisers union and other expenses incidental to his work.

Solicitor for the respondent argues that I cannot take the automobile expenses claimed into account even if I come to the conclusion that the employee was required to provide his car under the terms of his contract, because the evidence is insufficient. The total number of kilometres was not established and there is nothing to enable the respondent to determine the proportion of the 68 per cent claimed by the taxpayer. No adequate accounts were kept that could enable the Minister’s employees to conduct a satisfactory audit of the deductions claimed.

I will first discuss the expenses incurred as president of the union. The expenses incurred for his duties as president cannot be deducted from the income from his employment with Bell. If the appellant had income from his duties as president, the said expenses could be deducted from that income. See in this regard Robillard v. M.N.R., [1981] C.T.C. 2404, 81 D.T.C. 359 (T.R.B.) and Lavoie v. M.N.R., [1989] 2 C.T.C. 2202 (T.C.C.).

Cival, supra, cited by solicitor for the respondent, held in a case involving a government employee that the person's contract of employment did not require him either expressly or by implication to pay travelling expenses and that there was no evidence that the allowance for travelling expenses provided by the employer was not reasonable in the circumstances.

The decisions in Mireault, supra, and Denson, supra, also concerned Bell Canada employees and held in circumstances similar to those of the instant case that the employee was not required by the terms of his contract to provide a car, that he was given a reasonable allowance and that he could not deduct expenses in addition to the reimbursement received under paragraph 8(1)(h) of the Act.

However, to these cases must now be added those of Rozen v. The Queen, [1986] 1 C.T.C. 50, 85 D.T.C. 5611 (F.C.T.D.); Hoedel v. The Queen, [1986] 2 C.T.C. 419, 86 D.T.C. 6535 (F.C.A.); Moore v. The Queen, [1987] 1 C.T.C. 319, 87

D. T.C. 5217 (F.C.T.D.); rev'd in part [1990] 1 C.T.C. 311, 90 D.T.C. 6200 (F.C.A.); Betz v. The Queen, [1987] 1 C.T.C. 329, 87 D.T.C. 5223 (F.C.T.D.); [1990] 1 C.T.C. 321, 90 D.T.C. 6201 (F.C.A.); and The Queen v. Mina, [1988] 1 C.T.C. 380, 88 D.T.C. 6245 (F.C.T.D.). In the last case, Jérôme, J. said the following at page 385 (D.T.C. 6248-49):

I agree with the Tax Court judge that the Civa/ decision does not require that the deductions claimed here be disallowed. He distinguished Civa/ on the same basis as Strayer, J. in Rozen: that in this case there was sufficient evidence that the use of the car was an implied term of the employment contract. Unlike the payroll auditor, it is clear that these taxpayers could not do their job properly without the use of their cars. In light of the provisions of the collective agreement referred to, it could not be said that this contract was merely a unilateral one. The taxpayers were bound to use their cars in the performance of their duties. The jurisprudence presented supports this assessment and I see no reason to disturb it.

Nor do I think that the mileage allowance provided in this case distinguishes it from Rozen and Hoedel. If the mileage allowance turns out to be woefully inadequate, as alleged, it would be manifestly unjust to limit these taxpayers, who were required to use their cars, from deducting the balance of their reasonable expenses. I endorse Mr. Justice Strayer's remarks in Rozen that where an employee is obliged to travel to do his work, if his employer is not prepared to pay the exact and total costs of transportation, then he must come within the requirements of subparagraph 8(1)(h)(ii). It remains to be seen whether the reasonable costs in this situation were covered by the mileage allowance. If not, they are properly deductible under paragraph 8(1)(h).

Reviewing this recent case law, I feel that in the instant case it can be considered that an employee performing the appellant's duties was implicitly required by contract to provide his own car in order to achieve the success necessary to his continued employment and promotion.

However, the appellant first of all did not establish that his employer's allowance was not reasonable, and second, he did not establish the number of kilometres travelled on his job. The filing of a diary is not sufficient. It is not up to the Court to keep records. Records must be presented which allow the respondent's employees to check the validity of the deductions claimed in respect of kilometres travelled, places visited and expenses incurred. It was also necessary to show that, in view of the wording of subparagraph 8(1)(h)(iii) of the Act, the employer's allowance was not reasonable in the circumstances.

The appeal is dismissed.

Appeal dismissed.