Her Majesty the Queen v. Glenford R. Huffman, [1990] 2 CTC 132

Heald, J.A.: —This is an appeal from a decision of the trial division ([1989] 1 C.T.C. 32; 89 D.T.C. 5006) wherein the respondent's appeal with respect to his 1979 taxation year from an assessment made by the Minister of National Revenue was allowed and the matter referred back to the Minister for reassessment on the basis that the sum of $500 received in that taxation year by the respondent from his employer was not a benefit within the meaning of paragraph 6(1)(a) or an allowance within the meaning of paragraph 6(1)(b) of the Income Tax Act, R.S.C. 1952, c. 148 as amended. [1]

The Facts

At all relevant times, the respondent was a plainclothes police officer in the employ of the Niagara Regional Police Force and was assigned to the Identification Unit in the Criminal Investigation Branch. His duties involved general criminal investigatory work at crime scenes and inspecting for physical evidence. The respondent worked in the field about ninety percent of the time. His duties included examining for fingerprints, footprints, blood stains, etc. As a consequence, his clothing often became soiled, torn or contaminated with odours which made frequent cleaning necessary. The respondent's evidence which was accepted by the trial judge was to the effect that the jacket and overcoat purchased by him and required to be worn by him while on duty, were necessarily a size larger than he customarily wore when he was off duty. This was necessary in order to accommodate the on-duty equipment which he was required to carry (e.g. billy-club, walkie-talkie, revolver, etc.) (page 35 (D.T.C. 5008)). According to the trial judge, these clothes were chosen “with employment requirements in mind and were worn only at work." (page 37 (D.T.C. 5009)). He added at page 37 (D.T.C. 5009):

Though they were purchased in an ordinary clothing store, the clothes were in fact different and distinct from clothes the plaintiff normally wore, which were generally of a finer quality, more expensive and tailored to fit more closely.

The evidence also established that the equipment carried by the respondent as a plainclothes officer caused extra wear on his clothing, for example, the inner lining of his jacket was often torn by the holster, the trouser pockets became frayed and torn from constant removal and return of the billy-club to the pocket and the centre seam of the jacket often became torn from the strain and constant movement caused by the equipment being carried underneath the jacket. It is apparent from the evidence that the active nature of the respondent's duties as a plainclothes officer substantially curtailed the life of the clothing which he was required to wear.

Article 17.01 of the collective agreement between the respondent's employer and the Niagara Police Association, of which the respondent was a member provided:

17.01 Each member covered by this agreement who is required to provide and wear ordinary clothing as part of his regular duties, shall be re-imbursed by the Board for expenses in the purchase of such clothing, upon presentation of the necessary receipts. Such reimbursement shall be in an amount not to exceed five hundred ($500.00) per annum.

Article 26 of the collective agreement provides that each uniformed member of the Niagara Region Police Force is to be provided with normal working gear for both winter and summer. The evidence shows, however, that plainclothes officers are not provided with the full complement of clothing issued to uniformed officers. They were only issued one dress uniform for ceremonial occasions.

The object of Article 17.01 was to address the fact that plainclothes officers had not been previously reimbursed for the cost of plainclothes they were required to wear on duty. A transfer to plainclothes duty was only a lateral transfer and did not result in any pay increments. Consequently, since uniformed officers were provided with their working clothes (i.e., uniforms) at no cost to them, plainclothes officers prior to the addition of Article 17.01, suffered an economic loss while on plainclothes duty. Article 17.01 reimbursed them for that economic loss.

Discussion

The appellant submits that the learned trial judge erred in law in finding that the sum of $500 paid to the respondent pursuant to Article 17.01, supra, was not a benefit conferred upon him pursuant to paragraph 6(1)(a) of the Income Tax Act.

The appellant also makes an alternative submission to the effect that the sum of $79.57 (i.e., the difference between the payment to the respondent of $500 and the total of the receipts submitted by him ($420.43)) was an allowance pursuant to paragraph 6(1)(b) of the Income Tax Act, and thus the learned trial judge committed reviewable error in failing to include it in the respondent's income.

Paragraph 6(1) (a)

Counsel for the appellant relied on the decision of the Supreme Court of Canada in the case of The Queen v. Savage [2] . In Savage, the Court approved of a passage from an earlier decision of the Court in the case of Nowegijick v. The Queen, [1983] 1 S.C.R. 29; [1983] C.T.C. 20; 83 D.T.C. 5041 at page 25 (D.T.C. 5045; S.C.R. 39) to the effect that the phrase "in respect of" contained words of "the widest of any expression intended to convey some connection between two related subject matters". Accordingly, counsel submitted that the $500 paid to the respondent by his employer was paid to him in respect of his employment. I have no difficulty with that particular submission. However, such a conclusion does not address the critical issue as to whether or not, on these facts, the respondent is taxable pursuant to paragraph 6(1)(a) in respect of the $500 payment. In my view, the trial judge applied the proper test in deciding this issue. At page 35 (D.T.C. 5008) he commented that the Supreme Court of Canada in Savage, supra, specifically adopted the view of Mr. Justice Evans in the case of R. v. Poynton, [1972] C.T.C. 411; 72 D.T.C. 6329; [1972] 3 O.R. 727 (Ont. C.A.) where he stated at page 420 (D.T.C. 6335; O.R. 738):

I do not believe the language to be restricted to benefits that are related to the office or employment in the sense that they represent a form of remuneration for services rendered. If it is a material acquisition which confers an economic benefit on the taxpayer and does not constitute an exemption, eg loan or gift, then it is within the all-embracing definition of section 3. [3]

Based on this passage, the learned trial judge set out the test which he applied to the facts at bar (page 35 (D.T.C. 5008)): “It is therefore necessary to consider whether the facts here show that there was a material acquisition conferring an economic benefit on the taxpayer." He then proceeded to review the evidence and to make the findings of fact referred to supra. In applying the Savage test as enunciated, supra, to the factual situation at bar, he stated (at page 37 (D.T.C. 5009)):

Based on the jurisprudence defining benefit in paragraph 6(1)(a) of the Income Tax Act, I am unable to conclude in these circumstances that the plaintiff received a benefit. The plaintiff was required, in order to carry out his duties as a plainclothes officer and receive a salary as such, to incur certain expenses regarding his clothing, and reimbursement of these expenses should not be considered as conferring a benefit under paragraph 6(1)(a) of the Act. . . The taxpayer was simply being restored to the economic situation he was in before his employer ordered him to incur the expenses.

I agree with the trial judge. The findings of fact which he made are amply supported by the evidence. I also think that he correctly applied the relevant jurisprudence to the facts in this case.

In oral argument, the appellant's counsel endeavoured to establish that the references by the trial judge to the decision of the Exchequer Court in Ransom v. M.N.R., [1968] 1 Ex.C.R. 293; [1967] C.T.C. 346; 67 D.T.C. 5235 and to certain passages from the reasons in that case were an indication that the trial judge was applying a test somewhat narrower than the one approved by the Supreme Court of Canada in Savage, supra. With respect I do not agree with that perception of the test applied by the trial judge. It is clear to me that the trial judge properly applied the Savage test and not a narrower test. In so far as his references to the Ransom case are concerned, I can find nothing in the passages from that decision which would narrow the criteria approved in Savage.

Paragraph 6(1)(b)

In so far as this alternate submission is concerned, I am unable to agree that the sum of $79.57, being the difference between the $500 payment to the respondent and the receipts submitted by him ($420.43) can be held to be an allowance and thus taxable pursuant to paragraph 6(1)(b). The trial judge found, on the evidence (page 36 (D.T.C. 5009)), that the reimbursement was increased from $400 to $500 pursuant to the 1979 collective agreement. An administrative decision was taken that officers would not be required to submit receipts above $400 even though they would receive reimbursement of $500. The rationale for this decision was said to be the avoidance of extra paperwork. In any event, the trial judge said that he accepted the respondent's evidence that he spent more than $500. He added (at page 36 (D.T.C. 5009):

I therefore find, as a fact, that the plaintiff spent more than $500 in the year in question and was reimbursed for that expenditure the maximum allowable under the contract of employment, $500.

This reimbursement cannot be said to be an allowance as that term is used in paragraph 6(1)(b). In interpreting the use of the word "allowance" in another section of the Income Tax Act this Court said in the case of the Queen v. Pascoe, [1976] 1 F.C. 372; [1976] 2 F.C. 277; [1975] C.T.C. 656; 75 D.T.C. 5427 at page 658 (D.T.C. 5428):

An allowance is, in our view, a limited predetermined sum of money paid to enable the recipient to provide for certain kinds of expense; its amount is determined in advance and, once paid, it is at the complete disposition of the recipient who is not required to account for it. A payment in satisfaction of an obligation to indemnify or reimburse someone or to defray his or her actual expenses is not an allowance; it is not a sum allowed to the recipient to be applied in his or her discretion to certain kinds of expense.

Applying that test to these facts, it is obvious that the $500 here in issue or any part of it cannot be said to be an allowance. Article 17.01 provides for reimbursement only upon presentation of receipts. As noted by the trial judge, supra, a special exception was made in 1979 but only in respect of the $100 increase that year and in the interests of avoiding undue extra paperwork. This circumstance cannot operate so as to change the nature of the payment. It is still a reimbursement, not an allowance and the trial judge did not err in so finding.

For these reasons, it is my conclusion that the within appeal should be dismissed with costs.

Appeal dismissed.