Robert M Cruikshank v. Minister of National Revenue, [1985] 2 CTC 2344

Brule, TCJ: —

Issue

This is an appeal against an income tax assessment for the year 1981 in which the Minister of National Revenue disallowed an expense claimed by the taxpayer in filing his return in the amount of $447.88, under subparagraph 8(1)(i)(ii) of the Income Tax Act, RSC 1952, c 148, as amended. The expense disallowed involved the payment of a telephone answering service which was necessary for the appellant’s employment.

The appellant was employed by UniTrust Protection Services Ltd and in his notice of appeal stated:

The Declaration of Employment Conditions Form was signed by my employer as well as my employer's letter of March 11, 1982, which were both submitted to Revenue Canada Taxation and which both made clear that the Telephone and Answering Service were required and used for my work. As my substitute, the Telephone Answering Service wrote down messages and informed me when I was needed for work — particularly important in emergency situations which did occur and, thanks to the Telephone Answering Service taking calls and recording messages which they conveyed to me, I was able to report for work and prevent what would have been serious and expensive accidents at work.

Counsel for the Minister did not dispute any of the facts but rather took the approach that this expense did not come within the provisions of subparagraph 8(1)(i)(ii) of the Act and therefore must be disallowed. He did admit that if the appellant had hired telephone secretarial assistance, payment to such a person would have been a legitimate expense.

Analysis

Subparagraph 81)(i)(ii) allows a taxpayer, such as in this case, in computing his income for a taxation year a deduction from employment expenses for “office rent, or salary to an assistant or substitute” provided: (a) the taxpayer is required by his contract of employment to provide and pay for such expense; (b) the taxpayer has not been reimbursed and is not entitled to be reimbursed from his employer for such expense; and (c) the expense is incurred solely for the purpose of earning income from his employment.

While these conditions were met the respondent claimed the payment was not “salary to an assistant or substitute”. He claimed that "substitute” meant a person taking the place of the claimant and that "salary” was as defined in the Oxford dictionary, a fixed payment made by an employer at regular intervals to a person doing other than manual or mechanical work”.

The determination of the problem revolves around the interpretation and meaning of the words "salary” and "substitute”.

The definition of "salary” as put forward by the respondent (supra) would seem to include a payment to a Telephone Answering Service as the latter would qualify as a "person by definition in subsection 248(1) of the Act. It must then be determined if the payment was to an "assistant or substitute”. It was not to the former obviously and so to qualify the appellant’s expense must have been made to a "substitute”. While the respondent argued that the word "substitute” must be a person taking the place of the appellant I can find no jurisprudence to say that the word "substitute” must be a person.

Thorson, P in the Exchequer Court of Canada decision of W A Sheaffer Pen Company of Canada Limited v MNR, [1953] CTC 345; 53 DTC 1223, said at 350 (DTC 1226):

It is thus a cardinal rule of interpretation that the context in which a word in the Act appears must always be considered in order to ascertain its true meaning.

The Oxford English Dictionary, volume X, gives one definition of the word "substitute” as — “a thing put in place of another”.

The Random House Dictionary of the English Language, 1981, published in Canada gives a definition for "substitute” as, "a person or thing acting or serving in place of another”.

In this day of modern technology it must be recognized that substitutes are available, many of which are less expensive than former alternatives. In the present case a full or part-time telephone secretary would have been permitted at a much higher annual cost than $447.88. Here we do have people involved with the answering service who "wrote down messages and informed me when I was needed for work”. This service acted as a "substitute” for the taxpayer when required and accordingly the expense of the appellant is one which qualifies under subparagraph 8(1)(i)(ii) of the Act.

This appeal is therefore allowed and the matter referred back to the Minister for reconsideration and reassessment on the basis that the amount of $447.88 was an allowable expense of the appellant in his 1981 taxation year.

Appeal allowed.