Ian P Mackin, Jr v. Minister of National Revenue, [1982] CTC 2431, 82 DTC 1408

M J Bonner:—The appellant appeals from an assessment of income tax for his 1978 taxation year. On assessment the Minister disallowed a deduction claimed under paragraph 8(1 )(h) of the Income Tax Act with respect to travelling costs incurred by the appellant in connection with his work as an external auditor. The appellant performed such work during 1978 as an employee of Coopers & Lybrand, a firm of chartered accountants.

The appellant’s duties required him to perform by far the greater part of his work at premises of clients of the accounting firm. Eighty-four per cent of days worked during the period while the appellant owned a car were days worked at locations away from the employer’s place of business. Such locations varied. Subparagraph 8(1)(h)(i) is therefore plainly met.

The employer did not, according to the evidence, have any clear, consistent or rational policy for the reimbursement of the travelling costs incurred by its employees. The question whether any reimbursement would be made at all depended primarily, it would seem, on the decision of the managing accountant of the audit, although sometimes it depended on the decision of the partner in charge of the audit. The employer would not pay for taxi fares incurred by its non-car-owning employees, even though time constraints made the use of taxis obviously necessary from time to time. The appellant paid for his car and for gas, oil, repairs, insurance and other operating expenses in the first instance. He was reimbursed, when reimbursement was made at all, by payment at the rate of 20¢ per mile.

Payments made to the appellant in 1978 at the 20$ per mile rate totalled $51.20. Further payments were made to the appellant in 1979 in respect of 1978 miles travelled. When the total of such payments is divided by the total of miles travelled in the course of employment or the performance of the duties of employment the appellant was paid at an effective rate of 14¢ per mile. When total operating expenses, exclusive of capital cost allowance and interest, are divided by the total miles driven in the year, the appellant’s operating costs per mile worked out to 70€.

It is plain that authorized payments were insufficient to meet operating expenses, both as a result of insufficiency of the mileage rate paid by Coopers & Lybrand and as a result of limitations imposed by that firm on the circumstances in which it was prepared to pay mileage expenses to its employees. There is no material distinction between the circumstances of this case and the circumstances considered by the Federal Court in Henry Cival v The Queen, [1981] CTC 392; 81 DTC 5311. I must therefore conclude that the appellant meets the subparagraph 8(1 )(h)(ii) test.

I turn next to subparagraph 8(1 )(h)(iii). The travelling allowance received by the appellant was not one excluded from the computation of income by any of subparagraphs (v), (vi) or (vii) of paragraph 6(1 )(b) of the Act. The appellant was not a contract negotiator, salesman or clergyman, so far as I know. Certainly, there was no suggestion that he fell into any of those categories. The allowances paid were not computed in relation to time spent away from any municipality. The appellant therefore meets the subparagraph 8(1 )(h)(iii) test.

The position revealed by the evidence summarized above is completely indistinguishable in principle from that considered by the Federal Court in Cival. The cases to which the respondent’s counsel intended to make reference, and started to make reference, were cases that have all been overruled by the decision of the Federal Court in Cival. It is idle to review decisions of this Board which have been overruled. It is plain, then, that the appellant is entitled to a deduction.

I turn next to the question, “How much?” The amount originally claimed by the appellant was lower than the amount claimed at the hearing, the latter figure being $1,919.91. The manner in which the figure now claimed was computed is set forth in paragraphs 4 and 5 of the notice of appeal. It was not suggested in argument by the respondent’s counsel that the methodology employed in that calculation was incorrect. The appellant’s evidence as to the accuracy of the figures used survived cross-examination. It is, perhaps, a little odd that the appellant’s tax return showed about $600 less than he now claims. However, I have no reason for disbelieving the evidence given by the appellant explaining the circumstances in which the lower amount was claimed. The amount claimed in the return of income was based on estimates of the percentage of business miles which were in fact too low. The higher figures rested, the appellant said, on a re-examination of his weekly time sheets and on calculations of distance, on a straightline basis, from the office of the clients’ place of business and where the auditing work was performed.

Because straightline map distances are almost invariably shorter than actual distances travelled by road, the appellant is, I think, quite correct in saying that if he erred at all in making the calculation as to the amount now claimed, the result is that the amount now claimed is too low.

The appeal is therefore allowed and the assessment referred back to the respondent for variation on the basis that the appellant is entitled, by virtue of paragraph 8(1 )(h) of the Income Tax Act, to a deduction in the amount of $1,919.91.

Appeal allowed.