Donald H Price v. Minister of National Revenue, [1980] CTC 2386, 80 DTC 1311

D E Taylor:—This appeal was heard at the City of Winnipeg, Manitoba, on February 14, 1980, and is against an assessment for the year 1977 in which the Minister of National Revenue disallowed an amount of $292.97 claimed for automobile expenses. In assessing the appellant, the respondent relied, inter alia, upon section 3, paragraph 8(1 )(h) and subsection 8(2) of the Income Tax Act, SC 1970-71-72, c 63, as amended.

Background

The appellant was employed during the relevant time by Clarkson, Gordon & Co (“Clarkson”), and/or their affiliated business operations.

— He incurred automobile expenses in connection with his employment, which expenses he calculated at $713.77.

— He received from his employer $420.80 calculated on the basis of the mileage travelled.

— In preparing his 1977 income tax return, he deducted the difference of $292.97 from his income.

—The Notification of Confirmation by the Minister dated March 7, 1979, after the appellant filed a notice of objection, gave the following explanation:

. . . parking charges to the extent of $293 were not expended by the taxpayer for travelling in the course of his employment in accordance with the provisions of paragraph 8(1 )(h) of the Act.

Contentions

For the appellant:

— In the operation of a motor vehicle for the purposes alleged, a charge for parking is inherent in the nature of and the use of any such vehicle and its operation.

—The parking charge is within the provisions of paragraph 8(1)(h) of the Income Tax Act (Canada) and the right to the deduction claimed is not precluded by any other provision of the said Act.

For the respondent:

—The deduction of $292.97 claimed by the appellant was for parking expenses incurred by him at his place of employment;

—The deduction of $292.97 claimed was a personal expense.

—The parking expense was incurred at his place of work and therefore is not deductible for travelling in the course of his employment within the meaning of paragraph 8(1 )(h) of the Income Tax Act.

Evidence

The evidence and testimony showed that the appellant used his automobile to travel approximately 817 miles “in town” and 1583 miles (9 trips) “out of town” during the year, and that parking charges incurred by the appellant during travel away from the office were chargeable separately to Clarkson. Two appendices attached to the appellant’s income tax return were referenced by counsel for the appellant and these are reproduced as follows:

Appendix “A”—Statement of Firm Policy with respect to Travelling Expenses;

Appendix “B”—Statement of Allowable Employment Expenses—Automobile—1977.

APPENDIX “A"

STATEMENT OF FIRM POLICY WITH RESPECT TO TRAVELLING EXPENSES 1977

The firm reimburses staff members for the additional travel and living expenses that they must incur as a result of work assignments that are beyond reasonable access from the office.

In connection with such expenses, the firm pays certain standard allowances, as follows:

Meal Allowance

A per diem allowance ... may be claimed by staff members when out-of-town overnight on firm business. This is to cover the additional cost of dinner, breakfast and miscellaneous expenses (such as gratuities, newspapers, etc) that are incurred as a result of being away from home.

The per-diem meal allowances for 1977 were $14 for weekdays and $18.50 for weekends and holidays.

Mileage allowance

The firm will pay a mileage allowance . . . on out-of-town assignments and on intown assignments where the client is located beyond reasonable access by public transportation from the office. This rate is considered to cover the total expenses of operating the car (other than parking) including full insurance coverage.

Generally, mileage will be measured to the client’s premises from the office or the staff member’s home, whichever is the lesser.

When a staff member must change locations during the day he is entitled to the mileage between locations, or to taxi fare or to bus fare if he is travelling within the zone where mileage is not paid.

Parking charges will be paid when a staff member is entitled to claim mileage and free parking is not available within a reasonable distance of where he is working.

When staying out-of-town mileage between the client’s premises and the hotel may be claimed.

Staff members working at a particular client’s premises are expected to coordinate their travel plans in order to avoid the duplication of expense of more than one Car.

The mileage allowance was 20¢ per mile for all of 1977.

None of the above allowances are included in income as reported on the T4 slip.

APPENDIX “B"

STATEMENT OF ALLOWABLE EMPLOYMENT EXPENSES—AUTOMOBILE- 1977

Amount claimed is equal to the cost of operating automobile for business less all allowances paid by employer.

EXPENSES DUE TO BUSINESS USE
Type of Automobile—1967 Ford Fairlane—500
Miles Travelled on Business	—2104
Total Miles	—4570
% Business Usage	46.04%
Costs— Gasoline (2104 miles)		94.33
— Business Insurance		76.00
—46.04% of Regular Insurance		49.26
—46.04% of Maintenance		35.40
—CCA—46.04%—Class 10 (30%)
Averaged with 57% availability on
time basis = 51.57%		90.78
— Parking—Based on 80% availability
(4 out of 5 days)		368.00
Total Busines Expense		713.77

Allowance Paid by Employer
2104 miles @ $0.20 =	(420.80)
Net Claim For Tax Purposes	$292.97
12-4-78	(Signature)
Note: I maintain two automobiles,

the automobile used for pleasure/personal

driving is not reflected in this claim

Argument

Counsel for the appellant made the fundamental point that the very nature of the contract of employment with Clarkson required Price to keep an automobile “on standby” at the Winnipeg office, and that the resulting “standby” charge for parking was essentially no different than the cost of the automobile licences or insurance which would be deductible. He also pointed out that subparagraph 6(1)(b)(vii) had no application in this appeal because the allowance involved was calculated according to mileage driven, not according to time away from the office.

The following case reference were given:

Bentleys, Stokes and Low/ess v Beeson (Inspector of Taxes), [1952] All ER 82;

Eakins Construction Limited v British Columbia Toll Highways and Bridges Authority, 32 WWR 526;

Dr Ronald K Cumming v MNR, [1967] CTC 462; 67 DTC 5312.

Counsel for the respondent noted that “travel” commenced only upon the appellant leaving the Winnipeg office, and could not extend to costs incurred during a period of time when the automobile itself was not being used or in motion. The following judicial references were provided:

Cekota v MNR, 36 Tax ABC 279; 64 DTC 654;

Claus v MNR, 40 Tax ABC 395; 66 DTC 248;

Meier v MNR, [1967] Tax ABC 324; 67 DTC 224;

Guay v MNR, [1970] Tax ABC 1201; 70 DTC 1781;

Poulin v MNR, [1971] Tax ABC 528; 71 DTC 370;

Her Majesty the Queen v Pascoe, [1975] CTC 656; 75 DTC 5427:

Her Majesty the Queen v Diemert, [1976] CTC 301; 76 DTC 6187;

Provost v Her Majesty the Queen, [1976] CTC 445; 76 DTC 6254;

Her Majesty the Queen v Lavers, [1978] CTC 341; 78 DTC 6230;

Faubert v MNR, [1979] CTC 2713; 79 DTC 641;

Schnopel v MNR, [1979] CTC 2766; 79 DTC 654;

Gauvin v MNR, [1979] CTC 2812; 79 DTC 696;

Mahaffy v MNR, [1946] CTC 135; 3 DTC 937.

Findings

The fact that Price apparently may have met the stipulations under paragraph 8(1)(h) of the Act requiring him to travel andto pay for his expenses, should not be equated with his employer requiring that he have available a personal automobile for such a purpose. Having the automobile available was probably economic as well as efficient for both parties but it does not alter the fact that it was not a stipulated part of the appellant’s employment contract. A distinction may also be made between licence and insurance requirements for the automobile on one hand, and the parking charges on the other. The appellant’s automobile could not be operated without the licence nor, as I read Appendix “A”, without insurance when he attended to Clarkson business. However, I do not agree with the argument of counsel for the respondent that only costs incurred while the automobile is in motion are qualified for deduction as travelling expenses. In my opinion, this view from the Minister could even eliminate such things as repairs, licence and insurance. Further, any reference by the Minister to the disallowed amount ($292.97) as a “parking charge” may be misleading since by such identification the Minister would have already allowed an amount of $75.03 as a “parking charge” ($420.80 - ($713.77 - $368)).

Interpretation Bulletin IT-272 reads in part as follows:

Paragraph 33(a):

If the allowance is reasonable, the Department considers this a reimbursement for the use of the car. Therefore, the amount of the allowance is excluded from income and no automobile expenses or capital cost allowance may be claimed under paragraphs 8(1)(h) and (j).

Paragraph 35(a):

“reimbursement” means a payment by an employer to his employee to repay him for amounts he has spent on his employer’s business. . . .

In Gauvin (supra), it was noted by the Board that it was difficult to find legislative support for paragraph 33(c) of Interpretation Bulletin IT-272, and while I would extend that comment to both paragraphs 33(a) and 35(a) of the same bulletin, I recognize that they are useful vehicles for dealing with a difficult section of the Act.

When reference is made to paragraph 8(1 )(h), this automatically includes the preamble (subsection 8(1) itself) and, for purposes of this appeal, those sections read together would appear in somewhat the following way:

In computing . . . income . . . from employment, there may be deducted such .. . amounts as may reasonably be regarded as applicable to (that).. . employment . . . (and were) expended . . . for travelling in the course of (that) employment;

The thrust of the efforts of this taxpayer has been to show that the entire amount claimed ($713.77) was expended for travelling in the course of his employment. As indicated earlier, I have serious reservations that he has demonstrated a valid relationship between the parking charge and the other travelling expenses. However, there still would remain the prime hurdle—to show that the amount may reasonably be regarded as applicable to his income from employment. It is in this light that the Minister’s comment in the reply to notice of appeal should be read: “the deduction of $292.97 claimed was a personal expense”. The Minister did not reduce the claim by the total parking charges ($368),—he reduced it simply to the amount of the allowance received—$420.80.1 interpret that to mean that in the view of the Minister, the allowance itself was reasonable for the purposes intended by Clarkson. I would also conclude from the sentence “None of the above allowances are included in income as reported on the T4 slip” from Appendix “A” (supra) that Clarkson also considered it adequate—and probably a remuneration—in the light of Interpretation Bulletin IT-272. Any amount in excess of that allowance therefore may not reasonably be regarded as ap- plicable to that source—income from employment. Lacking any other identification to put on this excess amount, the Minister is correct in classifying it as personal. To have any hope of overturning the Minister’s rationale, the appellant must first show that the allowance received from Clarkson was not reasonable in the circumstances for the business purpose intended. It is not sufficient to show that it did not cover the total of his expenses—whether these expenses were actually incurred for travelling, or merely perceived as such by the appellant. There may be a distinction to be made between the qualification “as applicable” (to income from employment)—subsection 8(1) and the qualification “in the course of employment”—paragraph 8(1 )(h), but it is not a matter that appears to arise in the circumstances of this appeal. However, it is not beyond speculation that expenses could be incurred in the course of employment but would not be applicable to the income from that employment. In the instant appeal, there was no evidence adduced to show that the allowance of 20¢ per mile was not reasonable according to the standards of the day, and indeed it appears to be quite adequate. That leaves the Minister’s assumption that any excess expenses were personal, on solid ground.

The acceptance by an employee of a specific mileage allowance for the use of a personal automobile in travelling on the employer’s business exhibits certain elements of agreement between the two parties that the travelling expenses can be contained within that limit. As I see it, it is a difficult task for an employee to subsequently bring in the Minister of National Revenue to share as a third party in that arrangement. Accordingly, in view of the references made earlier to the tenuous relationship between subsection 8(1) of the Act and Interpretation Bulletin IT-272, the Board is careful to point out that even the fact a mileage allowance was “unreasonably low” would not necessarily result in the taxpayer having a claim for the difference against his employment income.

Summary

In principle, therefore, I see little distinction to be made between the facts in this case and those described in Gauvin (supra). Unless the mileage allowance itself can be defined as “unreasonably low”, the paramenters for the recipient taxpayer are already set by it, and from an income tax viewpoint, he exceeds that limit at considerable risk.

Decision

The appeal is dismissed.

Appeal dismissed.