James R Macdonald v. Minister of National Revenue, [1980] CTC 2796, 80 DTC 1685

John B Goetz:—This is an appeal with respect to the reassessments of the appellant’s income tax liability for his 1977 and 1978 taxation years, which reassessments were disallowed as deductions from the appellant’s income automobile expenses in the amounts of $527.17 and $1,093 for the years 1977 and 1978 respectively. The Minister relies, inter alia, upon paragraphs 6(1 )(b), 8(1 )(h), subsection 8(2) and section 67 of the Income Tax Act, SC 1970-71-72, c 63, as amended.

Facts

The appellant is employed by the Province of Nova Scotia, Provincial Tax Commission, as an Audit Supervisor with the Health Services Tax Division. His home base is in Sydney, Nova Scotia, and his employment requires him to travel around the Island of Cape Breton, the region under his supervision. He is a member of the Government Employees’ Association which applied to the Civil Service Commission for adjustments in reimbursing travelling policies. By an Order in Council dated July 17, 1973, a Civil Service Arbitration Board was appointed whereby a decision was handed down giving the following options to Government employees in claiming reimbursement for use of their personal car:

1. Accepting the method already in practice (straight mileage rate).

2. The option of receiving a monthly car allowance plus a reduced mileage allowance.

The appellant opted to receive the monthly car allowance and the reduced mileage allowance. He reported his monthly car allowance for the respective taxation years and also reported certain fixed expenses as further deductions in arriving at a net taxable income. Included in these expenses were capital cost allowance, insurance, licence, registration, inspection fees and capital repairs. He contends that the monthly car allowance and the certain fixed costs of owning the vehicle should be grouped together in arriving at a net taxable income, and the revenue from the reduced car mileage should be treated as a non-taxable revenue. In 1977 and 1978, the appellant received allowances for automobile expenses in the amounts of $1,394.10 and $1,420.80 respectively, which were reported as income. In the same years he was also in receipt of allowances for travelling expenses (amounting to $1,395 for 1977 and $1,484 for 1978). These were computed at the rate of 13.9¢ per mile by reference to the time actually spent by the employee travelling away from the municipality where his employer’s establishment, to which he ordinarily reported, was located.

Findings

The relevant sections to be considered are paragraphs 6(1)(b), 8(1)(h), subsection 8(2) and section 67 of the Income Tax Act, which read as follows:

6.(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.

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 (9),

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

8.(2) Except as permitted by this section, no deductions shall be made in computing a taxpayer’s income for a taxation year from an office or employment.

67. In computing income, no deduction shall be made in respect of an outlay or expense in respect of which any amount is otherwise deductible under this Act, except to the extent that the outlay or expense was reasonable in the circumstances.

Counsel for the respondent cited the following cases:

Wylde v MNR, [1979] CTC 3041 ; 79 DTC 829;

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

Krieger v MNR, [1979] CTC 2283; 79 DTC 269.

The burden of establishing an exemption or deduction rests squarely on the shoulders of the taxpayer (see Krieger v MNR). In my view, the Department is correct in taking the position that the appellant had not come within the full parameters of paragraph 8(1 )(h). Indeed, he was ordinarily required to carry on the duties of his employment away from his employer’s place of business, but he was not required to pay travelling expenses which he incurred in the performance of his office or employment. He was in receipt not only of a travelling allowance but a reduced mileage allowance for travelling expenses. It is quite clear, therefore, that he has not established his position for claiming a deduction and I dismiss the appeal.

Appeal dismissed.