John Mitchell v. Minister of National Revenue, [1979] CTC 2011, 79 DTC 38

Guy Tremblay:—This case was heard at Ottawa, Ontario, on December 8, 1978.

1. Point at Issue

The problem is whether the respondent is correct in disallowing the expenses in the amount of $1,096.25 incurred by the appellant (a resident of Ottawa, Ontario) during six weeks in 1976 while he was working in Montreal as a member of Le Comité Organisateur des Jeux Olympiques 1976.

2. Burden of Proof

The burden is on the appellant to show that the respondent’s assessment is incorrect. This burden of proof derives not from one particular section of the Income Tax Act, but from a number of judicial decisions, including the judgment delivered by the Supreme Court of Canada in R IV S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. The Facts

The facts in the present case are not in dispute.

3.01 During his 1976 taxation year, the appellant was a permanent employee of the Government of Canada in the City of Ottawa.

3.02 During the 1976 Olympics games, the appellant was requested by the Competition Director of Le Comité Organisateur des Jeux Olympiques (COJO) to work at the Olympics as co-ordinator of the results system for the olympics fencing competition.

3.03 From June 21 to August 1, 1976, the appellant, on leave of absence from the Government of Canada, worked for COJO in the City of Montreal.

3.04 While working at the Olympics, the appellant received from his employer, COJO, a salary of $57.69 per day. He received a total amount of $1,799.93. No allowance was paid to the appellant by COJO.

3.05 The appellant in his 1976 income tax return, claimed expenses in the amount of $1,096.25, representing lodging, transportation (from Ottawa to Montreal and return during the weekends) and meals expenses while working for COJO in the City of Montreal.

3.06 On August 5, 1977, by issuing the notice of assessment, the respondent disallowed the amount of $1,096,25.

3.07 On October 17, 1977, a notice of objection was filed by the appellant.

3.08 On April 5, 1978, the respondent confirmed the notice of assessment.

3.09 A notice of appeal was filed before the Tax Review Board on April 25, 1978.

4. Law—Jurisprudence—Comments

4.1 Law

As the appellant is an employee whose wages are only salary and not commission, the main sections concerned in the present case are 8(1)(h) and 8(2) of the new Act. These sections read as follows:

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) Travelling expenses—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.

(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.

4.2 Jurisprudence

The jurisprudence cited by counsel for respondent is the following:

1. W A Sheaffer Pen Co of Canada v MNR, [1953] CTC 345; 53 DTC 1223;

2. P Laurent v MNR, [1978] CTC 2412; 78 DTC 1311;

3. Theodore Felekidis v MNR, [1978] CTC 2666; 78 DTC 1485;

4. Anthony Mifsud v MNR, [1978] CTC 2537; 78 DTC 1408.

4.3 Comments

4.3.1 Paragraph 8(1 )(h): not applicable

In his appeal, the appellant makes an admission giving the good reason why paragraph 8(1)(h) does not apply in the present case:

I am aware that these expenses do not qualify under the explicit and normal terms of paragraph 8(1)(h) of the Act, since the expenses incurred do not relate to travel away from the locale in which the employer, COJO 76, was situated. 4.3.2 Special case

Despite the non-application of paragraph 8(1)(h), the appellant however invoked the general intent of the law because, according to him, the present case is a special one. He explains fluently in his appeal:

I submit, however, that consideration might be given to treating my case as a special one, for the following reasons:

(a) The Olympics games were a “one-off” event which required, for reasons of national prestige, the highest qualities of organization and accuracy of administration.

(b) The administration and on-the-spot decision-making related to the smooth conduct of a highly complex sport such as fencing requires the highest level of experience and expertise, both in the sport itself and in administration/manage- ment, in order to assure smooth conduct of the competition.

(c) I am one of the few persons in Canada with this particular blend of specialized skills, and thus was requested personally by the Competition Director to contribute to this phase of the Olympics. Monetary compensation to be paid was, however, strictly limited by the general regulation of COJO.

(d) I was granted leave of absence by my permanent employer in Ottawa for the duration of my duties in Montreal, and thus remained permanently employed in Ottawa before, during and following the COJO job.

(e) The monetary competition paid by COJO was low, and was intended to cover away-from-home expenses; no other allowance was paid me by COJO to meet these expenditures—as the only payment permissible under their regulations was a nominal-level “salary”.

(f) The normal frame work of paragraph 8(1)(h) of the Act is that the employee is expected to (and indeed normally does) reside at the locale of the employer, and that living expenses in that locale cannot therefore reasonably be regarded as a purely work-related expense. I was in fact required, as a de facto condition of employment, to reside at a place distant from my normal and permanent place of residence, and thus to assume the extra expense of residence in Montreal. The COJO position was, and was known at the outset to be, a limited duration post, and thus made totally unreasonable the expectation that I should move permanently to Montreal for its duration, and then back to Ottawa after its conclusion.

(g) Thorough inquiries within the COJO organization has failed to reveal another case similar to mine—in all other cases persons on the permanent core staff of COJO were enrolled, and were thus permanently located, in and around Montreal. Only in my case was it necessary, or indeed permitted, to reach outside the local area to obtain needed specialist services.

I therefore request that, because of the special and individual circumstances surrounding my case, the reasonable and moderate away-from-home expenses I actually incurred be accorded special consideration, and that they be allowed as a deduction from my taxable income for the taxation year 1976.

4.3.3 Income Tax Act: law of equity or not?

The Board understands that, according to equity, it would be reasonable that the appellant deduct the amount claimed. Unfortunately, the Income Tax Act is not a law of equity. Since it is a public policy statute, it should be strictly interpreted, that is, according to the letter of the law.

Moreover, in the present case, subsection 8(2) quoted above restricts the possibility of deduction only according to section 8.

Following the strict interpretation, sometimes there is equity and the principle equitas sequitur legem (equity follows the law) applies but not all the time.

In the present case, section 8 is an exemption section. In the case of Paul Laurent, cited above, at page 1312 Chairman Lucien Cardin says:

It should first be emphasized that since section 8 of the said Act constitutes an exception to general tax law, it must be interpreted restrictively, and subsection 8(2) confirms this restriction. Paragraph 8(1)(a) allows $150 to be deducted as expenses pertaining to employment, and this was granted to the taxpayer. Subparagraphs 8(1 )(h)(i), (ii), (iii) and 8(1 )(j)(i) and (ii), to which the taxpayer referred, apply specifically to income from an office or employment and do not concern business, professional or other income.

The Supreme Court of Canada in Wylie v City of Montreal (1885), 12 SCR 384 at 386, Sir W J Ritchie, CJ said:

I am quite willing to admit that the intention to exempt must be expressed in clear unambiguous language; that taxation is the rule and exemption the exception, and therefore to be strictly construed.

As section 8 has no application in the present case, unfortunately the Board has no alternative but to dissallow the appeal.

5. Conclusion

The appeal is dismissed in accordance with the above Reasons for Judgment.

Appeal dismissed.