Guy Rajotte v. Minister of National Revenue, [1979] CTC 2555

Guy Tremblay [TRANSLATION]:—This case was heard in Montreal, Quebec on January 17, 1978.

1. Point at issue

It must be determined whether the appellant was a resident of Canada in 1974, and consequently, whether the respondent is entitled to include the amounts earned from February 14, 1974 to December 31, 1974 in the appellant’s income. During this period the appellant, accompanied by his family, worked in Tunisia for his employer, a firm of consultants from Montreal. This firm had accepted a contract from the Canadian International Development Agency (CIDA). The appellant had been sent to Tunisia by his employer to perform the work.

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 W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. Facts

3.1 The appellant has been a member of the Order of Engineers of the province of Quebec since 1961 (A-3 and A-4). He was still a member in 1974 and 1975 and had paid the required subscriptions.

3.2 He had been employed with the consulting firm of Asselin, Benoît, Boucher, Ducharme, Lapointe Inc (ABBDL) since November of 1969. He worked in Quebec, particularly in the Montreal region. More specifically, at the end of 1973 and the beginning of 1974, he was in charge of various control projects for Hydro-Quebec, a client of ABBDL. He participated concurrently in preliminary studies for the MPP Project (Major Postal Plants).

3.3 ABBDL owned 100% of the shares in Tecsuit International Limitée (TIL).

3.4 On June 5, 1975, a written contract confirming a previous verbal contract was concluded between the Canadian International Development Agency (CIDA) and TIL for the purpose of “studying, preparing and submitting a draft master plan of the electric energy distribution of the Société tunisienne d’électricité et du gaz (Tunisia gas and electric company)”.

3.5 In order to carry out this contract in Tunisia, TIL borrowed employees from ABBDL, including the appellant. TIL does not have a pay roll. TIL cannot dismiss an employee. Moreover, ABBDL did not interfere in the contract between CIDA and TIL.

3.6 The appellant earned his regular salary plus 25% isolation allowance. According to the appellant, one of the main reasons he agreed to go to Tunisia was, inter alia, because he would not be taxed on his income.

3.7 In January of 1974 the appellant and his wife went to Ottawa for a week of briefing and “psychological conditioning”, given by CIDA to persons leaving for foreign countries to perform work in association with CIDA.

3.8 The appellant left for Tunisia on February 14, 1974 and his wife and children (aged 1V2 and 6V2) came to join him on March 15 of the same year. They lived in La Marsa, Tunisia. They returned to live in Montreal in April 1975.

3.9 Before leaving for Tunisia, the appellant sublet his apartment at 2185 Prudhomme Street in Montreal to his sister-in-law, by verbal agreement with three months’ notice to resume possession of the residence. He brought a kitchen set, an armchair and a dresser to Algeria. According to the appellant, he left a stove, refrigerator, dishwasher, a bed, winter equipment and so forth in the sublet apartment because it would have cost too much to bring them to Algeria.

3.10 He retained his bank account at the Royal Bank in Montreal. Deposits were made and money was then transferred to the British Bank of the Middle East.

3.11 He paid his own insurance covering his furniture in Canada. He gave up his telephone line in Montreal.

3.12 Upon his return to Canada, he resumed possession on September 1, 1975 of his residence which he had sublet to his sister-in-law when he left for Tunisia.

3.13 As for his work, the appellant maintained that he was not responsible to CIDA in any way, that is, that he did not have to submit any reports to the Agency. He made his regular reports to Mr Ransom of ABBDL. He was even specifically requested not to communicate with the CIDA representatives. In one particular case, he had forwarded to CIDA a photocopy of a letter sent to his employer. Mr Ransom sent reports to CIDA and the Société tunisienne d’électricité et du gaz (STEG). The appellant never received any comments on his reports.

3.14 He did not pay any income tax to the Tunisian government. Moreover, his employer made the source deductions for the Canadian government.

3.15 He received his family allowance. According to the appellant, this was an administrative error.

3.16 According to the contract between Canada and Tunisia (I-4) and the contract between Canada (CIDA) and TIL, both Canada and Tunisia were paying the cost of the work. Moreover, upon presentation of claims, CIDA paid TIL monthly for services rendered and expenses incurred.

3.17 In a notice of assessment dated February 13, 1976, the respondent included in the appellant’s income the sum of $20,962.10, which was the amount earned from February 14, 1974 to December 31, 1974.

3.18 A notice of objection was filed on May 6, 1976.

3.19 On November 5, 1976 a notice of reassessment was issued which took into account the amount of $3,153.88 deducted at source.

3.20 On the same date, a reply to the notice of objection upholding the inclusion of the $20,962.10 in the net income was sent to the appellant.

4. Act, Case Law and Comments

4.1 The main sections to be considered in the case at Bar are 2, 3, 5, 115 and 250(1)(d) of the new Act. The appellant also referred to s 101 of the CIDA Regulations.

4.2 The only case law cited by the parties was:

— Paul E Peterson v MNR, [1969] Tax ABC 682; 69 DTC 503;

— Rémi Bouchard v MNR, [1978] CTC 2071; 78 DTC 1074.

The appellant also referred to Interpretation Bulletins 161 and 221.

4.3 The problem of an individual’s residence is not a new one. Residence either has the extended meaning (section 250) or the ordinary meaning.

4.3.1 Residence in its extended meaning

Paragraph 250(1)(d) was referred to:

250. Extended meaning of resident.

(1) For the purposes of this Act, a person shall, subject to subsection (2), be deemed to have been resident in Canada throughout a taxation year if

(d) he performed services, at any time in the year, in a country other than Canada under a prescribed international development assistance program of the Government of Canada and he was resident in Canada at any time in the 3 months’ period preceding the day on which such services commenced.

First of all, can it be said that the appellant resided in Canada during the three months preceding the date he assumed his duties in Tunisia? This fact, which incidentally is uncontested, appears in paragraph 3.2 of the Facts.

Can it be said that, in the case at bar, the appellant worked in an international development assistance program prescribed by the Government of Canada?

According to the appellant, he was not subject to any orders from CIDA and had no contact with its representatives (paragraph 3.13 of the Facts). He was not paid by TIL. He received his salary from ABBDL, which was not a party to the contract between CIDA and TIL (paragraph 3.5 of the Facts). He received his instructions from Mr Ransom of ABBDL. He submitted that the presumption of residence cannot apply, primarily because of these facts.

From the evidence given, including a reading of the contracts between Canada and Tunisia and between CIDA and TIL, the Board has no choice but to accept, as the first principal fact, that through the Canadian International Development Agency (CIDA), Canada prescribed “an international development assistance program’’ with a view to preparing and submitting a draft master plan of the distribution of electrical power of the Société tunisienne d’électricité et du gaz.

As a second principal fact, the evidence clearly shows that the appellant found himself in Tunisia during 1974 and 1975 because of Canada’s participation in this project.

The Board considers that whether the appellant went to Tunisia as an employee of CIDA, TIL or ABBDL is immaterial since, in actual fact, he performed his duties in Tunisia in 1974 under an international development assistance program prescribed by Canada.

The Board therefore concludes that the extended residence as described in paragraph 250(1)(d) applies.

4.3.2 “Residence” in the ordinary sense

On many occasions the courts have ruled on this point. In Rémi Bouchard v MNR, [1978] CTC 2071; 78 DTC 1074, the Board referred to nineteen cases. A number of principles and factors were also brought out in the case, and they may be mentioned here:

Principles

(1) Residence is neither domicile nor citizenship;

(2) a person may even have two places of residence.

Factors

(1) The taxpayer’s background: his native country, his general life-style, his habits;

(2) the links that a person preserves with the country in question, such as: immovable properties (number and value, manner of use), family home, vacation site, storage of furniture, bank account, membership in a religious group, social club or professional organization;

(3) the presence of the husband or of the family and the husband in a given location in the course of the year in question;

(4) mere intention to return to the country does not necessarily settle the matter of residence, even though it may be essential in determining domicile;

(5) the motives or reasons offered to explain absence from or presence in a given location during a taxation year;

(6) the fact of travelling as a tourist or always remaining in a given location;

(7) the length of time spent in a given place during the taxation year in question and previous years;

(8) the regularity with which the taxpayer returns to his native country.

It is clear from the facts entered in evidence that the appellant actually did reside in Tunisia in the ordinary sense for eighteen months, inasmuch as the notion of residence is opposed to that of domicile.

Further, owing to certain contacts which the appellant maintained in Canada, and the principles and factors mentioned above and recognized in the case law, can it be said that the appellant was still a resident of Canada?

The appellant was a member of the Order of Engineers of Quebec (paragraph 3.1 of the Facts). He had retained his lease (the fact that he sublet to his sister-in-law implies that he was still the lessee) and he resumed it upon his return. He left certain movable property in Canada in the sublet premises (paragraph 3.9 of the Facts). He was paid by a Canadian employer, the same employer he had worked for since 1969 (paragraph 3.2 of the Facts) and for which he worked upon his return.

All these facts lead the Board to conclude that the appellant was also a resident of Canada in the ordinary sense. Accordingly, the appeal cannot be upheld on two grounds (extended residence and ordinary residence).

5. Conclusion

The appeal is dismissed in accordance with the above-mentioned reasons for judgment.

Appeal dismissed.