DR Robert H Gourlay v. Minister of National Revenue, [1973] CTC 2282

The Chairman (orally: September 28, 1972):—This is an appeal by Dr Robert Gourlay against the reassessments of the Minister of National Revenue for the taxation years 1968 and 1969. The reassessments and the appeal arise out of a disagreement between the taxpayer and the Department of National Revenue as to the portion of his automobile expenses that should be allowed to him as a deduction.

The doctor is a highly qualified surgeon, practising in the City of Vancouver and, at the material time, was Chief of Surgery at St Paul’s Hospital, was associated with Shaughnessy Hospital, and also with the Children’s Hospital. He had an office outside his home, which he attended to see patients approximately three days a week. He had administrative chores at St Paul’s Hospital two half-days a week, ‘and most of his surgical operations took place at St Paul’s. In fact, as time went on, he did his operations almost exclusively at St Paul’s.

He has given evidence and has indicated that, at the material time, his wife had a car, his son had a car, and he had his own car for business, as he used the term, which was a vehicle leased from Lawson Oates on West Broadway, Vancouver.

The original assessments by the respondent allowed the appellant 80% for his business use of this car. He objected to this amount, and subsequently the amount was almost reversed and he was allowed only 25%, in the final reassessments, for business use.

The respondent has called the assessor, Mr Ellison, who did the final assessment on file, and he has worked out in detail the mileage involved. He has also made an assumption that the doctor made two trips weekly for emergencies, and assumed that the rest, or the major portion, of his surgery was elective. I think, as time went on, a large portion of his surgery was elective, because in his evidence he in- dictated that he turned the emergency surgery problems over to other doctors, although he was on call should any unusual problem arise.

As I have indicated in the course of argument, this sort of an allowance is really a concession that has been made to certain business professions, perhaps the most difficult concession to administer being the one that is to be granted to medical doctors. Because of their busy practices and their technical training, they are famous for being notoriously bad bookkeepers, if not bad businessmen, and it is easy to see how the respondent’s assessor, with his accounting experience, was able to calculate the mileage to fit the allowance that was finally granted in the reassessments.

As I have also stated in the course of argument, I have heard these cases now from coast to coast, and it shocks me to see the discrepancy that takes place from district office to district office. In some cases, doctors have been allowed what, in my opinion, was far in excess of the allowance they should be granted, and yet they have still appealed. It is clearly a situation where, in my view, there is a lack of understanding on the part of the medical profession, to name but one of the professions involved, as to the basis upon which this so- called car allowance is granted. In this instance, I have indicated that I have never in my experience, either as a practising lawyer or as a member of this Board, seen such a low allowance for business use allowed to a medical doctor carrying on a specialty of surgery and generating the income that was generated in this instance.

In my view, the question of mileage is only one aspect that should be looked at in determining what is fair and reasonable under the circumstances. Many decisions have tried to lay down a general principle of law, or general principles of law, that would govern, but I find this one of the most difficult areas in which to apply any general principles. The assumption made by the assessor that only two emergency calls per week were made on the average is, in my view, wrong in the light of the evidence of the doctor, who said he made six, eight or ten per week. Nevertheless, this does not mean that the assessor is wrong in his calculation of the mileage. I would hesitate to suggest that any malice entered into the picture as a consequence of the doctor having taken a rather hostile position after receiving the Original assessments which, at the time he took objection to them, were in my view very reasonable: that is to say, the Minister had only charged 20% to personal use of the car.

Unquestionably, all of us use our vehicles for personal use, even though we are loath to recognize it, at any given time. As I have said, mileage is not the only criterion. The usual problem in these cases is where the doctors claim mileage between their homes and their offices or where the office is actually situated in the home. The mileage between hospital and office has been allowed in some instances, if not all. However, putting all these things aside and looking at the matter on the basis of the practices I have observed in the various district offices across Canada and my experience of the type of practice where one trip to a hospital might involve medical attention for many patients, each of whom would represent a separate source of income, it is my opinion that the mileage calculation is not sufficient.

It therefore becomes a question of what is fair and reasonable under the circumstances, and I acknowledge and openly declare that it is really to some extent a guessing game to arrive at the figures. The original assessment indicated that some assessor somewhere felt that 80% was a proper business allowance. The 20% was subsequently taken into account in the final assessment in 1969, but it does not prevent me from acknowledging that something more than was finally allowed was fair and reasonable in someone’s eyes in the Department of National Revenue, although this is not a view which is binding on the respondent. The doctor’s view, on the other hand, that he should be entitled to at least 90% of his car expenses is, in my view, unreasonable.

In reviewing the tax returns of the taxpayer and listening to his evidence in the box and that of the assessor, I therefore come to the conclusion that a fair and reasonable amount to be allowed to the doctor, and one that is in keeping with what is allowed in other district taxation offices across the country, under circumstances as similar as one can find, is 75% of the expenses actually incurred.

The appeal will therefore be allowed in part and referred back to the respondent for reassessment on that basis.

Appeal allowed in part.