Lawrence Zrobek v. Minister of National Revenue, [1972] CTC 2604, 72 DTC 1498

The Chairman:—This is an appeal by the taxpayer against notices of reassessment of income tax for the years 1966 and 1967 issued by the Minister of National Revenue in September of 1969.

The matter came on for hearing before J O Weldon, Esquire, QC on October 13, 1971 at the City of Saskatoon in the Province of Saskatchewan, at a sitting of the Tax Appeal Board as it was then constituted.

Judgment was not delivered in this case before Mr Weldon’s term of office with the Board expired, and the parties have agreed in writing that the decision be rendered by a member of the Tax Review Board on the basis of the transcript of the evidence and argument adduced before Mr Weldon, without the necessity of rehearing the appeal or of providing an opportunity to re-argue the case.

At the opening of the hearing, appellant’s counsel, Mr Andrew Hawrish, indicated that the appeal would be narrowed to one point, namely, that “the Appellant has filed his income tax returns claiming the depreciation, or a portion of the depreciation, of his automobile [for] which he has not received any compensation at all, and this is the only point that we’ll be arguing”. This appears at page 2 of the transcript.

The only witness called at the hearing was the appellant, who, at the material time, was district manager of Pepsi-Cola Canada Limited for Saskatchewan.

His evidence is that when he was approached by management to take the position in question he was asked if he had a car and was told that he would receive a mileage allowance, and that any bills for hotel accommodation and meals would be submitted on expense account and he would be reimbursed therefor. He said that the mileage allowance was to take care of his automobile — “strictly automobile: gas, maintenance, tires and what have you”. (I am quoting now from the fourth paragraph on page 4 of the transcript.)

Again, at page 39 during cross-examination by Mr Hynes, counsel for the respondent, Mr Zrobek agreed, in answer to a question with regard to information he had given to the taxation officials, that he had said that he received a gasoline allowance of 3.3 cents a mile and, in addition, a further $60 every four weeks as car allowance.

He agreed with Mr Hynes that the $60 was to cover car expenses not covered by the gasoline allowance, but did not agree that it was to cover depreciation, his understanding being that the amounts paid him by his employer were strictly for gasoline, grease jobs, tires and maintenance of the car.

There is no question that in the years under appeal the appellant received from his employer both a mileage allowance and a car allowance, plus an expense allowance paid on the basis of vouchers submitted, and that he did not include these items in the income declared by him on his income tax returns for those years. These amounts were payable to the appellant by virtue of his terms of employment and were intended to cover his various out-of-pocket expenses, and therefore it was not necessary for him to include them when reporting his income for the year. However, he now claims that, in addition to the amounts received by him for such expenses, he should, under subsection 11(11) of the Income Tax Act, be entitled to an additional deduction in respect of depreciation on his motor vehicle.

The Act is quite clear that, in order to be entitled to take advantage of subsection 11(11) of the Act, the taxpayer must also be entitled to deductions under subsection (6) or (9) of the said section 11 for the same taxation year. These latter deductions are only applicable to certain employees who, among other things, were, by their contract of employment, required to pay their own travelling expenses and were not in receipt of any allowance for travelling expenses that, by virtue of subparagraph 5(1)(b)(v), (vi) or (vii), was not included in computing their income. In my view, the appellant cannot fit within the confines of either subsection (6) or (9) of section 11, and therefore is not entitled to any allowance for depreciation under subsection 11(11) of the Act.

In other words, having taken advantage of the privileges available to him under section 5 of the Act, permitting him to exclude from his income the travelling expenses and allowances that he received from his employer, he cannot now seek to apply subsection (11), (9) or any other subsection of section 11, out of context in order to grab a further deduction for himself on account of expenses.

Certain cases were cited by the parties, but it is clear on the evidence, as pointed out by Mr Weldon at page 77 when giving his views on the case, that the appeal can be decided on the general evidence adduced and on the wording of the subsections involved, and that, since the wording of subsection (11) and the other applicable provisions of section 11 is clear, it is not necessary to look too closely at the cases.

If in fact the appellant did not receive adequate compensation from his employer for wear and tear on his personal automobile in the course of carrying out his duties, then that was a matter between himself and his employer at the material time. The fact remains that, having received expense allowances and having, as stated previously, excluded them from his declared income as he was entitled to do under section 5, he cannot now avail himself of subsection 11(11) of the Act.

For these reasons, in my view, the appeal must be dismissed and the assessments of the Minister for the taxation years 1966 and 1967 affirmed.

Appeal dismissed.