A W Prociuk (orally: February 24, 1975):
1 The appellant, Marcel Provost, appeals from the respondent's notices of reassessment dated May 10, 1973 wherein certain expenses claimed by him in the taxation years 1969, 1970 and 1971 were disallowed on the ground that he was not entitled to such deductions by reason of his employment. The amounts disallowed are as follows: for the year 1969 $1,383.64; for the year 1970 $2,311.90; for the year 1971 $1,979.06.
2 The facts of the case are brief and essentially not in dispute. The appellant was at all times material hereto employed as an account supervisor by an advertising firm known as Maurice Watier Publicité Ltée. He was paid a fixed yearly salary and, in addition to that, an annual bonus. The bonus was at the discretion of his employer, depending on the annual profit of the company; accordingly, he was not a commission salesman within the meaning of subsection 11(6) of the Income Tax Act as it was then in force.
3 In addition to his office work, he was obliged to call on the firm's established clients from time to time, and the expenses incurred by him on these occasions were reimbursed by his employer upon production of proper vouchers therefor. (See Exhibit I-1 filed on behalf of the respondent, which is a letter dated January 4, 1973 from the appellant's employer to the Minister of National Revenue.)
4 The appellant treated these reimbursements in accordance with the provisions of subparagraph 5(1)(b)(v) of the Income Tax Act, RSC 1952, c 148, which deals with income from an office or employment and reads as follows:
5. (1) Income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year, plus- (b) all amounts received by him for the year as an allowance for personal or living expenses or as an allowance for any other purpose except
The appellant, upon receiving reimbursement for the expenses which he incurred, treated said expenses in accordance with the above-mentioned paragraphs of subsection 5(1).5 Exhibit I-2 filed on behalf of the respondent, a letter dated February 27, 1973 is a further letter by the appellant's employer to the Minister of National Revenue, setting out the circumstances which gave rise to this appeal. In addition to the expenses paid by the employer, as stated above, the appellant was given a further annual allowance, which was included in his total salary earned, to enable him to pros pect for new clients, that is to say, to provide some reimbursement for his efforts and perhaps encourage him to seek new clients for the employer. Thus, in 1969 he received $1,300, in 1970 $1,325 and in 1971 $1,300 and, as I stated before, this was included in his salary and became part of the gross salary earned by him in the year. It is against these allowances that the appellant claims the deductions mentioned at the outset.
6 In Exhibit I-2 the employer seeks to explain that, since it was not possible to determine what the expenses for this type of work would actually be, the company chose to grant an allowance as part of the salary which the appellant was obliged to declare in accordance with paragraph 5(1)(b).
7 In claiming deductions for the additional expenses incurred by him in quest of new clients, the appellant sought to avail himself of the provisions of subsection 11(9) of the Income Tax Act as it was then in force, which relate to travelling expenses and read as follows:
11. (9) Where an officer or employee, in a taxation year,(a) was ordinarily required to carry on the duties of his employment away from his employer's place of business or in different places,
(b) 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
(c) was not in receipt of an allowance for travelling expenses that was, by virtue of subparagraph (v), (vi) or (vii) of paragraph (b) of subsection (1) of section 5, not included in computing his income and did not claim any deduction for the year under subsection (5), (6) or (7),
8 The expenses that the appellant claims in the years under appeal are as follows:
9 In 1969 part of his expenses are classified as “automobile expenses” while the other portion consists of expenses of the type commonly known as entertainment or promotional. Under “automobile expenses” he has listed gasoline $449.24; repairs $312.90; insurance $186; parking and garage (I take it that means parking at the place of work) $483.15; and licences and permits $41.45, for a total of $1,472.74. He has reduced this amount by 40% which he claims fairly represents his personal use of his car, so that the net claim in respect of his automobile expenses is $883.64. He also claims entertainment or promotional expenses in the sum of $500, for a total deduction of $1,383.64 for the year.
10 In the year 1970 his automobile expenses, after taking into account the 40% deducted for personal use, amount to $1,861.90 and his entertainment or promotional expenses are $450.
11 In 1971 the amount claimed for the automobile (less personal use) amounts to $1,119.56 and, in addition to that, he claims the full cost of parking and garage of $534.50, plus entertainment or promotional expenses in the sum of $325, for a total of $1,979.06.
12 To substantiate these figures, the appellant has filed with the Board, as Exhibits A-1, A-3 and A-4, his expense vouchers for the years in question. I note that his actual expenses, and they are varied, are far greater than the amount claimed, but the appellant sought to explain this by saying that he had kept a record in these exhibits of all his expenses for the year, and only certain ones were claimed as having been expended in the course of his employment and make up the totals which I have mentioned.
13 I should also add that Exhibit A-2 is a summary filed of the expenses claimed in the years in question. It should be noted that nowhere in subsection 11(9) does it mention entertainment, or what are known as promotional, expenses. The appellant, being a salaried employee, is not permitted to claim such expenses as a deduction from his salary by reason of the provisions of paragraph 12(1)(a) of the Income Tax Act then in force. Subsection 11(9) further states that a taxpayer, in order to benefit from its provisions, must ordinarily be required to perform his duties away from his employer's place of business.
14 It is not sufficient, in my opinion, and I believe I am supported in this by case precedent, that he occasionally absented himself from his office in search of new clients. Also, the contract of employment, according to subsection 11(9), would have to stipulate that he was required to pay his own expenses.
15 In the instant case, it is abundantly clear that he was given an allowance in advance for that purpose. It is clear to me from the evidence of the appellant, which I accept without hesitation, that there was an honest attempt to compensate him for such expenses as he might incur in extending the commercial horizon of his employer. Unfortunately, there is no provision in the Income Tax Act, nor is the jurisprudence which I have reviewed of any assistance in that regard, which would permit him to make the said deductions from the allowance he received and from his salary.
16 Accordingly, the appeal is dismissed.
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