Tradif D.J.T.C.:
1 The appellant testified and called Victor Tremblay in his capacity as captain of the vessel which is at issue here. The respondent called Yvon Ouellet, the author of an appraisal supporting the validity of the Department's contentions. Martial Labbé also testified in his capacity as the respondent's employee responsible for the matter. The point at issue was the following: what is the annual value of the benefit conferred on the appellant for the 1992 and 1993 taxation years resulting from the personal use of a boat placed at his disposal by the company «Conceptel Construction (1991) Inc»?
2 The appellant accepted the wording of the point at issue: however, he hastened to point out that he did not agree with the number of days recorded by the respondent.
3 The evidence clearly established, as regards the number of days or length of use, that the number was entirely justified both for the 1992 and for the 1993 taxation years. The number of days for 1992 was the subject of an agreement. As to 1993, the appellant himself said he had provided the information during the investigation, whence I find it hard to understand his challenge of this point in the notice of appeal and at the hearing.
4 The evidence provided no basis for questioning the number of days: on the contrary, it confirmed the correctness of the two reference periods.
5 The evidence is not quite as clear and transparent as to the value to be assigned to the benefit received by the appellant. The appellant himself submitted a valuation consisting of adding maintenance costs and interest charges together with depreciation and a return forecast. His calculations were broken down as follows:
| 1992 | 1993 | |
|---|
| Maintenance | $7,369 | $8,434 |
| Interest charges | $21,765 | $20,248 |
| Depreciation | $14,000 | $14,000 |
| Return | $11,200 | $11,200 |
| TOTAL | $54,334 | $53,882 |
| Number of days annually | 365 | 365 |
6 Daily cost of use $54,334%365 = $148.86 $53,882%365 = $147.62
7 This approach has the advantage of being understandable and coherent: farther, it is reasonable and realistic provided the components leading to the conclusions are as well. In this connection, the appellant himself did what he complained of in the respondent's appraisal, by amortizing the total input over a very exaggerated period of use, namely 365 days.
8 The appellant complained that the respondent had considered much too short a period of use: however, he himself considerably exaggerated the period of use in making his own calculations. It seems to me quite unreasonable to amortize the aforementioned expenses over a period of 365 days.
9 Weather conditions and the necessary and essential maintenance periods prevent the use of such a craft for a period of 365 days. There was no evidence that this kind of boat could be used 365 days a year.
10 On the other hand, the respondent's approach also had significant weaknesses, especially as regards the relevance of comparable units: I refer in particular to the fact that the expert witness took into account only the values that he obtained from his researches on the INTERNET. Moreover, the course of action taken by the respondent is in my view revealing as she completely changed her approach to estimating the value of the benefit received by the appellant.
11 The reference or estimate accepted seems to me to be lacking in precision and certainly does not comply with standard practice in such matters. I understand and accept the fact that this exercise was somewhat unusual, even difficult: however, that is not a sufficient basis for accepting as valid and credible the result of a somewhat clumsy exercise involving the use of comparisons which were more or less relevant and of questionable reliability both as to the value and the circumstances and place of use.
12 Mr. Ouellet admitted that he had not done many valuations in this particular area.
13 Such difficulties or limitations do not in any way validate or support the validity of the work used as a basis for estimating the daily cost of the boat which constituted a benefit for the appellant. Where does the daily cost of use of such a boat actually fall? What reasonable value should be added to the appellant's income? Undoubtedly, it is somewhere between the amount estimated by the appellant and the amount relied on by the respondent. The appellant certainly had the burden of proof: he was not able to show the reasonableness of the conclusions in the approach taken for his valuation; however, he was able to discredit the quality of the valuation on which the respondent relied. In such circumstances, in view of the weakness of the evidence on either side, I have no choice but to assess the daily cost of the boat. As the annual cost of use comes to approximately $55,000, I accept a reasonable and realistic average use, based on the evidence, of 200 days.
$55,000.00%200 = $275.00/day
14 The taxable benefit is thus arrived at as follows:
| 1992 | $275 × 21 | = | $5,775 + $404.25 | = | $6,179.25 |
| 1993 | $275 × 15 | = | $4,125 + $288.75 | = | $4,413.75 |
15 The appeal is therefore allowed on the basis that the value of the benefit received was $6,179.25 in 1992 and $4,413.75 in 1993: the assessments are accordingly referred back to the Minister of National Revenue for reconsideration and reassessment, the whole with costs to the appellant.
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