Nolinor – Court of Quebec finds that per-flight-hour allowances paid to crew flying to remote locations came within the s. 67.1(2)(d) exception for full deductibility

Nolinor, which carried on a business of providing charter flights to generally remote locations, e.g., in Nunavut or Gabon, paid its pilots, crew and mechanics allowances of $3 to $5 per flight hour to cover costs of meals and cleaning their uniforms. The ARQ denied 50% of the deductions claimed by Nolinor for such allowances pursuant to the Quebec equivalent of ITA s. 67.1(1) (respecting amounts paid in respect of the consumption of food or beverages). Richard JCQ found that such amounts were deductible in full by virtue of the exception under the equivalent of s. 67(2)(d) (regarding amounts required to be included in employees’ income pursuant to s. 6 respecting food or beverages consumed or that would be so included but for the remote site exception in s. 6(6)(a)(ii)) given inter alia that the allowances were in respect of remote work sites described in the Quebec equivalent of s. 6(6)(a)(ii).

Nolinor was required pursuant to a covenant under its loan agreement with a Canadian bank to take out a policy on the life of its (indirect) wholly-owning shareholder and CEO (Mr. Prudhomme) and assign that policy to the bank as security for the loan. The ARQ denied to Nolinor deductions for the premiums paid by Nolinor on the policy since Mr. Prudhomme was named as the policyholder. In allowing the deduction under the equivalent of ITA s. 20(1)(e.2), Richard JCQ found that in substance Nolinor was the policyholder.

Neal Armstrong. Summaries of Les Investissements Nolinor Inc. v. ARQ, 500-80-039880-191 (Court of Quebec, 19 June 2023) under s. 67.1(2)(d) and s. 20(1)(e.2).