Henri-Georges Lavoie v. Minister of National Revenue, [1978] CTC 2452

Guy Tremblay [TRANSLATION]:—The case at bar was heard at Quebec City on May 12, 1977.

1. Summary

The question is whether $2,041 paid to the appellant in 1974 by his employer Davie Shipbuilding Limited as a meal allowance, in accordance with his collective agreement, is: taxable within the meaning of the Income Tax Act.

2. Burden of Proof

The burden is on the appellant to show that the respondent’s assessment is incorrect. This burden of proof results not from any particular provision of the Income Tax Act, but from several court decisions, including the judgment of the Supreme Court of Canada rendered in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. Facts

3.1. In 1974 the appellant, a shipbuilding engineer, worked on a tugboat for Davie Shipbuilding Limited of Lauzon, Quebec.

3.2. According to his testimony, his work required him to be on call 24 hours a day, 365 days a year.

3.3. His work, which consisted in supervising the assembly and repair of machinery, was always done on a boat, either in port or on the river.

3.4. When the boat was in port, the appellant worked one full shift of 24 hours and then had two days off. During the 24-hour shift, he had his meals delivered by a restaurant and paid for them out of his own pocket.

3.5. When the boat was on the river, one man cooked for the others. The length of time away from port varied from two to ten days.

3.6. The following is a letter written by Davie Shipbuilding Limited on April 15, 1975 and filed as Exhibit I-1:

TO WHOM IT MAY CONCERN:

This is to certify that Mr Henri-Georges Lavoie, SIN 205-209-612, was paid a total of $2,040.50 in 1974 in meal allowance, in accordance with the provisions of the collective agreement which governs Mr Lavoie’s working conditions.

I certify that this information is correct.

(sgd) Marcel Bernard

Assistant Director

Personnel and Staff Relations

According to the appellant this allowance, which amounts to an average daily allowance of $5.83, was provided for in the collective agreement. It was paid in one lump sum and therefore also applied to non-working days.

3.7. The appellant lived in Beauport, 5 or 6 miles from his usual place of work.

3.8. On March 3, 1975 the appellant filed his 1974 income tax return, declaring a net income of $19,286. On June 2, 1975 he filed an amended return, claiming that the allowance of $2,040.50 was not taxable and therefore declaring a net income of $17,246.48.

3.9. On February 16, 1976 the respondent issued a notice of assessment in which he disallowed the deduction of $2,040.50.

3.10. On April 5, 1976 the appellant filed a notice of objection, and on September 29, 1976 the respondent sent a notification confirming his assessment.

3.11. On December 22, 1976 the appellant filed his notice of appeal with the Board.

4, Act, Comments and Precedents

The sections of the new Act which seem to apply in the case at bar are subsection 5(1), paragraph 6(1 )(b) and subsection 6(6):

5. (1) Income from office or employment.—Subject to this Part, a taxpayer’s income for a taxation year from an office or employment is the Salary, wages and other remuneration, including gratuities, received by him in the year.

6. (1) Amounts to be included as income from office or employment.— There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable:

(b) Personal or living expenses.—all amounts received by him in the year as an allowance for personal or living expenses or as an allowance for any other purpose, except

(i) travelling or personal or living expense allowances

(A) expressly fixed in an Act of the Parliament of Canada, or

(B) paid under the authority of the Treasury Board to a person who was appointed or whose services were engaged pursuant to the Inquiries Act, in respect of the discharge of his duties relating to such appointment or engagement,

(ii) travelling and separation allowances received under service regulations aS a member of the Canadian Forces,

(iii) representation or other special allowances received in respect of a period of absence from Canada as a person described in paragraph 250(1 )(b), (c) or (d),

(iv) representation or other special allowances received by an agentgeneral of a province in respect of a period while he was in Ottawa as the agent-general of the province,

(v) reasonable. allowances for travelling expenses received by an employee from his employer in respect of a period when he was employed in connection with the selling of property or negotiating of contracts for his. employer,

(vi) reasonable allowances received by a minister or clergyman in charge of or ministering to a diocese, parish or congregation for expenses for transportation incident to the discharge of the duties of his office or employment,

(vii) allowances (not in excess of reasonable amounts) for travelling expenses received by an employee (other than an employee employed in connection with the selling of property or negotiating of contracts for his employer) from his employer if they were computed by reference to time actually spent by the employee travelling away from

(A} the municipality where the employer’s establishment at which the employee ordinarily worked or to which he ordinarily made his reports was located, and

(B) the metropolitan area, if there is one, where that establishment was located,

in the performance of the duties of his office or employment,

(viii) such part of the aggregate of allowances received by a volunteer fireman from a government, municipality or other public authority for expenses incurred by him in respect of, in the course of, or by virtue of the discharge of his duties as a volunteer fireman, as does not exceed $300, or

(ix) allowances (not in excess of reasonable amounts) received by an employee from his employer in respect of any child of the employee living away from the employee’s domestic establishment in the place where the employee is required by reason of his employment to live and in full-time attendance at a school in which the language primarily used for instruction is the official language of Canada primarily used by the employee if

(A) a school suitable for that child primarily using that language of instruction is not available in the place where the employee is so required to live, and

(B) the school that the child attends is the school closest to that place in which that language is the language primarily used for instruction;

6. (6) Employment at special work site. —Notwithstanding subsection (1), in computing the income of a taxpayer for a taxation year from an office or employment, there shall not be included

(a) the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses incurred by him for, board and lodging received by him

(i) in respect of, in the course of or by virtue of his office or employment at a special work site from which, by reason of distance from the place where he maintained a self-contained domestic establishment (in this subsection referred to as his “ordinary place of residence’’) in which he resided and actually supported a spouse or a person dependent upon him for support and connected with him by blood relationship, marriage or adoption, he could not reasonably be expected to return daily to his ordinary place of residence, and

(ii) in respect of a period while he was required by his duties to be away, for a period of not less than 36 hours, from his ordinary place of residence; or

(b) the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses incurred by him for, transportation between his ordinary place of residence and the special work site referred to in subparagraph (a)(i), received by him

(i) in respect of, in the course of or by virtue of his office or employment described in subparagraph (a)(i), and

(ii) in respect of a period described in subparagraph (a)(ii), during which he received board and lodging, or a reasonable allowance in respect of expenses incurred by him for board and lodging, from his employer.

First of all, the Board notes that the appellant’s income in 1974 was income from an office or employment. As a general rule, an employer does not pay for his employees’ meals, and this expense is not included in his general obligations. An employer who provides meals for his employees is the exception rather than the rule. In fact, since time immemorial meals have always been considered personal expenses, or expenses of the supporting individual in the case of a dependant, namely the parent. Meals are part of a person’s “living” expenses “subsistance” which the Bélisle dictionary defines as “nourriture et entretien” (food and maintenance).

In the Income Tax Act, these expenses are not considered obligatory for the employer, and when they are paid by him, only exceptionally is this amount not treated as income from employment for the employee. The Act does not give a special meaning to the word “meals”, that Is, a meaning different from its ordinary one, and thus it considers them to be personal or living expenses.

Although subsection 248(1) of the new Act extends the meaning of “personal or living expenses”, it does not exclude the ordinary meaning, that is, “nourriture et entretien” (food and maintenance).

Are amounts received by employees from their employers as living allowances taxable? Paragraph 6(1 )(b) could not be any clearer on the subject, although it does provide for some exceptions. None of the exceptions, however, applies to the appellant.

The only exception which might at first glance seem to apply is subsection 6(6), concerning employment at a special work site. The condition that the employee must be on the site for a period of not less than 36 hours considerably limits. the application of this section to the case at bar. The appellant usually worked only 24 hours when in port. It is true that when he was away from port, he sometimes remained at the work site for up to ten days, which means that he was away from his place of residence for more than 36 hours. According to the evidence, however, not only were meals supplied on the boat, he also still received $5.83 a day. In his assessment, the respondent did not include the price of the meals received, only the $5.83.

Counsel for the respondent cited a long list of precedents:

(1) Robert Shorrocks Williams v MNR, [1955] CTC 1; 55 DTC 1006;

(2) Kenneth W Blackman, Joseph Kenneth Weaver and Robert Raymond Quenneville v MNR, [1967] Tax ABC 480; 67 DTC 347;

(3) John Charles Landeryou v MNR, 35 Tax ABC 174; 64 DTC 281;

(4) Christopher John Bicknell v MNR, [1972] CTC 2031; 72 DTC 1001;

(5) J R Scanlan v MNR, 3 Tax ABC 329; 51 DTC 84;

(6) Victor Hammond Woodland v MNR, 5 Tax ABC 114; 51 DTC 374: [1953] CTC 111; 53 DTC 1112;

(7) William Futoransky v MNR, [1974] CTC 2068: 74 DTC 1060:

(8) Dieter Broese v MNR, [1973] CTC 2251; 73 DTC 207;

(9) Elmer Sjolie v MNR, 5 Tax ABC 309; 52 DTC 19.

In his argument, the appellant maintained that the legal provisions did not apply since the $2,040.50 was simply repayment of expenses incurred in the normal course of his work. He argued that if he had presented the employer each week with an expense account for meals at an average daily cost of $5.83, it would not have been taxable, since it would simply have been repayment of expenses incurred. Why then, he argued, would a contractual allowance for these same purposes be taxable? The appellant filed a newspaper article by Marcel Boutin, entitled “Les frais de repas et de logement sont parfois déductibles du revenu” (meals and lodging are sometimes tax: deductible). He further stated that this allowance was provided for in his collective agreement. In equity, he concluded, the allowance should not be taxed.

First of all, the Board believes that, although the money was repayment of expenses incurred during the normal course of his duties, it cannot hold that the expense is therefore deductible. In view of the fact that the appellant is a wage-earner, all expenses which are to be deducted from his income must be explicitly provided for in section 8 of the new Act. Subsection 8(2) is clear regarding this subject:

8. (2) Except as permitted by this section, no deductions shall be made in computing a taxpayer’s income for a taxation year from an office or employment.

The only meal expenses allowed in section 8 are those provided for in subsection 8(4), which can only be claimed by a salesman working on commission or by a person who ordinarily is required by his duties to be away from his employer’s establishment, and to pay his own travelling expenses and is not reimbursed for them. Neither of these apply to the appellant and therefore he could not legally deduct meal expenses.

Although the collective agreement provided that the employer would pay a meal allowance, meal expenses are. still considered living expenses, which are taxable under paragraph 6(1 )(b) of the new Act.

Should the Board rely on equity and hold that, in the case at bar, meal expenses were deductible and the living allowances not taxable? Unfortunately, in the interpretation of the Income Tax Act the Board has no authority to decide on the basis of equity. It must make its decisions according to the wording of the Act and interpret it strictly. A good many judgments cited by’ counsel for the respondent make this same point.

In Kenneth W Blackman, Joseph Kenneth Weaver and Robert Raymond Quenneville v MNR, [1967] Tax ABC 480; 67 DTC 347, the Tax Appeal Board held that the Minister of National Revenue had been legally justified in including in the appellants’ income a sum of $284, representing an additional four dollars a day provided to employees from Haifax who were temporarily sent to Montreal by their employer. This amount was considered to be a living allowance.

The Board would allow the appeal if the Act contained a section which in substance read as follows:

Meal allowances paid by the employer to the employee shall be deductible when these are provided for in the collective agreement.

No such section exists at the present time.

5. Conclusion

The appeal is dismissed.

Appeal dismissed.