Gilles Lepine v. Minister of National Revenue, [1978] CTC 2895, [1978] DTC 1637

Guy Tremblay [TRANSLATION] — This case was heard at Chicoutimi, Quebec, on October 17, 1977.

1. Point at Issue

It must be decided whether the sums of $7,070.90 and $3,112.68 received by the appellant in 1973 and 1974 as an isolation bonus should be included in the calculation of income.

2. Burden of Proof

The appellant has the burden of showing that the respondent’s assessments are incorrect. This burden of proof derives not from a particular section of the Income Tax Act but from several judicial decisions, including the judgment of the Supreme Court of Canada in the case of R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. Facts

3.1 During the years concerned the appellant was employed by the Aluminum Company of Canada Ltd, at a basic salary of $9,227.37 in 1973 and $11,075.24 in 1974.

3.2 During these two years, he was sent to Kansar, Republic of Guinea, by his employer. Under an agreement with Alcan Pittsburg Co Ltd, the employer loaned the appellant to this company, to go and “assist in setting up a bauxite dehydration plant”.

3.3 To attract employees to work in another country, the employer paid an “isolation” bonus of $700 a month. In fact, in 1973 the appellant received $7,070.90 under this heading, and $3,112.68 in 1974.

3.4 According to the appellant, his Canadian employer paid his basic salary plus the bonus into his bank account in Chicoutimi.

3.5 The appellant has been married since 1967. During 1973 and 1974, his wife remained in Canada.

3.6 According to Mr Charles Aime Gauthier, assistant supervisor in the pay office of Aluminum Company of Canada Ltd at Arvida, the appellant’s salary, the bonus and the cost of-transporting the employee to and from his work in Guinea were reimbursed to Aluminum Company of Canada Ltd by Alcan Pittsburg.

3.7 In Guinea, the appellant received from Alcan Pittsburg Ltd a certain sum of money in local currency so that he could pay for his food and lodging.

3.8 This sum was deducted from reimbursements paid to Aluminum Company of Canada Ltd, which deducted it from the amount paid into the appellant’s bank account.

3.9 In filing his tax returns, the appellant did not include the isolation bonus in his income.

3.10 The respondent, on September 26, 1975, when assessing the year 1974, and on November 14, 1975, when assessing the year 1973, included these bonuses in the appellant’s income. He naturally did not include the costs of the appellant’s transportation from Canada to Guinea and back.

3.11 On December 9 and 11, 1975 he filed notices of objection. On March 12, 1976 the respondent sent a notification confirming the previous assessment.

3.12 An appeal was submitted to the Board on June 10, 1976.

4. Act and Comments

According to the respondent, since the appellant was on salary the sections of the new Act which apply to the case at bar are subsection 5(1) and paragraphs 6(1)(a) and (b):

s 5. Income from office or employment (1) 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.

s 6. Amounts to be included as income from office or employment. (1) 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:

(a) Value of benefits. The value of board, lodging and. other benefits of any kind whatever (except the benefit he derives from his employer’s contributions to or under a registered pension fund or plan, group sickness or accident insurance plan, private health services: plan, supplementary unemployment benefit plan, deferred profit sharing plan or group term life insurance policy) received or enjoyed by him in the year in respect of, in the course of, or by virtue of an office or employment;

(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 paragraphs 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, or

(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;

In view of the sections cited above, the Board has no choice but to include the amounts received as isolation bonuses in the appellant’s income. Regardless of whether these bonuses were received as salary, a gratuity or an allowance for personal or living expenses, they must be included in income because of the sections cited above, particularly paragraph 6(1 )(b).

The appellant further contends that this amount was received for his board and is not taxable: therefore the amount should be deducted. The only expenses which can be admitted as a deduction against employment income are set out in section 8 (or sections 60 to 66, but these do not apply to the case at bar). The respondent cited paragraphs 8(1 )(e) and 8(1 )(g) of the new Act:

(e) Expenses of certain railway company employees employed away from ordinary residence or home terminal. — amounts disbursed by the taxpayer in the year for meals and lodging while employed by a railway company

(i) away from his ordinary place of residence as a relieving telegrapher or station agent or on maintenance and repair work, or

(ii) away from the municipality and the metropolitan area, if there is one, where his home terminal was located, and at a location from which, by reason of distance from the place where he maintained a self- contained domestic establishment 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 that place,

to the extent , that he has not been reimbursed and is not entitled to be reimbursed in respect thereof;

(g) Transport employee’s expenses — where the taxpayer was an employee of a person whose principal business was passenger, goods, or passenger and goods transport and the duties of the employment required him, regularly,

(i) to travel, away from the municipality where the employer’s establishment to which he reported for work was located and away from the metropolitan area, if there is one, where it was located, on vehicles used by the employer to transport the goods or passengers, and

(ii) while so away from such municipality and metropolitan area, to make disbursements for meals and lodging,

amounts so disbursed by him in the year to the extent that he has not been reimbursed and is not entitled to be reimbursed in respect thereof;

These sections cannot apply since one of the required conditions is that the employer be a railway or transport company. Aluminum Company of Canada Ltd is neither a railway nor a transport company.

The Board also considered the other paragraphs of section 8, but none of them can permit the appellant to. deduct any expenses in addition to those he has already deducted under paragraph 8(1 )(a):

(a) Employment expense deduction. — a single amount in respect of all offices and employments of the taxpayer, equal to the lesser of $150 and 3% of the aggregate of

(i) his incomes for the year from all offices and employments (other than the office of a corporation director) before making any deduction under this section, and

(ii) all amounts included in computing his income for the year by virtue of paragraphs 56(1)(m) and (o);

Thus in applying the Income Tax Act for the years in question, the Board has no choice but to uphold the assessments issued by the respondent.

5. Conclusion

The appeal is dismissed in accordance with the reasons for judgment cited above.

Appeal dismissed.