17 July 1991 External T.I. 9113045 F

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

July17, 1991

Dear Sirs:

Re: Application of Paragraph 67.1(2)(e)

This will reply to your letter of May 8, 1991 requesting clarification of the comments in our letter, dated January 18, 1990, concerning the application of paragraph 67.1(2)(e) of the Income Tax Act (the Act) with respect to board and lodging allowances given to employees at special work sites. You now have three further questions.

1.     In our view the application of subsection 67.1(1) of the Act is broader than the more narrow application of paragraph 67.1(2)(e). Subsection 67.1(1) of the Act contains the words "in respect of which we interpret to mean in relation to or in connection with. By comparison paragraph 67.1(2)(e) of the Act contains the term "is incurred by the person for" which in our view is much more restrictive than the reference in subsection 67.1(1).

2.     You describe a hypothetical situation where a substantial portion of a company's contracting work is carried out at the customers' premises which are located well outside of the municipality where the company's head office is located, such that the employees do not return to their homes each night. The job sites would, for purposes of subparagraph 6(6)(a)(i) of the Act, be considered "special work sites". For purposes of paragraph 67.1(2)(e) of the Act (as proposed in the draft technical Bill), the determination as to whether the out of town job sites would be considered "a particular place of business" is a question of fact to be determined on the basis of the details in each specific case. The duration of the time required to complete a contract at a specific site is not necessarily decisive. However, the longer the completion period the greater the likelihood that the specific site would qualify as a particular place of business. Ordinarily a specific site which qualifies as a "special work site" for purposes of subparagraph 6(6)(a)(i) of the Act should also qualify as a "particular place of business".

3.     In our previous letter we expressed the view that although the exception in paragraph 67.1(2)(e) is only available where the employer provides the food or is the one who makes the arrangements for the food to be made available to the employees, the Department may be prepared to look through the transaction to the ultimate payer if extenuating circumstances exist, such as where the location of the particular place of business or a lack of catering facilities prevent the employer from directly providing the food or making arrangements for the food to be made available. The number of employees involved is not the kind of circumstance which we consider extenuating, in view of the apparent intent of the legislation that allowances not qualify for exception in paragraph 67.1(2)(e). A determination as to whether extenuating circumstances exist in any particular case could only be determined when all the details of the case have been established and reviewed. Such a review would normally be made by officials of the local District Taxation Office, who are in a better position to appreciate all of the circumstances.

We trust our comments will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental     Affairs Branch