20 April 1993 Internal T.I. 9303437 F - Limitation Regarding Food and Beverages Expenses

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.

April 20, 1993

Attention:  L. McDougall

Section 67.1 of the Income Tax Act (the "Act")

We are writing to you in reply to your memorandum of February 8, 1993 in which you requested our comments on the application on section 67.1 in a factual situation involving XXXXXXXXXX  To briefly summarize the issue, XXXXXXXXXX feels that subparagraph 6(6)(a)(ii) of the Act exempts it from subsection 67.1(1) pursuant to paragraph 67.1(1)(d), whereas Audit staff in the District Office feel that there is no such exemption since the employees are on travel status and their meal allowance is excluded from their income by virtue of paragraph 6(1)(b).

Our Comments:

It is our view that the major criterion to be considered in deciding whether a reasonable allowance paid to an employee would not be included in the employee's income by virtue of subparagraph 6(6)(a)(ii) rather than paragraph 6(1)(b) of the Act is that of time. The exclusion under paragraph 6(1)(b) applies to "travelling expenses" and therefore would not be applicable in a situation where an allowance was paid with respect to a stay in one place for a period of such duration that it was tantamount to a sojourn as opposed to travelling. In our view, it is unlikely that one would have a choice in a situation where an employee was working at a certain location whether the exclusion under paragraph 6(1)(b) or subparagraph 6(6)(a)(ii) would apply as it is unlikely that a situation would arise where both exclusions could be said to apply to the same set of circumstances. This view is in accord with that expressed in IT-518, paragraph 2(d) wherein it mentions both the situation where an employee relies on subparagraph 6(6)(a)(ii) of the Act by virtue of being employed at a remote location, and the other situation where an employee relies on paragraph 6(1)(b) by virtue of being on travel status. It is a question of fact whether either of paragraph 6(1)(b) or subparagraph 6(6)(a)(ii) will apply.

In our view, subparagraph 6(6)(a)(ii) does not apply, regardless how remote the location is, if an employee would not be expected to establish a self-contained domestic establishment because of the temporary nature of the employee's stay at the location. In this particular situation, we concur with the view of the Audit staff that the employees are on travel status and that the appropriate relieving provision is paragraph 6(1)(b).

Accordingly, the meal expenses are subject to subsection 67.1(1).

We trust that our comments are of assistance.

R. Albert for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch