[OFFICIAL ENGLISH TRANSLATION]
Date: 19980427
Docket: 97-2256(IT)I
BETWEEN:
DANIEL PEARSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Guy Tremblay, J.T.C.C.
Issue
[1] According to the Notice of Appeal
and the Reply to the Notice of Appeal, the issue is whether the
appellant is correct in claiming home office expenses of $1,428,
$1,576 and $1,537 for the 1992, 1993 and 1994 taxation years,
respectively. According to the appellant, he is both a sales
representative and a sales reviewer for
Les Aliments Lesters Limitée. His territory
covers the Eastern Townships, the Lower St. Lawrence, the
North Shore, Beauce and Saguenay-Lac-St-Jean. For the purposes of
his work, he allegedly drove 70,000 kilometres in 1992 and 66,479
kilometres in 1994.
[2] According to the respondent, the
appellant did not use the home office for meeting customers in
the ordinary course of performing his duties during the years at
issue.
Burden of proof
[3] The appellant bears the burden of
showing that the respondent's assessments are incorrect. This
burden of proof derives from a number of judicial decisions,
including the Supreme Court of Canada's judgment in
Johnston v. Minister of National Revenue.[1]
[4] In Johnston, the Court held
that the facts assumed by the respondent to support assessments
or reassessments are also presumed to be true until proven
otherwise. In the case at bar, the facts assumed by the
respondent are described in subparagraphs (a) to (g) of
paragraph 4 of the Reply to the Notice of Appeal. That
paragraph reads as follows:
[TRANSLATION]
4. In making
the reassessments dated May 24, 1996, for the 1992,
1993 and 1994 taxation years, the Minister assumed the following
facts, inter alia:
(a) during the years
at issue, the appellant was employed by
Les Aliments Lesters Limitée (hereinafter
"the employer"); [admitted]
(b) during the years
at issue, the appellant was a commission salesperson;
[admitted subject to amplification]
(c) during the years
at issue, the appellant met his customers at a place other than
at his employer's place of business; [admitted subject to
amplification]
(d) the appellant
reported the following number of kilometres as the distance he
drove for employment purposes:
Kilometres
for
Total
Year
employment purposes
kilometres
1992
70,000
km
70,000 km
1994
66,479
km
74,584 km
[admitted]
(e) during the years
at issue, the part of the appellant's self-contained
domestic establishment for which he claimed home office expenses
was not the place where he principally performed the duties of
his office or employment; [denied]
(f) during the
years at issue, the part of the appellant's
self-contained domestic establishment for which he claimed
home office expenses was not used on a regular and continuous
basis for meeting his customers or other persons in the ordinary
course of performing the duties of his office or employment;
[denied]
(g) accordingly, for
the 1992, 1993 and 1994 taxation years, the Minister disallowed
the home office expenses claimed by the appellant in the amount
of $1,428 for the 1992 taxation year, $1,576 for the 1993
taxation year and $1,537 for the 1994 taxation year.
[denied]
Facts in evidence
[5] With respect to
subparagraph 4(b) of the Reply to the Notice of Appeal, the
appellant argued that, in addition to being a commission
salesperson, he was also the supervisor of two sales
representatives. He said that, in his field of sales, like many
others, results are what matter. He has 14 years of seniority
with his employer and knows his trade. The customers call the
tune. One has to know how to understand them.
[6] For that purpose, customers must
be met not on Mondays or Fridays but on the other days of the
week between 8:30 a.m. and 5:00 p.m.
[7] On Mondays, he meets the two
representatives at his home office to prepare the week's
work. Given the territories to be covered (Eastern Townships,
Beauce, Lower St. Lawrence, North Shore,
Saguenay-Lac-St-Jean), planning must be done
accordingly to achieve the best result.
[8] On the road, he works 22 to 24
hours a week meeting customers from 8:30 a.m. to
5:00 p.m. He arranges it so that he can cover his territory
outside his customers' business hours. For example, when he
goes to Saguenay-Lac-St-Jean, he leaves at 5:00
or 6:00 a.m. so that he can be with a customer at
8:30 a.m. He returns home in the evening. He does this two
or three days a week. He updates the cards for each customer he
has met during the day.
[9] He works in his office four to six
hours every weekend planning programs and promotions for
customers and preparing for Monday's meeting with the
representatives.
[10] In 1997, his employer, after going over
the sheets for all the representatives, reviewed his sheet and
put the following down as a condition of employment:
[translation] "40% of work done at home". According to
Form T2200 signed by the employer, the appellant is obliged
to rent an office or use a portion of his home: that portion is a
room in which he has a desk, computer, telephone and fax machine;
where he sees a few customers and contacts his employer and
customers from his territories; and also where he meets with the
two representatives every Monday.
[11] The appellant goes to his
employer's office, which is in Montréal, every three
months.
Act - Analysis
Act
[12] The provision of the Act that
governs this case is subsection 8(13). It reads as
follows:
8(13) Work space in home. Notwithstanding
paragraphs (1)(f) and (i):
a) no amount is deductible in computing an
individual's income for a taxation year from an office or
employment in respect of any part (in this subsection referred to
as the "work space") of a self-contained domestic
establishment in which the individual resides, except to the
extent that the work space is either:
(i) the place where the individual principally performs the
duties of the office or employment, or
(ii) used exclusively during the period in respect of which
the amount relates for the purpose of earning income from the
office or employment and used on a regular and continuous basis
for meeting customers or other persons in the ordinary course of
performing the duties of the office or employment.
(b) where the conditions set out in subparagraph
(a)(i) or (ii) are met, the amount in respect of the work
space that is deductible in computing the individual's income
for the year from the office or employment shall not exceed the
individual's income for the year from the office or
employment, computed without reference to any deduction in
respect of the work space; and
(c) any amount in respect of a work space that was,
solely because of paragraph (b), not deductible in
computing the individual's income for the immediately
preceding taxation year from the office or employment shall be
deemed to be an amount in respect of a work space that is
otherwise deductible in computing the individual's income for
the year from that office or employment and that, subject to
paragraph (b), may be deducted in computing the
individual's income for the year from the office or
employment.
[13] Subparagraph 8(13)(a)(i) cannot
apply to the appellant, since he does not
"principally"-that is, more than 50 percent of the
time-perform the duties of his employment there.
[14] Nonetheless, the Court is of the
opinion that, given that he is obliged to have an office at home
and given the facts summarized above (see paragraph 10),
subparagraph 8(13)(a)(ii) does apply to him.
[15] The amount claimed is not disputed by
the respondent in the Reply to the Notice of Appeal.
Conclusion
[16] The appeal is allowed and the
assessments are referred back to the Minister of National Revenue
for reconsideration and reassessment.
Signed at Québec, Quebec, on April 27, 1998.
J.T.C.C.
Translation certified true
on this 11th day of June 2003.
Sophie Debbané, Revisor
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