Date:
20021223
Docket:
2002-2730-IT-I
BETWEEN:
DONNA
HORBAY,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasons
for Judgment
Beaubier,
J.T.C.C.
[1]
This appeal pursuant to the Informal Procedure was heard at
Vancouver, British Columbia on December 12, 2002. The
Appellant was the only witness.
[2]
Paragraphs 4 to 10 of the Reply to the Notice of Appeal describe
the issue in appeal. They read:
4.
The Minister reassessed the Appellant's 2000 taxation year
and disallowed $2,414.80 on account of office in the home expense
(the "Disallowed Expense") and issued a Notice dated
October 29, 2001.
5.
The Appellant filed a Notice of Objection dated
January 11, 2002 and the Minister confirmed the
reassessment of the Appellant's 2000 taxation year and issued
a confirmation notice dated April 25, 2002.
6.
In so reassessing the Appellant, the Minister relied on the
following assumptions of fact:
a)
in 2000 the Appellant was an employee of the Province of British
Columbia, Attorney General British Columbia Corrections
Department ("B.C. Corrections");
b)
the Appellant was a probation officer with B.C. Corrections
and her main duty was to interview those individuals who were
guilty of a criminal offence and draft pre sentence reports for
the courts;
c)
the Appellant was required by her contract of employment with
B.C. Corrections to either rent office space or use a portion of
her home in the performance of her duties;
d)
the Appellant utilized 10% of the total square footage of her
home as an office;
e)
the Appellant was not paid her salary from B.C. Corrections
by way of commissions or similar amounts according to volume or
sales or contracts negotiated; and
f)
the Disallowed Expense consisted of mortgage interest.
B.
ISSUES TO BE DECIDED
7.
The issue is whether the Appellant is entitled to claim
employment expenses comprised of the Disallowed Expense when
calculating her income for the 2000 taxation
year.
C.
STATUTORY PROVISIONS RELIED ON
8.
He relies on paragraph 8(1)(i) and subsections 8(2) and 8(10) of
the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as
amended (the "Act").
D.
GROUNDS RELIED ON AND RELIEF SOUGHT
9.
He respectfully submits that the Appellant is not entitled to
deduct the Disallowed Expense, being mortgage interest, due to
subsection 8(2) of the Act.
10.
He further submits that the Appellant is not entitled to deduct
the Disallowed Expense under paragraph 8(1)(i)(ii) of the
Act, as it consists of mortgage interest and not
rent.
[3]
The assumptions in paragraph 6 are correct.
[4]
Paragraphs 8(1)(i) and (ii) and subsection 8(2) of the
Income Tax Act (the "Act")
read:
8(1) In
computing a taxpayer's income for a taxation year from an
office or employment, there may be deducted such of the following
amounts as are wholly applicable to that source or such part of
the following amounts as may reasonably be regarded as applicable
thereto:
...
(i)
amounts paid by the taxpayer in the year as
(i)
annual professional membership dues the payment of which was
necessary to maintain a professional status recognized by
statute,
(ii)
office rent, or salary to an assistant or substitute, the payment
of which by the officer or employee was required by the contract
of employment,
...
(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.
[5]
In the Court's view, the question, in part, is whether the
mortgage interest can be regarded as "office rent"
under paragraph 8(1)(ii). The appellant argued that, from a
practical point of view, it amounts to the same thing in her
case.
[6]
Unfortunately subsection 8(1), as restricted by
subsection 8(2), does not permit the analogous treatment of
interest payments for which the Appellant argues for employees.
This is unfortunate in this day when working from the home has
become commonplace and is often required by an employer in order
to save office overhead expenses. It may be another case where
the Act has not kept place with the evolution of the
workplace.
[7]
The Court accepts the interpretation adopted by McNair, J. of the
Federal Court in The Queen v. Thompson, 89 DTC 5439 in
which the appeal was on an identical basis. McNair, J. referred
to the judgment of Rip, T.C.J. in Felton v. M.N.R., 89 DTC
233 (T.C.C.) and stated at pages 5443 and 5444:
The strict
ratio of the case is contained in the following passage
from the judgment of Rip T.C.J. at pp. 234-35:
The words
"rent" and "loyer" in
subparagraph 8(1)(i)(ii) contemplate a payment by a
lessee or tenant to a lessor or landlord who owns the office
property in return for the exclusive possession of the office,
the property leased by the latter to the former.
The
payments by Mr. Felton to a money-lender of interest on
money borrowed, to a utility supplier for the utility, to
maintenance personnel for maintenance, to an insurer for
insurance and to a municipality in respect of taxes are not
payments of rent by a lessee to a lessor. None of these payments
by Mr. Felton was for the use or occupancy or possession of
property owned by another person.
Obviously,
the judges of the Tax Court in both Philips and
Felton applied the plain meaning rule of statutory
interpretation in determining that the home office expenses of an
employee were not deductible as office rent under s.
8(1)(i)(ii), notwithstanding the illogical unfairness of
the section in permitting the selfsame deduction in the case of
business or professional persons.
This modern
rule for the interpretation of taxing statutes was admirably
expounded by Estey J. in Stubart Invetments Ltd. v.
The Queen, [1984] 1 S.C.R. 536, 84 DTC 6305. The learned
judge recalled the strict rule of statutory interpretation
invoked for many years, whereby any ambiguities in the charging
provisions of a tax statute were to be resolved in favour of the
taxpayer. He pointed out that the converse was true where a
taxpayer sought to rely on a specific exemption or deduction
provided in the statute. In that case, the strict rule required
that the taxpayer's claim fall clearly within the exempting
provisions, and any doubt in that regard had to be resolved in
favour of the Crown. Indeed, he perceived the introduction of
exemptions and allowances as marking "the beginning of the
end of the reign of the strict rule". The learned judge
stated the following conclusion in the S.C.R. report of the case
at p. 578 (see DTC at p. 6323):
Professor
Willis, in his article, supra, accurately forecast the
demise of the strict interpretation rule for the construction of
taxing status. Gradually, the role of the tax statute in the
community changed, as we have seen, and the application of strict
construction to it receded. Courts today apply to this statute
the plain meaning rule, but in a substantive sense so that if a
taxpayer is within the spirit of the charge, he may be held
liable. See Whiteman and Wheatcroft, supra, at p.
37.
While not
directing his observations exclusively to taxing statutes, the
learned author of Construction of Statutes (2nd ed. 1983),
at p. 87, E.A. Dreidger, put the modern rule
succinctly:
"Today
there is only one principle or approach, namely, the words of an
Act are to be read in their entire context and in their
grammatical and ordinary sense harmoniously with the scheme of
the Act, the object of the Act, and the intention of
Parliament."
...
The
question remains: Are the amounts claimed for home office
expenses in the 1980 and 1981 taxation years deductible as
"office rent" under s. 8(1)(i)(ii) of the
Income Tax Act? In my view, the plain meaning of the words
of the statutory provision read in context with the scheme of the
Act as a whole precludes any possibility of an affirmative answer
to the question. This was the approach adopted by the judges of
the Tax Court of Canada in Phillips and Felton,
with which I fully concur. In the result, I find that the
Minister was correct in his reassessments of the defendant's
income for the 1980 and 1981 taxation years, save only for the
amounts claimed for utilities, heating and hydro in
1980.
[8]
For this reason, the appeal is dismissed.
Signed at Saskatoon, Saskatchewan,
this 23rd day of December, 2002.
J.T.C.C.COURT FILE
NO.:
2002-2730(IT)I
STYLE OF
CAUSE:
Donna Horbay v. The Queen
PLACE OF
HEARING:
Vancouver, British Columbia
DATE OF
HEARING:
December 12, 2002
REASONS FOR
JUDGMENT BY: The Honourable Judge D. W.
Beaubier
DATE OF
JUDGMENT:
December 23, 2002
APPEARANCES:
For the
Appellant:
The Appellant herself
Counsel for
the
Respondent:
Amy Francis
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-2730(IT)I
BETWEEN:
DONNA
HORBAY,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Appeal heard
on December 12, 2002 at Toronto, Ontario, by
the
Honourable Judge D. W. Beaubier
Appearances
For the
Appellant:
The Appellant herself
Counsel for
the
Respondent:
Amy Francis
JUDGMENT
The appeal from the reassessment made under the Income Tax
Act for the 2000 taxation year is dismissed in accordance
with the attached Reasons for Judgment.
Signed at Saskatoon, Saskatchewan, this 23rd day of December,
2002.
J.T.C.C.
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