Docket: 2006-3339(IT)I
BETWEEN:
TOLSON A. HUDSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on August 10, 2007
at St. John's, Newfoundland and Labrador
Before: The Honourable
Justice G. A. Sheridan
Appearances:
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For the Appellant:
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The
Appellant himself
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Counsel for the Respondent:
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Selena Sit
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____________________________________________________________________
JUDGMENT
In accordance with the attached Reasons for Judgment, the
appeal from the reassessments made under
the Income Tax Act for the 2002 and 2003 taxation years is allowed and the reassessments are referred back to
the Minister of National Revenue for reconsideration and reassessment on the
basis that the motor vehicle expenses of $3,598.82 and $3,230.88 incurred by
the Appellant in 2002 and 2003, respectively, were amounts expended by him in
respect of motor vehicle expenses for travelling in the course of his employment
as contemplated by paragraph 8(1)(h.1) of the Act.
Signed at Ottawa, Canada, this 30th day of October, 2007.
"G. A. Sheridan"
Citation: 2007TCC661
Date: 20071030
Docket: 2006-3339(IT)I
BETWEEN:
TOLSON A. HUDSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellant,
Tolson Hudson, is appealing the assessment of the Minister of National Revenue
disallowing employment expenses in 2002 and 2003.
[2] In those years,
Mr. Hudson was employed by the Government of Newfoundland and Labrador as an
Economic Development Officer in St.
John's. The position required him to
travel for employment-related purposes and to pay the expenses of such travel.
He duly filed a Form T2200, "Declaration of Conditions of
Employment", signed on behalf of his employer with his income tax returns. He received from his
employer two vehicle allowances, a per kilometer allowance of $0.315 and a
fixed allowance. These allowances were included as income for 2002 and 2003
pursuant to subparagraphs 6(1)(b)(vii.1) and (x) of the Income
tax Act.
[3] In 2002, Mr.
Hudson incurred total motor vehicle expenses for personal and employment use of
$7,486.12; in 2003, of $4,901.20. He claimed motor vehicle employment expense
deductions of $3,598.82 and $3,230.88, respectively. He calculated these
amounts based on the number of kilometers for which he had received his per
kilometer allowance, plus the kilometers from his daily 30‑kilometer drive
between his residence and his office (the "commute"). His justification
for including the commute kilometers was that the only reason he took the motor
vehicle to work was his employer's requirement that he do so. He had alternate
and less expensive means of transport of which, but for the employment
requirement, he would have availed himself.
[4] The Minister was
not persuaded by this argument and denied the commute-expense portion of his
claims on the basis that travelling to and from work was personal use of the
motor vehicle. The Minister calculated the allowable motor vehicle expense
deduction based only on the number of kilometers for which Mr. Hudson had
received a per kilometer allowance. Accordingly, the calculation for 2002 was
made as follows:
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Total motor vehicle
expenses:
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$7,486.12
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Amount of per kilometer
allowance:
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$182.70
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Per kilometer allowance
rate:
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$0.315/km
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Total employment kilometers
=
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580 km ($182.70/$0.315km)
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Total personal and
employment kilometers:
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13,560km
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Percentage
employment use of motor vehicle:
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4.28% (580km/13,560km)
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Allowable
motor vehicle expense deduction =
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$320.41 (4.28% x $7,486.12)
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[5] In 2003, although
entitled to, Mr. Hudson did not claim a per kilometer allowance from his
employment; accordingly, the Minister assumed the number of employment-use
kilometers to be zero, thereby resulting in a total denial of any motor vehicle
expenses for 2003.
[6] The only
question is whether Mr. Hudson's commute was a personal or employment use of
his motor vehicle. On the somewhat unusual circumstances of this case, I am
persuaded that the commute kilometers ought to be included in the calculation
of Mr. Hudson's allowable motor vehicle expense deduction under paragraph 8(1)(h.1):
SECTION 8: Deductions allowed.
(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:
...
(h.1) Motor
vehicle travel expenses – where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of the
office or employment away from the employer's place of business or in different
places, and
(ii) was required under the contract of employment to pay motor
vehicle expenses incurred in the performance of the duties of the office or
employment,
amounts
expended by the taxpayer in the year in respect of motor vehicle expenses
incurred for travelling in the course of the office or employment, except where
the taxpayer
(iii) received an allowance for motor vehicle expenses that was,
because of paragraph 6(1)(b), not included in computing the taxpayer's income
fro the year, or
(iv) claims a deduction for the year under paragraph (f);
[7] The general rule
is that no deductions may be made from income from employment.
However, the preamble of subsection 8(1) permits the deduction of amounts that "may
reasonably be regarded as applicable" to the various categories which
follow. Among these is paragraph 8(1)(h.1) which sets out in
considerable detail the criteria to be satisfied for motor vehicle travel
expenses. Whether particular expenses may be "reasonably" regarded as
applicable to the source listed is a question of fact.
[8] At the hearing,
counsel for the Respondent advised the Court that the Respondent no longer took
issue with the adequacy of Mr. Hudson's books and records.
There is no dispute that, in principle, Mr. Hudson is entitled to a motor
vehicle expense deduction under paragraph 8(1)(h.1); the only issue is
the quantum of that deduction. That determination turns on whether Mr. Hudson's
use of his vehicle to and from his place of employment was employment‑related
or of a personal nature.
[9] He was required
to have his motor vehicle available at the office. The only way that requirement
could be satisfied was to drive it there each day; if he left it permanently parked
at the office, as counsel for the Respondent rather gamely suggested in
argument, he would have been completely deprived of the personal use of his own
vehicle, a quite unreasonable expectation to impose on an employee. (And had
the employer provided the parking space, he might also have been further taxed
for his trouble.) I accept his evidence that, except for the requirement that
he have his vehicle at work, he would have relied on the cheaper alternate
transportation that was available to him: catching a ride with his son who
lived at home, carpooling or taking the bus. Instead, he had to take his car
back and forth and was responsible for the expenses incurred in doing so.
[10] Finally, I agree
with his respectful submission that a ruling by this Court in his favour might
open the floodgates to similar cases is "not his problem". The
Minister's duty is to assess accurately an individual taxpayer's tax liability
in accordance with the legislative provisions and the facts of that taxpayer's circumstances.
[11] On the particular
facts of these appeals, I am satisfied that the motor vehicle expenses Mr.
Hudson incurred in 2002 and 2003 as a result of his commute were employment-related
rather than personal. In respect of the 2003 taxation year, the fact
that Mr. Hudson did not claim a per kilometer allowance in 2003 does not
diminish the employment-related quality of the motor vehicle expenses claimed
for the commute travel in that year. Whether he claimed the per kilometer
allowance or not, the fact remains that he was required by his employer to have
the car available at the office each day.
[12] The appeal is
allowed and the assessments are referred back to the Minister of National
Revenue for reconsideration and reassessment on the basis that the motor
vehicle expenses of $3,598.82 and $3,230.88 incurred by the Appellant in 2002
and 2003, respectively, were amounts expended by him in respect of motor
vehicle expenses for travelling in the course of his employment as contemplated
by paragraph 8(1)(h.1) of the Act.
Signed at Ottawa,
Canada, this 30th day of October, 2007.
"G. A. Sheridan"
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