Citation: 2007TCC497
Date: 20070910
Docket: 2007-1344(IT)I
BETWEEN:
FRANCINE CAOUETTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1] This is an appeal, filed under the informal procedure,
from an assessment made by the Minister of National Revenue (the Minister)
under the Income Tax Act (the Act) for the Appellant’s 2004 taxation
year. By notice of reassessment dated September 25, 2006, the Minister
disallowed the Appellant’s deduction of employment expenses related to a car.
The Appellant duly objected to the reassessment on October 23, 2006 and,
on February 8, 2007, the Minister confirmed the reassessment.
[2] During the relevant period, the Appellant worked for
the Canada Post Corporation (the employer) as a letter carrier. The Appellant
had to use her car in the
performance of the duties of the employment. Therefore, to deliver the mail, the Appellant had to
travel about 47 kilometres a day with her car, a route that required 340 stops.
The Appellant was also required, under her contract of employment, to incur the
expenses related to the use of her car in the performance of the duties of the employment. In 2004, the Appellant received an
allowance of $4,380 from her employer as compensation for the expenses she
incurred for the use of her car. The allowance is paid at a rate of 42¢ for the
first 5,000 kilometres and 36¢ for the subsequent 6,335 kilometres
travelled. That allowance was not included in computing the Appellant’s income
for the 2004 taxation year as income from employment.
[3] The Appellant testified that the expense of
$2,352 she claimed in computing her income for the 2004 taxation year as
income from employment represented expenses related to the use of her car which
were not reimbursed by her employer. The Appellant explained that she set
expenses related to the use of her car to deliver the mail at $6,683 in
2004 by simply multiplying the total amount of expenses related to her car for
2004 by the percentage of the use of the car in 2004 to deliver the mail. The
Appellant also explained that she recently carried out a more detailed analysis
of the expenses related to the use of her car to deliver the mail. Owing to
that analysis, she came to the conclusion that the method she used in 2004
to determine the costs related to the use of her car to deliver the mail was
unfavourable to her in that the cost per kilometre for the use of her car to
deliver the mail was much higher in 2004 than the cost per kilometre for
personal use because of the 30 stops and departures per kilometre she had
to make to deliver the mail, stops and departures that also led to a very high
fuel consumption and premature wear and tear on her car. The Appellant claimed
that the actual costs for the use of her car in the performance of the duties of the employment in 2004 were $9,266 rather than
$6,683. In that regard, the Appellant submitted some receipts (Exhibit A‑5)
to support her claim. I can understand that the cost per kilometre for the use
of the car to deliver the mail can be higher than the cost per kilometre for
personal use. However, the Appellant did not convince me of the actual cost of
the expenses related to the use of her car to deliver the mail. In fact, the
Appellant’s evidence in that respect was scanty at best.
[4] The Appellant submits that the allowance paid by her
employer in 2004 was clearly insufficient and therefore unreasonable in
that it did not even cover half of the total expenses related to the use of her
car in the performance of the
duties of the employmentand
that, thus, she was entitled to claim, in computing the income for the 2004
taxation year as income from employment an expense of $2,352 which
represents a portion of the expenses not reimbursed by her employer.
[5] The Respondent essentially submits that the Appellant could not, under paragraph
8(1)(h.1) of the Act, deduct the expense of $2,352 in computing the
income for the 2004 taxation year as income from employment, as in 2004 she
received an allowance for motor vehicle travel expenses which was not included
in computing her income for that taxation year.
[6] The relevant provisions of the Act read as follows:
6(1) Amounts to be included as income
from office or employment — There shall be included in computing the income of a taxpayer
for a taxation year as income from an office or employment such
of the following amounts as are applicable
. . .
(b) Personal
or living expenses — all amounts received
by the taxpayer in the year as an allowance for personal or living expenses
or as an allowance for any other purpose, except
. . .
(vii.1) reasonable allowances for the use of a motor vehicle
received by an employee (other than an employee employed in connection with the
selling of property or the negotiating of contracts for the employer) from the
employer for travelling in the performance of the duties of the office or
employment,
8(1) Deductions allowed — 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
[Emphasis added.]
[7] It is plain from paragraph 8(1)(h.1) of the Act
that a taxpayer may deduct, in computing his or her income for a taxation year
from employment, vehicle expenses incurred for travelling if the following
conditions are met:
(i) the taxpayer is ordinarily required to carry on the duties of the office or employment
away from the employer's place of business or in different places;
(ii) the taxpayer was
required under the contract of employment to pay motor vehicle expenses
incurred in the performance of the duties of the employment;
(iii) the taxpayer must have incurred the travel
expenses deducted in the course of the
employment.
In the case at bar, all the expenses incurred by the
Appellant meet those three conditions.
[8] However, paragraph 8(1)(h.1) of the Act
provides that such a deduction cannot be claimed by the taxpayer if he or she
received an allowance that
was, because of paragraph 6(1)(b), not included in computing the taxpayer's
income for the year.
Subparagraph 6(1)(b)(vii.1) of the Act provides that there shall not be
included in computing the
income of a taxpayer for a taxation year as income from employment, reasonable allowances for the use of a motor vehicle received by
an employee (other than an employee employed in connection with the selling of
property or the negotiating of contracts for the employer) from the employer
for travelling in the performance of the duties of the employment.
[9] In my opinion, the provisions of the Act demonstrate that a taxpayer
cannot deduct expenses related to the use of his or her car in the performance of the duties of the
employment if he or she received
an allowance covering the travel expenses, unless that allowance is
unreasonable and included in computing the taxpayer's income for the year. That position seems to be consistent with that set
out in Brunet v. Canada, 2003 TCC 642. However, one must not
automatically conclude that when an employee receives a reasonable allowance
that is not included in computing his or her income, that employee cannot
deduct expenses related to the use of his or her car in the performance of the duties of the
employment. In fact, I am of
the opinion that an employee may deduct expenses vehicle travel expenses not
covered by the allowance paid by his or her employer, but nevertheless
incurred in the performance of the duties of the employment, even if he or she
receives a reasonable allowance covering a portion of his or her travel
expenses that is not included in computing the taxpayer's income as income from employment. For instance, an employee who is
required, as part of his or her job, to travel 40,000 kilometres in a
given year with his or her car and to whom, for whatever reason, the employer
pays a reasonable allowance covering only 10,000 of the 40,000 kilometres
travelled reserves, in my opinion, the right to deduct vehicle travel expenses
in respect of the 30,000 kilometres for which he or she does not receive
any allowance from the employer, even if the reasonable allowance he or she
receives from the employer for the 10,000 kilometres is not included in
computing his or her income. That position seems consistent with that set out
in Evans v. Canada, T.C.C., No. 97‑2588(IT)I,
November 23, 1998, [1998] T.C.J. No. 1055 (QL), and is not
necessarily contrary to that set out in Brunet, supra.
[10] In this case, the evidence revealed that, in 2004, the
Appellant received an allowance covering all her travel expenses and
that she did not include that allowance in computing her income for that year.
Accordingly, she could not deduct the expense of $2,352 she claimed in
computing her income for the 2004 taxation year as income from employment. In
fact, I am of the opinion that when a taxpayer receives a reasonable allowance
covering all his or her travel expenses, under no circumstances can he
or she deduct, under subsection 8(1)(h.1) and paragraph 6(1)(b)(vii.1)
of the Act, expenses not covered by that allowance. Conversely, to the extent
that the taxpayer were to demonstrate that the allowance is unreasonable, he or
she could deduct all his or her travel expenses, provided that he or she
includes the allowance received from the employer in computing his or her
income for that given year as income from employment. In other words, the
Appellant could have deducted all expenses related to the use of her car in the performance of the duties of the
employment had she demonstrated
that the allowance paid by her employer was unreasonable and had she included
that allowance in computing her income for the 2004 taxation year as income
from employment. Again, the Appellant would have had to demonstrate both the
actual cost of the expenses related to the use of her car to deliver the mail
and that the allowance received by the employer was unreasonable, which she did
not do in this case.
[11] For these reasons, the appeal is dismissed.
Signed at Ottawa, Canada, this 10th day of September
2007.
“Paul Bédard”
Translation certified true
on this 11th day of October 2007.
Daniela Possamai,
Translator
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