Citation: 2008TCC149
Date: 20080314
Docket: 2007-3292(IT)I
BETWEEN:
RANAPRATAP SINGH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellant,
Mr. Singh, is the sole director and shareholder of RPS Industries Inc. He
is also employed by his company. In 2002, RPS Industries Inc. purchased a
new BMW automobile which the Appellant used in carrying out his employment
duties. He kept the BMW in his driveway at his home in Scarborough. In
reassessing the Appellant’s income for that taxation year, the Minister of
National Revenue included in his income a standby charge benefit and an
operational cost benefit in respect of the BMW.
[2] The
Appellant represented himself and was the only witness to give evidence. As was
explained to him at the hearing, he has the onus of proving wrong the
assumptions upon which the Minister’s decision was based.
[3] The
reassessment was based on the following assumptions:
(a) the
Appellant was an employee of RPS throughout the 2002 taxation year;
(b) the
Appellant reported and received employment income from RPS, in the amount of
$75,000, which did not include any taxable benefits relating to an
employer-provided automobile;
(c) RPS,
the Appellant’s employer, made available to the Appellant an automobile,
throughout the 2002 taxation year;
(d) the
Appellant used the said automobile, which was purchased and owned by RPS,
throughout the 2002 taxation year;
(e) the
automobile was a 2000 BMW, purchased by RPS in June 2000, for the total amount
of $49,218 (including all taxes);
(f) the
Appellant was the sole shareholder and director of RPS, throughout the 2002
taxation year, and the only employee of RPS who drove the automobile and had
the automobile made available to him;
(g) the
Appellant failed to keep an automobile mileage log book, or any other type of
records, to establish the reasons for using, and the amount of use of, the
automobile;
(h) the
Appellant’s personal driving of the automobile would include him driving to and
from his home, to and from his work premises;
(i) as
the Appellant did not provide any information to help establish his total km
driven during the 2002 taxation year (including any type of breakdown as to
what he considered personal and/or business mileage), it was assumed that he
did not drive the automobile substantially for business during that taxation
year;
(j) as
a result, a full standby charge benefit was included in the Appellant’s income,
for the 2002 taxation year, calculated as follows:
$49,218
(total cost) x 2% = $11,812
(k) in
addition, an operating cost benefit was included in the Appellant’s income, for
the 2002 taxation year, which was calculated as 50% of the full standby charge
benefit noted in subparagraph 8(j) above i.e. $11,812 x 50% = $5,906
(l) as
a result of the calculations noted in subparagraphs 8(j) and 8(k) above, the
Appellant’s employment income from RPS was increased by the amount of $17,718
for the 2002 taxation year.
[4] In respect of paragraph 8(j) above, given that the BMW was already two years old in 2002,
the Appellant took issue with using the purchase price value in the calculation
of the standby charge. He conceded, however, that he had nothing to support a
different valuation. He did not dispute that the BMW had been “made available”
for his use but testified that he used it almost exclusively for “business
purposes” by which he meant, in his employment. His personal use was limited to
the 17-kilometer round trip commute between his home and RPS Industries Inc., as
well as the odd errand.
[5] The difficulty that the Appellant faced in advancing
this position was the general lack of
supporting documentation. He did not keep a log for the BMW because, he said, his
accountant had told him he was under no legal obligation to do so.
Consequently, he had no record of the kilometers driven in 2002 or any way of
showing the proportion of personal to employment use of the BMW. Nor did he
have any other records i.e., odometer readings or repair invoices which might
have assisted in these determinations. Indeed, the only evidence of that sort
came from counsel for the Respondent, who when it became clear the Appellant had
arrived at the hearing without any corroborative documentation, obliged the
Court by producing copies of certain invoices[2] that the Appellant testified to having given to the
auditor. As it turned out, even these documents were of little use to the
Appellant as they pertained to the 2000 taxation year, not the year under
appeal. Further, the information contained in them was insufficient to establish
with any reliability the kilometers driven in 2002.
[6] In the absence
of any records to substantiate his position, the Appellant’s case boiled down
to a plea to take his word that the BMW had been used almost exclusively for
his employment.
[7] Whatever the
Appellant’s accountant may have told him, the fact is that a taxpayer is
obliged by the Income Tax Act to keep adequate books and records. The
rationale behind this statutory duty is the self-reporting nature of the
Canadian income tax system. What the taxpayer reports in his annual return must
be capable of verification should the Minister make such a request. If it comes
to an appeal in the Tax Court of Canada, by choosing not to keep proper
records, the taxpayer simply increases the burden he already bears of proving the
Minister’s assessment to be incorrect.
[8] In the present
case, the Appellant struck me as a hard-working individual, sophisticated
enough to build and maintain a thriving business. A man of his intelligence and
experience surely knows the value of tracking in some fashion the use of an
automobile made available for his use by his solely owned company. In not doing
so, he took a calculated risk and must now face the consequences. Having failed
to produce sufficient evidence to show that the Minister’s reassessment was
incorrect, the Appellant cannot succeed in his appeal. The appeal is therefore dismissed.
Signed at Ottawa, Canada, this 14th day of March, 2008.
"G. A. Sheridan"
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