Citation: 2006TCC487
Date: 20060914
Docket: 2006-1321(IT)I
BETWEEN:
FRANCIS TREMBLAY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from assessments made by the Minister of National Revenue (the “Minister”)
under the Income Tax Act (the “Act”) for the 2000 and 2001 taxation years. The Minister
determined that the Appellant had benefited from the use of a vehicle that was
owned by the company of which he held all of the shares.
[2] The issue is
whether the Minister was justified in adding the amount $10,566 for the
2000 taxation year and $11,077 for the 2001 taxation year as benefit from
the use of a company vehicle.
[3] The Minister relied
on the following assumptions of fact to make his assessment:
(a) During
the taxation years at issue, the Appellant was the sole shareholder,
administrator and employee of the company 9028-6493 Québec (the “Company”)
Inc.; (admitted) with correction
(b) The Appellant
kept no record of the use of the vehicle; (admitted)
(c) During the
taxation years at issue, the Company made available to the Appellant disposal
a Ford F‑350 purchased on April 19, 1999, for $46,585; (admitted)
(d) The Appellant’s
residence is 5 km from the Company’s place of business; (admitted)
(e) The auditor
considered that the Appellant made the journey between his residence and the
Company’s place of business twice per day, five days per week 48 weeks per year
for a total of 2,400 km per year; (denied)
(f) The auditor
estimated the Appellant’s personal use of the vehicle at 23%; (neither
denied nor admitted)
(g) The reasonable
standby charge for the Appellant came to $10,566 for the 2000 taxation
year and $11,077 for the 2001 taxation year.
[4] The Appellant, who
had the burden of proof, admitted subparagraphs (a) through (d).
[5] He testified that
the vehicle concerned in the assessment was a heavy vehicle requiring special
registration. He also stated that he had received a ticket because the vehicle
did not have the proper registration, which forced him to keep the truck off
the roads for a long period of time. He also explained that he had brought
proceedings against Ford because he had been misled regarding the truck’s
features.
[6] He also admitted
that the vehicle was in his possession and that it was available for personal
use, as it was parked at his private residence at all times. This was to avoid
problems of vandalism, which were more likely to occur if the truck were parked
at the Company’s place of business. Despite this admission, the Appellant
stated that he had not used the truck for personal reasons.
[7] The Appellant
strenuously objected to the Minister’s calculation of the personal use of the
vehicle; personal use was determined to be 23% based on two journeys per day
between his residence and the workshop, totalling 2,400 km/year out of a total
use of 10,812 km.
[8] In support of his
objection, he stated that he hadn’t used the vehicle in question during the
winter season. However, he admitted that the truck stayed registered and that
his insurance remained in effect. He also stated that the vehicle was not moved
for a long time due to the wrong registration.
[9] A log book was kept
in the truck pursuant to road regulations, as is the case for very heavy trucks
and trucks that haul long trailers. Despite this obligation, the Appellant did
not see fit to also keep a record to note personal trips or use.
[10] The Court was therefore
unable to calculate the amount of personal use from the explanations submitted
by the Appellant. One thing is certain, the trips between his residence and the
workshop were undeniably personal in nature.
[11] The Respondent
called Richard Perron. Mr. Perron, an employee of Revenu Québec, explained
that he had been the one to assess the mileage done for personal reasons. He
explained that he had first checked, using a reliable method, the vehicle’s
yearly mileage.
[12] After that, he
essentially multiplied the mileage travelled daily between the Appellant’s
private residence and the workshop. Then, he subtracted the mileage determined
to be personal (trips between the residence and the workshop) from the total
mileage on the vehicle and arrived at the proportion of 23% personal use.
[13] In Adams v.
Canada, [1998] F.C.D. No. 477, (QL), Strayer, Décary and Robertson
JJ.A. say the following in paragraphs 1, 8 and 17:
. . . Pursuant to paragraph 6(1)(e),
and subsections 6(2) and 6(2.1) of the Income Tax Act, the Minister
reassessed the taxpayers on the basis of a "reasonable standby
charge" for the use of automobiles "made available" to them by
their employer during the taxation years in question. Those
provisions read as follows:
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Section 6(1) 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:
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6(1)(e) where the taxpayer's employer or a person
related to the employer made an automobile available to the taxpayer, or to a
person related to the taxpayer, in the year, the amount, if any, by which
(i)
an amount that is a reasonable standby charge
for the automobile for the total number of days in the year during which it was
made so available exceeds
(ii)
the total of all amounts, each of which is an
amount (other than an expense related to the operation of the automobile) paid
in the year to the employer or the person related to the employer by the
taxpayer or the person related to the taxpayer for the use of the automobile.
. . .
6(2) For the purposes of paragraph 1(e),
a reasonable standby charge for an automobile for the total number of days (in
this subsection referred to as the "total available days") in a
taxation year during which the automobile is made available to a taxpayer or to
a person related to the taxpayer by the employer of the taxpayer or by a person
related to the employer (both of whom are in this subsection referred to as the
"employer") shall be deemed to be the amount determined by the
formula
A/B
x [2% x (C x D) + 2/3 x (E - F)]
where
A is the lesser of
(a) the
total number of kilometres that the automobile is driven (otherwise than in
connection with or in the course of the taxpayer's office or employment) during
the total available days, and
(b) the
value determined for B for the year under this subsection in respect of the
standby charge for the automobile during the total available days,
except
that the amount determined under paragraph (a) shall be deeded to be equal
to the amount determined under paragraph (b) unless
(c)
the taxpayer is required by the employer to use the automobile in
connection with or in the course of the office or employment, and
(d)
all or substantially all of the distance travelled by the
automobile in the total available days is in connection with or in the course
of the office or employment;
B is the product obtained when 1,000 is
multiplied by the quotient obtained by dividing the total available days by 30
and, if the quotient so obtained is not a whole number and exceeds one, by
rounding it to the nearest whole number or, where that quotient is equidistant
from two consecutive whole numbers, by rounding it to the lower of those two
numbers;
C is the cost of the automobile to the
employer where the employer owns the vehicle at any time in the year;
D is the number obtained by dividing such of
the total available days as are days when the employer owns the automobile by
30 and, if the quotient so obtained is not a whole number and exceeds one, by
rounding it to the nearest whole number or, where that quotient is equidistant
from two consecutive whole numbers, by rounding it to the lower of those two
numbers;
E is the total of all amounts that may
reasonably be regarded as having been payable by the employer to a lessor for
the purpose of leasing the automobile during such of the total available days
as are days when the automobile is leased to the employer; and
F is the part of the amount determined for E
that may reasonably be regarded as having been payable to the lessor in respect
of all or part of the cost to the lessor of insuring against
(a)
loss of, or damage to, the automobile, or
(b)
liability resulting from the use or operation of
the automobile.
6(2.1) Where in a
taxation year
(a) a
taxpayer was employed principally in selling or leasing automobiles,
(b) an
automobile owned by the taxpayer's employer was made available by the employer
to the taxpayer or to a person related to the taxpayer, and
(c) the
employer has acquired one or more automobiles, the amount that would otherwise
be determined under subsection (2) as a reasonable standby charge shall, at the
option of the employer, be computed as if
(d) the
reference in the formula in subsection (2) to "2%" were read as a
reference to "1 1/2%", and
(e) the cost
to the employer of the automobile were the greater of
(i)
the quotient obtained by dividing (A) the cost to the employer of all
new automobiles acquired by the employer in the year for sale or lease in the
course of the employer's business by
(B) the
number of automobiles described in clause (A), and
(ii)
(ii) the quotient obtained by dividing (A) the cost to the employer of
all automobiles acquired by the employer in the year for sale or lease in the
course of the employer's business by
(B) the
number of automobiles described in clause (A).
[Emphasis mine]
8
. . . In
short, an automobile is made available to an employee if it is at his or her
disposal and there is a concomitant right of usage. Indeed, actual usage by an
employee, for either personal or business purposes, is not expressly required.
A mere right of usage is sufficient, of which more will be said below. Within
this context, it is clear to me that the broad and unqualified language found
in both linguistic versions of paragraph 6(1)(e) reinforces the
Minister's argument that unrestricted use of an automobile is not a condition
precedent to the application of that provision. . . .
17 In
summary, the broad wording used in both linguistic versions of paragraph 6(1)(e),
coupled with its legislative history, support the Minister's position. In my
respectful view, unrestricted or exclusive use of an employer's automobile is
not a condition precedent to the imposition of a standby charge. Nor is actual
usage required, whether it be for personal or business purposes. What is
required is that an employer have made an automobile available to, or at the
disposition of, an employee and, correlatively, that he or she have had a right
to use it. This is only logical since subsection 6(2) deems an employee to have
made personal use of an employer's automobile, irrespective of whether this is
so. In my view, the standby provisions were carefully crafted with the object
of promoting certainty at the expense of flexibility. That being said the harsh
consequences which flow from a deeming provision are tempered by the
"minimal personal use" exception grafted on to subsection 6(2) in
response to this Court's decision in Harman
. This is the point in time where actual usage and the purposes for which the
automobile was made available become relevant considerations.
[14] The method used to
determine the personal use of the vehicle was quite reasonable, especially
since the absence of a log book made it the only way to proceed.
[15] The vehicle was
indeed unused for a certain period; however, it was obviously used for personal
reasons, specifically for trips between the workshop and the residence. This is
one area where there is no doubt that there was personal use, since the trips
between the Appellant’s residence and the workshop where he worked constituted
travel of an essentially personal nature.
[16] Moreover, the
Appellant formally admitted that the company of which he was the sole
shareholder had put at his disposal a Ford F‑350 purchased on April 19,
1999, for $46,585.
[17] Since the Appellant
could not demonstrate convincingly that the mileage done for personal reasons
was less than the mileage on which the assessment was based and since the
method the Minister used to determine the mileage was reasonable, the Court has
no choice but to confirm the validity of the assessment.
[18] For these reasons,
the appeal is dismissed.
Signed at Ottawa, Canada, this 14th day of September
2006.
“Alain Tardif”
on this 27th day
April 2007.
Gibson Boyd, Translator
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