|
Citation: 2003TCC163
|
|
Date: 20030327
|
|
Docket: 2002-684(EI)
|
|
BETWEEN:
|
|
MOHINDER S. CHAUHAN,
|
|
Appellant,
|
|
and
|
|
|
|
THE MINISTER OF NATIONAL REVENUE,
|
|
Respondent.
|
REASONS FOR JUDGMENT
Little, J.
A. FACTS
[1] The
Appellant has worked as a labourer in orchards in the Okanagan for over 25
years.
[2] The
Appellant's brother Pritam Chauhan ("Pritam") resides in Merritt,
British Columbia and is employed on a full-time basis at a sawmill owned by
Weyerhaeuser Canada Ltd.
[3] Prior
to 1999 Pritam and his wife, Jasbir Chauhan, owned a 50% interest in a property
(the "Property") situated in Keremeos, British Columbia consisting of
20 acres on which they operated an orchard. The Property consisted of four
separate five-acre parcels of land.
[4] Chain
Singh, the father of Pritam and the Appellant, held a 50% interest in the
Property.
[5] The
Property produced apples, cherries, peaches, pears and apricots.
[6] For
approximately 15 years prior to 1998 the Appellant and his wife, Balvinderjit
Chauhan ("Balvinderjit") managed the Property for Pritam and Jasbir
and retained any money from the sale of fruit.
[7] In
1999 Chain Singh transferred ownership in two five-acre parcels of the Property
to the Appellant and Balvinderjit. The 10-acre parcel owned by the Appellant
and his wife is referred to as the Appellant's Orchard.
[8] In
1999 the Appellant and Balvinderjit continued the day-to-day management of the
orchard located on the two five-acre parcels owned by Pritam and Jasbir. The
10-acre parcel owned by Pritam and Jasbir is referred to as Pritam's Orchard.
[9] In
1999 the Appellant and Balvinderjit also managed the Appellant's Orchard.
[10] In filing his income tax return for the 1999 taxation year the
Appellant reported a farming loss in respect of the Appellant's Orchard.
[11] In 1999 the Appellant also received a T-4 slip from Pritam which
stated that he had employment income from Pritam in the amount of $8,559.20.
The T‑4 slip related to the work reported on Pritam's Orchard.
[12] The payroll records prepared by Pritam's accountant and the monthly
records prepared by Jasbir indicate that in 1999 the Appellant did not commence
working for Pritam as the manager of Pritam's Orchard until the 20th day of
July 1999. (The Appellant said that he did not commence work until
July 20, 1999 because he was recovering from a gall bladder operation.)
[13] The Appellant testified and the payroll records (Exhibit A-1) indicate
that the Appellant claims to have worked usually 9 to 10 hours per day from
July 20, 1999 until October 14, 1999 without one day off for holidays or
sickness, etc. (Note – I have indicated that the usual hours recorded by
the Appellant per day were 9-10 hours per day. Of the 87 continuous days of
work claimed by the Appellant he indicated that he only worked eight hours per
day in seven of the 87 days and he claims to have worked 9-10 hours per day for
80 continuous days.)
[14] The payroll records of the Appellant may be summarized as follows:
July (20-31) - 113
hours reported
August (1-31) - - 296
hours reported
September (1-30) - 276
hours reported
October (1-14) - 138
hours reported
Total 823
[15] The Appellant received the following cheques from Pritam in 1999 in
connection with the work that he carried out on Pritam's Orchard:
|
Date of Cheque
|
Amount
|
Date Cashed
|
|
|
|
|
|
July 31, 1999
|
$ 955.45
|
October 07, 1999
|
|
August 31, 1999
|
2,166.29
|
October 07, 1999
|
|
September 30, 1999
|
2,053.06
|
October 20, 1999
|
|
October 31, 1999
|
1,356.33
|
November 02, 1999
|
[16] In the 1999 taxation year the Appellant and Balvinderjit also operated
the orchard located on the two five-acre parcels that were owned by the
Appellant and Balvinderjit. In other words, in addition to working 9-10 hours
per day for 87 continuous days on Pritam's 10-acre orchard, the Appellant
claims that he also worked on his own 10-acre orchard. (Note – the Appellant
said that on several occasions he hired members of his family to assist with
the operation of his orchard.)
[17] In the 2000 taxation year the Appellant and Balvinderjit leased the 10
acres of Pritam's Orchard and operated an orchard on the whole 20 acres.
[18] The Appellant applied for benefits under the Employment Insurance
Act (the "Act") for the period July 20, 1999 to October
14, 1999 (the "Period").
[19] By letter from J. Morgan of the Canada Customs and Revenue Agency
dated the 11th day of December 2001, officials of Human Resources Development
Canada were advised that the Appellant was not entitled to benefits under the Employment
Insurance Act. Mr. Morgan's letter contained the following comments:
It has been decided that he (i.e.
the Appellant) was not employed in insurable employment during the period under
review.
This decision is issued pursuant to
subsection 93(3) of the Employment Insurance Act and is based on
paragraphs 5(1)(a) and 5(2)(i) of the Employment Insurance Act.
B. ISSUES
[20] (1) Whether the Appellant was
employed by Pritam in the Period in insurable employment and if so, how many
insurable hours did he have in the Period?
(2) In the
alternative, if the Appellant was employed under a contract of service in the
Period, would the Appellant and Pritam have entered into a substantial similar
contract of employment if they had been dealing with each other at arm's
length?
C. ANALYSIS
[21] The question to be answered is whether or not the employment of the
Appellant was excepted employment. The relevant provisions of the Act are
as follows:
5. (3) For the purposes of
paragraph (2)(i),
(a) the question of
whether persons are not dealing with each other at arm's length shall be
determined in accordance with the Income Tax Act; and
(b) if the employer
is, within the meaning of that Act, related to the employee, they are deemed to
deal with each other at arm's length if the Minister of National Revenue is
satisfied that, having regard to all the circumstances of the employment,
including the remuneration paid, the terms and conditions, the duration and the
nature and importance of the work performed, it is reasonable to conclude that
they would have entered into a substantially similar contract of employment if
they had been dealing with each other at arm's length.
[22] The Appellant and Pritam are blood brothers. They are therefore
related persons as defined by the Income Tax Act and they are therefore
deemed not to be dealing with each other at arm's length for the purposes of
paragraph 5(3)(b) of the Act.
[23] In this situation the Appellant claims that he worked in Pritam's
Orchard for a total of 823 hours from July 20 – October 14, 1999 and he
claims that he and his wife operated their own 10-acre orchard at the same
time.
[24] The evidence also indicates that the Appellant did not cash the
cheques received from Pritam for one or two months. For example, the evidence
indicates that the Appellant received a cheque dated July 31, 1999 in the
amount of $955.45 and the cheque was not cashed until October 07, 1999 (a
period of more than two months).
[25] I am not convinced that the Appellant's circumstances of employment
were such that he would have entered into such a type of contract of employment
with a non-arm's length employer and obviously, the payor, would not have dealt
with third parties in such a manner. The Appellant did so because Pritam was
his brother and Jasbir was his brother's wife.
[26] In my opinion the Appellant has failed to discharge the onus placed
upon him to demonstrate that the Respondent's determination is incorrect.
Therefore, the appeal is dismissed and the determination of the Minister is
confirmed.
Signed at Vancouver, British Columbia, this
27th day of March 2003.
J.T.C.C.
Email this Content