Delisle v. The Queen, docket 2000-2494-IT-I (Informal Procedure)

Date: 20010724

Docket: 2000-2494-IT-I

BETWEEN:

CLÉMENT DELISLE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Lamarre Proulx, J.T.C.C.

[1]            This is an appeal under the informal procedure for the 1995 to 1997 taxation years.

[2]            The point at issue is whether the appellant could deduct amounts paid under a holding proposal to his creditors as business expenses during those years.

[3]            The facts on which the Minister of National Revenue (the "Minister") relied in making his reassessments are set out in paragraph 13 of the Reply to the Notice of Appeal (the "Reply").

[4]            The main facts are as follows:

                [TRANSLATION]

                . . .

(d)            the appellant's business is known as "Méga Watt Enr" (hereinafter the "business");

(e)            the main activity of the business consists in assessing the energy capacity of its clients (farms, buildings, etc.) and finding them solutions for more efficient energy consumption;

. . .

(g)            in 1995, the appellant experienced financial difficulties and made a holding proposal to his creditors, undertaking to repay them in full;

(h)            to repay his debt in full, the appellant undertook to pay $500 a month to the trustee, who then distributed the amounts collected to the creditors;

(i)             the total amount of the creditors' claims is $28,032.18, 60 percent of which were expenses incurred for business purposes, while the difference was incurred for personal purposes;

(j)             the total amount of the claims represents expenses incurred by the appellant during the years prior to the 1995 taxation year;

(k)            furthermore, the appellant has not shown that the expenses incurred in the years prior to 1995 had not been claimed as business expenses at that time;

. . .

[5]            The notice of appeal states that the appellant believes the business expenses represent 65.78 percent of total expenses, not 60 percent, as the respondent states in paragraph 13(i) of the Reply.

[6]            The notice of appeal also states that the appellant operated a business in 1995, 1996 and 1997. The evidence did not establish this fact.

[7]            The appellant testified and said that he had been in business from 1991 to 1993. Although his testimony on this point was vague, it seems clear that the appellant was not in business during the years in issue, that is, from 1995 to 1997. However, the Minister's decision was not based on this specific aspect. The Minister's decision was based on the following: (1) the expenses were incurred in the previous years; and (2) the appellant failed to show that those expenses had not been claimed in those previous years.

[8]            The only document that the appellant brought with him was the dividend sheet prepared by the trustee and signed on March 12, 1998. It states the names of the creditors and the amounts of their claims. The invoices were not produced, although it seems to me that they could have been. The invoices must exist since they served as a basis for the creditors' claims.

[9]            One fact is certain: the expenses were incurred before 1995. Normally, a business uses the accrual method of accounting, not the cash method. The appellant was unable to indicate on what basis he had claimed the business-related expenses in the previous years.

[10]          I have no choice but to note that neither the creditors' invoices nor the statements of revenue and expenditure for the previous years were produced and that the appellant's testimony was extremely vague. There is therefore no documentary or testimonial evidence that can rebut the Minister's allegations that the expenses were claimed in the years in which they were incurred. Under these circumstances, the appeal must be dismissed.

Signed at Ottawa, Canada, this 24th day of July 2001.

"Louise Lamarre Proulx"

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

2000-2668(IT)I

BETWEEN:

CLÉMENT DELISLE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on July 9, 2001, at Québec, Quebec, by

the Honourable Judge Louise Lamarre Proulx

Appearances

Counsel for the Appellant:                  Howard M. Bruce

Counsel for the Respondent:                              Marie-Aimée Cantin

JUDGMENT

                The appeal from the assessments made under the Income Tax Act for the 1995, 1996 and 1997 taxation years is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 24th day of July 2001.

"Louise Lamarre Proulx"

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]