Date: 20001103
Docket: 2000-1922-IT-I
BETWEEN:
KEVIN FURLOTTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bell, J.T.C.C.
ISSUE:
[1]
Is the Appellant, in computing income, entitled to deduct
"work space in home" expenses of:
$5,158.37 for his 1995 taxation year;
$5,491 for his 1996 taxation year; and
$6,114.76 for his 1997 taxation year
pursuant to subsection 18(12) of the Income Tax Act
("Act").
FACTS:
[2]
The Appellant operated an income tax consulting business, an
automobile recycling business and a travel representative
business in each of 1995 and 1997 and also operated those three
businesses plus a recreational products business in 1996, all in
and from his home.
[3]
He testified that he claimed all expenses for those years in a
general deduction. He then said that Revenue Canada extracted
home office related expenses in the amounts aforesaid in excess
of net income and disallowed same.
APPELLANT'S SUBMISSIONS:
[4]
Appellant's counsel submitted that the opening words of
subsection 18(12), namely:
Notwithstanding any other provision of this Act, ...
mean that, for the purposes of interpreting that provision,
regard can be had to no other section of the Act, particularly to
sections 3 and 9. He then submitted that "income" as
used in paragraph 18(12)(b) did not, accordingly, mean
net income but, rather, gross income.
[5]
Subsection 18(12) reads:
(12) Notwithstanding any other provision of this Act, in
computing an individual's income from a business for a
taxation year,
(a) no amount shall be deducted in respect of an otherwise
deductible amount for any part (in this subsection referred to as
the "work space") of a self-contained domestic
establishment in which the individual resides, except to the
extent that the work space is either
(i) the individual's principal place of business,
or
(ii) used exclusively for the purpose of earning income from
business and used on a regular and continuous basis for meeting
clients, customers or patients of the individual in respect of
the business;
(b) where the conditions set out in subparagraph (a)(i) or
(ii) are met, the amount for the work space that is deductible in
computing the individual's income for the year from the
business shall not exceed the individual's income for the
year from the business, computed without reference to the amount
and sections 34.1 and 34.2; and
(c) any amount not deductible by reason only of paragraph (b)
in computing the individual's income from the business for
the immediately preceding taxation year shall be deemed to be an
amount otherwise deductible that, subject to paragraphs (a) and
(b), may be deducted for the year for the work space in respect
of the business.
[6]
Counsel referred to Pawlikowski v. R., [1998] 2 C.T.C. 2945 where
this Court found that non-home related expenses "are
separately deductible". It then determined that the home
related expenses could be deducted from a figure described as
"Revenue".[1]
[7]
With respect, I do not agree that the Appellant should succeed on
that basis. In my view the words "Notwithstanding any other
provision of this Act" found in subsection 18(12) simply
place a limit on the amount of expense that would, without that
limitation, be deductible from all income.
[8]
The meaning of the above quoted words cannot logically be
construed to mean that basic income computing principles can be
ignored. In the context in which those words are used, a
preferable interpretation would be that notwithstanding the
general deductibility of an amount, that amount will be
limited.
[9]
Section 18 is both permissive and restrictive. Subsection 18(1)
provides that in computing income "no deduction shall be
made in respect of" specified items. Section 18(2), imposing
a limit on certain interest and property tax, uses the words
"notwithstanding paragraph 20(1)(c)"[2] and provides that
certain interest amounts and property taxes will not be
deductible. This is the sense in which the
"notwithstanding" portion of subsection 18(12) should
be viewed. Paragraph 20(1)(c) is a section permitting
interest deduction. It was, therefore, easy to except its
application to specific circumstances. There are a number of
statutory provisions respecting computation of income. The
legislators may have wanted to ensure that all such provisions
were neutralized for the purpose of computing the deductibility
of home related office expenses and, without enumerating them,
used the aforesaid general and broad language appearing in
subsection 18(12).
[10]
Accordingly, the appeal will be dismissed.
Signed at Ottawa, Canada this 3rd day of November,
2000.
"R.D. Bell"
J.T.C.C.
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