Denise Lavoie v. Minister of National Revenue, [1990] 1 CTC 2276, [1990] DTC 1139

Tremblay, T.C.J.: —This appeal was heard on November 23, 1988 at the City of Montreal, Québec.

1. The Point at Issue

The point at issue is whether the appellant, a teacher and an officer of the Syndicat des enseignants de Laval (SEL) is correct in the computation of her income with respect to the 1983 taxation year not to include the sum of $817 received from the SEL, according to the appellant, as a refund of expenses actually incurred in her duties as an officer of the SEL, and to deduct the sum of $605 as travelling expenses for the purpose of carrying on the activities arising from her union duties.

The respondent determined the sum of $817 received by the appellant to be earnings and included it in her income.

Moreover, the respondent argues that the sum of $605 was not expended as expenses that the appellant was required to pay under her contract of employment within the meaning of the provisions of 8(1)(h) of the Income Tax Act.

2. The Burden of Proof

2.01 The burden of proof is on the appellant to show that the respondent's assessments are incorrect. This burden of proof results from several judicial decisions, including the judgment by the Supreme Court of Canada in Johnston v. M.N.R., [1948] S.C.R. 486; [1948] C.T.C. 195; 3 D.T.C. 1182.

2.02 In that judgment the Court decided that the facts assumed by the respondent in support of the assessments or reassessments are also presumed to be true unless the contrary is proved. In the case at bar, the facts presumed by the respondent are described in subparagraphs 6(a) to (e) of the respondent's amended reply to the notice of appeal. This paragraph reads as follows:

[Translation]

6. In assessing and confirming the assessment issued, the respondent Minister of National Revenue relied on the following presumptions of fact, inter alia:

(a) during 1983 the appellant was an officer of the Syndicat des Enseignants de Laval [admitted by the appellant] ;

(b) during 1983 in the performance of her duties the appellant participated in several union meetings [admitted by the appellant];

(c) the Syndicat des Enseignants de Laval pays compensation to its members when they attend at various union meetings [not admitted by the appellant];

(d) during 1983 the Syndicat des Enseignants de Laval thus paid compensation to the appellant in the total amount of $817.00 for having attended at various union meetings [not admitted by the appellant];

(e) during the 1983 taxation year the appellant did not include the sum of

$817.00 in the computation of her income [admitted by the appellant];

3. The Facts

A. Examination of Lise Vanier by counsel for the appellant

3.01 In 1983, Ms. Vanier was a teacher and officer of the SEL for the secondary sector. On September 20 of that year she was appointed to the position of treasurer of the SEL. In addition to requiring that she prepare budget forecasts and ensure that the financial policies set by the SEL were followed, this position also required that she check applications for reimbursement in accordance with the policy that had applied since 1980 (Exhibits A-1 and A-2).

3.02 She is in possession of all the minutes of the various meetings of the Board of Directors, stewards' meetings and committee meetings for 1982-83 and 1983-84 from September 1 to August 31.

3.03 Based on the document coded D-8283-CA81 entitled Politique d'indemnités et de remboursements [compensation and reimbursement policy] (Exhibit A-3) and on the minutes of meetings, the witness indicated that in her letter of September 18, 1985 to the respondent (Exhibit A-4) she had given the correct information concerning the compensation of $817 received by the appellant and the expenses incurred of $605.

The calculation in Exhibit A-4 shows the following details:

Name: Denise Lavoie

Taxation year: 1983

Amount examined: $817.00

Work performed: 12 meetings of Board of Directors

21 stewards' meetings and stewards

(14 @ $15.00 and 7 @ $11.00)

20 committee meetings

Expenses incurred:

Board of Directors :

Travel: 12 X (30 km @ .25km)		$ 90.00
Stewards' meetings and stewards:
Travel: 21 X (30 km @ .25km)		$157.50
Committees:	(average hour)
Travel: 20 x (30 km @ .25km)		$150.00
Travel involved in union duties:
17 x (30 km @ .25km)		$127.50
School visits: 4 x (80 km @ .25km)		$ 80.00
Total expenses incurred:		$605.00
Compensation received:
Board of Directors :
12 x $25.00		$300.00
Stewards' meetings:
14 x $15.00		$210.00
7 x $11.00		$ 77.00
Committees :
20 x $11.00		$220.00
Meals:
1 x $10.00		$ 10.00
Total compensation received:		$817.00

3.04 Photocopies of eight cheques relating to compensation and to expenses of representation were filed as Exhibit A-5.

With respect to the compensation paid, the following definition is given on Exhibit A-3:

[Translation]

Compensation is paid at a fixed rate to cover normal meeting expenses: travel, meals, child care, and so on, unless there are specific provisions.

The amounts were set on the basis of an average arrived at from a number of cases, and everything was properly approved by all the members.

Lise Vanier explained that the $25 is given to members of the Board of Directors for each meeting in which they participate [Translation] "outside a teacher's normal working hours" (Exhibit A-3, Article 1). This $25, as it was established before 1980, serves generally to cover expenses arising from such meetings and more specifically travelling expenses, child care expenses and meals.

3.05 Stewards receive $11 when the meeting [Translation] “is held from 4:00 pm to 6:30 pm" and $15 when the meeting goes later into the evening. The expenses covered are primarily child care and meals (Exhibit A-3, p. 1, Article 2).

3.06 Committee members receive $11 per meeting (Exhibit A-3, p. 1, Article 3).

3.07 Reimbursement relates to (1) travelling expenses; (2) "room" expenses;

(3) meal expenses; (4) long distance telephone expenses; (5) parking and "toll" expenses; (6) any other expenses approved by the Board of Directors (Exhibit A-3, pp. 2-3, Articles 1 to 6). Some of these expenses (1 and 2) are reimbursed for participation in meetings held outside the SEL's territory.

3.08 The supporting vouchers on which Ms. Vanier relied in issuing the cheques in Exhibit A-5 were filed as Exhibit A-6.

3.09 Ms. Vanier explained that in 1985 investigators from both Revenue Canada and Revenu Québec came to audit the books. No form T-4 or TP-4 had been issued by the SEL because in its view no salary had been paid.

These forms were required for 1983. After examining the facts relating to the compensation paid, the forms were changed; "Application for reimbursement" forms are now required to be filled out by the union officers to the satisfaction of the two government departments. In any event, the respondent did not include the compensation in the income of the union officers for 1984. The respondent now no longer taxes amounts of this nature paid to union officers.

3.10 B. Cross-examination of Ms. Vanier by counsel for the respondent

The witness acknowledged that a member of the Board of Directors may receive the $25 even if he does not attend a meeting, but on certain conditions. The second paragraph of Article 1 on page 1 of Exhibit A-3 reads as follows:

[Translation]

If a member of the Board cannot attend a meeting because he is absent on union business authorized by the Board (or the president, in an emergency) he shall receive the allowance.

3.11 Counsel for the respondent had the witness produce as Exhibit 1-2 a document that had been sent to the respondent at the same time as Exhibit A-4 on September 18, 1985.

The first page of this document contains the following:

[Translation]

BOARD OF DIRECTORS

Each member of the Board shall receive as compensation to cover normal meeting expenses (travel, meals, child care) an amount fixed at $25.00.

These meetings shall be held at the Union’s head office. Attendance at such meetings shall last from 6 to 8 hours (4:30 pm to 10:30 pm) or (4:30 pm to 12:00 midnight).

Members of the Board of Directors shall receive no other reimbursement apart from this compensation for travel expenses arising out of duties performed on Laval Island. For example: school visits, regular visits to the Union's head office (clerical work, collecting documents or telexes, examining files, discussing cases, and so on).

Further, they shall receive no other monthly or yearly payment for their responsibilities as elected representatives.

The following are three typical cases: (1) 31 kilometres plus 8 hours child care at $2; (2) 20 kilometres plus 8 hours child care at $2; (3) 40 kilometres, no child care.

3.12 The following appears at page 2 of Exhibit 1-2:

[Translation]

STEWARDS’ MEETINGS

Each steward of an establishment shall receive as compensation to cover normal meeting expenses (travel, meals, child care) an amount fixed at $11.00 if the meeting is held from 4:30 to 6:30 pm, about (2 hours), or an amount fixed at $15.00 if the meeting is held from 4:30 to 9:30 pm (5 hours).

These meetings shall be held at the premises of the school board located on Laval Island (Mont-de-LaSalle school).

Members of the board of directors shall receive no other reimbursement apart from this compensation for work and responsibilities arising out of their position as stewards at establishments (meetings with teachers, printing and distributing documents, . . . visits to SEL to follow up decisions . . .).

Three typical cases are again described. The witness explained that the reason for the increase from $11 to $15 in compensation if the meeting is held from 4:30 to 9:30 pm is to cover child care and meal expenses.

3.13 The following appears at page 3 of Exhibit 1-2:

[Translation]

COMMITTEES

Each member of a committee shall receive as compensation to cover normal meeting expenses (travel, meals, child care) an amount fixed at $11.00.

These meetings shall be held at the head office of the Union.

The time for these meetings shall vary from a minimum of two (2) hours to a maximum of nine (9) hours (no variation in the amount allowed).

At page 4 there is a description of a typical case identical to the appellant's case, that is, a member who attended 28 meetings of the Board of Directors, 18 stewards' meetings and 31 committee meetings.

3.14 The witness explained that from 1980 to 1986 child care was $2 per hour and that since 1987 it has been $3 per hour. The kilometre rate went from $0.25 to $0.29. This is the rate applied by the CEQ.

3.15 Examination in chief of the appellant Denise Lavoie by her counsel

The appellant testified that she teaches in a large school where there are 125 teachers. She is the only union steward. That involves many meetings of all sorts (information, pedagogical policy, training, discipline). She must also visit schools located in the western sector of Laval.

3.16 The appellant produced, as Exhibit A-7, the notice of objection sent to the respondent on June 11, 1985, following the notice of assessment dated March 18, 1985. This notice of objection contains substantially the same details as those described in Exhibit A-4 (para. 3.03). Nonetheless she noted that she had attended 55 meetings after working hours.

4, Law - Cases at Law - Analysis

4.01 Law

The main provisions of the Income Tax Act involved in the instant case are subsection 5(1) and paragraph 8(1)(h).

4.02 Cases at law

The parties referred the Court to the following cases at law:

1. Samson v. M.N.R., [1943] Ex. C.R. 17; [1943] C.T.C. 47; 2 D.T.C. 610;

2. Ransom v. M.N.R., [1967] C.T.C. 346; [1968] 1 Ex. C.R. 293; 67 D.T.C. 5235;

3. Robillard v. M.N.R., [1981] C.T.C. 2404; 81 D.T.C. 359, (T.R.B.);

4. Her Majesty The Queen v. Paradis, [1985] 2 C.T.C. 3 (F.C.T.D.); 86 D.T.C. 6029.

4.03 Analysis

4.03.1 The deduction of $605 claimed by the appellant as travelling expense in the performance of her union duties cannot be allowed as a deduction. The evidence indicated that these expenses were reimbursed by the SEL (para. 3.03).

4.03.2 The solution to the problem of the $817 involves a much more fundamental question: that is, whether or not the appellant has an “office” or "employment" in the SEL within the meaning of the Act. These words are defined in section 248(1) as follows:

248. (1) In this Act,

“office” means the position of an individual entitling him to a fixed or ascertainable stipend or remuneration and includes a judicial office, the office of a Minister of the Crown, a member of a legislative assembly or a member of a legislative or executive council and any other office, the incumbent of which is elected by popular vote or is elected or appointed in a representative capacity and also includes the position of a corporation director; and "officer" means a person holding such an office;

"employment" means the position of an individual in the service of some other person (including Her Majesty or a foreign state or sovereign) and "servant" or "employee" means a person holding such a position;

4.03.3 The evidence presented by the SEL on this point appears clear. Exhibit A-3, produced by the appellant and entitled Politiques d'indemnités et de remboursements explains that "compensation is paid at a fixed rate to cover normal meeting expenses: travel, meals, child care, and so on, unless there are specific provisions" (para. 3.04).

Exhibit 1-2 produced by the respondent substantially confirms Exhibit A-3. There is the further addition that there shall be no other monthly or yearly payment for their work and responsibilities as members of the Board of Directors, stewards of an establishment or committee members.

4.03.4 Counsel for the respondent referred to the Robillard case (para. 4.02(3)) which is similar to this appeal. In that case an employee of the Ministère du Revenu received $85 per month as second vice-president of the Syndicat des professionels du gouvernement du Québec (SPGQ). This amount was determined to be income. Counsel for the respondent argued that an amount per month or an amount per meeting as in this appeal is not different in substance. It is the same thing.

If we look a little closer, however, we find that this $85 was provided in "Règlement No 2 concernant les paiements des dépenses des membres du SPGQ" [regulation No. 2 respecting payments of expenses of members of the SPGQ], quoted at page 362 D.T.C., where the following passage appears:

[Translation]

These supplementary expenses [$170.00 for the president; $85.00 for the vice- president, $125.00 for the secretary, and so on] represent compensation (including overtime) for representation and Union work.

[Emphasis added.]

It was held that by referring in this way to overtime performed, the requirements of subsection 5(1) of the Act were met; this subsection reads as follows:

5. (1) Subject to this Part, a taxpayer's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by him in the year.

The $85 constituted, inter alia, remuneration for the work performed.

4.03.5 According to the “Petit Robert" dictionary, “indemnité” [compensation] is defined as, inter alia:

[Translation]

Amount paid to compensate for certain expenses.

It therefore seems that the use of the word "compensation" by the SEL is in line with the ordinary dictionary meaning of the word.

I understand that fixing the amount at $25, for the members of the Board of Directors for example, after determining an average for various typical cases, permitted administrative simplification of expense claims, referred to as compensation.

The weight of the evidence indicates that this was indeed reimbursement of expenses and was not remuneration involving any connotation of time worked (paras. 3.03 to 3.13). The reason that the fixed amount increased with the hours worked was because of the additional expenses involved: child care, meals, and so on (para. 3.12).

The fact that it was possible to determine an average for the compensation (para. 3.03) for purposes of administrative simplification does not change the nature of the compensation, that is, "amount paid in compensation for certain expenses". Moreover, the fact that a member of the Board of Directors who does not attend a meeting still receives the $25 allowance when he is absent on union business (para. 3.10) in no way changes the essence of the compensation. Since he is on union business he still has expenses to meet: travel, child care, and so on.

Finally, while the regulation on occasion refers to the allowance instead of the compensation, this in no way changes the evidence that it is indeed compensation.

4.03.6 Accordingly, the appeal with respect to the deduction of the $817 from income is allowed. The deduction of $605 (para. 4.03.1) however is refused.

5. Conclusion

The appeal is allowed in part with costs and the matter referred back to the respondent for reconsideration and reassessment in accordance with the reasons set out above.

Appeal allowed in part.