Dr. Aremanda v. Subbarao v. Minister of National Revenue, [1986] 2 CTC 2089, 86 DTC 1554

Couture, C.J.T.C.:— This appeal deals with the deductibility of an amount of $7,307 claimed by the appellant as travelling expenses incurred by him regarding his wife and two daughters in computing his income for the taxation year 1980 under the circumstances hereinafter described.

The appellant, who acted for himself, explained to the Court that he is an associate professor in the Faculty of Administration at the University of Ottawa. His main duties at the University are teaching, research and attending committee meetings for the Faculty and the University, but research constitutes about 40 per cent of his duties.

In 1979 he applied and was awarded a research fellowship by the Social Sciences and Humanities Council of Canada, (the Council) and in 1980 pursuant to this award he received $10,680 which he included as income in his tax return.

In addition to the amount of $10,680 the appellant also received in 1980 an amount of $7,500 from the University of Ottawa as a research grant pursuant to a research program sponsored by the University. This $7,500 was included as income in his tax return.

In computing his income for the taxation year under appeal the appellant deducted from the $18,180 expenses amounting to $16,244. Included in the $16,244 was $7,307 representing the travelling expenses for his wife and his two daughters to India where the appellant carried on the research for which he had received the $18,180.

Under the Council’s rules a recipient of a fellowship must assume the costs of travel for his dependants, but he is entitled to be reimbursed therefor if they have resided for four months at the locality where he is carrying on his research. Consequently, the appellant was reimbursed $7,307 in 1981 since they departed for India in December 1980. This was included as income in his 1981 tax return.

By assessment dated December 23, 1982 the respondent disallowed this expense of $7,307 but allowed the remainder of the expenses as claimed.

Under date of March 10, 1983 the appellant filed a notice of objection to the assessment of December 23, 1982 and by notice of reassessment the Minister confirmed the assessment.

Since the respondent in assessing the appellant allowed all the expenses he had claimed in computing his income, except the amount of $7,037 which is the sole amount under discussion in this appeal, it seems obvious that he has treated the two awards received by the appellant as amounts contemplated by the provisions of paragraph 56(1 )(o) of the Act and not as amounts referred to in paragraph 56(1)(n).

Under the provisions of paragraph 56(1 )(o) certain expenses incurred by a taxpayer may be deducted from income in the nature of a grant, but only expenses specifically mentioned in the said paragraph are eligible, unless they are otherwise deductible under another provision of the Act in computing his income for the year as provided therein.

Paragraph 56(1 )(o) of the Act reads as follows:

56. (1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,

(o) the amount, if any, by which any grant received by the taxpayer in the year to enable him to carry on research or any similar work exceeds the aggregate of expenses incurred by him in the year for the purpose of carrying on the work, other than

(i) personal or living expenses of the taxpayer except travelling expenses (including the entire amount expended for meals and lodging) incurred by him while away from home in the course of carrying on the work,

(ii) expenses in respect of which he has been reimbursed, or

(iii) expenses that are otherwise deductible in computing his income for the year.

Travelling expenses of his spouse and children cannot be construed as expenses incurred by the taxpayer for the purpose of carrying on his work as required by the provisions of paragraph (o). They were not even remotely associated or related to such a purpose as the only and sole reason for the expense in question was to move his family with him to India where he was to carry on his research project.

The provisions of subparagraph (i) exclude from the deductibility of expenses provided in paragraph (o) those expenses which are of a personal and living nature, except expenses which could be considered as personal and living within the ordinary meaning of these words but only to the extent that these expenses were incurred by him while away from home in the course of carrying on his work.

The words “incurred by him . . . in the course of carrying on the work” in subparagraph (i) could probably be attributed the meaning that to the extent that the taxpayer has paid for such expenses whether they were for himself or someone else they are eligible for the deduction especially since Thurlow, C. J. in M.N.R. v. Yonge-Eglinton Building Limited, [1974] C.T.C. 209 at 214; 74 D.T.C. 6180 at 6183 in considering the words “in the course of” said:

It may not always be easy to decide whether an expense has so arisen but it seems to me that the words “in the course of” in paragraph 11(1)(cb) are not a reference to the time when the expenses are incurred but are used in the sense of “in connection with” or “incidental to” or “arising from” and refer to the process of carrying out or the thing that must be undertaken . . .

Whatever meaning could be extracted from the English wording of subparagraph (i), the French version is more specific and removes any doubt that only expenses of the taxpayer himself are eligible for the deduction. The possessive adjective “ses” precedes the words “frais de déplacement”’, “repas” and “son” precedes the word “logement” thereby making it clear that the legislation refers to the taxpayer's own expenses only and not to expenses incurred on behalf of third parties.

For the above reasons the appeal is dismissed.

Appeal dismissed.