Real Mireault v. Minister of National Revenue, [1985] 1 CTC 2167, 85 DTC 170

Taylor, TCJ [TRANSLATION]:—This appeal was heard in the city of Montreal on October 18, 1984. The issue is whether the appellant was entitled to deduct certain expenses as “automobile expenses” in the computation of his taxable income.

The facts in this appeal are set out in the reply to the notice of appeal:

In assessing and confirming his assessment, the Minister of National Revenue relied, inter alia, on the following facts:

(a) during the 1981 taxation year, the appellant was employed by Bell Canada as Manager—Customer Services, Laurentian District;

(b) Bell Canada’s main place of business in the Laurentian District is St-Jérôme;

(c) during the taxtion year in question, the appellant had to travel regularly outside St-Jérôme since his duties required that he look after the neighbouring St-Jovite area;

(d) during the year in question, all expenses incurred by the appellant in the performance of his duties were reimbursed by his employer, Bell Canada;

(e) regarding his travel expenses, the appellant used his own vehicle for business purposes, travelling 4,862 kilometres in 1981;

(f) Bell Canada reimbursed to the appellant the sum of $959.81 in payment of the fixed and variable expenses incurred in covering the above-mentioned 4,862 kilometres;

(g) that reimbursement was very reasonable, being 20.5 cents a kilometre or 32.80 cents a mile, and the respondent did not tax that amount;

(h) in discussions with the respondent’s officers, the appellant admitted that he had travelled 24,000 kilometres in his vehicle in 1981; the distance was broken down as follows:

— personal use	19,138 km / 11,961 m / $79.74
— business purposes	4,862 km / 3,039 m / $20.26

(i) during the taxation year in question, the vehicle used by the appellant was a Volvo acquired in 1977 for $7,000;

(j) in 1981, the appellant did not incur automobile expenses in excess of the reasonable amount reimbursed by his employer;

The respondent referred to Bell Canada’s General Circular #305.2, which contains the following provisions:

1.03 It is the general practice of the Company to provide its employees with transportation to carry out their duties, ie by air, railway, bus, drive-yourself vehicles and Company-owned vehicles as appropriate. This general practice, however, does not preclude an agreement whereby an employee’s car is made available for Company use.

1.04 Under certain conditions, hereinafter described, it may be desirable or necessary to authorize the use of an employee’s passenger car on Company business.

3.03 The rates of remuneration to be applied for the use of authorized employee- owned cars are:

Quebec Region

(a) 20.5 cents (twenty and a half) per kilometre.

For his part, the taxpayer observed:

. . . I think that s 6(l)(b)(vii) was misinterpreted. As I briefly said earlier, reimbursement was referred to in terms of time, whereas in my case, expenditures were made on the basis of mileage. And, lastly, even though there was no obligation on my part or the employer’s part, I was required, according to Interpretation Bulletin 272, to use my automobile fairly regularly in the performance of my duties.

Therefore, I think that I meet the criteria of s 8( l)(h), and I ask that my expenses and income be included in my income.

On the other hand, counsel for the respondent argued that the appellant:

. . . did not show that under his contract of employment, he was required to pay the travelling expenses incurred by him in the performance of the duties of his office or employment.

. . . received an allowance for travelling expenses, and by virtue of s 6( 1 )(b)(vii)(A) it was not included in computing his income.

In addition, the Court took note of the following decisions: Cyril John Ransom v MNR, [1967] CTC 346; 67 DTC 5235, William H Gauvin v MNR, [1979] CTC 2812; 79 DTC 696, The Queen v Henry Cival, [1983] CTC 153; 83 DTC 5168.

In Ransom (supra), the Judge considered the definition of the terms “reimbursement” and “allowance”, but I recall that the Act was amended in 1972. The Court dealt with this problem in Cival (supra) as well. At that time, it is quite possible that a “reimbursement” calculated according to Bell Canada’s circular was an “allowance”, even though Bell Canada’s circular speaks of “remuneration” and not “reimbursement”. On reading Revenue Canada’s Interpretation Bulletin No IT-272R, I cannot see the reason for the distinction between paragraphs 33 and 38. I would suggest that an amount based “on mileage” is the same type as an amount based on the “number of days” away.

Nonetheless, even if the amount at issue in the instant case is considered “income” in paragraph 6(1 )(a) or paragraph 6(1 )(b) of the Income Tax Act, SC 1970-71-72, c 63, as amended, the taxpayer must be able to comply with subparagraph 8(l)(h)(iii) of the Act, and he must also comply with subparagraphs 8(l)(h)(i) and 8(l)(h)(ii). I therefore doubt that the respondent described the situation correctly by saying “having received an untaxed amount”, but I am absolutely certain that the respondent was right in saying that “the appellant was not contractually bound to pay his expenses”. Pages 158 and 5171 respectively in Cival (supra) read:

In my view, the arrangement between Mr Cival and his employer, if a contract at all, was at most what is sometimes called a unilateral contract. It was an arrangement under which his employer undertook to reimburse him on a mileage basis for expenses incurred in using his car in the performance of his duties. I do not interpret the arrangement as involving a promise by Mr Cival to use his car in performing his duties and pay the expenses out of his own pocket in return for an undertaking by his employer to reimburse him. To put it another way: as I see the arrangement, Mr Cival was not contractually bound to use his car in doing his job and to pay the expenses involved: if at any time during 1977 he had refused to use his car for this purpose, he would not have been suable by his employer for breach of contract. It follows that, to adopt the words used in subparagraph 8(l)(h)(ii), he was not required under his contract of employment to pay the expenses incurred by him in using his car in the performance of the duties of his employment. This is enough to dispose of the appeal.

For the above reasons, the appeal is dismissed.

Appeal dismissed.