Robert Delisle v. Minister of National Revenue, [1984] CTC 2962, 84 DTC 1854

Cardin, TCJ [TRANSLATION]:—This is an appeal by Mr Robert Delisle against tax assessments for the 1977 and 1978 taxation years. It concerns the deductibility of certain amounts as expenses incurred in gaining income from a business.

Facts

The appellant is a commission salesman of handicrafts. In conducting his business, the appellant must visit buyers in Toronto and several cities in the western provinces at least twice a year.

The appellant shares the expenses of an office in Montreal equally with a Mr Leborgne. Although the appellant and Mr Leborgne are not associated in their respective businesses, they share equally the expenses incurred for exhibition costs in Toronto and Montreal. The appellant and Mr Leborgne participate in exhibitions that take place twice a year in both Montreal and Toronto. To do this the appellant and Mr Leborgne share the cost of renting space in an appropriate building, usually that of Southam Exhibitions (Exhibit A-1). For the purposes of exhibiting their merchandise, the appellant and Mr Leborgne have to pay for electricity, decoration, construction of shelves and installation of everything required to make their booth as attractive as possible.

In his tax return for the 1977 and 1978 taxation years, the appellant claimed business expenses of $17,110.53 and 27,946.42 respectively. These totals represent half of the exhibition expenses, half of the office expenses and all the representation and travel expenses incurred by the appellant in the operation of his business during the two years in question.

On September 29, 1980 the Department of National Revenue issued reassessments for the 1977 and 1978 taxation years in which it allowed $9,662.31 of the $17,110.53 claimed by the appellant as operating expenses for 1977, thereby disallowing the deduction of $7,448 for 1977. For 1978 the Department of National Revenue allowed $15,781.44 of the $27,946.42 claimed for business expenses, thereby disallowing the deduction of $12,164 claimed as business expenses for the 1978 taxation year.

After serving his notice of objection, the appellant lodged a notice of appeal dated April 5, 1982. Bills from Southam for 1977 and 1978 exhibition costs were included in the notice of appeal. The appellant’s share of the payment of these bills is half of the various amounts.

In his reply, the respondent’s counsel argued that the exhibition expenses found in the supporting documents submitted by the appellant, with his notice of appeal of April 5, 1982, were allowed in a reassessment of the appellant dated February 1, 1982. The Department of National Revenue allowed additional expenses of $2,473 for the 1977 taxation year and $624 for 1978. However, the Department of National Revenue disallowed expenses of $4,975 for 1977 and $11,500 for 1978. These are the amounts that are in dispute.

The respondent’s argument is that the deductible expenses incurred by the appellant did not exceed $12,125 for 1977 and $16,404 for 1978.

The appellant argued that the amounts claimed were all incurred by him in 1977 and 1978 in the operation of his business. He explained that most of the travel and representation costs were presented to the Department of National Revenue as a total amount, such as account statements from Visa, which was not sufficient. At the hearing, the appellant wanted to file numerous bills that he had obtained from Visa, which Visa used to make up its account statements, as supporting evidence. The respondent’s counsel objected to the bills being filed, arguing that he was taken by surprise since the notice of appeal concerned only exhibition expenses and not representation expenses. The respondent’s second point was that it would be impossible to ascertain whether the bills for representation or travel expenses that the appellant wished to file had already been included in the amounts allowed by the Department of National Revenue in these two assessments. The appellant admitted that the said bills had already been submitted to the Department of National Revenue.

It is clear, as the appellant stated, that he could not gain income from his business without incurring operational expenses that are normally deductible. The respondent did, in fact, allow $12,135 of the $17,110.53 claimed as expenses in 1977 and $16,406.42 of the $27,946 claimed for 1978.

In order to win the case the appellant, who had the burden of proof, would have had to clearly show the Court how and why the amounts of $4,975 and $11,500 disallowed by the Minister should also be included in the operational expenses of his business for the taxation years from 1977 to 1978 respectively. This the appellant did not do.

The appeal is dismissed.

Appeal dismissed.