Richard Komarniski v. Minister of National Revenue, [1980] CTC 2170, 80 DTC 1134

Guy Tremblay:—This case was heard in Winnipeg, Manitoba on November 13, 1979.

1. The Point at Issue

The problem is whether the appellant is correct in deducting in the computation of his income for the taxation year 1976, the amount of $424.70 and for the taxation year 1977, the amount of $619.44. The appellant, an employee of an aircraft company, purchased with the said amount, tools which were required and used in the performance of his duties of employment. According to the appellant “tools” are “supplies”.

2. Burden of Proof

The burden is on the appellant to show that the respondent’s assessment is correct. This burden of proof results especially from several judicial decisions, one of which is the judgment delivered by the Supreme Court of Canada in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. The Facts

The facts are not in dispute. At the beginning of the trial the parties filed a Statement of agreed facts which reads as follows:

1. At all material time the appellant was employed as an aircraft mechanic by Perimeter Aviation.

2. One of the conditions of his employment is that he must supply his own small tools for use in the performance of his duties.

3. These small tools consist of all kinds of wrenches, drills, punch drifts, metalcutting tools, hammers, cutters, pliers and bits for the drills.

4. The employer provides all the major items of equipment and any special tools required for special jobs.

5. A varied assortment of small tools is required for efficiency in handling the many different sizes of nuts, bolts, etc which are encountered while working on the various types of aircraft.

6. For the taxation years 1976 and 1977, the appellant attempted to deduct from his income the amounts of $424.70 in 1976 and $619.44 in 1977 in respect of these small tools, some of this amount having been expended for new tools and some to replace those which had become broken, lost or worn out.

7. During his 1976 taxation year the appellant derived a net farming income in the amount of $55.30 but otherwise did not derive any income from business or property.

8. During his 1977 taxation year the appellant did not derive any income from business or property.

9. The appellant relies exclusively on the provisions of section 8(1 )(i)(iii) of the Income Tax Act, 1952 RSC c 148.

4. Law—Precedent Cases—Comments

4.1 Law

Subparagraph 8(1)(i)(iii) of the Income Tax Act reads as follows:

In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:

(i) amounts paid by the taxpayer in the year as

(iii) the cost of supplies that waere consumed directly in the performance of the duties of his office or employment and that the officer or employee was required by the contract of employment to supply and pay for,

4.2 Precedent Cases

The precedent cases referred to by the parties were:

1. John Leonard McLeavy v MNR, 10 Tax ABC 137; 54 DTC 13;

2. Herman Luks (No 2) v MNR, [1958] CTC 345; 58 DTC 1194.

4.3 Comments

4.3.1 The appellant must meet the following requirements of the former legal provision to deduct the claimed expenses:

(1) the amounts must be paid by the appellant in the concerned years;

(2) they must be amounts for cost of supplies;

(3) the supplies must have been consumed directly in the performance of the duties of the appellant’s employment;

(4) the things purchased must have been supplies that the appellant was required by the contract to supply and pay for and that the appellant was not entitled to be reimbursed for.

4.3.2 If the first condition is met (paragraph 3.6), the second and those conditions, however, can be answered only after the Board will have defined the word “supply” and stated if the tools listed in paragraph 3.3. (wrenches, drills . . .) are supplies.

4.3.3 In the case of Herman Luks referred to above, the present Chief Justice of the Federal Court Mr Thurlow, then a judge of the former Exchequer Court of Canada, made some interesting comments, on the distinction between “supplies” and “equipment”:

“Supplies” is a term the connotation of which may vary rather widely, according to the context in which it is used. In s 11(10)(c) it is used in a context which is concerned with things which are consumed in the performance of the duties of employment. Many things may be consumed in the sense that they may be worn out or used up in the performance of duties of employment. The employer’s plant or machinery may be worn out. The employee’s clothing may be worn out. His tools may be worn out. And materials that go into the work, by whomsoever they may be provided, may be used up. “Supplies” is a word of narrower meaning than “things” and in this context does not embrace all things that may consumed in performing the duties of employment, either in, the sense of being worn out or used up. The line which separates what is included in it from what is not included may be difficult to define precisely but in general, I think its natural meaning in this context is limited to materials that are used up in the performance of the duties of the employment. It obviously includes such items as gasoline for a blow torch but, in my opinion, it does not include the blow torch itself. The latter, as well as tools in general, falls within the category of equipment.

The distinction between supplies and equipment was considered in The D’Vora, (1952) 2 All ER 1127, where the problem was whether or not the supplying of fuel oil to a ship fell within the meaning of the expression “building, equipment or repairing a ship”. Willmer, J said at 1127:

Clearly, the supplying of fuel oil could hardly come within the words “building” or “repairing”. The argument, however, is that it comes within the word “equipping”. To my mind, there is, prima facie at least, a wealth of difference between the meaning of the word “equipping” and the meaning of the word “supplying”. At my suggestion reference has been made to the Oxford Dictionary, but I confess that a perusal of that word has not thrown any great light on the problem which I have to determine. It is to be observed, however, that when I look through the synonyms given for “supply” in the Oxford Dictionary the one word which I do not meet is “equip”. In my judgment, the important difference between “equip” and “supply” is that “supply” is a word which is appropriate for use in connection with consumable stores, such as fuel oil, whereas “equip” connotes something of a more permanent nature. I can well understand that anchors, cables, hawsers, sails, ropes and such things, may be said to be part of a ship’s equipment, although they may have to be renewed from time to time, but such things as fuel oil, coal, boiler water, and food appear to me to be in quite a different category.

The category before Willmer, J was not the same as that in the present case, for he was considering whether providing fuel oil, which could readily be regarded as supplying the ship, could also be regarded as equipping it, while what has here to be determined is whether tools, which are readily classed as equipment, can also be classed as supplies. But the passage quoted indicates that, in general, the two categories are quite distinct from each other.

The Board agrees with the above comments and states that the tools listed in paragraph 3.3 are not “supplies” but “equipment”.

5. Conclusion

The appeal is dismissed in accordance with the above reasons for judgment.

Appeal dismissed.