Caron v. R., [1998] 3 CTC 2720

Tremblay T.C.J.:

Point at Issue

The point at issue is whether the appellant was correct in claiming the amounts of $3,501, $4,542 and $480 in respect of meal, accommodation and ferry expenses in computing his income for 1992, 1993 and 1994 respectively.

The appellant was a site superintendent for Beauvais & Verret Inc., and his work was to supervise two current job sites in two isolated locations.

According to the respondent, the appellant had to supervise only one site, which was his place of business. The appellant was merely a temporary employee. Moreover, the appellant received a travel allowance from his employer which was not included in his income.

The respondent further disallowed a refund of amounts of $178.66 in 1992 and $171.55 in 1993 paid for employee services in respect of disallowed expenses.

Burden of Proof

The burden is on the appellant to show that the respondent’s assessments are incorrect. This burden of proof arises from a number of judicial decisions including a judgment by the Supreme Court of Canada Johnston v. Minister of National Revenue^ [1]

In that same judgment, the Court held that the. facts assumed by the respondent in support of assessments or reassessments are also assumed to be true until proven otherwise. In the instant case, the facts assumed by the respondent are set out in subparagraphs 4a. to f. and paragraph Sa. to c. of the Reply to the Notice of Appeal. Those paragraphs read as follows:

[TRANSLATION]

4. In making these reassessments, the Minister made in particular the following assumptions of fact:

a. during the 1992, 1993 and 1994 taxation years, the appellant was a site superintendent for the company Beauvais & Verret (the “employer”); [admitted]

b. the employer supervised the construction sites of the Sobey’s chain of food stores; [admitted]

c. the appellant received an allowance for travelling expenses from his employer for the years in appeal, and those allowances were not included in computing his income under subparagraph 6(l)(h)(v); [admitted with an explanation]

d. the appellant did not show that the: allowances he received from his employer were not reasonable; [denied]

e. consequently, the appellant’s expenses in issue, $3,501 in 1992, $4,542 in 1993 and $480 in 1994, were disallowed; [admitted that they were disallowed, though improperly]

f. in addition, the goods and services tax rebate for employees for the 1992 and 1993 taxation years was revised to nil under subsection 253(1) of the Excise Tax Act. [admitted that it was revised to nil, though improperly]

5. At the objection stage, the Minister obtained certain information from the employer and made the following assumptions of fact:

a. during the 1992, 1993 and 1994 taxation years, the appellant worked strictly in the supervision of one work site in particular, and one site at a time; [denied]

b. for the appellant, the employer’s place of business was the particular work site where lie was working at the time; [denied] C. the appellant was merely a temporary employee of the employer; [being only on a specific work site]

Evidence of Facts

In addition to the above admissions, the evidence was supplemented by the appellant’s testimony and the filing of Exhibits A-1 to A-3.

The appellant admitted that he had claimed the following expenses in computing his net income for the 1992, 1993 and 1994 taxation years:

As Exhibit A-3, he filed proof of his expenses, except the ferry expenses, which were included in the $500 amount received weekly in respect of transportation expenses.

For II years, the appellant has worked for Beauvais & Verret, whose place of business is at 2181 rue Léon-Harmel, in Québec. As Exhibit A-1, the appellant filed a number of letters from his employer concerning his work and travelling expenses, meal expenses and accommodation expenses.

A letter dated March 21, 1990, addressed “To whom it may concern” reads in part as follows:

[TRANSLATION]

Mr. Caron is employed by us as [a superintendent]; he is not governed by the Construction Decree as regards to his wage rate and the definition of his duties.

He has worked for us since 1987 and has worked on a number of work sites (Rimouski, Matane, Rivière-du-Loup, Campbellton, Québec. St-Apollinaire and St-Casimir). The length of time these sites operated varied with their size.

He has also travelled to prepare estimates for the purpose of bidding on new contracts.

He regularly reports to head office, submitting analyses of the operation of his sites, as well as his reports for bidding purposes.

A letter dated June 3, 1991, reads as follows:

[TRANSLATION]

... This is to confirm that the amounts paid to you have been paid to defray your expenses for travel to our sites as a superintendent of our company and that you are responsible for room and board.

A letter dated September 24, 1997, reads as follows:

[TRANSLATION]

We hereby confirm that Laurin Caron has been employed by us for a number of years as a site supervisor on various contracts throughout the province of Quebec and New Brunswick for three to six months at a time, varying from contract to contract. In that capacity, his duties were to supervise and coordinate construction work. However, on all the contracts to which he: was assigned, there has never been an administrative office of any kind on site. Administrative tasks such as the following were performed from our Quebec office:

• project management,

• accounting,

• secretarial work,

• purchase orders,

• billing,

• payment,

• solicitation,

• contract negotiation.

Yours sincerely,

A judgment by the Small Claims Court, Montmagny District, issued by Judge Andre Verge of the Court of Quebec on January 8, 1992, in accordance with sections 59 and 63 of the Quebec Taxation Act was filed as Exhibit A-2.

The learned judge granted the application by the appellant Laurent Caron respecting an amount of $4,901 for substantiated accommodation and meal expenses for 1988.

In brief, the Court did not accept the argument by the Quebec Department of Revenue that, since the appellant had received an allowance for travelling expenses, he could not be allowed the deduction for food and accommodation expenses. On this point, the Court relied among other filings on a decision by the Supreme Court of Canada in Johns-Manville Canada Inc. v. R. [2] The Court allowed the appeal.

The payer performed work mainly as a contractor for Sobey’s in the construction of supermarkets. He also hired subcontractors for this purpose, but the appellant was hired as a superintendent to supervise work.

According to the appellant, he had mainly worked in Baie-Comeau in 1992. He went there to make a bid in Ste-Anne-des-Monts.

In 1993, he worked in Rimouski on a $3,000,000 contract to expand a supermarket. He went to Ste-Anne-des-Monts again to make a bid.

In 1994, he mainly worked in Ste-Anne-des-Monts and made a bid in Baie-Comeau.

According to the appellant, when he worked as a supervisor, a trailer on the site was used for meetings with subcontractors, etc.

According to the appellant, average travelling expenses of $500 were paid each week.

Act - Case Law - Analysis

Act

The provisions of the Income Tax Act (the Act) invoked were ss. 6(1), 6(l)(b)(v), (vi), (vii), 8(1), 8(1)(e), 8(1)(/), 8(1)(g) and 8(1)(h), some of which do not apply, as indicated below:

6. Amounts to be included as income from office or employment.

(1) There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable:

(b) Personal or living expenses — all amounts received by him in the year as an allowance for personal or living expenses or as an allowance for any other purpose, except

(v) reasonable allowances for travelling expenses by an employee from his employer in respect of a period when he was employed in connection with the selling of property or negotiating of contracts for his employer,

(vi) reasonable allowances received by a minister or clergyman in charge of or ministering to a diocese, parish or congregation for expenses for transportation incident to the discharge of the duties of his office or employment,

(vii) reasonable allowances for travelling expenses (other than allowances for the use of a motor vehicle) received by an employee (other than an employee employed in connection with the: selling of property or the negotiating of contracts for the employer) from the employer for travelling away from

(A) the municipality where the employer’s establishment at which the employee ordinarily worked or to which he ordinarily made his reports was located, and

(B) the metropolitan area, if there is one, where that establishment was located,

in the performance of the duties of his office or employment,

8. Deductions allowed.

(1) 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:

(4) Meals. An amount expended in respect of a meal consumed by an officer or employee shall not be included in computing the amount of a deduction under paragraph (1)(f) or (A) unless the meal was consumed during a period while he was required by his duties to be away, for a period of not less than twelve hours, from the municipality where the employer’s establishment to which he ordinarily reported for work was located and away from the metropolitan area, if there is one, where it was located.

Provisions not Applicable

8 (1)(e) railway company employees;

8 (f) salesman’s expenses;

8 (1)(g) transport employee’s expenses.

8(/i) Travelling expenses — where the taxpayer, in the year,

(i) was ordinarily required to carry on the duties of his employment away from his employer’s place of business or in different places, and

(ii) under the contract of employment was required to pay the travelling expenses incurred by him in the performance of the duties of his office or employment, amounts expended by the taxpayer in the year (other than motor vehicle expenses) for travelling in the course of the taxpayer’s employment, except where the taxpayer

(iii) received an allowance for travelling expenses that was, by reason of subparagraph 6(1 )(A)(v), (vi) or (vii), not included in computing the taxpayer’s income for the year, or

(iv) claimed a deduction for the year under paragraph (e), (f) or (g);

Case Law

The parties cited the following cases:

1- Laurin Caron v. Department of Revenue Quebec, Small Claims Division, Court of Quebec, Civil Division 3.03;

2- Nelson v. Minister of National Revenue (1981), 81 D.T.C. 190 (T.R.B.);

3- R. v. Merten (1990), 90 D.T.C. 6600 (Fed. T.D.);

4- Davey v. Minster of National Revenue (1961), 61 D.T.C. 531 (Can. Tax App. Bd.);

5- Viitrarc v. Minister of National Revenue (1976), 76 D.T.C. 1073 (T.R.B.).

Analysis

Travelling Expenses

The travelling expenses are not in issue. The appellant received $500 a week and that was not for room and board [9] (letter of June 3, 1991).

Meal Expenses

Subsection 8(4), supra, is clear. Meal expenses may not be deducted:

…, unless the meal was consumed during a period while he was required by his duties to be away, for a period of not less than twelve hours, from the municipality where the employer’s establishment to which he ordinarily reported for work was located and away from the metropolitan area, if there is one, where it was located.

The payer has its place of business in Québec [9]. The appellant performed his duties as a construction site superintendent [14, 15, 16]. The question is which of the two sites must be considered.

All the cases cited above heard by the Tax Review Board (Nelson and Viitrarc), the Tax Appeal Board (Davey) and the Federal Court (Merten) were decided in circumstances similar to those of the instant appeal, in that the employer’s establishment to which the taxpayer ordinarily reported for work was the construction site, not the employer’s principal place of business.

Accordingly, meal expenses may not be deducted.

Accommodation Expenses

Accommodation expenses are not defined as such in the Act except through the definition of “travelling expenses” in paragraph 8(l)(/i) which excludes motor vehicle expenses.

These expenses are deductible “except where the taxpayer”:

(iii) received an allowance for travelling expenses that was, by reason of subparagraph 6(1)(b)(v) [employed to negotiate contracts: not applicable], 6(l)(b)(vi) [for a minister: not applicable], and

6(1)(Z?)(vii) reasonable allowances for travelling expenses (other than allowances for the vise of a motor vehicle) received by an employes: (other than an employee employed in connection with the selling of property or the negotiating of contracts for the employer) from the employer for travelling away from

(A) the municipality where the employer’s establishment at which the employee ordinarily worked or to which he ordinarily made his reports was located, and

(B) the metropolitan area, if there is one, where that establishment was located,

in the performance of the duties of his office or employment,

Subparagraph 6( 1 )(fe)(vii) is applicable to the appellant as regards the application of paragraph 8(1 )(/t) because he did not receive reasonable allowances for accommodation expenses.

In short, there is no single class of travelling expenses. If meal expenses were not specifically addressed by subsection 8(4), they could also have been included in paragraph 8(l)(/t) through the operation of subparagraph 6(l)(Z>)(vii).

In Johns-Manville Canada Inc. v. R., [1985] 2 S.C.R. 46 (S.C.C.), Estey J. writes, at page 67:

On the other hand, if the interpretation of a taxation statute is unclear, and one reasonable interpretation leads to a deduction to the credit of a taxpayer and the other leaves the taxpayer with no relief from clearly bona fide expenditures in the course of his business activities, the general rules of interpretation of taxing statutes would direct the tribunal to the former interpretation.

This interpretation is applicable to the accommodation expenses in the instant case.

Conclusion

The appeal is dismissed in respect of the meal expenses and granted in respect of the accommodation expenses.

Appeal allowed in part.