Richard a Ronchka v. Minister of National Revenue, [1979] CTC 3071, 79 DTC 853

Delmer E Taylor:— This is an appeal heard in the City of Toronto, Ontario, on September 21, 1979, against an income tax assessment in which the Minister of National Revenue disallowed an amount of $1,353.57 deducted as described in two documents attached to the appellant’s 1977 income tax return:

March 22, 1978

Notes to 1977 Tax Return

Note 1: Living expenses while at an out-of-town work site

In accordance with instructions I received from the supervisor of the Toronto District Office on June 29, 1977, I am claiming the following allowable expenses associated with my employment at Ontario Hydro as outlined in the accompanying letter.

I was required to maintain my usual residence in Mississauga associated with my regular place of employment in Toronto, as well as providing my own accommodation and living expenses at my out-of-town work site. I was not reimbursed for these.

My extraordinary living expenses during this period included:

Accommodation at New Hotel, Deep River, Ont	$526.77
Meals at New Hotel, Deep River, Ont	826.80
Total Extraordinary Expenses	$1389.57 (sic)

Note that my transportation to the work site in July and from the work site in November was paid for by Ontario Hydro, and I am not claiming these transportation costs as expenses associated with this job.

ONTARIO HYDRO

700 University Avenue,

Toronto, Ontario MSG 1X6 January 17, 1978

Location: H6-F12

(416) 592-4528

TO WHOM IT MAY CONCERN:

Mr R A Ronchka was on temporary assignment at Ontario Hydro’s training facilities at Rolphton, Ontario from July 4, 1977 to November 19, 1977. He was responsible for all living expenses while there. In addition he maintained his residence in Mississauga as his regular place of employment is Ontario Hydro’s Head Office in Toronto.

Yours truly,

(Sgd) St . . . Wolfe

S E Wolfe

Techical Supervisor

Business Section

SEW:bh

Business Administration Department

The position of the appellant was summarized in the notice of appeal as follows:

In February 1977, I was hired by Ontario Hydro to work at their Head Office in Toronto, Ontario. From July 4 to November 19, 1977, I was required to report to Hydro’s location at Rolphton, Ontario (approximately 300 mi from Toronto) at my own expense. I supported my residence and pregnant wife in Mississauga during this period.

In addition, I have been unable to secure from the department why section 6 of the tax Act, as it was applied by the Tax Review Board in the “Forestall Decision” is inapplicable in my case. And I would like a ruling on this basis, or on the basis of section 8—travel expense.

In assessing the appellant, the respondent relied, inter alia, upon sections 6 and 8 of the Income Tax Act, SC 1970-71-72, c 63, as amended, and submitted that:

(a) the appellant was not, in the year, required to carry on the duties of his employment away from the employer’s place of business;

(b) the appellant was required under his contract of employment ordinarily to report to work at Rolphton, Ontario.

Evidence

There were certain additional points brought out at the hearing by the appellant:

— his actual employment with Ontario Hydro commenced with his assignment to Rolphton;

—it was customary for new employees hired under similar circumstances to spend some time at locations outside Toronto, but not all employees did so immediately after employment;

—the circumstances under which each individual employee did spend time out of Toronto for training were negotiated individually. In his case, it was made clear to him that it was to be at his own expense.

Argument

The appellant referred the Board to the Federal Court decisions in The Queen v Thomas Healy, [1979] CTC 44; 79 DTC 5060, and The Queen v James F Forestell, [1979] CTC 370; 79 DTC 5289, both of which decisions allowed the relief sought to the respective taxpayers. In the opinion of the appellant, the expressions “on temporary assignment” and “his regular place of employment” in the letter from Ontario Hydro quoted above, should be accepted as fulfilling the conditions in paragraph 8(1 )(h) of the Act.

The position of counsel for the Minister was that Ronchka had no working relationship at all to Toronto as his place of employment, and so the Healy decision (supra) was not relevent; and further that the critical element in the Healy appeal (supra) Was not a disallowance by the Minister under paragraph 8(1)(h) of the Act but a disallowance under subsection 8(4) of the Act, although such a disallowance under subsection 8(4) in the final result deprived the taxpayer Healy of the benefit he sought under paragraph 8(1)(h).

Findings

The Board first emphasizes the point that the Healy decision (supra) was not under paragraph 8(1)(h) of the Act, and accordingly comments dealing with the rationale by which the appeal was first allowed at the Tax Review Board level [1976] CTC 2098; 76 DTC 1087, dismissed on appeal at the Federal Court, Trial Division level, [1978] CTC 355; 78 DTC 6239, and finally allowed (and not further appealed by the Minister) at the Federal Court of Appeal level, [1979] CTC 44; 79 DTC 5060, should be taken cautiously in any attempt by either party to apply all or part of the same reasoning to the instant appeal. It is clear at all levels of the appeal that the taxpayer Healy qualified under paragraph 8(1)(h) of the Act for the deduction he sought, and it was only the disqualification under subsection 8(4) which was the basis for contention. The appellant in the instant case must first show the Board the he qualifies to the same degree as did Healy before Healy launched his appeal, if he wishes to use Healy (supra) as a starting point. While not a point at issue in Healy (supra), the learned justice of the Federal Court at the Trial Division level did address himself to the manner in which Healy already had so qualified, and we are fortunate to have that enlightenment available. At pp 357 and 6241 respectively, Thurlow, ACJ, reviewed the case and summarized it as follows:

In the view I have of the facts, it was a matter of regular occurrence, normal and not exceptional for the defendant to carry out his duties during the racing season as required by his employer at at least two, if not three, different places, that is to say, at Toronto and at Fort Erie or at the Greenwood, Woodbine and Fort Erie racetracks.

I conclude, therefore, that the defendant’s situation fell within the meaning of paragraph 8(1)(h) and that he was entitled to a deduction in respect of his expenses of travelling in the course of his employment. Moreover such expenses would, I think, ordinarily include, but for the effect of subsection 8(4), the cost of his meals while at Fort Erie in the course of his duties.

The Board emphasizes the term “different places” and points out therefore that for the taxpayer in this appeal to attain precisely the same level that Healy had before his appeal, Ronchka must demonstrate that he “was ordinarily required to carry on the duties of his employment . . . in different places”, (subparagraph 8(1 )(h)(i). There is no evidence that this appellant was under any such constraint or direction with regard to his employment at Ontario Hydro. His own evidence was quite the opposite—that he was “ordinarily required” to work at the Head Office of Ontario Hydro in Toronto. To qualify (on precisely the same grounds as Healy) this appellant would be required to demonstrate to the Board that he was “as a matter of regular occurrence” (Healy (supra) pp 357 and 6241) required to work in different places. It is not my impression that he attempted to do SO, or could have done so. Rather, it would appear that he is proposing that he was required to work ‘‘away from his employer’s place of business” and proposing that his “employer’s place of business” was Toronto for purposes of his own employment.

It seems to me abundantly clear from the decision in Healy (supra) that Healy was “ordinarily required” to perform the duties of his employment at two different places (Toronto and Fort Erie, in the sense of municipalities), or three different places (Greenwood, Woodbine and Fort Erie racetracks, in the sense of physical locations), it being a “distinct possibility” at the outset of each year that he would do so. I do not easily see in the judgments a line of reasoning asserting that his entitlement to deduct expenses while at Fort Erie arose from the fact that he was “away from his employer’s place of business”. As I read it, the “employer’s place of business” would have been Toronto when he was in Toronto, and Fort Erie when he was in Fort Erie, although this aspect of paragraph 8(1 )(h) was apparently not relevant to the judgments given. However, that he was “ordinarily” required to work in different places for the purposes of paragraph 8(1 )(h)(i) did not mean that he “ordinarily” reported for work at these different places. The judgment of the Federal Court of Appeal (supra) stands for the proposition, in my opinion, that there was only one such municipality at which he “ordinarily” reported for work for purposes of subsection 8(4) and that, in the case of Healy, was Toronto.

In the instant case there is no particular evidence that the appellant worked at the Toronto office before his assignment to Rolphton, but whether he did so or not I would not conclude, for purposes of paragraph 8(1)(h) of the Act, that merely shifting an employee from one “establishment” to another “establishment” necessarily shifts the “place of business” of the employer in the same way. It is clear that the employer (Ontario Hydro) had an “establishment” in Rolphton as well as in Toronto. But whether identified as “establishment” or “municipality”, the place of business to which this appellant wishes to attach himself for purposes of paragraph 8(1)(h) of the Act is Toronto.

The appellant’s evidence was that he applied for a position in Toronto, would not have accepted a permanent assignment in any other place, was hired for Toronto, but was required to work at Rolphton for the period of time under review prior to filling the Toronto position. I accept the appellant’s evidence on these points. It is uncontradicted and it is logical. The “employer’s place of business” for purposes of paragraph 8(1 )(h)(i) for this employee is determined to be Toronto. The respondent’s fundamental proposition therefore—“the appellant was not—required to carry on the duties of his employment away from the employer’s place of business”—is rejected.

However, the subtlety of paragraph 8(1)(h) is not so easily exhausted, and it has been touched on by the Minister’s second proposition—“the appellant was required under his contract of employment ordinarily to report to work at Rolphton, Ontario”. Unfortunately for the Minister, however, that proposition does not withstand scrutiny either. In my view it is patently obvious that Ronchka was required ordinarily to report for work at Rolphton during the period under review, and that this was a condition of the approval of his application for employment in Toronto. However, in the view I am expressing of paragraph 8(1)(h) of the Act, the fact that he was “ordinarily required” to report for work at Rolphton during the period under review is quite irrelevant, which of course does not aid the Minister at all. In contrast, it is important that this appellant fulfill the prime condition of paragraph 8(1 )(h)(i)—that he “was ordinarily required to carry on the duties of his employment away from his employer’s place of business”.... That he was “away from his employer’s place of business” (identified as Toronto) I have accepted, but the question then becomes—was he “ordinarily required” to be away from Toronto, not merely was he so required on this one occasion? “Ordinarily required” does not mean that during a certain period of time, ie on a temporary assignment, the employee was “required . . . ordinarily to report for work” at a location other than his employer’s place of business. “Ordinarily required” does mean that it was “normally”, as opposed to “rarely”, or “exceptionally” (Healy (supra)pp 357, 6241), ‘‘as a matter of regular occurrence” (same reference as previous quotation), that the taxpayer, during the year or during his employment, would be working away from his employer’s place of business. There is no evidence in this appeal that Ronchka agreed that there would be such flexibility in his terms of employment, or that anything of such a nature was expected from him by Ontario Hydro. There is no indication that a situation in any way similar to the Rolphton assignment was anticipated or ever again arose. The contract of employment was not based upon any premise that in his state of employment, he was ordinarily required to work away from his employer’s place of business. Subparagraph 8(1 )(h)(ii) points out that the travelling expenses for which an employee may claim would be his obligation under the contract of employment, and that contract in my view should contain terms calling for the employee to be required as a matter of regular occurrence to work away from Toronto. Evidence to support such criteria has not been presented, and I fail to see that paragraph 8(1)h) of the Act provides a deduction to employees who, under the occasional or single event category, are working away from the “employer’s place of business”.

Before finalizing the matter, note should be made with regard to a comment on pp 48 and 5064 respectively of the Federal Court of Appeal judgment in Healy (supra):

The objective of section 8(1)(h) is to enable employees who are required by their employment to work from time to time away from the places at which they usually work, to deduct their out-of-pocket expenses in so doing.

It does not appear to me that the Federal Court was including within the ambit of paragraph 8(1)(h) such exceptional circumstances (occasional or single event) as those in the instant appeal. I would stress the precise wording in the above statement: who are required by their employment to work

from time to time . . That qualification does not read: “who work from time to time . .

Since the appellant raised the question of the applicability of Forestell (supra) to his case, the Board simply notes that this judgment deals again with entirely different sections of the Act (paragraphs 6(1)(a) and (b), and subsection 6(6)) and has no direct application in resolving the matter before the Board. I quote from that judgment at pp 373 and 5292 respectively:

Section 8 of the Act is not applicable in this case because it deals with deductions that may be made from actual income as distinguised from an allowance that is not included in income.

Under section 8(1)(h) he could not deduct his travelling expenses because they were not incurred in the course of his employment but rather travelling to and from his home. Under section 8(1)(h) he could not deduct his meals because they were not consumed away from the municipality where the employer’s establishment to which he ordinarily reported for work was located and away from the metropolitan area where it was located. Her Majesty the Queen v Diemert, [1976] CTC 301; 76 DTC 6187; Luks (No 2) v MNR, [1958] CTC 345; 58 DTC 1194; Healy v Her Majesty the Queen, [1979] CTC 44, 79 DTC 5060.

Conclusion

In my view, it is a condition of the employment of a taxpayer that he be “ordinarily required’’ to work, either away from his employer’s place of business, or in different places, before he qualifies for the deduction available under paragraph 8(1)(h). Such a condition is not filled by an exceptional, unusual, or unrepeated incident of employment assignment away from the employer’s regular place of business. It must be normal or a matter of regular occurrence that he be required to fulfil his duties in such a way in order to claim such a deduction.

Decision

The appeal is dismissed.

Appeal dismissed.