Elmer Aylmer Adrian v. Minister of National Revenue, [1974] CTC 2147, 74 DTC 1110

The Assistant Chairman:—This is the appeal of Elmer Aylmer Adrian from an income tax assessment in respect of the 1970 taxation year.

There are two issues in this appeal. First, whether a deduction of $690 claimed by the appellant as expenses incurred in connection with meals and accommodation while travelling in the course of his employment away from his employer’s regular place of business was properly reduced by the Minister of National Revenue to an amount of $255 with respect to such expenses.

Secondly, whether the amount of $1,505 claimed by the appellant as a loss on the sale of a combine was properly disallowed by the Minister.

As to the first issue, the appellant is a truck driver employed by William Shinkaruk whose principal place of business is in Saskatoon and who is engaged in the transporting of petroleum products. The appellant’s residence is in Hepburn, Saskatchewan, some 30 miles from Saskatoon, from which he commutes once a week to his employer’s place of business.

In Saskatoon the appellant in the year pertinent to this appeal rented a room for $20 a month and paid in total an amount of $105 (Exhibit A-3) which is included in his deduction as expenses incurred for meals and accommodation.

From his employer’s place of business in Saskatoon the appellant travelled to neighbouring cities, towns and villages transporting oil products. The duration of these trips, depending on the distance from Saskatoon and on the time required to unload the cargo, ranged from 4 to 12 hours. The appellant, however, in claiming his deductions for meals, calculated three meals a day at an average of $1.25 per meal regardless of the hours spent by him away from his employer’s place of business on any one day.

Subsection 11(7) of the Income Tax Act is pertinent to the facts of this case and reads:

11. (7) Expenses of transport employees.—Notwithstanding paragraphs (a) and (h) of subsection (1) of section 12, where a taxpayer was an employee of a person whose principal business was passenger, goods, or passenger and goods transport and the duties of the employment required him, regularly,

(a) to travel, away from the municipality where the employer’s establishment to which he reported for work was located and away from the metropolitan area, if there is one, where it was located, on vehicles used by the employer to transport the goods or passengers, and

(b) while so away from such municipality and metropolitan area, to make disbursements for meals and lodging,

amounts so disbursed by him in a taxation year may be deducted in computing his income for the taxation year to the extent that he has not been reimbursed and is not entitled to be reimbursed in respect thereof.

It is crystal clear from this section that the only deductible expenses for meals and lodging are those incurred while the taxpayer was away from his employer’s place of business which in this instance is Saskatoon.

The appellant did not require, nor in fact use, on his delivery trips any lodging other than the one he rented in Saskatoon and just as the expenses incurred by the appellant travelling from his residence to his employer’s place of business are personal expenses and not deductible, his expenses incurred for lodging in Saskatoon are not deductible within the meaning and intent of subsection 11(7) of the Act; nor pursuant to the same section, are the expenses for meals taken by the appellant in Saskatoon deductible, with the result that the only expenses within the provisions of subsection 11(7) that are deductible are for meals taken by the appellant while away from Saskatoon. On the basis of one meal for every four hours the appellant spent away from Saskatoon, particularly as set forth in Exhibit A-4, I am satisfied that the reduction to the amount of $255 allowed by the Minister in the absence of any vouchers for meals taken by the appellant away from Saskatoon in 1970 is not only factual and reasonable, but the only deduction which can legally be claimed by him under subsection 11(7) or any other section of the Income Tax Act.

As to the second issue, the appellant in 1953 acquired a Massey- Ferguson dealership which he operated for approximately one year. In a net worth assessment of the appellant in 1953 (Exhibit R-1), a Cockshutt combine was listed as having been sold for an amount of $1,600. This was included on the balance sheet. Taxes were duly paid on the sale at the time. However, the combine had not been fully paid for and the appellant was forced to repossess the machine. As things turned out, the combine was never paid for and the appellant kept the combine long after he had ceased to operate the Massey- Ferguson dealership.

On August 17, 1970, approximately 11 years after the repossession of the combine, the appellant sold it for parts at a price of $45 (Exhibit A-1). In his 1970 return the appellant deducted an amount of $1,505 as a loss to him on the sale of the combine. The Minister disallowed the deduction pursuant to the provisions of paragraph 11 (1 )(f) of the Act which reads:

(f) Bad Debts.—the aggregate of debts owing to the taxpayer

(i) that are established by him to have become bad debts in the year, and

(ii) that have (except in the case of debts arising from loans made in the ordinary course of business by a taxpayer part of whose ordinary business was the lending of money) been included in computing his income for that year or a previous year;

Here again the Act is quite clear that bad debts are deductible only in the year they become uncollectable. The balance of payment on the combine became uncollectable and a bad debt long before 1970, and it could have been established as such and claimed as a loss at least in the year the combine was repossessed.

In my view there is no way whereby paragraph 11(1)(f) can be interpreted to allow the deductibility of a bad debt some 11 years after the debt became uncollectable.

For the reasons herein set forth, the appeal on both issues is dismissed.

Appeal dismissed.