Date: 19990216
Docket: 98-707-IT-I
BETWEEN:
YVON ROYER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for judgment
Lamarre Proulx, J.T.C.C.
[1] This appeal under the informal procedure concerns the 1994, 1995 and 1996 taxation years.
[2] The issue is whether the appellant is entitled to deduct motor vehicle expenses under paragraph 8(1)(h.1) of the Income Tax Act (“the Act”).
[3] The facts on which the Minister of National Revenue (“the Minister”) relied in making his assessments are set out as follows in paragraphs 9 and 11 of the Reply to the Notice of Appeal (“the Reply”):
[TRANSLATION]
9. In computing his income for the 1994, 1995 and 1996 taxation years, the appellant claimed, inter alia, motor vehicle expenses of $5,842.95 for the 1994 taxation year, $5,361.52 for the 1995 taxation year and $6,150.68 for the 1996 taxation year.
. . .
11. In making the reassessments dated June 2, 1997, for the 1994, 1995 and 1996 taxation years, the Minister assumed, inter alia, the following facts:
(a) during the years at issue, the appellant was employed by the Canadian National Railway Company (hereinafter “the Company”);
(b) during the years at issue, the appellant received from the Company a non-taxable allowance for motor vehicle expenses based on the number of kilometres he drove;
(c) during the years at issue, the appellant’s place of business was in the different places where he had to go to carry out the duties of his employment;
(d) the motor vehicle expenses claimed by the appellant in his tax returns for the taxation years at issue were accordingly not deductible, since the appellant received a non-taxable allowance from the Company.
[4] The appellant testified at the request of his agents. Yves Côté, a Revenue Canada appeals officer, testified at the request of counsel for the respondent.
[5] The appellant is a heavy equipment operator. He explained that his employer told him on Friday or over the weekend where his services would be required during the following week. The places in question were his employer’s various railway yards. They included the Turcot yard in Montréal and other yards in such places as Coteau, Drummondville, Richmond, St-Lambert, Ste-Hélène, Windsor Mills and Ottawa.
[6] The appellant’s tax returns for each of the years at issue were filed as Exhibits I-1 and I-2. Form T2200, Declaration of Conditions of Employment, shows, for example, that in 1995 the appellant received $.1305 a kilometre for driving 34,480 kilometres, for a total of $4,499.64. The form also shows—and this may seem contradictory—that the appellant was required to pay his own motor vehicle expenses. For the years at issue, the appellant did not consider his employer’s travel allowances sufficient. He therefore calculated his transportation expenses and deducted his employer’s allowances.
[7] Exhibit A-2 is the appellant’s logbook. He was reimbursed by his employer based on the number of kilometres entered. Exhibit A-5 is an excerpt from the collective agreement dealing with travel allowances.
[8] The Minister’s position is difficult to determine. On the one hand, by not including the motor vehicle allowances in the appellant’s income, he is admitting that the travel allowances received by the appellant were received for travelling in the course of his employment. However, paragraph 11(c) of the Reply alleges that the appellant was merely going to his employer’s places of business, which would imply that the travel expenses were personal expenses. In such circumstances, the allowances received should be included in the appellant’s income as an employee benefit.
[9] The appeals officer explained to the Court that each of the employer’s work sites is a place of business of the employer and that the appellant therefore cannot avail himself of paragraph 8(1)(h.1) of the Act. He told the Court that in theory the allowance the appellant received from his employer should have been taxable as a personal benefit under paragraph 6(1)(b) of the Act. He did not give any specific reasons for why this was not done.
[10] The notice of confirmation filed as Exhibit A-1 sets out another concept, namely proof of the claimed expenses. That notice reads as follows:
[TRANSLATION]
You have not shown that the travel expenses you incurred in the performance of your duties were greater than the allowance of $4,045.00 for 1994, $4,499.64 for 1995 and $2,785.00 for 1996 that you received from your employer. You therefore cannot deduct the amounts of $5,842.95 in 1994, $5,361.52 in 1995 and $6,150.68 in 1996 as motor vehicle expenses under paragraph 8(1)(h). Moreover, according to subsection 8(2), you cannot deduct those amounts in computing your income from an office or employment.
[11] Counsel for the respondent’s written argument echoes the Minister’s ambiguous position:
[TRANSLATION]
15. The respondent’s position is that the appellant is not entitled to deduct the expenses he incurred in travelling from his home to his place of work.
16. The respondent submits that, from the appellant’s point of view, the employer’s place of business can be considered to be each of the work sites listed in the appellant’s logbook.
17. The evidence showed that the appellant’s work required him to travel in the St. Lawrence area.
18. Although it is admitted that the travel expenses were incurred, the fact remains that the Minister of National Revenue considers the appellant’s travel between his home and his place of work to have been personal in nature. Unquestionably, personal expenses are not deductible.
[12] If the allowances were for personal expenses, they should have been included in the appellant’s income under paragraph 6(1)(b) of the Act. Yet they were not included. I do not think that this was merely an oversight by the Minister. The fact is that, according to the logic of the Act, those allowances were not for personal expenses, as we shall see below.
[13] Counsel for the respondent referred to Madsen v. M.N.R., 70 DTC 1475, and Davey v. M.N.R., 61 DTC 531, to show that a work site is a place of business and that an employee is not entitled to deduct travel expenses incurred in getting there. The former case involved a construction worker who was steadily employed at a single site, while the latter case involved a taxpayer who worked for three employers but at a single site for each employer. The facts are, on their very face, different from those of this case, in which the employee must work at a number of sites located far from one another.
[14] Counsel also referred to Viitkar v. M.N.R., 76 DTC 1073. The facts of that case are the same as those in the instant case: the employee had to work at a number of his employer’s sites. However, I believe that that decision has been modified by recent decisions of the Federal Court (Trial Division) and the Federal Court of Appeal: The Queen v. Chrapko, 84 DTC 6544 (F.C.T.D.), The Queen v. Chrapko, 88 DTC 6487 (F.C.A.), and The Queen v. Merten, 90 DTC 6600 (F.C.T.D.). I refer to the comments of Jerome A.C.J. in Chrapko (F.C.T.D.), supra:
. . . Rather, it seems to me to have been the intention of Parliament to establish an allowance for those who may be in a position to control the cost of travelling to their principal place of employment, but because they are required to report to work at different places, are not in the same position with respect to the other locations. . . .
I refer also to those of Strayer J. in Merten, supra:
. . . On appeal the Court of Appeal has implicitly qualified those words by recognizing that a taxpayer can deduct expenses for travelling from his home to a place of work as long as that place of work is other than the place at which he “usually” works. . . .
[15] Paragraph 8(1)(h.1) of the Act reads as follows:
(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:
. . .
(h.1) Motor vehicle travel expenses – where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of the office or employment away from the employer’s place of business or in different places, and
(ii) was required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of the office or employment,
amounts expended by the taxpayer in the year in respect of motor vehicle expenses incurred for travelling in the course of the office or employment, except where the taxpayer
(iii) received an allowance for motor vehicle expenses that was, because of paragraph 6(1)(b), not included in computing the taxpayer’s income for the year, or
(iv) claims a deduction for the year under paragraph (f).
[16] On the basis of the case law already cited, it is my view that paragraph 8(1)(h.1) of the Act provides for two situations: the first is where an employee is ordinarily required to carry on his or her duties away from the employer’s place of business, and the other is where an employee is ordinarily required to carry on his or her duties in different places. I believe that the first situation covers individuals who report to one place, which is a place of business, and who must ordinarily carry on their duties away from that place.
[17] As for the second situation, I do not think that the expression “different places” excludes a place of business. I accept the position of counsel for the respondent, which is supported by the above-mentioned case law, that a work site is a place of business. If an employee must carry on his or her duties at several places of business, those places of business come precisely within the meaning of “different places”. If the employee ordinarily works at one of those different places and works at the others at the employer’s discretion, travel to the usual place of business will be personal expenses. The conditions of employment are important in being able to determine which is the usual place of work and which constitute the different places. The distance from one place to another and changes in the place of work based on the employer’s needs will have as a consequence, inter alia, that the places of work will be different places.
[18] Counsel for the respondent referred to Interpretation Bulletin IT-522R, paragraph 33 of which reads as follows:
33. Concerning ¶ 31(b) above, the requirement will be met where the following conditions are satisfied:
. . .
(b) the employee’s reasonable travel costs must not be fully reimbursed by the employer. In determining the reasonableness of the amount claimed by the employee for travel costs, consideration will be given to the mode of transportation used by the employee versus the mode of transportation that could be used to satisfy the requirement to travel.
[19] In her written argument, counsel for the respondent submitted the following:
[TRANSLATION]
36. In this regard, we submit to the Court that this is exactly what the collective agreement refers to. The employer grants the public transport rate as it considers that its employees could use that mode of transportation.
[20] In my view, under the usual rules of pleading it is too late to make this type of argument. It should have been made in the Reply. For the exception set out in subparagraph 8(1)(h.1)(iii) of the Act to be applicable, the Reply should have been based on the fact that the allowance received by the appellant was reasonable. Under subparagraph 6(1)(b)(vii.1), reasonable allowances for the use of a motor vehicle received by an employee from the employer for travelling in the performance of the duties of his or her employment are not to be included in computing income from employment. To be eligible for the deduction provided for in paragraph 8(1)(h.1) of the Act, the taxpayer would then have had to prove that the allowances were not reasonable.
[21] The agents for the appellant have requested the reimbursement of the expenses the appellant incurred in obtaining professional advice on this matter. Section 10 of the Tax Court of Canada Rules (Informal Procedure) (“the Rules”) reads as follows:
10(1) Costs on an appeal shall be at the discretion of the judge by whom the appeal is disposed of in the circumstances set out in subsection 18.26(1) of the Act which reads as follows:
“18.26 (1) Where an appeal referred to in section 18 is allowed and the judgment reduces the aggregate of all amounts in issue or the amount of interest in issue, or increases the amount of loss in issue, as the case may be, by more than one half, the Court may award costs to the appellant in accordance with the rules of Court.”
(2) A judge may direct the payment of costs in a fixed sum, in lieu of any taxed costs.
[22] In The Queen v. Munro, 98 DTC 6443, the Federal Court of Appeal determined that the only costs that may be awarded are those provided for in the Rules. I cite the following from paragraph 14 of that decision:
Costs permissible under the Informal Procedure Rules are of two kinds: an award of a fixed sum, in lieu of any taxed costs (rule 10(2)); or an award of taxed costs, which are payable by one party to another. These taxed costs are classified, for all practical purposes, under two headings: costs as between party and party and costs as between solicitor and client. . . .
[23] The appeal is allowed with payment of a fixed sum of $600 to the appellant.
Signed at Ottawa, Canada, this 16th day of February 1999.
“Louise Lamarre Proulx”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]