Tax Court of Canada Judgments

Date: 19980102

Docket: 97-1559-IT-I

BETWEEN:

DAVID J. ELLIOTT,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Christie, A.C.J.T.C

[1] This appeal is governed by the informal procedure provided for under section 18 and following sections of the Tax Court of Canada Act. The year under review is 1995. The Notice of Appeal reads:

“I wish to file an appeal to the Tax Court of Canada, concerning year 1995 and the deduction I made of $957 on line #229 other employment expenses. I enclose copies of the following documents:

A) Letter of response from Chief of Appeals, Belleville to my objection.

B) Notice of Confirmation by the Minister.

C) My reasons for appealing.

Please note that I wish to choose ‘Informal Procedure’.

The Tax Office that dealt with my Notice of Objection is the same per item A above. If possible I prefer the location of a court hearing to be Belleville, Ontario.

Please contact me if you require more information.”

The letter referred to in paragraph A) is simply a letter to the appellant from Revenue Canada informing him that the assessment of the appellant’s liability to income tax in 1995 has been confirmed and that if he disagrees with the decision he may appeal to the Tax Court of Canada. The Notice of Confirmation referred to in paragraph B) states that the assessment regarding 1995 is confirmed on the basis that “you were not required to travel away from the municipality where your employer’s establishment to which you reported for work was located for a period of at least 4 hours. Therefore you cannot claim a deduction from income in the year for $957.00 under paragraph 8(1)(g).” The reasons referred to in paragraph C) are:

“I am a school bus driver employed by Laidlaws Transit Ltd., 3 McSteven Drive, Picton, Ontario, K0K 2T0. In 1995 my duties required me to be away from this location where I report for work. The basic assignments were performing a school run in the A.M., at noon, and in the P.M. On numerous occasions I was assigned by my employer to perform charters between A.M., noon and P.M., and on occasions, in the evenings. On those days of no charters I remained in Belleville, (a 35 minute drive from my home terminal Picton where I report for work,) on standby, available to the bus radio to handle any emergency calls from my employer that might arise, and which did on numerous occasions.

A typical day would be as follows:

7 A.M. - Report for duty - daily circle check of bus - starting bus allowing time for warm up, especially in winter months.

7:25 A.M. - Leave for Belleville, Ontario driving company bus from home terminal.

8:00 A.M. - Arrive in Belleville.

8:10 A.M. - Commence morning school run.

8:50 A.M. - Morning school run completed.

8:50 A.M. to 11 A.M. - Perform charters if any scheduled. If not, be on standby for a school run to points north to Stirling, Ontario area.

11:25 A.M. - School run commences.

1:30 P.M. - Arrive back in Belleville - time varied slightly depending on circumstances - missing students, weather etc.

1:30 P.M. to 3:15 P.M. - Perform charters if any scheduled. If not remain on standby in Belleville - meal break excepted.

3:15 P.M. - Arrive at school for afternoon run.

3:30 P.M. - School run commences.

4:10 P.M. - School run ends.

4:45 P.M. - Arrive back at home terminal, check bus for cleaning, fuelling etc.

5 P.M. - Duties completed (if no evening work involved otherwise return time would be later).

Revenue Canada has disallowed my claim in maintaining that I am ‘carrying out a contract’ per page 3, Section 7, Circular 73-21R7.

I refer to this Circular and the 1995 Employment Expenses Guide.

1. Page 11, Chapter 5, 1995 Employment Expenses Guide:

I work for a bus company.

I travel in vehicles my employer uses to transport passengers.

I am regularly required to travel away from the Municipality where my home terminal is located, i.e. Picton, Ontario.

I incurred meal expenses while travelling away from that Municipality.

Page 11, 2nd column, last paragraph into page 12 indicates that I am entitled to claim one meal per day under my circumstances.

I contend that I meet all conditions required according to the 1995 Tax Guide - Re Employment Expenses.

2. The 1995 Employment Expenses Guide does not mention the terms ‘carrying out a contract’ or ‘employers establishment’.

3. The 1995 Employment Expenses Guide - page 11, column 2, paragraph 3 states that if employment was not transportation of goods or passengers, expenses may still be able to be claimed by reference to Circular 73-21R7. This therefore indicates that I would not need to refer to Circular 73-21R7 as I am an employee who transports passengers.

4. Circular 73-21R7, page 3, section 7(c)(ii) indicates a change in home terminal will occur when an employee has been assigned on a voluntary or bid basis from positive action taken by the employee. In my case I took no such action. It was my employer who requested that I take this work. No contract or permanent pledge was ever taken by either my employer or myself, and as such my work was subject to change at any time. The arrangement therefore was for an interim period. It is this part on which Revenue Canada is basing its reason for disallowing my claim. I respectably maintain that for reasons above, this issue does not apply in my situation. I report to work at my employer’s Picton terminal. Laidlaw Transit Ltd. does not have an office or location in Belleville.

Reasons for Appealing

5. I maintain that my employment of transportation of passengers was subject to exactly the same conditions in 1995 as other taxpayers in similar occupations who are allowed this claim. In disallowing mine I submit that Revenue Canada may not have applied the tax law in a fair and consistent manner within the declaration of taxpayers rights.

6. I maintain that the terms ‘carrying out a contract’ and ‘employment establishment’ should have been listed with the conditions I have itemized in reason number 1, in the 1995 Employment Expenses Guide, with a reference to Circular 73-21R7. Such an addition to the Guide would have clearly alerted taxpayers such as myself to refer to the said circular to establish the relevance of the terms ‘carrying out a contract’ and ‘employers establishment’. As it stands, in my simple opinion, Circular 73-21R7 has actually reversed and countermanded information in the 1995 Employment Expenses Guide which clearly indicated that I was entitled to the claim that I made.

Based on all information that I have submitted, I with respect ask the Tax Court of Canada to allow me a hearing.”

[2] The opening paragraphs and paragraphs 1 to 10 inclusive of the Reply to the Notice of Appeal read:

“In reply to the Notice of Appeal for the 1995 taxation year, filed on May 20, 1997, the Deputy Attorney General of Canada says:

A. STATEMENT OF FACTS

1. He admits the facts stated in the Notice of Appeal.

2. He says that the letter from A.N. (Tony) Kelly and the Notification of Confirmation, both dated May 15, 1997, referred to and attached to the Notice of Appeal speak for themselves.

3. With respect to the three page document in which are stipulated the Appellant’s reasons for appealing, referred to and attached to the Notice of Appeal:

(a) he admits the facts stated in the first and third sentences of the first unnumbered paragraph of the first page and in the first and second sentences of paragraph 1 of the second page of the said document;

(b) he denies the facts alleged in the second sentence of the first unnumbered paragraph of the first page, in the third, fifth and sixth sentences of paragraph 1 of the second page and in paragraph 5 on the third page of the said document; and

(c) he has no knowledge of and says that the statements made in the remainder of the said document are made principally by way of argument and does not admit any allegation of fact incidentally contained therein.

4. By Notice of Assessment dated March 18, 1996, the Minister of National Revenue (the ‘Minister’) initially assessed the Appellant’s income tax return for the 1995 taxation year.

5. In computing income for the 1995 taxation year, the Appellant deducted the amount of $957.00 as other employment expenses.

6. By Notice of Reassessment dated January 31, 1997, the Minister reassessed the Appellant’s income tax return for the 1995 taxation year, disallowed the said other employment expenses referred to in paragraph 5 above and increased to Appellant’s net business income from nil to $2,168.00 which adjustment is not currently being disputed by the Appellant.

7. The Appellant served on the Minister a Notice of Objection dated February 13, 1997 with respect to the 1995 taxation year.

8. By Notification of Confirmation dated May 15, 1997, the Minister confirmed that the reassessment, not to allow the deduction for other employment expenses for the 1995 taxation year in the amount of $957.00, was made in accordance with the provisions of the Income Tax Act (the ‘Act’).

9. In so confirming the reassessment of the Appellant’s income tax return for the 1995 taxation year, the Minister made the following assumptions of fact:

(a) in computing his income for the 1995 taxation year, the Appellant deducted employment expenses with respect to transport employee’s expenses, more specifically for meals expenses, in the amount of $957.00 calculated as shown on Schedule ‘A’;

(b) during the 1995 taxation year, the Appellant was employed as a school bus driver by Laidlaw Transit Ltd. (the ‘Employer’);

(c) during the 1995 taxation year, the Employer’s principal business was passenger and goods transport;

(d) during the 1995 taxation year, the Employer’s place of business was located in Picton, Ontario;

(e) during the 1995 taxation year, the Employer had a contract with the Hastings County Board of Education (the ‘Board’);

(f) the contract referred to in subparagraph 9(d) above consisted of providing daily bus transportation services to students of the Board of the surrounding Belleville area, to school in the morning and from school in the afternoon, as well as providing transportation to students at noon to Stirling (the ‘Contract’);

(g) during the 1995 taxation year, the Appellant’s duties of employment consisted in carrying out the Contract using the Employer’s school bus (the ‘Vehicle’);

(h) during the 1995 taxation year and with respect to the Appellant, the Employer’s establishment within the meaning of subparagraph 8(1)(g)(i) of the Act was where the Employer was carrying out the Contract, hence the municipality and metropolitan area of Belleville;

(i) during the 1995 taxation year, the Appellant’s home terminal was where the Appellant had to report to work, hence the municipality and metropolitan area of Belleville;

(j) during the 1995 taxation year, the Appellant returned to his residence in Hillier, Ontario each night using the Employer’s Vehicle and the Vehicle was kept at the Appellant’s residence overnight;

(k) expenses with respect to travelling to and from work are personal and living expenses of the Appellant;

(l) during the 1995 taxation year, the Appellant’s duties of employment with the Employer did not require him, regularly, to travel, away, for at least four hours daily, from the municipality and metropolitan area in which the Appellant’s home terminal was located;

(m) during the 1995 taxation year, the Appellant did not make disbursements for meals while away from the municipality and metropolitan area of Belleville with respect to his duties of employment with the Employer;

(n) the amounts claimed as other employment expenses with respect to transport employee’s expenses for the 1995 taxation year were personal or living expenses of the Appellant; and

(o) the Appellant was not entitled to deduct employment expenses with respect to transport employee’s expenses in computing his income for the 1995 taxation year.

B. ISSUE TO BE DECIDED

10. The issue is whether the Appellant is entitled to deduct employment expenses, in computing his income for the 1995 taxation year, pursuant to paragraph 8(1)(g) of the Act.

SCHEDULE ‘A’

Calculation of employment expenses

claimed by the Appellant

1995 taxation year

Meals Expenses

Method of calculation used:Simplified method

Flat cost allowed by the Minister $11.00 per meal

Number of Days/Trips 174

Total Flat Cost $1,914.00

Portion subject to limitation *50%

Amount claimed $957.00”

[3] The onus is on the appellant to show that the reassessment is in error. This can be established on a balance of probabilities. Where the onus lies has been settled by numerous authorities binding on this Court. It is sufficient to refer to two judgments of the Supreme Court of Canada in this regard: Anderson Logging Co. v. The King, [1925] S.C.R. 45 and Johnston v. M.N.R., [1948] S.C.R. 486.

[4] At trial the appellant placed three documents in evidence, namely, Information Circular numbered 73-21R7, issued by Revenue Canada, dated March 8, 1991 in which paragraph 7 thereof is emphasized; a letter to the appellant from Revenue Canada dated April 29, 1997 in which the appellant’s position is discussed at some length and which contains this paragraph:

“A Notice of Confirmation will be recommended as it relates to the 1995 reassessment dated January 31, 1997 which denied you a claim for meal expenses pursuant to the provisions of paragraph 18(1)(g) of the Income Tax Act, pending your circled reply below.”

The appellant circled the word “disagree” to indicate that he disagreed with the decision indicated in the letter; an Ontario School Bus Association publication entitled SCHOOL PURPOSE VEHICLE DRIVER’S DAILY INSPECTION LOG BOOK as required by Ontario Regulation 612 of the Highway Traffic Act. It states at the commencement thereof “Period covered: from September 1, 1997 to June 30, 1998”.

[5] Paragraph 8(1)(g) of the Income Tax Act (“the Act”) provides:

“8. (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:

. . .

(g) where the 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 the taxpayer, regularly,

(i) to travel, away from the municipality where the employer’s establishment to which the taxpayer 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

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

amounts so disbursed by the taxpayer in the year to the extent that the taxpayer has not been reimbursed and is not entitled to be reimbursed in respect thereof.”

[6] The appellant alleges he reported for work in Picton and it is his home terminal. It is the position of counsel for the respondent that the employer’s establishment within the meaning of subparagraph 8(1)(g)(i) is the municipality and metropolitan area of Belleville and that for 1995 the appellant’s home terminal was that territory. I believe that the whole of the evidence establishes this. Consequently, not only has the appellant failed to discharge the onus of proof previously referred to, but the evidence establishes in a positive way that the reassessment under appeal is correct.

[7] I wish to refer to two reported decisions. Nelson v. M.N.R., 81 DTC 190, a decision of the Tax Review Board. The Hon. L.G. Cardin, Chairman of the Board, said this at page 192 with reference to the words “the employer’s place of business” in subparagraph 8(1)(h)(i) of the Act:

“I also believe that in order to obtain the correct meaning of ‘the employer’s place of business’, Section 8(1)(h)(i) of the Act should, as suggested by the learned Justice, be read together with Section 8(4) of the Act. It appears to be logical and well within the provisions of Section 3(1) of the Interpretation Act, R.S.C. 1970, c. I-23, to consider that the ‘employer’s place of business’ as used in Section 8(1)(h)(i) of the Act, does not necessarily refer to the employer’s head office or any of its administrative offices but refers specifically to that establishment of the employer for which the taxpayer was hired, to which he was assigned and at which he ordinarily reports for work. In other words, the ‘employer’s place of business’ should in my opinion be interpreted in relation to the taxpayer.”

In Derrien v. M.N.R., 80 DTC 1951 M.J. Bonner, a member of the Board, said at page 1753:[1]

“In my view the solution becomes apparent when paragraph 8(1)(g) is read as a whole within its statutory context. The approach of the Income Tax Act to deductions from salary or wages in the process of computing income from office or employment is generally restrictive. In this regard reference should be made to subsection 8(2) of the Act. The exceptions in subsection 8(1) are not to be regarded as having been inserted capriciously. The exception made for transport employees by paragraph 8(1)(g) recognizes that the nature of the work often involves substantial trips away from the area where such employees live and report for work. Such trips impose a burden of expense for meals and lodging not borne by the ordinary worker who can sleep and eat, at least most of the time, at home. The ‘while so away’ qualification and the use of the word ‘and’ in the phrase ‘disbursements for meals and lodging’ tend to support this conclusion. The cost to the ordinary worker of food and shelter is a personal expense. The cost to a transport worker of meals and lodging necessitated by travel in the course of his duties is much more directly related to the income earning process.

When paragraph 8(1)(g) is read as a whole within its context it will be seen that some of the dictionary definitions of ‘travel’, such as ‘to go from one place to another’, are inappropriate. When paragraph 8(1)(g) refers to travelling away from a municipality and its metropolitan area it contemplates journeys of such substantial distance and duration as to require disbursements for both meals and lodging. It does not encompass all cases in which a taxpayer goes from a place inside the metropolitan area to a place just outside it. (emphasis supplied)

In this case the Appellant’s claim was limited to disbursements for meals alone. It is unnecessary to decide whether the Appellant’s trips took him beyond the boundary of the metropolitan area in which Sea Island is located. The trips could not be said to involve travel away from that metropolitan area within the meaning of paragraph 8(1)(g). The appeal is therefore dismissed.”

The words in italics are reiterated in Kraushar v. M.N.R., 86 DTC 1210 (T.C.C.) and in MacDonald v. The Queen, [1995] T.C.J. No. 1084 (T.C.C.).

[8] The appeal is dismissed.

Signed at Ottawa, Canada, this 2nd day of January 1998.

"D.H. Christie"

A.C.J.T.C.C.

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