Date: 19990920
Docket: 98-2084-IT-I
BETWEEN:
YVON SIMARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Lamarre Proulx, J.T.C.C.
[1] These are appeals under the informal procedure for the 1995 and 1996 taxation years. The Minister of National Revenue (the "Minister") issued notices of reassessment, adding amounts of $825 and $2,550 in computing the appellant's employment income for those years respectively.
[2] In making those reassessments, the Minister relied on the facts set out in paragraph 5 of the Reply to the Notice of Appeal (the "Reply") as follows:
[TRANSLATION]
(a) the appellant is a retired employee of Canada Post Corporation;
(b) the appellant was a Grand Knight in the fraternal society of the Chevaliers de Colomb, Conseil 1989 (Chicoutimi), during the years in issue;
(c) on August 14, 1997, the Minister conducted an audit of the accounting records of the Chevaliers de Colomb, Conseil 1989 (Chicoutimi) for the 1995 and 1996 taxation years;
(d) on the basis of this audit, the Minister determined that the appellant had received and cashed amounts of $825 and $2,550 in 1995 and 1996 respectively from the Chevaliers de Colomb, Conseil 1989 (Chicoutimi);
(e) the Minister determined that the amounts of $825 and $2,550 constituted employment income received from the Chevaliers de Colomb, Conseil 1989 (Chicoutimi).
[3] In his notice of appeal, the appellant did not dispute the fact that he had received the amounts in issue, but provided the following explanation:
[TRANSLATION]
. . .
The money I received never constituted, and never served as, income. It was an expense account amount that I was therefore to spend on entertainment expenses and the Knights of Columbus never issued a T-4. They had asked me to raise funds and those funds were distributed to charities in the city. . . .
There were weeks when I did not have enough money with all the activities that I was organizing because, like everyone else, I had to pay to take part in them, and that did not include my car. For example, a dinner organized on Thursday evenings for the Knights cost me between $25 and $30 a week. Considering the 60 to 70 hours that I put in each week, I wonder how this could have been income at $75 or $100 a week.
[4] The appellant testified, as did Richard Pelchat, an auditor with the Revenue Canada tax services office in Chicoutimi.
[5] The appellant admitted subparagraph 5(a) of the Reply and corrected subparagraph 5(b) by specifying that he was a third degree member of the Knights of Columbus, which is two degrees below Grand Knight.
[6] The appellant responded to the statement in subparagraph 5(d) of the Reply in a highly evasive manner. When asked "Did you receive amounts of $825 and $2,250?" he answered "I have no way of knowing; I have no documents." The appellant related that the Knights of Columbus organization had a deficit at that time and that it had assigned him the task of getting it back on a sound financial footing. The amounts received were advances which the organization had made to him for the purpose of finding customers to rent the organization's room. He also organized a weekly dinner for seniors. He did not have to keep any accounting records to show the organization how the advances were spent because it required none. He said he used the money in question to pay for gasoline, to pay expenses for entertaining presidents or secretaries of associations, and to cover the cost of his own attendance at the dinners he organized for seniors. In this last case, the cost of his meals was at least $25 to $30 a week. As for gasoline, he never recorded his kilometrage.
[7] Exhibit I-1 consists of cheques that were made by the Knights of Columbus to the order of Yvon Simard. For 1995, 11 cheques in the amount of $75 were issued on a weekly basis to Mr. Simard from October 19 to December 28. One cheque bears the inscription [TRANSLATION] "For salary". The others bear no inscription. Thirty-four cheques were issued for 1996. From January 4 to June 27, 1996, Mr. Simard received cheques of $75 on a weekly basis, most of which bear the inscription [TRANSLATION] "For salary". Mr. Simard received another cheque, for $100, on June 27, 1996, a cheque for $20 on July 11, 1996, a cheque for $30 on July 18, 1996, cheques for $100 on August 15 and 22, 1996 and cheques for $75 on July 25 and August 2 and 8, 1996. He also received four cheques for $100 from August 29 to September 19, 1996.
[8] Richard Pelchat explained to the Court that one of the purposes of the audit referred to in subparagraph 5(c) of the Reply was to establish from accounting records whether there had been payments of salary. For 1995, the names of seven persons constantly appeared. The same exercise was conducted for 1996 and the same names reappeared. Mr. Pelchat inquired of the secretary-treasurer, Mr. Audet, as to the nature of these payments and Mr. Audet answered that they were for salaries.
[9] The Court allowed the appellant to send in evidence of the expenses which he claimed to have incurred for the Knights of Columbus in relation to the amounts he regularly received in 1995 and 1996. The appellant sent two letters. A representative of the respondent checked with one of the two persons who ostensibly wrote those letters. That person said that he had not written the letter, and the second letter did not contain the signer's address or telephone number.
[10] In my view, the appellant did not adduce satisfactory evidence that the total amount of the sums received from the Knights of Columbus consisted of advances made for expenses incurred by him. The appellant confirmed a number of times that the organization had never required supporting documentation. He could spend the amounts as he wished without having to account for them to the payer. The nature of the payments was thus less a reimbursement of expenses than a salary, allowance or payment for services. The amounts appear to have been paid for the appellant's work or services. If that work or those services entailed expenses, the appellant should have kept a record of them.
[11] There is however one thing that works in the appellant's favour. His versions never changed. It is possible that he was a promoter or animator highly dedicated to the organization's cause and that he incurred expenses for that cause. It is also possible that the organization, as a result of the audit it underwent, was not prepared to give him the help he needed to explain the circumstances in which he received the regular payments in part of each of the years 1995 and 1996. In view of the absence of any supporting evidence or of even the most basic accounting, the total amount of the sums received periodically clearly cannot be considered as reimbursements or advances. However, in view of the fact that the versions given are plausible and consistent with each other, the Court is of the view that a deduction of 25 percent of the amounts received can legitimately and lawfully be granted to the appellant in respect of expenses incurred in carrying on his activities as a promoter and animator.
[12] The appeals are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the above basis.
Signed at Ottawa, Canada, this 20th day of September 1999.
"Louise Lamarre Proulx"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]