Date: 20020130
Docket: 2001-909-IT-I
BETWEEN:
NORMAN FERGUSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
P.R. Dussault, J.T.C.C.
[1] These are appeals from assessments for the 1997 and 1998 taxation years. In assessing the Appellant, the Minister of National Revenue (the "Minister") included in his income, the amounts of $3,807 and of $4,153 for each year respectively as a standby charge and operating expense benefit related to an automobile provided by his employer Crown Protection Incendie Inc. (the "employer" or the "company").
[2] In assessing the Appellant, the Minister relied on the assumptions of fact stated in paragraphs 5a) to 5k) of the Reply to the Notice of Appeal. These paragraphs read as follows (Annex 1 omitted):
A. STATEMENT OF FACTS
5. In order to establish the above-mentioned assessments, the Minister relied on the following assumptions of fact:
a) the appellant was an employee of the employer to provide emergency services for the employer, during the 1997 and 1998 taxation years;
b) the employer provided the appellant with an automobile in order to carry out the services he provided to the employer;
c) on January 11, 1997 the employer leased an 1997 Volkswagen Jetta (hereinafter the "automobile") for use by the appellant;
d) the lease for the automobile expired December 11, 1998;
e) the monthly lease payments including GST and TVQ totalled $306.53;
f) at the signature of the lease, January 11, 1997 the employer paid on the lease $2,340.52 comprising $1,499.71 on account, $306.53 for the first month lease, $325.00 guarantee deposit $104.98 GST, $104.30 TVQ;
g) the employer made the automobile available for the use by the appellant for a period of 11 and 12 months for 1997 and 1998 respectively;
h) following an audit of the employer it was concluded that the employer had not included in the T4 Information slip for the employee a benefit related to the standby charge and operation benefit enjoyed by the employee during the 1997 and 1998 taxation years;
i) the Minister calculated the standby benefit, in accordance with paragraph 6(1)(e) of the Income Tax Act (hereinafter the "Act"), for 1997 and 1998 at $2,267.13 and $2,473.24 respectively, (Annex 1);
j) the Minister calculated the operating benefit, in accordance with paragraph 6(1)(k) of the Act, for 1997 and 1998 at $1,540.00 and $1,680.00 respectively (Annex 1);
k) the total benefit for the automobile provided by the employer as calculated by subparagraph 5(i) and 5(j) is $3,807.13 and $4,153.24 for 1997 and 1998 respectively.
[3] The Appellant testified briefly. Counsel for the Respondent cross-examined him even more briefly. The Appellant, who is also the owner of the company, a fire sprinkler and fire alarm service company, stated that he is required to have the automobile at his disposal for his work 24 hours a day, seven days a week in order to respond to emergency calls from clients and fire departments. The Appellant brought to Court numerous contracts confirming that he needed the automobile at all times for that purpose.
[4] In his Notice of Appeal to which he attached a map, the Appellant indicated that his home is close to the company's place of business in Châteauguay (Québec). The Notice of Appeal states that the personal use of the automobile would have amounted to 2.5 kilometres a day for a total of 912 kilometres a year on an average of 18,750 kilometres travelled each year with the automobile. Although, the question of the minimal use is thus raised in the Notice of Appeal, it is not addressed in the Reply to the Notice of Appeal in any way.
[5] The automobile is a "fire red" Jetta (the Appellant submitted pictures to the Court) identified with the name and logo of the company. During his testimony, the Appellant stated that the car is used almost exclusively, that being more than 90% of the total kilometres travelled for the business of the company and that his maximum use for personal purposes, going to the office and coming back home as well as the odd stop for cigarettes would have amounted to a maximum of 125 kilometres a month. The Appellant said that he has never used the car for a pleasure trip or holidays. However, the Appellant admitted that he has not kept a logbook during the years in issue.
[6] The testimony of the Appellant is uncontradicted and I have no reason to doubt its truthfulness.
[7] Mr. Maurice Faubert testified for the Respondent more particularly on the calculation of the benefit included in the Appellant's income for the years in issue. He admitted that, given the Appellant's testimony, it was not reasonable to have assessed the standby charge and the operating expense benefit without any reduction.
[8] However, counsel for the Respondent maintained his position and requested that the appeals be dismissed by relying exclusively on a decision I rendered in 1990 in the case of Lavigueur v. Canada [1990] T.C.J. 1137 also reported at 91 DTC 448. Counsel referred more particularly to the analysis of subsection 6(2) of the Act and to the assumption, in the last part of that provision, that the personal use is 1000 kilometres a month or 12,000 kilometres a year unless the taxpayer established otherwise in prescribed form, i.e., on form TD5. Counsel noted that in the present case, the Appellant had not maintained a logbook and that he had not provided the information required on the prescribed form TD5.
[9] In Lavigueur, supra, the years in issue were 1984 and 1985. In 1988, subsection 6(2) has been considerably modified and now provides besides other changes, an arithmetic formula to compute the value of the benefit. The former requirement of subsection 6(2) "in fine" with respect to the filing of a prescribed form no longer exists and form TD5 has long disappeared. To put it simply, subsection 6(2) now provides that if all or substantially all of the distance travelled by the automobile in the total available days is in connection with or in the course of the office or employment, the value of benefit will be reduced to a proportion of 1,000 kilometres a month or 12,000 kilometres a year if the total number of kilometres driven (otherwise than in connection with or in the course of the taxpayer's office or employment) during the total available days is less than 1,000 kilometres a month or 12,000 kilometres a year.
[10] In my opinion, the evidence as presented indicates that both conditions have been satisfied in the present case. First, substantially all of the distance travelled meaning 90% or more of the distance travelled, during the years in issue was in connection with or in the course of the Appellant's employment with the company. Second, the distance travelled otherwise than in connection with the Appellant's employment was an average of 125 kilometres a month.
[11] From the foregoing, the appeals are allowed and the assessments are referred back to the Minister for reconsideration and reassessment pursuant to paragraph 6(1)(e) and subsection 6(2) as well as under paragraph 6(1)(k) of the Act on the basis that substantially all of the distance travelled with the automobile was in connection with or in the course of the Appellant's employment and that the distance travelled otherwise than in connection with or in the course of that employment was 125 kilometres a month for 11 months in 1997 and 12 months in 1998.
Signed at Ottawa, Canada, this 30th day of January 2002.
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"P.R. Dussault" |
J.T.C.C.
COURT FILE NO.: 2001-909(IT)I
STYLE OF CAUSE: NORMAN FERGUSON,
and Her Majesty The Queen
PLACE OF HEARING: Montreal, Québec
DATE OF HEARING: January 17, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge P.R. Dussault
DATE OF JUDGMENT: January 30, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Claude Lamoureux
COUNSEL OF RECORD:
For the Appellant:
Name:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada.
2001-909(IT)I
BETWEEN:
NORMAN FERGUSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on January 17, 2002, at Montreal, Québec
by the Honourable Judge P.R. Dussault
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Claude Lamoureux
JUDGMENT
The appeals from the assessments made under the Income Tax
Act for the 1997 and 1998 taxation years are allowed, in
accordance with the attached Reasons for Judgment, and the
assessments are referred back to the Minister of National Revenue
for reconsideration and reassessment pursuant to paragraph
6(1)(e) and subsection 6(2) as well as under
paragraph 6(1)(k) of the Act on the
basis that substantially all of the distance travelled with the
automobile was in connection with or in the course of the
Appellant's employment and that the distance travelled
otherwise than in connection with or in the course of that
employment was 125 kilometres a month for 11 months in 1997
and 12 months in 1998.
Signed at Ottawa, Canada, this 30th day of January 2002.
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"P.R. Dussault" |
J.T.C.C.