Tax Court of Canada Judgments

Date: 20020930

Docket: 2000-4087-IT-G

BETWEEN:

PARAMBIR KAUR DHILLON,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Hershfield, J.T.C.C.

[1]            The Appellant is an R.C.M.P. constable who attended the R.C.M.P. Cadet Training Program ("training program") from January 26, 1998 to August 4, 1998.

[2]            During the training program the Appellant was required to stay at the R.C.M.P. Training Academy in Regina. At the time her residence was at her parents' home in Toronto. During the term of the training program the Appellant was paid a bi-weekly allowance from which deductions were made for lodging, meals and for health, life and disability insurance. During the training program the Appellant was attributed a total allowance of $9,520.00 from which was deducted $2,483.00 for meals, $970.54 for lodging and $320.00 for various insurance coverage items ("training expenses").[1]

[3]            The Appellant's 1998 taxation year was assessed on the basis that she was an employee of the R.C.M.P., that the total allowance of $9,520.00 was income from employment and that the training expenses were non-deductible. In filing her return for the 1998 year the Appellant did not include the training allowance and did not deduct amounts for training expenses. At trial the Appellant took the position that her taxable income was her net receipt - $5,747.00. While not accepting that she was an employee, she was willing to accept that she had gross income from a non-enumerated source of $9,520.00 from which the training expenses were deductible in calculating income for tax purposes. In the alternative, if she was an employee, she asserted that the training allowance included a non-taxable benefit and must be reduced accordingly. The issues were thereby limited to categorizing and quantifying the inclusion amount, gross and net, for tax purposes.

[4]            In simpler terms, the issues in this appeal are the status of the Appellant during the training program, the nature of the training allowance and whether the training expenses are deductible or properly included in the first place as part of the Appellant's income for tax purposes.

Facts:

[5]            The Appellant testified at the hearing. A training officer, Dr. G.L. Bell, was also called on behalf of the Appellant. The Respondent called an appeals officer, Mr. R. Davidson. The following are my findings in respect of their testimony and the exhibits tendered in a joint book of documents.

[6]            The Appellant first interviewed for a constable position with the R.C.M.P. in October of 1995. She was required to take a written exam in Kitchener, Ontario and attend at a suitability interview in Toronto. A medical exam was required and physical fitness levels required certification.

[7]            In April of 1996, the Appellant received a letter from the R.C.M.P. confirming that her application for a constable position had been recommended for further processing. The Appellant's name was placed on the R.C.M.P. post-interview ranking list and her file was forwarded for a background investigation and final medical clearance. She was provided with a Conditional Offer of Enrolment which she was asked to sign and return. Although the enrolment offer was conditional, the letter advised that the Appellant should be prepared to be enrolled anytime within the next two to eight months and that she could expect to be enrolled before the end of October 1996. In fact, her enrolment was delayed until January 1998.

[8]            The Appellant explained that the delay in her enrolment was primarily due to background investigation enquiries having to be made overseas. During this time the Appellant maintained a regime of vigorous physical training and completed a number of programs to ensure that additional qualifications specified in the Conditional Offer of Enrolment would be met. These included first aid and CPR certificates as well as required typing skills.

[9]            The Conditional Offer of Enrolment provided that the enrolment was conditional on the Appellant obtaining a top secret level of security clearance. It also provided that, at the time of enrolment, the Appellant was required to respect the principles of the Conflict of Interest and Post-Employment Code for Public Office Holders and Commissioners Standing Orders enacted pursuant to section 69 of that Code as they apply to regular members of the R.C.M.P. (paragraphs (h) and (i) of the Conditional Offer of Enrolment). Further, acceptance of the conditional offer was on the following terms:

I accept this offer of enrolment and understand that it is conditional upon my remaining suitable, in all aspects, as set out above. I also understand that I cannot be appointed a Regular Member of the RCMP unless I successfully complete the Cadet Training Program at the RCMP Training Academy at Regina, Saskatchewan. By accepting this offer of enrolment I agree that upon appointment as a Regular Member of the RCMP I will receive my pay through direct deposit to the financial institution of my choice and provide you with the information required for this purpose.

[10]          The Appellant enrolled in the training program in January of 1998 and signed the Cadet Training Agreement on January 23, 1998. The training period was to consist of approximately 27 weeks of instruction at the Training Academy in Regina. Upon successful completion of the program, the cadet was expected to be engaged as a regular member of the R.C.M.P. if she accepted her first posting. Indeed, on completion of the cadet program the Appellant was offered a posting at Fisher Branch. She accepted and was sworn in as a constable of the R.C.M.P.

[11]          The training agreement provided for the allowance and training expenses as follows:

Allowances

1.              During the training period, the RCMP will provide the Cadet a bi-weekly allowance, less deductions for meals, accommodation, income tax, CPP, UIC and other deductions as deemed necessary by the RCMP.

Accommodation

1.                     During the training period, the RCMP will provide accommodation at "Depot" Division, or at locations where developmental training is being provided (if applicable), at a cost to the Cadet as determined by the RCMP.

The amount deducted for training expenses, although not set out in the agreement, was set out in correspondence to the Appellant prior to her entering into it.

[12]          The training agreement expressly provided that until such time as an offer of engagement was made and accepted, the cadet would neither be a member of the R.C.M.P. nor an employee of the Government of Canada. While the agreement did not speak of the terms of engagement once the Appellant became an employee of the R.C.M.P., correspondence to her in early January 1998 stated that once she had successfully completed all the requirements of the training program and was engaged as a regular member constable, she would receive an engagement rate salary of $31,172.00 per annum and that after six months of service and successful completion of recruit field training, her salary would increase to $39,083.00 per annum. There was a further increase after 18 months of service.

[13]          The Appellant as a cadet was not a participant in the pension plan and received no vacation benefits.

[14]          The Appellant testified that throughout the 27-week training period she was accommodated with seven other women in a dormitory referred to as the "pit". It was a basement dormitory allowing her approximately 50 square feet of living space. She had a single bed with a three-drawer chest. The women's washrooms and shower facilities were not a part of the dormitory.

[15]          All meals were at designated times. No food was allowed in the dormitory. All lunches and breakfasts had to be taken at the mess hall. More time was allotted for dinner which permitted occasional getaways. However, the Appellant testified that the workload only permitted the troop to leave the compound a few times during the course of the 27 weeks so that practically speaking all but a few dinners were required to be had at the mess hall.

[16]          Although the Appellant made no reference to dormitory living rules, other than giving the impression that life was highly regulated, I note that Exhibit A-1, Tab 12 sets out strict rules for dormitory living. For example, consider the following extract:

Uniform articles of kit and civilian clothing will be separated by (4) hangers. These hangers will be of the same consistency, i.e.: all wire hangers or all wood hangers. One of each type is not acceptable. When removing an article of kit from your closet, DO NOT LEAVE the empty hanger between pieces of clothing. You may include this particular hanger to complete the set of (4) separating your clothes or you may put it in the drying room where your "extra" hangers should be kept.

The note goes on as follows:

Uniform articles of kit are to be positioned in your closet as shown in the diagram and nothing different. Ensure that you are completely familiar with the clothing layout as described by numbers in your handout. Pit partners will position articles in a mirror image fashion with each other.

[17]          The Appellant referred to the Cadet Training Handbook which included a recitation of the training program objectives. Objectives included the following:

·          know the law, R.C.M.P. Policy and Code of Conduct sufficiently to ensure that you exercise discretion responsibly and lawfully;

·          manage evidence, exhibits and crime scenes effectively;

·          gather information and evidence necessary to effective policing;

·          work effectively as part of a policing team;

·          handle firearms safely and proficiently;

·          be comfortable with electronic communication technology and R.C.M.P. information systems; and

·          understand policing as a career, vocation and service for self and family.

·         

[18]          The handbook also set out that the daily routine started at 6:00 a.m. and ended 10:30 p.m. with lights out at 10:45 p.m. The Appellant testified that in fact wake-up actually started at between 5:15 and 5:30 each morning. There were seven hours of scheduled classes daily as well as two daily parades. She was in uniform until approximately 4:40 p.m. each day after which she was permitted to put on civilian attire unless after hour assignments required her to be in uniform which was often the case.

[19]          The handbook underlined that the training was very intensive and demanding. It provided that "in order to meet the requirements, you will be given work assignments in the evening, on the weekends and in exceptional circumstances, during statutory holidays".

[20]          The Appellant testified that homework was assigned daily and there were compulsory competency assignments as well. Weekly competencies worked on outside of formal training hours included training in firearms, police driving, defence tactics, physical fitness and applied police sciences. The Appellant testified that there was virtually no free time. She did not get leave on holidays with the exception of one trip home. As to weekends, she testified that she had occasional weekend time off, perhaps once a month.

[21]          Progress reports were maintained and each progress report measured some 30 competencies, progress for which was being regularly evaluated and documented. Two "unsatisfactory" notations on a competency report meant termination and two "needs improvement" notations in the same area constituted one unsatisfactory grade.

[22]          The Appellant testified that she also routinely partook in various work duties. The duties were assigned by the Sergeant Major's office after classes and weekends. All duties were mandatory. In respect of all these duty "assignments" she was required to wear R.C.M.P. cadet attire.

[23]          A description of work duties was included in the book of documents. Duties included roving patrol; front desk receptionist in guard room (answering the phone, signing out vehicles, signing out keys for various buildings, etc.); front gate (guarding the front entrance to the base to allow only authorized personnel to enter); museum guide (giving visitors' tours and being stationed at the front desk answering phone). The Appellant testified that she was involved in all of these working duties in four or eight-hour shifts on weekends or after hours during the week. The duties were required for a total of eight hours every two weeks or some 108 hours over the course of the program.

[24]          With respect to roving patrol duty, same was carried out in unmarked cars and the Appellant acknowledged that while on patrol she had no duties in relation to law enforcement. Patrols were training exercises.

[25]          In addition, the Appellant recalled two ceremonial parades (the 125th Anniversary Parade and the Pan Am Games Parade). This was also required duty for which R.C.M.P. attire had to be worn.

[26]          I accept the Appellant's testimony that the entire program was a rigorous series of classes, work assignments, duty assignments, drills and deportment exercises.

[27]          Dr. Bell confirmed much of the Appellant's evidence regarding the rigours of the program. He acknowledged that the term "pit" was an accurate description of the facilities afforded cadets and he acknowledged that the program was as set out in the materials and as testified to by the Appellant.

[28]          Dr. Bell is a doctor of psychology and is a training officer for the Cadet Training Program. Since 1996, he has been in charge of the curriculum and evaluation in respect of the program. He had also previously been involved in recruitment and training. All the staff of the training program reported to Dr. Bell who in turn reported to the commanding officer.

[29]          Dr. Bell testified that the approach to training and hiring had changed since 1994; the current cadet program being fully implemented in 1996. Under the former system the recruits were hired as employees of the R.C.M.P. on recruitment. The new methodology was to sign up recruits as cadets and only take them on as employees once they were sworn in as constables of the R.C.M.P. which was when they had successfully completed the training program and accepted their first posting.

[30]          Dr. Bell suggested that the primary reason for the change in the system had to do with termination. The old system required that recruits who failed to qualify be fired, whereas under the new system cadets who did not qualify would not be hired. Further, the change permitted a learning style approach. Regina was recast as a learning centre.

[31]          Dr. Bell testified that there was approximately a six percent attrition rate in the program. Approximately one-half of which, three percent, did not complete the program due to unsatisfactory performance and the other half of which, another three percent, were dropouts. He testified that the rate of attrition was the same in the old program and the new program. He noted, however, that in the current system there was an automatic termination where competency reports were inadequate. In the former system retesting was permitted, the inference being that automatic termination was more acceptable where the cadets were not treated as employees. Notwithstanding this difference (which underlines the rationale for the switch in systems) there was, as stated, no difference in the rate of attrition between the two systems. The recruiting of constables was done on the same basis before and after the change in the training system; namely, the number of recruits or cadets taken on was and is determined by the number of available positions on the force. The program and the pool of trainees enrolled to take it still serve one purpose which is to fill vacancies on the force. Recruitment and training are unchanged. With respect, the process as I see it, is wholly unchanged except the "employment" commencement line has contractually been moved.

[32]          With respect to work duties, Dr. Bell was asked whether or not the cadets were viewed as a labour force. Dr. Bell testified that under the old system the recruits were definitely viewed as part of the labour force and were consolidated as such. He testified that after the change in the system working duties were regarded more as simulated training exercises. He acknowledged, however, that, at least, they had a dual aspect. Dr. Bell agreed that some people would acknowledge that cadets were a cheap source of labour. He acknowledged some of their work was as labour replacement.

[33]          Dr. Bell acknowledged that the objectives of the program were to ensure that officers were job ready on completion of the program. He acknowledged that the program was there to ensure training for R.C.M.P. constables and it was not there to train others. He confirmed that cadets were always hired if they successfully completed the program and accepted a posting. This was qualified in that there was one last screening process before induction. Further, after induction there was a three-month probationary period. Regardless of these qualifications, it remains the case that in Dr. Bell's experience all cadets completing the program and accepting a posting were sworn in as constables.

[34] As to the testimony of the Respondent's witness, Mr. Davidson, I can only say that he was not able to add much in the way of valuable input. He acknowledged that he only became involved with the file after confirmation of the reassessment had been issued. The appeals officer who had dealt with the objection had been reassigned and was not available. Mr. Davidson's knowledge of the matter was only based on having read file reports of the appeals officer who actually reviewed the file on objection.

[35] He confirmed that a matching process had triggered the reassessment given that the R.C.M.P. had issued T-4 slips in respect of the full amount of the training allowance. That is, in spite of their own contract, introduced when it changed its system, the R.C.M.P. administratively continued to treat the cadets as employees and to issue T-4 slips.[2] Mr. Davidson acknowledged that there was no record of any interviews with anyone at the R.C.M.P. in respect of its practice of issuing T-4 slips in the face of the express language of the training agreement. He acknowledged that there had been a direction from Ottawa to the effect that a cadet in the R.C.M.P. training program, although not an employee for certain purposes, was an employee for the purposes of the administration of the Income Tax Act (the "Act")[3] and that the allowance was in lieu of wages.

[36] Mr. Davidson confirmed his view that since training expenses were deducted at source, it was proper to regard them as received and to include them in the amount paid in lieu of wages. He confirmed his view that they were not deductible under any provision of the Act.

[37] Mr. Davidson had been examined for discovery. Portions of the transcript of that examination were read into the record by reference. It is clear from such transcript that Mr. Davidson was unable to field questions relating to issues that arose when this matter was being discussed with the Appeals Section. He was unable to explain, for example, why certain administrative practices allowing that employee training expenses were not taxable benefits had not been applied.[4] IT News-13 for example, provided that courses taken for maintenance or upgrading in the context of ongoing employment will generally be considered to primarily benefit the employer and therefore be non-taxable. He could only reply that the appeals officer may have made the distinction between training for maintenance or upgrading of employer related skills, the costs for which are not treated as taxable employee benefits, and initial or job-ready training. Counsel for the Appellant pointed out that IT News-13 made no such distinction. I would also point out that the distinction drawn is not well founded once it is determined (as the C.C.R.A. has done in this case) that the trainee was already an employee during the training program. That is, once this determination is made, there is no question in this case that the training upgraded employer-related skills and was primarily for the benefit of the employer since vacancies on the regular force needed to be filled with personnel trained in this program. Food and lodging were provided as necessary incidents of such employer-related program, not as a benefit for cadets. Accordingly, if the Appellant was an employee during the training program, there can be no taxable benefit here at least if IT News-13 reflects a proper construction of the Act.

Analysis:

[38] The Reply provides that the reassessment relies on section 3, subsections 5(1), 6(1), 6(6), 8(2) and paragraphs 8(1)(h) and 56(1)(n) of the Act.

[39] Counsel for the Respondent relied principally on subsection 5(1) which provides that a taxpayer's income for a taxation year from an office or employment is the salary, wage or other remuneration received by the taxpayer in the year. Alternatively, he argued that paragraph 6(1)(b) applied. That paragraph includes in the income of an employee all amounts received by the taxpayer in the year as an allowance for personal or living expenses. He relied on paragraph 8(1)(h) and subsection 8(2) in respect of the administrative position that no deduction could be claimed for meals or lodging.[5]

[40] Counsel for the Appellant was prepared to concede that the monies received by the Appellant from the R.C.M.P. were income from a source pursuant to section 3 of the Act. He took issue, however, with the amount of income that was derived from such source and with the characterization of the source as employment income. Appellant's counsel argued that the source was not one specifically set out in section 3. He cited a number of cases which confirmed the principle that the enumeration of sources in section 3, employment, business, property and capital gains, were not exhaustive sources and that it was open for me to find that the allowance in question was income from a non-enumerated source.[6] He went on to argue that the statutory limitations in respect of employment deductions were not applicable to such other sources and that the income amount must be determined after recognizing costs related to deriving income from such other sources.[7] He argued training expenses would thereby reduce the income of the Appellant in the subject year to the net amount she would acknowledge as income. Of course another aspect of his argument is whether or not the training expense portion of the training allowance was an amount received as opposed to a benefit received. If the training expenses are viewed as a benefit in paragraph 6(1)(a), he argues that they are not properly brought into income even if the Appellant is an employee. In that event he argues that paragraph 6(1)(a) better categorizes the training expenses than do subsection 5(1) which refers to salary, wages and other remuneration received or paragraph 6(1)(b) which includes amounts received as personal living allowances. If the training expenses are better categorized as a benefit received and taxable only to the extent included under paragraph 6(1)(a), it is contended that they will not be taxable as the training program was for employer-related skills. I agree with the latter position.

[41] In my view, there is little doubt in this case that the Appellant was an employee of the R.C.M.P. throughout the training program. The training agreement was clearly a contract of service. By partaking in the program, the cadets were in the service of the R.C.M.P. and fulfilling its needs. To find otherwise would wholly ignore the master-servant relationship that existed during the training period. That, linked with the high probability that the master-servant relationship that existed in the training program would continue on completion of the program (where that linkage was the raison d'être for the program being offered and taken), makes a compelling case for finding the Appellant to be an employee of the R.C.M.P. during the training program. The connections between the job and the program have such a degree of continuity and interdependence as to make it impossible, in my view, to avoid this conclusion.

[42] The change in the system and the essentially unilateral imposition of a new employment commencement date in the standard form of agreement used by the R.C.M.P. are not of such substance as to change the fundamental character of the relationship. That cadets were bound by certain enactments relating to codes of conduct applicable to regular members of the R.C.M.P. strongly suggests that they were considered members of the force although not regular members. This is further supported by the work duties they performed and by the administrative decision for tax purposes to regard cadets as employees and to issue T-4 slips in respect of their allowance. The allowance in part at least was viewed as remuneration in respect of employment. Indeed this decision to issue T-4 slips casts doubt on whether the non-employee provision in the training agreement was intended to alter the true nature of the relationship during training as opposed to introducing a different mindset for dealing with recruits who failed to meet the requirements of continued retention as regular members of the force.

[43] Of course there is no special categorization of a relationship that exists simply for tax purposes. One is an employee at law or not. Even the contractual classification of a relationship will not be determinative. The true nature of the relationship must be determined on the facts of each case. In the case at bar the contractual attempt to preclude employment classification was founded in the perception that it made termination easier. The true nature of the relationship was hardly a consideration in the formulation of the provision. When considering the impact of a contractual provision so added, a contrary position taken by the party that sought to impose that provision becomes quite relevant. By unilaterally issuing T-4 slips, the R.C.M.P. has largely offset any weight that might be given to the amended form of agreement imposed on the Appellant. In the circumstances she had no say and even if she did, her agreement to her non-employment classification is of little help in determining the nature of the relationship.

[44] The program was not intended to offer an education in policing. It was intended to train cadets for their role as a constable in the R.C.M.P. Knowledge of R.C.M.P. systems, policies and codes of conduct were an integral part of the program. These are employer-related skills that pertain to this particular employer. It was constable training for a regular position then available and anticipated by both contractors to be filled by cadets. In this context their service with the R.C.M.P. commenced when they signed the training agreement. From this point on they were in the service of the R.C.M.P. The only question is what are the services being provided under this contract of service?[8] The work duties attested to by the Appellant as set out in paragraph 23 of these Reasons are likely sufficient in this regard even if they are not the primary focus of the training program. Dr. Bell's testimony is also likely sufficient to support a finding that there was a contract of service on the facts of this case (see paragraph 32 of these Reasons). Regardless, I think it is sufficient a service - in the context of supporting a finding of there being a contract of service - to subject oneself to the training regime of, and for, the person who recruited you to provide the services for which you are being trained.

[45] I have been referred to two cases that require mention: Brewster Transportation & Tours v. M.N.R.[9] and Eastern Ontario Health Unit v. Canada (M.N.R.).[10] Both cases involved pre-employment programs that were found not to give rise to employment relationships prior to completion of the program and commencement of regular duties. In both programs attendance was a precondition to job commencement. In Eastern the program was clearly an application or selection process. It was preliminary in nature. It consisted of information and assessment sessions. There was no meaningful correlation between those participating and those who were given a job. The program was given by a third party. There were no services performed. That case is readily distinguished from the case at bar. In Brewster, however, the facts are closer to the one at bar. Bus drivers to be employed by Brewster were required to complete a driver training program. While there was no suggestion that there was a full-time job waiting, successful applicants could bid for openings, failing which they were placed on a "spare board" and guaranteed a minimum salary each month. While these facts demonstrate that a degree of continuity and interdependence existed between the program and the employment, it was clearly less than in the case at bar. The program in Brewster created an inventory of potential regular employees as opposed to constituting the group selected to fill known and available positions of regular duty. As well, in Brewster, contract, licensing and union considerations pointed on the whole of the evidence to a non-employment relationship. Further, trainees were not paid any remuneration for services. Indeed, no services were performed by the trainees. These factual differences are sufficient to distinguish the cases. In the case at bar I am satisfied on the whole of the evidence that employment commenced when the remuneration commenced which is to say when the cadets were admitted to the program.

[46] This finding makes it unnecessary for me to consider whether the training allowance might be considered a non-enumerated source under section 3 or whether it is income pursuant to paragraph 56(1)(n) dealing with bursaries. What must now be considered is subsection 5(1) and paragraphs 6(1)(a) and (b) in order to determine the taxability of the allowance.

[47] I am satisfied on the facts and contextual evidence in this case that it is appropriate to break down the allowance into two parts. The allowance net of training expenses is, in my view, brought into income under subsection 5(1) as income from an office or employment. This part of the allowance at least is remuneration received by the taxpayer in the year paid in lieu of wages. If nothing else, it reflects compensation for services if not servitude.

[48] As to the training expenses portion of the allowance, the method of dealing with them under the training agreement (see paragraph 11 of these Reasons) tends to support a finding that these are to be taken as part of the allowance that should be brought into income under subsection 5(1) as well. The agreement provides net remuneration by netting out the training expenses and other source deductions that are clearly and properly meant to be included as part of the allowance and included as income. These other source deductions are: income tax, CPP and UIC. Since training expenses are similarly deducted, the inference is that they are to be treated in the same way - added back to the gross amount of the allowance for the purpose of determining income. This is how the T-4 slips were prepared and is the basis for the reassessment including the training expenses as part of the income received. While generally such inference and treatment would be the end of the matter, I find it necessary in this case to consider whether the proper construction of the arrangement taken as a whole warrants negating the inference of the source deduction aspect of the agreement. Keeping in mind that the agreement was cast as a "non-employment" agreement it is hard to conclude that the mechanics of providing room and board were intended to reflect one "employment" tax consequence versus another. It seems likely that this whole issue has been unwittingly created and exacerbated by T-4 slips, the preparation and impact of which were not considered when the training agreement was recast. In any event, the circumstances support a finding in this case that the remuneration amount for the purposes of subsection 5(1) is the portion of the "allowance" that excludes the training expenses - the latter more properly being dealt with under paragraph 6(1)(a) or, as the Respondent has argued, under paragraph 6(1)(b).

[49] Dealing firstly with the application of paragraph 6(1)(b), it is difficult to imagine the portion of the allowance relating to training expenses as being an allowance for the purposes of that paragraph since such an allowance is an amount received and over which the employee recipient has discretion as to use.[11] The reason that an allowance is taxable is that it is possible that it conceals remuneration.[12] In the case at bar the allowance is set to match living expenses charged by the employer. The Appellant is given absolutely no choice as to the expenditure in terms of where or how it is spent or how much to spend. The reality here is that the Appellant has an out-of-pocket expense incurred by reason of employment and is being reimbursed for that expense. Such reimbursements are not taxed under subsection 5(1) or paragraphs 6(1)(a) or (b).[13] That she receives the reimbursement in fixed monthly amounts does not change its essential character.

[50] Looking at the training expenses from a different perspective, I note that there is also a question in the circumstances of this case as to whether it is proper to regard the Appellant as having received that portion of the allowance. While it is true that one receives something when one derives the benefit from it, it is surely open in this case to suggest that the "something" is the benefit itself, not the monies attributed as having been applied to provide the benefit. This is true, or so it seems to me, when the connection between the attributed funds and the benefit are pre-determined and cast in stone so as to afford the employee no choice. In fact the Appellant has contracted to forego the receipt of funds in favour of her employer who contracted to pay it, which is to say she agreed to take less compensation. In exchange she received accommodation and meals the value of which might be taxable under paragraph 6(1)(a). To suggest otherwise makes the employer the party responsible to determine both what constitutes a benefit and what value to give it for tax purposes. The taxability under paragraph 6(1)(a) of any benefit conferred is not the amount the employer determines as pay foregone but the value of the benefit as determined in accordance with principles applicable for the purposes of that paragraph.

[51] The essence of the question of the taxability of the training expenses in this case is that it reflects a benefit for boarding and lodging. The value of such benefit can be included in income under paragraph 6(1)(a). It is commonly understood however that to include any value in income it must first be determined to be a benefit that benefits the employee as opposed to being primarily for the benefit of the employer.[14] At this point I note that the analysis of the training expenses being a non-taxable reimbursement merges in theory with the finding that they are not a benefit. Expenses incurred by an employee in the course of employment and reimbursed by the employer reflect benefits that primarily benefit the employer. While I believe it is sufficient that I have found that the training expenses were incurred in this case in the course of employment and thereby not taxable, I have no hesitation on the facts of this case, to add that, in my view, there was virtually no benefit to the Appellant in the provision of the training expenses and that the amount incurred in respect of such expenses were incurred by the employer for its own account and for its own benefit. It needed to round up and plant recruits at a location convenient to it. It was essential to the deportment training, if nothing else, to house recruits where their every action could be graded. How else could the position in the closet of articles of kit be monitored as being in a mirror image fashion with one's pit partner? The economic benefit to an employee of affording an employer such monitoring advantage and of being sequestered in a "pit" away from the amenities of home escapes me.

[52] Accordingly, the appeal is allowed. The income from employment subject to tax is the training allowance received, namely $5,747.00, which excludes the training expenses attributed to the Appellant as wages deducted at source.

Signed at Ottawa, Canada, this 30th day of September 2002.

"J.E. Hershfield"

J.T.C.C.

COURT FILE NO.:                                                 2000-4087(IT)G

STYLE OF CAUSE:                                               Parambir Kaur Dhillon and

                                                                                                Her Majesty the Queen

PLACE OF HEARING:                                         Winnipeg, Manitoba

DATE OF HEARING:                                           July 17, 2002

REASONS FOR JUDGMENT BY:      The Honourable Judge J.E. Hershfield

DATE OF JUDGMENT:                                       September 30, 2002

APPEARANCES:

Counsel for the Appellant: Cy M. Fien

Counsel for the Respondent:              Gerald Chartier

COUNSEL OF RECORD:

For the Appellant:                

Name:                                Cy M. Fien

Firm:                  Fillmore & Riley

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2000-4087(IT)G

BETWEEN:

PARAMBIR KAUR DHILLON,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on July 17, 2002 at Winnipeg, Manitoba, by

the Honourable Judge J.E. Hershfield

Appearances

Counsel for the Appellant: Cy M. Fien

Counsel for the Respondent:              Gerald Chartier

JUDGMENT

                The appeal from the assessment made under the Income Tax Act for the 1998 taxation year is allowed, without costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant received in the year employment income of $5,747.00.

                The Appellant is entitled to no further relief.

Signed at Ottawa, Canada, this 30th day of September 2002.

"J.E. Hershfield"

J.T.C.C.