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Docket: 2003-47(IT)I |
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BETWEEN: |
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PHILIPPE GIRARD, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
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[OFFICIAL ENGLISH TRANSLATION] |
____________________________________________________________________
Appeals heard on July 25, 2003 at Montréal, Quebec
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Before: The Honourable Judge Louise Lamarre Proulx |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Claude Lamoureux |
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JUDGMENT
The appeal from the assessment made under the Income Tax Act (the "Act") for the 1998 taxation year is dismissed;
The appeals from the assessments made under the Act for the 1999 and 2000 taxation years are allowed and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment, subtracting $100 from the calculation of the Appellant's income for each of those year;
The whole in accordance with the attached reasons for judgment.
Signed at Montréal, Quebec this 21st day of October 2003.
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"Louise Lamarre Proulx" |
Lamarre Proulx, J.
Translation certified true
on this 23rd day of March 2004.
Gerald Woodard, Translator
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Citation: 2003TCC749 |
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Date: 20031021 |
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Docket: 2003-47(IT)I |
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BETWEEN: |
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PHILIPPE GIRARD, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Lamarre Proulx, J.
[1] This is an appeal under the informal procedure relating to the 1998 to 2000 taxation years.
[2] The issue is whether the Appellant must include monthly travel allowances of $450 in the calculation of his income.
[3] The facts on which the Minister of National Revenue (the "Minister") relied in making the reassessment are described in paragraph 4 of the Reply to the Notice of Appeal as follows:
[translation]
(a) during the taxation years in question, the Appellant was employed by the company "Groupe Concerto Inc.";
(b) the Appellant's father was the sole shareholder in "Groupe Concerto Inc." during the taxation years in question;
(c) during the taxation years in question, the Appellant was mainly, among other things, an employee at the warehouse of "Groupe Concerto Inc.";
(d) following an audit of "Groupe concerto Inc.", the Minister found that the Appellant had received a monthly travel allowance of $450 for the taxation years in question, in addition to his salary or wages, without having to justify the presumed relevant expenses to the company;
(e) the audit of "Groupe Concerto Inc." also found that the Appellant had received a $100 Christmas bonus for the taxation years in question;
(f) the monthly allowance and bonus were not indicated on the T4 forms for the taxation years in question;
(g) in his calculation of income for the taxation years in question, the Appellant did not report the $5,400 ($450 X 12) or the $100;
(h) the Minister was able to confirm with other employees that the Appellant worked almost solely inside the warehouse of "Groupe Concerto Inc.";
(i) 4 or five times per year, the Appellant went with another employee on service calls, riding in the other employee's vehicle;
(ii) very rarely, once in the three-year period according to an employee, the Appellant used his own vehicle for his employment;
(i) regarding the taxation years in question, the Appellant admitted that he did not keep a travel log for the use of his vehicle for his employment and that he had not been required to provide supporting documents;
(j) at the objection stage, the Appellant provided a "reconstituted" travel log, but was unable, to the Minister's satisfaction, to provide explanations or documentation to support the log;
(k) for the taxation years in question, the Minister ruled that the Appellant was unable to demonstrate that the monthly travel allowance received from "Groupe Concerto Inc." was reasonable and thus included the total amount of the allowance in the calculation of the Appellant's income for each year.
[4] The Appellant and his father, Mr. Gilles Girard, testified for the Appellant. Ms. Lyne Audelin and Mr. Jean-Claude Roy testified for the Respondent.
[5] The Appellant filed six documents, numbered one to six, as Exhibit A-1. The Appellant admitted to paragraphs 4(a), 4(b), 4(d) and 4 (h)(i) of the Reply.
[6] The employer was an industrial and commercial water treatment company. Products included charcoal filters, sand filters, softeners, water towers and steam boilers.
[7] The Appellant stated that his job duties varied. He did not hold a set position. He could be asked to clean, conduct laboratory analyses, work on product production, shipping or receiving.
[8] He explained that he needed the vehicle for gathering water samples from clients, commissioning certain equipment and customer service. He stated several times that he made an average of one to two trips per week.
[9] Document 3 of Exhibit A-1 describes the Appellant's work duties. This document was prepared on September 15, 2002 by the Appellant's father, Mr. Gilles Girard, who was also the employer's sole shareholder. The document essentially repeats what the Appellant described, particularly duties outside the plant. It includes the gathering of samples from clients, customer service and various trips, such as to the bank.
[10] The Appellant denied paragraph 4(i), but in fact it is true. He explained that it is not possible for him to list his travels in 2002. The information logs that the Appellant filed as Exhibit A-2 are summary reconstituted logs.
[11] The Appellant explained that the monthly allowance covered all vehicle expenses that he might have. He was not required to report because his work varied and he did what he was asked to do.
[12] The Appellant also stated that, within the company, there were six or seven employees and that each employee received this allowance. Salespeople or representatives also had a credit card for gas.
[13] He admits to having received a $100 bonus in 1998.
[14] Under cross-examination, the Appellant stated that he was a representative from 1989 to 1995, but that it was not his type of work.
[15] He then worked internally. He prepared orders that were delivered by an independent carrier. A Mr. Landry worked in customer service and he went with him on occasion.
[16] Mr. Gilles Girard is now retired. He states that the Appellant, his son, used the vehicle for company purposes.
[17] Under cross-examination, he admitted that office employees received a travel allowance even if they did not have a vehicle.
[18] Ms. Lyne Audelin is an office clerk. She held various positions with the company, including receiving telephone calls and orders, accounting and payroll.
[19] From her office, she was able to see the plant and the parking lot.
[20] She stated that the Appellant prepared products, shipped them and analyzed water samples collected by representatives. She would see the Appellant arrive in the morning and leave in the evening. She stated that the Appellant might go with Mr. Landry once per month. He would take the latter's vehicle, rarely taking his own.
[21] She admitted that she received an allowance for a vehicle that she did not have. It was a means of paying her.
[22] Mr. Jean-Claude Roy was the Appeals Officer. He added to what the others had stated about customer service being documented in the company's accounting.
[23] Counsel for the Respondent consented to judgment with respect to the bonuses in 1999 and 2000.
[24] Counsel for the Respondent claimed that it is a matter of application of paragraph 6(1)(b) of the Income Tax Act (the "Act") and subparagraph (vii.1)(x) of the same section of the Act. An allowance received from an employer for travel to carry out one's duties is deemed to not be reasonable when that allowance is not based solely on the number of kilometres travelled.
[25] Counsel for the Respondent also claimed that the most objective witness is Ms. Audelin and that her version of the facts is very clear: the Appellant worked on-site and she did not state that the allowance was based on kilometres travelled.
Conclusion
[26] Subparagraphs 6(1)(b)(v), (vii.1), the introduction to subparagraph (x) and that subparagraph read as follows:
6(1) Amounts to be included as income from office or employment - There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable
. . .
b) Personal or living expenses - all amounts received by the taxpayer in the year as an allowance for personal or living expenses or as an allowance for any other purpose, except
. . .
(v) reasonable allowances for travel expenses received by an employee from the employee's employer in respect of a period when the employee was employed in connection with the selling of property or negotiating of contracts for the employee's employer,
. . .
(vii.1) reasonable allowances for the use of a motor vehicle received by an employee (other than an employee employed in connection with the selling of property or the negotiating of contracts for the employer) from the employer for travelling in the performance of duties or the office or employment.
. . .
and for the purposes of subparagraphs 6(1)(b)(v) 6(1)(b)(vi) and 6(1)(b)(vii.1), an allowance received in a taxation year by a taxpayer for the use of a motor vehicle in connection with or in the course of the taxpayer's office or employment shall be deemed not to be a reasonable allowance
(x) where the measurement of the use of the vehicle for the purpose of the allowance is not based solely on the number of kilometres for which the vehicle is used in connection with or in the course of the office or employment,
[27] The most important part here is subparagraph (x). To be reasonable within the meaning of the Act, an allowance must be based on the number of kilometres travelled. If not, it is deemed not to be reasonable and must be included in calculating employment income.
[28] The evidence revealed that the facts described in the Reply to the Notice of Appeal were true. During the years in question, the Appellant received a monthly travel allowance of $450 without being required to justify the expenses to his employer. Furthermore, the Appellant almost never had to travel for his work.
[29] The aforementioned allowance is thus an amount to be included in the Appellant's employment income pursuant to paragraph 6(1)(b) of the Act.
[30] Counsel for the Appellant consented to judgment with respect to including the $100 bonuses in 1999 and 2000.
[31] The appeal for the 1998 taxation year is dismissed. The appeals for the 1999 and 2000 taxation years are allowed so as to deduct the $100 amounts from the calculation of the Appellant's income.
Signed at Montréal, Quebec this 21st day of October 2003.
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"Louise Lamarre Proulx" |
Lamarre Proulx, J.
Translation certified true
on this 23rd day of March 2004.
Gerald Woodard, Translator