[OFFICIAL ENGLISH TRANSLATION]
1999-3710(IT)I
BETWEEN:
ALAIN BEAULIEU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on April 20, 2001, at Sherbrooke, Quebec, by
the Honourable Judge Alain Tardif
Appearances
Counsel for the Appellant: Marco Pierre Caza
Counsel for the Respondent: Anne-Marie Desgens
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1995, 1996 and 1997 taxation years are dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 18th day of January 2002.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 3rd day of April 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020118
Docket: 1999-3710(IT)I
BETWEEN:
ALAIN BEAULIEU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] The appeals are for the 1995, 1996 and 1997 taxation years. The notices of reassessment resulted from the addition of $9,820, $9,000 and $8,100 in employment benefits to the appellant's income for those years.
[2] In issuing the notices of reassessment that were confirmed on May 27, 1999, the Minister of National Revenue ("the Minister") assumed the following facts:
[TRANSLATION]
(a) the employer, Saint-Romuald Construction inc., did not consider the appellant to be an employee governed by the construction decree during the years at issue;
(b) during the years at issue, the appellant worked for Saint-Romuald Construction inc. primarily as a civil engineering technician at work sites; he also prepared estimates at the head office for the purpose of making bids and assessing the cost of work;
(c) during the years at issue, the appellant's residential address was in Estrie while the employer's head office was in a suburb of Québec;
(d) during the years at issue, the appellant received $300 a week from Saint-Romuald Construction inc. as a board and lodging allowance regardless of whether he performed his duties at the work sites or the head office;
(e) during the years at issue, only the board and lodging allowance paid to the appellant while he was working at the head office of Saint-Romuald Construction inc. was added to his income for the following reasons:
(i) the appellant's duties at the head office of Saint-Romuald Construction inc. were not of a temporary nature but were part of that company's normal activities;
(ii) the head office of Saint-Romuald Construction inc. is not a work site or a special work site;
(iii) during each of the years at issue, the appellant worked at the head office of Saint-Romuald Construction inc. for periods of close to 30 weeks.
[3] The issue is whether the amounts received by the appellant in 1995, 1996 and 1997, that is, $9,820, $9,000 and $8,100, were taxable income on the basis that they were employment benefits.
[4] The appellant explained that he and his family had their home in Notre-Dame-Des-Bois, a municipality more than 100 kilometres away from Québec.
[5] The appellant, a civil engineering technician, explained that he had to leave that area in 1995, 1996 and 1997 to obtain a job corresponding to his experience and knowledge. He said that he was involved in carrying out many work projects, ranging from road construction to the management of wastewater and aqueduct water.
[6] His work also involved preparing bids to obtain contracts. He explained that the company that had hired him generally had to submit several bids for each contract it obtained because of the aggressiveness of the competition.
[7] To prepare the bids, he had to go to the place where the work was to be performed; he analyzed the soil composition, verified the extent of the constraints of all kinds and identified the various companies that could provide the equipment and the materials, such as sand, gravel and chippings. He assessed the scope of the work on the basis of the place and the region where the work was to be performed, while taking account of the advantages and constraints.
[8] All of the information gathered was then put through a computer program that did the appropriate calculations and provided the final data needed to prepare the bid and submit it to the interested parties.
[9] The appellant explained that he worked primarily outside the office, directly on the work sites; he was at the office very occasionally. In answer to a question by the Court, he estimated that about 10 percent of his time was spent at the office.
[10] The appellant did not have an assigned office; he used one of the three or four offices that had been set up for various visiting employees at the company's headquarters.
[11] The respondent filed a long list of companies (Exhibit A-1) to which a bid had been submitted; they were mainly companies in the Québec area, where the appellant's employer had its headquarters.
[12] The appellant argued that during the years at issue, he spent the vast majority of his time at the various work sites either to prepare a bid or to supervise the performance of the work.
[13] Denis Otis also testified; he was the labour relations manager at the company where the appellant worked; he was responsible primarily for applying the decree concerning the field of economic activity that consists of infrastructure works, such as road networks and the organization of water and sewer system work.
[14] He described how complex the application of the decree was, emphasizing the many fine points and the numerous data he had to take into account to ensure compliance with the decree.
[15] Like the appellant, he said that the construction industry was very unusual in that there was no job security for the workers; they were often laid off with a few hours' notice. According to the witness, the jobs were quite temporary, since their duration depended on the length of the contracts or the number of contracts to be performed.
[16] Mr. Otis said that good employees were in especially great demand and were highly valued by employers, which tended to do everything possible to keep them.
[17] The appellant and Mr. Otis stressed that construction was an unstable, precarious field of economic activity; everything depended on the contracts obtained, which were generally few in number because of the many companies interested in doing the same work.
[18] Moreover, the economy was not at its best during the years at issue. As a result, some companies cut prices, while others, including the appellant's employer, bid on work in more remote areas to get away from competitors that were less interested in those contracts because of the greater number of constraints involved.
[19] Companies working in that field of economic activity very commonly had to lay off workers periodically while waiting to obtain a contract. Very often, employees had to leave home to go where there was work to be done. Finally, construction workers had to change employers regularly.
[20] The appellant often referred to work stoppages, the instability in the industry and the need to work for several employers. However, the evidence showed that he worked continuously over long periods of time. I therefore noted a considerable difference between the theory that emerged from the testimonial evidence and the appellant's actual working conditions during the taxation years at issue.
[21] The evidence was also specific as regards the consistency in the identical amounts the appellant received each week for travelling to the work sites.
[22] The appellant argued that those amounts were a minimum travel allowance; if his costs were lower, he benefited; however, he explained that if his costs were higher than the allowance, he could be reimbursed for the difference by his employer, provided that he submitted vouchers. In other words, he systematically received a certain amount that he did not have to justify.
[23] In point of fact, it has been shown on the balance of evidence that all expenses were paid by his employer; he had a car and a credit card to pay the costs he incurred when using the car. The other expenses-meals, accommodation and so on-were paid in full either out of petty cash or simply by reimbursing the appellant when he submitted vouchers.
[24] In concrete terms, the appellant was away from Québec for a long time only very rarely; the evidence referred to a work site in Senneterre. Generally speaking, he had to work mainly in the Québec area.
[25] For the appellant to support and reinforce his arguments, it would have been important to adduce persuasive evidence that the $300 corresponded to the reimbursement of actual expenses incurred in and for the performance of his duties. He did not submit any documents, records or vouchers in this regard. On the contrary, the evidence showed that he had a car and a credit card and that he could be reimbursed for certain expenses if he submitted vouchers.
[26] Accordingly, there is good reason to believe that the $300 the appellant received from his employer every week had nothing to do with the reimbursement of expenses that were actually incurred. It was a kind of bonus or premium or simply a benefit.
[27] The many questions put to Denis Otis when he testified revealed that he considered the appellant to be an employee subject to the decree because his residence was not in the Québec area. In other words, the Québec area, where the appellant worked, was considered to be the location of a job site far from the appellant's place of residence in Notre-Dame-Des-Bois.
[28] That was a rather liberal, not to say highly flexible, interpretation of the decree. Such an interpretation does not hold up since, on the basis of such logic, the appellant could have received two premiums, that is, the same amount he was paid every week regardless of where he worked in the immediate Québec area and another premium covering his expenses when he was outside the Québec area.
[29] Such a conclusion may, prima facie, seem unreasonable; no responsible, serious employer ever pays its employees' expenses twice; on the contrary, employers generally establish all sorts of mechanisms to verify and monitor expenses to avoid abuses and ensure that they pay solely what is provided for in decrees, agreements or contracts.
[30] In this case, what may seem unlikely on the face of it becomes, on the contrary, very coherent if one considers Mr. Otis' testimony. He said unequivocally that very good land survey technicians were indispensable employees who were in great demand by companies because they were essential to the preparation of bids and the performance of work. Such employees could therefore differentiate between making a profit or incurring a loss and obtaining or losing a contract.
[31] In other words, the evidence showed that the appellant had a strategic job and expertise that was quite indispensable; he was an employee who was essential to the efficient operation of the company.
[32] Given this premise, it becomes very easy to understand an employer's interest in such a strategic, essential employee. Since the decree provides for the same hourly wage and similar working conditions for all those with the same classification, it is natural or even essential, and fair enough, that companies use all kinds of tactics to increase and sustain the interest of qualified people in order to ensure their loyalty, which is in the companies' best interests.
[33] The appellant's employer had the idea of using the decree, enhanced by the use of a car, to strengthen the employment relationship between the appellant and the company. The method was no doubt worthwhile for both parties, since the appellant was loyal in that he almost never had any wasted time and always worked for the same group.
[34] However, such an agreement has no effect against the respondent. It has been shown on the balance of evidence that the allowance the appellant received was basically employment income that was disguised as a premium paid under the decree to serve as an allowance for expenses incurred in the course of an office or employment outside the immediate area of his residence.
[35] The evidence showed that the appellant was unquestionably an employee who had qualifications and, above all, exceptional experience. His employer therefore arranged things so as to interest him in remaining its employee by providing him with various benefits, including the use of a car and a company credit card, continuity in his employment and, finally, a regular weekly allowance of $300 to serve as compensation for duties performed mainly in the Québec area.
[36] In this regard, the appellant referred to Interpretation Bulletin IT-91R4, which lists the conditions that must be complied with:
· the employee must have worked at a special work site, being a location at which the duties performed by the employee were of a temporary nature;
· the employee must have maintained at another location a self-contained domestic establishment as the employee's principal place of residence;
· the self-contained domestic establishment must have been, throughout the period, available for the employee's occupancy and not rented by the employee to any other person;
· the self-contained domestic establishment must have been one to which, by reason of distance, the employee could not reasonably be expected to have returned daily from the special work site; and
· the period while the employee was required by his or her duties to be away from the employee's principal place of residence, or to be at the special work site, must have been at least 36 hours.
[37] With regard to duties of a temporary nature, the appellant adduced theoretical evidence concerning the practices and customs that exist in the construction industry. I have no doubt that such things are common in that field of economic activity; however, the appeals relate exclusively to the appellant's situation, and only the facts applicable to the appellant himself are relevant.
[38] To avoid the taxation of the weekly premium that amounted to $9,820 for 1995, $9,000 for 1996 and $8,100 for 1997, the employer and the employee described it as an allowance that was paid and owed under the decree to which they were both subject.
[39] To show that their interpretations were sound, the appellant and the paymaster indicated that for the appellant, the Québec area was a different location than his place of residence in Notre-Dame-Des-Bois and that, as a result, he had to leave his place of residence to work.
[40] In other words, the appellant argued that he worked during the years at issue at a special work site or a location away from his ordinary residence.
[41] The general principle that income from an office or employment is included in computing a taxpayer's income is found in subsection 5(1) and paragraphs 6(1)(a) and (b) of the Act.
[42] However, subsection 6(6) of the Act sets out an exception for the value of expenses or an allowance for board and lodging:
(6) Employment at special work site or remote location. Notwithstanding subsection (1), in computing the income of a taxpayer for a taxation year from an office or employment, there shall not be included any amount received or enjoyed by the taxpayer in respect of, in the course or by virtue of the office or employment that is the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses the taxpayer has incurred for,
(a) the taxpayer's board and lodging for a period at
(i) a special work site, being a location at which the duties performed by the taxpayer were of a temporary nature, if the taxpayer maintained at another location a self-contained domestic establishment as the taxpayer's principal place of residence
(A) that was, throughout the period, available for the taxpayer's occupancy and not rented by the taxpayer to any other person, and
(B) to which, by reason of distance, the taxpayer could not reasonably be expected to have returned daily from the special work site, or
(ii) a location at which, by virtue of its remoteness from any established community, the taxpayer could not reasonably be expected to establish and maintain a self-contained domestic establishment,
if the period during which the taxpayer was required by the taxpayer's duties to be away from the taxpayer's principal place of residence, or to be at the special work site or location, was not less than 36 hours; or
(b) transportation between
(i) the principal place of residence and the special work site referred to in subparagraph (a)(i), or
(ii) the location referred to in subparagraph (a)(ii) and a location in Canada or a location in the country in which the taxpayer is employed, in respect of a period described in paragraph (a) during which the taxpayer received board and lodging, or a reasonable allowance in respect of board and lodging, from the taxpayer's employer.
[43] The appellant did not work for several employers during various periods that were interrupted by periods without work. The situation in this case was quite different: the appellant worked regularly and was laid off very exceptionally. He always worked for the same employer or for a related or affiliated group.
[44] With regard to the nature of the duties, the estimated total duration of a project and, finally, the agreed period for which the appellant was hired, I consider it important to reproduce the appellant's argument word-for-word:
[TRANSLATION]
Nature of the duties:
It must be recalled that the appellant is a civil engineering technician, that his trade comes into play only during a certain phase (Phase A) of a project and that such duties are usually considered to be of a temporary nature, like those of a carpenter.
Estimated total duration of a project:
The evidence shows that the appellant was hired either to make bids or to work at a construction site. Accordingly, for each of those duties, he was given specific instructions for a definite period of time.
Agreed period for which the employee was hired under the contract of employment or other employment terms:
It has been put in evidence that the appellant never received any guarantees with regard to his employment; he was a full-time employee and did not receive any benefits under the Act respecting labour standards. It has also been shown that the employer had no work to give him other than the work associated with his trade, that is, work as a civil engineering technician.
[45] In actual fact, unlike the various operators, the duration of whose work basically depended on the use of machinery, the appellant had a special status, primarily in terms of the benefits he received but also in terms of continuity, since he was directly associated with and involved in the activities that generated work.
[46] The appellant put forward several hypotheses and referred to situations that were more theoretical than practical. Such evidence may have been useful in defining the context in which the appellant worked, but it was not sufficient to dispose of the appeal.
[47] The issue in the case at bar must be resolved by considering only the facts, terms and conditions and circumstances that existed for the appellant. Hypotheses, generalities and even customs have nothing to do with the factors that must be considered to dispose of the appeal.
[48] Theoretically, the appellant had no contractual or formal guarantee with regard to the duration of his employment. However, given the conditions he was granted (car, credit card, reimbursement of expenses, various premiums), he was no doubt aware that his employer was doing everything possible and leaving absolutely nothing to chance to provide him with stability and continuity. Moreover, if the appellant's arguments were valid, the vast majority of jobs would be of a temporary nature.
[49] Very few people can claim to have absolute job security. All jobs are dependent on the economic situation of the company doing the hiring. The appellant certainly did not have job security, but this does not automatically mean that his duties were of a temporary nature, like those of a machine operator; rather, his status was comparable to the status of the people who had administrative responsibilities in the company. Was he not one of the main architects of most of the bids, which were the very foundation of the company's existence?
[50] I am not sure that the carpenters, machine operators and all the company's other workers benefited from a car, a credit card and such long, continuous periods of work.
[51] The evidence shows that he had a strategic job that was highly valued by the employer, which did everything possible to keep him in his job. There is no doubt that this concern was entirely legitimate; however, the employer could not disguise the facts by characterizing a considerable part of the income payable to the appellant as allowances payable under the construction decree.
[52] Given the various benefits he received, the appellant could or even had to consider his employment to be stable, regular and dependable, and his decision to leave his family in Notre-Dame-Des-Bois was a personal decision, although it may have been legitimate. However, he could not turn his personal choice to his advantage and, above all, rely on that choice to consider himself a worker who was obliged to travel long distances to perform his duties.
[53] The evidence shows that there were no reasonable or valid grounds to explain or support the appellant's choice to keep a residence in Notre-Dame-Des-Bois so as to be able to establish that his residence in Québec was required for the performance of his duties.
[54] The amounts received by the appellant were basically income received in connection with his employment; the appeals must therefore be dismissed.
Signed at Ottawa, Canada, this 18th day of January 2002.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 3rd day of April 2003.
Sophie Debbané, Revisor