T-5176-79
Henry Cival (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Smith D.J.—Winnipeg, March 4
and September 19, 1981.
Income tax — Income calculation — Deductions — Appeal
from Tax Review Board's decision disallowing a deduction for
capital cost allowance on the plaintiff's car — Plaintiff's
employer paid a flat mileage rate to compensate the plaintiff
for all ownership and operating costs relating to the use of the
car while the plaintiff was performing the duties of his
employment — Mileage payments fell short of compensating
plaintiff for actual costs — No formal contract existed be
tween the plaintiff and his employer with respect to travelling
expenses — Whether the plaintiff can deduct the uncompen-
sated expenses for the use of his car for his employer's
purposes — Income Tax Act, S.C. 1970-71-72, c. 63, s.
8(1)(h),(j) — Income Tax Regulations, SOR/54-682, s.
1100(1 )(a), Schedule B, class 10.
Appeal from a decision of the Tax Review Board disallowing
a deduction for capital cost allowance on the plaintiff's car. At
the request of his employer, the plaintiff used his own car for
transportation to and from the business premises where his
duties required him to go. No formal contract was entered into
with respect to his travelling expenses on Departmental busi
ness. The employer paid a flat mileage rate to offset all
ownership and operating costs. Depreciation is included in
ownership costs. The mileage payments fell short of offsetting
the ownership costs. The plaintiff claimed the shortfall as a
deduction. Paragraph 8(1)(h) of the Income Tax Act provides
that the taxpayer may deduct amounts expended for travelling
in the course of his employment provided that the taxpayer, (i)
was ordinarily required to carry on the duties of his employ
ment away from his employer's place of business, (ii) was
required, under the contract of employment, to pay the travel
ling expenses incurred in the performance of the duties of his
employment, and (iii) was not in receipt of an allowance for
travelling expenses that was, by virtue of subparagraph
6(1)(b)(v),(vi) or (vii), not included in computing his income
and did not claim any deduction for the year under paragraph
(e),(f) or (g). The question is whether the plaintiff can deduct
the uncompensated expenses for the use of his automobile for
government purposes.
Held, the appeal is allowed. In order to show that he is
entitled to a deduction for the uncompensated expenses for the
use of his automobile for government purposes, the plaintiff
must prove that all three conditions set out in paragraph
8(1)(h) have been complied with. With regard to the condition
stated in subparagraph (i), the evidence establishes that it has
been complied with. With respect to subparagraph (ii), the
total of mileage payments received by the plaintiff in 1977 fell
short of paying the government's share of his automobile
expenses in that year, including depreciation of the car. The
plaintiff must pay the shortfall. Nothing in the terms of the
arrangement for the use of the car on government business
provides that he shall do so, but one of the terms is that what he
will be paid is limited to the authorized mileage allowance.
That authorized amount being insufficient to pay all the car
expenses intended to be provided for, it is clear that the
shortfall results from the insufficiency of the mileage rate, in
the circumstances of this case, to encompass all the expenses.
Consequently, since the shortfall is occasioned by the insuffi
ciency of the payment provision of the arrangement, the plain
tiff, under the contract, is required to pay the shortfall. The
fact that he is not required to pay all the car expenses should
not prejudice his position with respect to the portion he is
required to pay. Thus condition (ii) has been complied with.
None of the provisions in the subparagraphs and paragraphs
mentioned in subparagraph (iii) apply. Condition (iii) has been
complied with. Subparagraph 8(1)(h)(iii) only applies to such
allowances as are, by virtue of subparagraphs (v), (vi) or (vii)
not included in computing the taxpayer's income and to deduc
tions claimed under paragraphs (e),(f) or (g) of subsection
8(1).
Cekota v. Minister of National Revenue 64 DTC 654,
distinguished. Meier v. Minister of National Revenue 67
DTC 224, distinguished. Guay v. Minister of National
Revenue 70 DTC 1781, distinguished. Krieger v. Minister
of National Revenue 79 DTC 269, distinguished. Mac-
Donald v. Minister of National Revenue 80 DTC 1685,
distinguished.
INCOME tax appeal.
COUNSEL:
A. J. Irving for plaintiff.
W. Lefebvre for defendant.
SOLICITORS:
Aikins, MacAulay & Thorvaldson, Win-
nipeg, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
SMITH D.J.: This is an appeal by a taxpayer
from the decision of the Tax Review Board dated
July 4, 1979, dismissing the taxpayer's appeal
from the assessment for income tax of his income
for the taxation year 1977.
The plaintiff is a payroll auditor in the Win-
nipeg Office of the Department of National Reve
nue. His duties require him to be away from his
employer's office for 90 per cent or more of his
working hours. Some of his work takes him to the
premises of many taxpayers in Winnipeg, but a
great deal of it requires him to travel to various
cities and towns outside the city. The evidence
indicates that at the request of his immediate
superior he agreed to use his own automobile for
transportation to and from the business premises
where his duties required him to go. This use of his
car resulted in his incurring substantial transporta
tion expenses in addition to those resulting from
using the car for his own purposes.
No formal contract was entered into with
respect to his travelling expenses on Departmental
business, but the Treasury Board of the Federal
Government issues a travel directive which makes
detailed provisions relating to compensation for
expenses of this kind. This document is not a
statute but it does set out governmental policy,
which the officials of government will carry out.
The revised edition of this directive, dated April,
1977, was effective for most of that year. Part 3 of
the directive deals with transportation procedures
and private vehicle rates. Paragraph 3.03 sets out
the mileage rates. The portion relevant to the facts
of this case reads as follows:
3.03 The mileage rates payable for authorized official use of
private cars within and outside the headquarters area are:
(a) when the employer requests, and the employee agrees to the
use of the car:
All provinces
except Nfld.,
N.W.T. and Yukon
cents per mile
(i) for each of the 1st 4,000
miles per fiscal year 19.5
(ii) for each mile from 4,001 to 8,000
miles per fiscal year 17.5
(iii) for each mile in excess of 8,000
miles per fiscal year 16.5
(b) when an employee requests permission
to use a car, and the employer agrees 9.0
•
Paragraph 3.061 provides:
3.061 The rates, prescribed above ... are paid on the basis of a
two-rate system as follows:
(a) when the employer requests the employee to use a private
vehicle and the employee agrees, the rates paid are designed to
offset the cost of "ownership" and the cost of "operating" a
private vehicle, i.e.:
(i) "Ownership Costs", consisting of depreciation, provincial
tax, finance charges, insurance and license fees, and
(ii) "Operating Costs", consisting of gasoline, oil, lubrica
tion, tires, maintenance and repairs.
(b) when the employee requests permission to use a private
vehicle and the employer agrees, the rates paid cover only the
"operating costs".
The plaintiff clearly comes under paragraph
3.03(a). He was paid mileage at the rate pre
scribed in this paragraph. It is also clear that he
comes under paragraph 3.061(a), which paragraph
indicates that the rates payable under paragraph
3.03(a) are designed to offset both "ownership
costs" and "operating costs," and that ownership
costs include depreciation. I understand paragraph
3.061(a) as meaning that the rates payable under
paragraph 3.03(a) are designed to offset all owner
ship and operating costs as described in paragraph
3.061(a), or more accurately, all such costs as the
government is willing to pay.
The amount paid to the plaintiff under para
graph 3.03(a) for the 1977 taxation year was
$1,270.89. He claims the expenses incurred by him
that were attributable to the use of the car on
government business in that year, 42 per cent of
the total expenses, amounted to $1,782.92, and
consisted of the cost of insurance, gas, oil and
repairs, and capital cost allowance (depreciation).
He thus claims in respect of both ownership costs
and operating costs. There is no dispute between
the parties as to the accuracy of his figures. The
amount claimed for capital cost allowance is
$985.95, more than half of all the expenses.
In the result the expenses exceeded the amount
paid to him by $512.03. In other words, the mile
age payments at 19.5 cents per mile fell $512.03
short of offsetting the ownership and operating
costs they were designed to offset.
On his income tax return for 1977 he deducted
this amount of $512.03. The deduction was disal-
lowed by the Minister on assessment and that
decision was upheld by the Tax Review Board.
The rules governing what may be deducted from
otherwise taxable income are statutory. They are
not affected by Treasury Board directives. The
rules respecting deduction of travelling expenses
are found in paragraph 8(1)(h) and subparagraph
(j)(ii) of the Income Tax Act, R.S.C. 1952, c. 148
as amended by S.C. 1970-71-72, c. 63, which read
as follows:
8. (1) In computing a taxpayer's income for a taxation year
from an office or employment, there may be deducted such of
the following amounts as are wholly applicable to that source or
such part of the following amounts as may reasonably be
regarded as applicable thereto:
(h) where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of his
employment away from his employer's place of business or
in different places,
(ii) under the contract of employment was required to pay
the travelling expenses incurred by him in the performance
of the duties of his office or employment, and
(iii) was not in receipt of an allowance for travelling
expenses that was, by virtue of subparagraph 6(1)(b)(v),
(vi) or (vii), not included in computing his income and did
not claim any deduction for the year under paragraph (e),
(/) or (g),
amounts expended by him in the year for travelling in the
course of his employment;
(j) where a deduction may be made under paragraph (/) or
(h) in computing the taxpayer's income from an office or
employment for a taxation year,
(ii) such part, if any, of the capital cost to him of an
automobile used in the performance of the duties of his
office or employment as is allowed by regulation;
Two points are clear to me from reading these
provisions: first, under paragraph (h) all three
situations described in subparagraphs (i), (ii) and
(iii) must be shown to exist in order to qualify for
deduction of travelling expenses; second, capital
cost allowance (depreciation) is not included in
travelling expenses under paragraph (h), but may
be deducted under paragraph (j), if and to the
extent that it is allowed by regulation. In my view
the word "regulation" in subparagraph (ii) of
paragraph (j) means "regulation enacted by Order
in Council under statutory authority". Thus it does
not include a Treasury Board directive.
Part XI of the Income Tax Regulations, SOR/
54-682, deals with capital cost allowances. Para
graph 1100(1)(a) lists 25 classes of property and
the maximum percentage of the capital cost of
property in each class which may be deducted in
each taxation year. Schedule B to the Regulations
contains a description of the kinds of property that
are included in each class, and the first kind of
property mentioned in class 10 is "automotive
equipment, including a trolley bus, but not includ
ing an automotive railway car acquired after May
25, 1976, a railway locomotive, or a tramcar".
This description obviously includes an automobile.
In respect of property in class 10 the maximum
percentage deductible is 30.
Applying these provisions to the situation
described supra in subparagraph 8(1)(j)(ii) of the
Act, it is clear that the maximum amount of
capital cost that may be deducted each year in
respect of an automobile owned and used by an
employee in the performance of the duties of his
employment is the proportion of 30 per cent of the
capital cost that the use of the automobile for the
duties of his employment is of the total use of the
automobile for that taxation year. As the original
capital cost is depreciated by the amount deducted
each year, the maximum amount deductible, in the
language of paragraph 1100(1) (a) of the Regula
tions, is 30 per cent of the indicated proportion
of the amount remaining ... from the undepreciated capital
cost to him as of the end of the taxation year (before making
any deduction under this subsection for the taxation year) of
property of the class [i.e.: the automobile];
It is government policy to pay for the use of
private automobiles in its service by inclusive mile
age rates allowances, which rates have increased
over the years by reason of the increasing prices of
cars and increasing costs of operating them. Such
a method of payment does not lend itself to an
accurate payment of depreciation computed on a
basis of a fixed rate of cents per mile. This is so
because a car depreciates in value year after year,
regardless of the number of miles it is driven. To
illustrate, let us assume that five cents per mile is
allowed for depreciation, to be paid for as a capital
cost allowance, and that a new car bought for
$10,000 is driven on government business, during
the first year after acquisition, a distance of 5,000
miles. Depreciation at the allowable rate of 30 per
cent would be $3,000. If the private use of the car
was also 5,000 miles, making a total of 10,000
miles for the year, half the total depreciation of
$3,000, i.e. $1,500 would be sustained by the
taxpayer in respect of the government use of the
car, while the amount he would receive as a capital
cost allowance at five cents a mile would be $250,
or only one sixth of the actual depreciation. If the
car had been driven a total of 20,000 miles, of
which 10,000 miles were on government business,
he would have received $500 or one third of the
actual depreciation. And if the mileage rate
allowed for depreciation had been 10 cents per
mile the amount he would have received as capital
cost allowance would have been doubled in each
case. If the plaintiff's experience in 1977 was
about average, significantly more than 10 cents
per mile would be needed to fully recoup the
taxpayer for his allowable depreciation. This
would certainly be true in all cases where the car is
new or only one or two years old, is fairly high in
price and during the year in question has only been
driven a moderate distance on government
business.
On the other hand if the car, costing $10,000
new, had been 5 years old at the beginning of the
year, its depreciated value at that time, allowing
30 per cent depreciation each year on the
depreciated value at the beginning of the year,
would have been $1,680.70. Thirty per cent
depreciation for the sixth year of operation would
have been $504.21. For his 50 per cent of miles
driven it would have been $252.11. The amount he
would have received as capital cost allowance at
five cents per mile for 5,000 miles would have been
$250, approximately the same as the allowable
depreciation; at ten cents per mile it would have
been $500, or approximately double the allowable
depreciation; at ten cents per mile for 10,000 miles
it would have been $1,000, or about four times the
allowable depreciation.
Similarly, a uniform mileage rate does not take
into account the wide differences that exist in new
car prices.
My conclusion is that, having adopted a mileage
rate as a simple, convenient method of paying for
private cars used on government business, the gov
ernment has almost certainly, in fixing a rate for
cases in which the employer has requested an
employee to use his own car on government busi
ness, tried to set a rate that was reasonably fair,
that in some cases would result in overpayment of
depreciation costs and in other cases would result
in underpayment, depending on such factors as the
cost and age of the car, the number of miles driven
on government business and the number of cents
per mile allowed for depreciation.
To be completely fair, in cases where the
employer, viz. the government, has asked the
employee to use his automobile for government
purposes and the employee has done so, the gov
ernment should pay the full cost of having and
using the car for its proportion of its use during the
year, including depreciation, no more and no less.
The government's policy is designed to produce
this result, more or less approximately, but as we
have seen, payment of a fixed number of cents per
mile sometimes results in the employee receiving
more than the full cost of the car for the propor
tion of the total car mileage for the year that is
attributable to government use, and sometimes, as
in the present case, leaves the employee with sub
stantial uncompensated expense. In the one case
the amount of the overpayment is net income and
properly subject to income tax. In the other the
amount of the uncompensated expense could be
eliminated by allowing it to be deducted from the
employee's income for the year.
As indicated, supra, depreciation, though not
strictly speaking included in the term "travelling
expenses", is, in my opinion a deductible property
expense under subparagraph 8(1)(j)(ii) of the Act,
section 1100 of the Regulations, and Schedule B to
the Regulations. However, under the decision of
the Tax Review Board, the plaintiff, for the 1977
taxation year, after receiving the full amount of
the mileage payment to which he was entitled,
finds himself with uncompensated expenses for use
of his automobile for government purposes in the
amount of $512.03. It is this amount which he
claims the right to deduct from his income for
1977. In order to show that he is entitled to make
this deduction he must prove that all three condi
tions set out in paragraph 8(1)(h), quoted supra,
have been complied with.
With regard to the condition stated in subpara-
graph (i), the evidence establishes clearly that it
has been complied with. The parties disagree with
respect to subparagraph (ii). For convenience I
think it will be useful to quote it again at this
point. It provides:
8. (1) ...
(h) where the taxpayer, in the year,
(ii) under the contract of employment was required to pay
the travelling expenses incurred by him in the performance
of the duties of his office or employment, and
amounts expended by him in the year for travelling in the
course of his employment;
may be deducted from the taxpayer's income for
the year.
Counsel for the plaintiff claims that his client
was required to pay the travelling expenses, this
claim being denied by the defendant. The words
"under the contract of employment" have some
significance in deciding which view is correct.
There is no evidence that the plaintiff was
employed under a written contract, nor that he
was informed that under the terms of his employ
ment he would be required to pay the travelling
expenses incurred by him on government business.
The government's policy, as set out in paragraphs
3.03 and 3.061 of the Treasury Board directive,
quoted supra, indicates, on the contrary, that,
while he usually paid these expenses in the first
instance, he was to be compensated for them by
receiving the mileage payment authorized for this
purpose. The general practice was for the
employee to keep a record of his travelling
expenses, including the number of miles travelled,
and every two weeks he would put in a detailed
statement of expenses and would receive payment
for them, including the authorized payment for the
number of miles his car had been driven on gov
ernment business. On some occasions he would
estimate in advance what his expenses would be,
ask for and receive the amount estimated, any
necessary adjustments being made when his
detailed statement of actual expenses was submit
ted following his return to Winnipeg. In either
case it is clear that his authorized travelling
expenses would not be borne by him finally, but
would be paid by the government. The real inten
tion was that the employee would be reimbursed
by the government for expenses incurred by him in
carrying out his duties.
Unfortunately, as we have seen, the total of the
mileage payments received by the plaintiff in 1977
fell short by $512.03 of paying the government's
share of his total automobile expenses in that year,
including depreciation of the car. Consequently,
unless he is successful in this action he will be
$512.03 out of pocket, because as the person who
incurred the expenses and the person who owned
the car, the loss will have to be borne by him,
unless he has a right to pass it on to someone else.
Counsel for the plaintiff submits that, since the
government is not bound to pay more than the
amount payable under its policy, the plaintiff is
required to pay the shortfall of $512.03. As I view
the situation the plaintiff most certainly must pay
the shortfall. Nothing in the terms of the arrange
ment for the use of the car on government business
provides that he shall do so, but one of the terms is
that what he will be paid is limited to the author
ized mileage allowance. That authorized amount
being insufficient to pay all the car expenses
intended to be provided for, it is clear that the
shortfall results from the insufficiency of the mile
age rate, in the circumstances of this case, to
encompass all the expenses. Consequently I think
it may be held properly that, since the shortfall of
$512.03 which the plaintiff must pay is occasioned
by the insufficiency of the payment provision of
the arrangement, the plaintiff, under the contract,
is required, in the broad sense of that word, to pay
the shortfall. The fact that he is not required to
pay all the car expenses should not prejudice his
position with respect to the portion he is required
to pay. Thus, in my opinion the plaintiff has shown
that condition (ii) has been complied with.
Turning to condition (iii), for convenience I
repeat it here. It provides:
8. (1) ...
(h) where the taxpayer, in the year,
(iii) was not in receipt of an allowance for travelling
expenses that was, by virtue of subparagraph 6(1)(b)(v),
(vi) or (vii), not included in computing his income and did
not claim any deduction for the year under paragraph (e),
(f) or (g),
amounts expended by him in the year for travelling in the
course of his employment;
may be deducted from the taxpayer's income for
the year.
None of the provisions in the subparagraphs and
paragraphs mentioned in subparagraph (iii) supra
apply, in my opinion, to the situation we are
dealing with in this case. Consequently, it cannot
be said that the plaintiff, in 1977, was in receipt of
an allowance for travelling expenses that was, by
virtue of any of the provisions of the stated sub-
paragraphs of paragraph 6(1)(b), not included in
computing his income. Nor did he claim any
deduction for that year under any of paragraphs
(e), (f) or (g) of subsection 8(1). In my view
condition (iii) of paragraph 8(1)(h) has been com
plied with.
Finally the jurisprudence that has developed on
the kind of issue we are dealing with requires
consideration. Most of it is found in decisions of
the Tax Appeal Board or Tax Review Board which
were not taken by way of appeal to the court's.
Counsel for the defendant referred particularly
to five cases, all of them decisions of the Tax
Appeal Board except the two most recent cases of
the five, which were decisions of the Tax Review
Board. The five cases are:
Cekota v. M.N.R. 64 DTC 654; Meier v.
M.N.R. 67 DTC 224; Guay v. M.N.R. 70 DTC
1781; Krieger v. M.N.R. 79 DTC 269; and
MacDonald v. M.N.R. 80 DTC 1685.
The headnote in the report of the Cekota case
states:
All three requirements of section 11(9) [now section 8(1)(h)]
must be met before a taxpayer can obtain relief. In this case,
although paragraph (a) [now (i)] had been satisfied, paragraph
(b) [now (ii)] did not meet with compliance. The employer had
agreed to reimburse the appellant for any expenses incurred by
him while travelling abroad on business, and the evidence did
not establish that the appellant was obliged to pay any of his
own travelling expenses.
The present case differs on two points of fact.
The government (employer) did not agree to pay
all of the plaintiff's expenses. Under its policy it
did pay for necessary lodging, meals and long
distance telephone calls, but for the use of his car
it unilaterally set a mileage rate of so many cents
per mile and paid that amount, which amount, as
we have seen, was insufficient, by $512.03, to pay
all the costs of the car for the government portion
of the car's use in 1977. We have also seen that,
because the insufficiency of the government pay
ment, the plaintiff, of necessity, had to bear the
burden of the amount, $512.03. In my view, this
decision is not injurious to the plaintiff's case.
In the Meier case the employee had used her car
on her employer's business in 1964 for one trip
only, a distance of 171 miles, for which she was
reimbursed at 10 cents per mile. She deducted in
her income tax return for that year the cost of
operating the car for the full year, having been
advised erroneously that she was entitled to do so.
It was held that she was not entitled to the deduc
tion. The requirements of subsection 11(9), now
paragraph 8(1)(h), had not been met. Having been
reimbursed for her trip on her employer's business,
she was not required to pay the travelling expenses
incurred in the performance of her duties. The
decision clearly turned on the fact that she had
been reimbursed.
In the Guay case the appellant sought to deduct
from his 1968 income a substantial amount addi
tional to what he had received from his employer
for the use of his car in the performance of his
duties. The Minister disallowed the claim and the
Tax Appeal Board upheld that decision. The
Board, in giving its decision, said [at page 1781]:
In order for an employee to have the right to deduct travel
ling expenses from his income (in this case, salary), he must not
have received any sum in lieu of travelling expenses. If he does
receive any sum to cover travelling expenses occasioned by his
work or in the course of his work, the Act does not permit him
to claim them.
The Board then quoted the three paragraphs of
subsection 11(9) of the Act, now subparagraphs of
paragraph 8(1)(h), and also subsection 11(11),
now paragraph 8(1)(j). It then concluded:
As the appellant, on the one hand, was not required to pay his
travelling expenses, and on the other hand, was in receipt of an
allowance for travelling expenses, I regret that I must find
there is no ground for his appeal.
I am unable to accept this conclusion or the
statement of law contained in the first quotation
supra. I have found nothing in the Act that can
properly be interpreted as meaning that payment
by an employer to an employee, whether as an
allowance or a reimbursement, of any amount,
however small or inadequate, for travelling
expenses incurred by the employee in the perform
ance of his duties, will prevent the employee from
claiming successfully the right to deduct expenses
properly incurred. It is difficult to think that Par
liament had any intention that an inadequate pay
ment should have such a result. I have stated,
earlier in these reasons, that in my opinion, where
an employer pays an employee part only of the car
expenses incurred by the employee in using his
automobile in the performance of his duties, the
result is that the employee is required to pay the
balance of those expenses.
The second ground for the decision in the Guay
case, is, in my opinion, definitely wrong. It is not
every allowance received for travelling expenses
that prevents a taxpayer, under subparagraph
8(1)(h)(iii), from claiming a right to deduct any
travelling expenses from his income for the year in
which they were incurred, but only an allowance
that was, by virtue of subparagraph (v), (vi) or
(vii) of paragraph 6(1)(b) not included in comput
ing his income, or if the taxpayer claimed any
deduction for the year under paragraph (e), (f) or
(g) of subsection 8(1). Neither in the Guay case
nor in the present case do the car expenses with
which those cases are concerned fall into any of
the situations described in any of the indicated
subparagraphs and paragraphs. Further, in the
present case counsel for the plaintiff stated that
the allowance or reimbursement of car expenses
that he claimed was required to be included in his
income for the year and was so included.
In the Krieger case the taxpayer travelled on his
employer's business up to 30 days each year. He
received a travel allowance and claimed to deduct
additional expenses. It was held by the Tax Review
Board that he did not qualify for the deduction
because he was not "ordinarily" required to be
away from his employer's place of business, he was
not obliged to pay travelling expenses, and he in
fact received an allowance for those expenses. This
case differs from those we have just been consider
ing only on the ground that the taxpayer was not
"ordinarily" required to be away from his employ
er's place of business, which is not the situation we
are concerned with.
In the MacDonald case the Tax Review Board
dismissed the taxpayer's appeal on the ground that
he was not required to pay the travelling expenses
he incurred. Further, he was in receipt of both a
travelling allowance and a mileage allowance. The
case is on all fours with some of the others already
discussed. I deem it unnecessary to discuss it
further.
I have read a number of other decisions of the
Tax Appeal Board and of the Tax Review Board.
All of them are to the same effect as those dis
cussed supra. I have also read several decisions of
the Federal Court and of the Supreme Court of
Canada, which dealt with deductions from income,
but have concluded that they were of little assist
ance in the present case as none of them dealt with
the kind of situation and statutory provisions with
which we are here concerned.
With all due respect for what appears to have
been the invariable view of the Tax Appeal Board
and the Tax Review Board, I am unable to accept
their view of the law as correct.
To begin with, in this case there is no dispute as
to the items of automobile expense claimed by the
plaintiff, or as to the amounts of such items. Nor is
there any dispute as to the amount paid to the
plaintiff for those expenses. Consequently I accept
as a fact that the total amount claimed was legiti
mately incurred by him in the performance of the
duties of his employment. It is likewise clear that,
after receiving the amount paid to him by the
government under its policy of reimbursement or
allowance, there was a balance outstanding of
$512.03. He is not entitled to any further payment
under the government's policy, but the costs were
incurred by him and unless he can deduct them
from his income, he must bear the burden of them.
As indicated earlier, in the broad sense of the
expression "he was required to pay them" under
the arrangement for payment by the government,
because it was the failure of that arrangement to
pay all the automobile costs which saddled him
with the burden of the balance of them. In my
view therefore subparagraph 8(1)(h)(ii) of the
Income Tax Act has been complied with.
In my view, also, the Tax Appeal Board and the
Tax Review Board have been mistaken in their
understanding of the meaning and effect of sub-
paragraph 8(1)(h)(iii) of the Act. As stated above,
that subparagraph does not apply generally to all
allowances for travelling expenses. It does not even
apply, in terms, to all such allowances that are not
included in computing the taxpayer's income. It
only applies to such allowances as are, by virtue of
subparagraphs (v), (vi) or (vii) not included in
computing the taxpayer's income and to deduc
tions claimed under paragraphs (e), (f) or (g) of
subsection 8(1). None of those subparagraphs or
paragraphs have any relation to the kind of situa
tion we have in this case. I cannot find that
subparagraph (iii) of paragraph 8(1)(h) has not
been complied with.
In the final result the plaintiff will have judg
ment in his favour with costs. The matter is
referred back to the Minister of National Revenue
for reassessment of the plaintiff's income for the
year 1977 on the basis that he is entitled to deduct
the sum of $512.03 from his income for that year,
being the balance of automobile expenses incurred
in that year in the performance of the duties of his
employment, but disallowed by the Minister.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.