Date: 20020611
Docket: 2001-3265-IT-I
BETWEEN:
GERRY McCANN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Bowman, A.C.J.
[1] These appeals are from assessments for the appellant's 1997 and 1998 taxation years. The issue is the appellant's entitlement to a deduction in computing her income of $6,190.43 and $7,474.68 as employment expenses under subsection 8(1) of the Income Tax Act.
[2] In 1997 and 1998 the appellant was a flight attendant employed by Canadian Airlines International ("CAI"). She was also the union designated chairperson of the Occupational Health and Safety Committee[1] ("OHSC") of the Airline Division of CUPE Local 4010. She spent upwards of 60% of her time in connection with her work as chairperson of the OHSC.
[3] Part II of the Canada Labour Code contains extensive provisions relating to the safety and health of persons employed in a federal work, undertaking or business. Section 135 deals with the establishment and operation of safety and health committees such as the OHSC chaired by the appellant. Subsection 135(1) reads:
Subject to this section, every employer shall, for each work place controlled by the employer at which twenty or more employees are normally employed, establish a safety and health committee consisting of at least two persons one of whom is an employee or, where the committee consists of more than two persons, at least half of whom are employees who
(a) do not exercise managerial functions; and
(b) subject to any regulations made under subsection (11), have been selected by the trade union, if any, representing the employees and by any employees not represented by a trade union.
[4] Subsection 135(6) sets out the detailed and extensive powers of such committees. It reads:
A safety and health committee
(a) shall receive, consider and expeditiously dispose of complaints relating to the safety and health of the employees represented by the committee;
(b) shall maintain records pertaining to the disposition of complaints relating to the safety and health of the employees represented by the committee;
(c) shall cooperate with any occupational health service established to serve the work place;
(d) may establish and promote safety and health programs for the education of the employees represented by the committee;
(e) shall participate in all inquiries and investigations pertaining to occupational safety and health including such consultations as may be necessary with persons who are professionally or technically qualified to advise the committee on those matters;
(f) may develop, establish and maintain programs, measures and procedures for the protection or improvement of the safety and health of employees;
(g) shall regularly monitor programs, measures and procedures related to the safety and health of employees;
(h) shall ensure that adequate records are kept on work accidents, injuries and health hazards and shall regularly monitor data relating to those accidents, injuries and hazards;
(i) shall cooperate with safety officers;
(j) may request from an employer such information as the committee considers necessary to identify existing or potential hazards with respect to materials, processes or equipment in the work place; and
(k) shall have full access to all government and employer reports relating to the safety and health of the employees represented by the committee but shall not have access to the medical records of any person except with the consent of that person.
[5] Subsections 135(7), (8) and (9) read:
(7) A safety and health committee shall keep accurate records of all matters that come before it pursuant to subsection (6) and shall keep minutes of its meetings and shall make those minutes and records available to a safety officer on the officer's request.
(8) A safety and health committee shall meet during regular working hours at least once each month and, where meetings are urgently required as a result of an emergency or other special circumstance, the committee shall meet as required whether or not during regular working hours.
(9) The members of a safety and health committee are entitled to such time from their work as is necessary to attend meetings or to carry out any of the other functions of a member of the committee, and any time spent by a member while carrying out any of the functions of a member of the committee shall, for the purpose of calculating wages owing to that member, be deemed to have been spent at work.
[6] It appears from the evidence that there was a very high incidence of health and safety problems among airline attendants. The OHSC was an active, busy and important committee. That is not, however, the issue. The question is whether the appellant can deduct the expenses claimed, which are set out in Schedule A to the Reply to the notice of appeal.
GERRY McCANN
TAXATION YEARS 1997 AND 1998
EXPENSES CLAIMED AND DISALLOWED
1997 1998
Motor vehicle expenses $ 84.10 $ 28.80
Parking $ 30.00 $ 36.00
Supplies $ 120.00 $ 120.00
Telephone $ 330.00 $ 1,260.00
Capital cost allowance $ 787.50 $ 1,344.60
Work space in home $ 4,838.83 $ 4,685.28
Expenses claimed $ 6,190.43 $ 7,474.68
Expenses disallowed $ 6,190.43 $ 7,474.68
Expenses allowed $ $
Work space in home expenses claimed:
Heat $ 3,250.00
Electricity $ 1,000.00
Maintenance $ 800.00
Property taxes $ 1,148.22
Rent $32,400.00 $24,750.00
Cable $ 438.00 $ 876.00
Total $33,838.00 $30,824.22
Personal use portion claimed $28,999.17 $26,138.94
Amount claimed $ 4,838.83 $ 4,685.28
[7] The statutory basis of her claim is subsection 8(1) of the Act which reads in part
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.1) where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places, and
(ii) was required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of the office or employment,
amounts expended by the taxpayer in the year in respect of motor vehicle expenses incurred for travelling in the course of the office or employment, except where the taxpayer
(iii) received an allowance for motor vehicle expenses that was, because of paragraph 6(1)(b), not included in computing the taxpayer's income for the year, or
(iv) claims a deduction for the year under paragraph (f);
...
(j) amounts paid by the taxpayer in the year as
(i) annual professional membership dues the payment of which was necessary to maintain a professional status recognized by statute,
(ii) office rent, or salary to an assistant or substitute, the payment of which by the officer or employee was required by the contract of employment,
(iii) the cost of supplies that were consumed directly in the performance of the duties of the office or employment and that the officer or employee was required by the contract of employment to supply and par for.
...
[8] Counsel for the respondent relies upon subsection 8(2) which reads
Except as permitted by this section, no deductions shall be made in computing a taxpayer's income for a taxation year from an office or employment.
[9] There is no doubt that a claim to deduct employment expenses must fall within the provisions of section 8. If it does not it must fail.
[10] Both parties rely upon subsection 8(13), which reads
Notwithstanding paragraphs (1)(f) and (j),
(a) no amount is deductible in computing an individual's income for a taxation year from an office or employment in respect of any part (in this subsection referred to as the "work space") of a self-contained domestic establishment in which the individual resides, except to the extent that the work space is either
(i) the place where the individual principally performs the duties of the office or employment, or
(ii) used exclusively during the period in respect of which the amount relates for the purpose of earning income from the office or employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties of the office or employment;
(b) where the conditions set out in subparagraph (a)(i) or (ii) are met, the amount in respect of the work space that is deductible in computing the individual's income for the year from the office or employment shall not exceed the individual's income for the year from the office or employment, computed without reference to any deduction in respect of the work space; and
(c) any amount in respect of a work space that was, solely because of paragraph (b), not deductible in computing the individual's income for the immediately preceding taxation year from the office or employment shall be deemed to be an amount in respect of a work space that is otherwise deductible in computing the individual's income for the year from that office or employment and that, subject to paragraph (b), may be deducted in computing the individual's income for the year from the office or employment.
[11] Counsel for the respondent did not question the fact that the appellant incurred the expenses claimed. Paragraphs 10 and 11 of the reply set out the respondent's position.
10. He respectfully submits that the Appellant is not entitled to the Expenses pursuant to subsection 8(1) of the Act as the Appellant was not required to incur or to pay the Expenses as a condition of her employment and for the purpose of earning income from employment and therefore is prohibited from deducting the Expenses by subsection 8(2) of the Act and further the Appellant is precluded from claiming work space in home expense by virtue of subsection 8(13) of the Act.
11. He further submits that the Appellant is not entitled to claim either capital cost allowance or mortgage interest as section 8 of the Act does not permit the deduction of amounts incurred on account of capital by an employee.
[12] So far as paragraph 11 is concerned, the appellant abandoned her claim to deduct capital cost allowance and she did not claim mortgage interest.
[13] The position set forth in the reply differs somewhat from that expressed in a letter to her accountants, Grieves & Associates, from the appeals division of the CCRA. The letter reads
Re: Gerry McCann
Notices of Objection dated April 4, 2000
1997 and 1998 Taxation Years
We have reviewed the above objections.
We have discussed and clarified with the Canadian Airlines, we were told the position as a Health and Safety personnel is a volunteer job and there is no employment contract for this position.
Furthermore, all expenses incurred by the personnel would be reimbursed by the union.
Please note that employment expenses may only be claimed by employees earning a salary or earning commission income. If there is no employment contract and the job is only on a volunteer basic, one cannot deduct any expenses (even one do not get reimburse) [sic] because the expenses are not considered incurred for the purpose of earning employment income.
Based on the above information, we propose to confirm the previous reassessment and we will hold the above file till November 30, 2000 for you to submit any comments or to provide us with the supported employment contract. We will send you a Notice of Confirmation if no reply is received by the stated date.
[14] Counsel for the respondent put forward the following arguments:
(a) When performing her duties as chairperson of the OHSC she was doing so as a volunteer and not as an employee of CAI.
(b) The appellant was not required by her contract of employment to incur the expenses.
(c) She could have been reimbursed by CAI or the union for any expenses she incurred.
(d) There was office space available at the airport as well as a computer.
(e) She did not need to use her car.
(f) The office space in her home is not where she principally performed the duties of her office or employment and therefore the deduction of the expenses of that office is prohibited by subsection 8(13).
[15] This is indeed a formidable array of arguments. The easy solution would be to accept some or all of them and dismiss the appeals. Nonetheless the claim is a most deserving one and I think this court has an obligation to the appellant to examine with some care the Crown's arguments. Unrepresented appellants make up a large and important part of the work of this court, particularly in the informal procedure. The course of least resistance is to dismiss the appeal because usually the Crown's arguments have some semblance of plausibility and if the trial judge accepts them and dismisses the appeal he or she can take comfort from the fact that the unrepresented litigant is unlikely to appeal to the Federal Court of Appeal. Our obligations as a court of first instance with exclusive jurisdiction to hear appeals under the Income Tax Act and other federal statutes go far beyond adopting superficially plausible arguments.
[16] We have here a person who is employed by CAI and is appointed by her union to serve as a chairperson of an important committee, the creation of which is required by a federal statute, the Canada Labour Code, which sets out in detail the powers and functions of the committee. The creation of such a committee is a responsibility imposed on the employer, CAI, and not on the union. The Crown's argument seems to be that in serving on the OHSC she was not doing so as an employee of CAI but as a volunteer on behalf of the union. The fact that the union is entitled to nominate someone to the committee does not mean that in serving on the committee she was somehow doing so on behalf of the union, outside of any contract of employment with CAI. I think that in chairing the committee the appellant was doing so as an employee of CAI under her contract of employment. One might test this conclusion by asking whether her status as an employee of CAI ceased when she served on the committee if CAI were not unionised. The answer is, I think, obvious. This conclusion disposes of one of the major obstacles to the appellant's claim.
[17] Since I have concluded that in performing her duties on the OHSC she was doing so under her contract of employment with CAI the next enquiry must be whether the expenses that she incurred were required under that contract of employment to be incurred by her. The answer to this question requires a preliminary examination of several other assertions made by the respondent.
[18] The Crown called a Mr. Stephen Knowles who is at present Manager of Safety Operations and InFlight Products for Air Canada. In the years in question he was the manager of flight attendants for CAI for Vancouver, Calgary and Edmonton. He stated that there were office space and facilities such as a computer provided by CAI for the work of the OHSC. He also stated that any expenses would have been reimbursed either by "the company or the union".
[19] Ms. McCann was quite adamant in denying his assertions. She stated that any office space that might have been available was quite inadequate for the purposes of the OHSC and that no computer was available for her use as chairperson of the committee. She also stated that she would not have been reimbursed by the union or CAI for her expenses.
[20] Some passing reference was made by Mr. Knowles to the collective agreement. It was not put in evidence and I am not prepared to accept his recollection of what might be in it.
[21] In any case in which there is a difference between Mr. Knowles' evidence and that of the appellant I prefer the appellant's because I believe it to be more reliable. Mr. Knowles stated that he received a "strong direction" from CAI that he was not to approve any T-2200 certificates relating to office space and payment of expenses. T-2200 certificates (Declaration of Conditions of Employment) are required to be filed as a condition of an employee being entitled to deduct employment expenses. Originally the appellant filed such certificates indicating that the conditions in subsection 8(1) of the Act were present. Then in December 2000 Mr. Knowles at the request of the CCRA filed new forms T-2200 stating that none of the conditions were met.
[22] I do not think that Mr. Knowles was an impartial witness. Moreover, he was not on the OHSC in the years in question and his evidence about the appellant being entitled to reimbursement of her expenses or having office space available to her is at best conjectural.
[23] On the evidence I have concluded that neither CAI nor the union made office space or a computer available to the appellant that would enable her to perform her responsibilities as chairperson of the OHSC. Moreover I am not persuaded that she had any right to be reimbursed for her expenses. This latter point was not pleaded as an assumption and the Crown therefore had the onus of establishing it. That onus has not been met.
[24] To summarize the conclusions so far, then:
(a) The appellant's duties as chairperson of the OHSC were performed under the contract of employment with CAI.
(b) Adequate facilities in the form of office space and computer were not provided to her and therefore if she was to perform the duties as chairperson of the OHSC she had to supply them herself.
(c) She was not entitled to be reimbursed for these expenses.
[25] From these conclusions does it follow that the payment of the expenses was required by the contract of employment? If the duties were covered by her contract of employment and to perform those duties she had to incur the expenses I think the contract of employment required her to do so. The appellant stated that she had a "verbal" (I take it she means oral) agreement that she had to work out of a home office. I accept this evidence but I do not think it is altogether necessary. If the effective performance of the duties of her employment required that she perform them from her home or incur the expenses I think that the contract of employment implicitly required it. An explicit contract in writing is not necessary.
[26] Before I come to the large item of the work space in the home I shall dispose of the smaller items. I am not prepared to allow motor vehicle expenses and parking. These expenses relate to the cost of travelling from her place of employment at the airport to her home where she has her office. I do not think that the cost of getting from the airport to her home, even if she has an office at home, is what paragraph 8(1)(h.1) of the Act is aimed at. This would be a strained and somewhat unreasonable interpretation.
[27] The cost of supplies falls under subparagraph 8(1)(i)(iii) of the Act and is deductible. The telephone charges of $330 in 1997 and $1,260 in 1998 are supplies within the meaning of subparagraph 8(1)(i)(iii) of the Act (see Patrick J. Fardeau v. The Queen, file number 1999-2399(IT)I, May 23, 2002). I believe the 1997 charge was for a part of her home line whereas in 1998 the amount was for a cell phone that she required. I see no reason for disallowing this.
[28] I come now to the more substantial charges of $4,838.83 and $4,685.28 for the cost of the work space in her home. The appellant put in pictures of the office and it seems obvious that the entire room was needed for the work she was doing. Indeed, to judge by the clutter she probably could have done with more. I can see why she needed the office at home. The largest item is rent in both years — $32,400 and $24,750. Her allocation of the cost between personal and home office is not unreasonable (14.3% in 1997 and 15.2% in 1998) and is in any event not challenged. However I do not see where subparagraph 8(1)(i)(ii) (office rent) covers any of the other items listed under "work space in home expenses claimed". Using the percentage allocation used by the appellant but applying it only to the rent we arrive at a figure for the home office for 1997 of $4,633 and for 1998 of $3,762. This result may seem a little unreasonable considering that if her income were from a business the other home office expenses would be allowed but subsection 8(2) is quite specific and all subparagraph 8(1)(i)(ii) speaks of is office rent.
[29] The respondent says that the appellant is not entitled to any amount for office rent because the home office is not where she "principally performs the duties of her office or employment".
[30] The home office was used exclusively for the work of the OHSC. The appellant testified that the work of the OHSC was conducted about 90% of the time in her office and that she spent upwards of 60% of her time on the work of the OHSC. The percentages may be imprecise to some extent but they are the best evidence I have. 90% of 60% is 54%. As Dussault J. said in Transport Jacques Lemieux Inc. v. M.N.R., [1991] C.T.C. 2612 at page 2614:
While the word "principally" would seem to cause little difficulty in that it means for the most part or, expressed as a percentage, over 50 per cent, the disagreement seems to be regarding the factors used to describe it.
[31] On that basis the office was used "principally" by the appellant in performing the duties of the office or employment. I prefer however not to have the case turn on a mathematical calculation. As a matter of common sense the office is used exclusively for this important aspect of the appellant's work. In ordinary parlance this is where she principally does her work.
[32] The appeals are allowed and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment to allow the deduction under subsection 8(1) of the Act in the computation of the appellant's income for 1997 and 1998 from her office or employment of the amounts of $5,083 and $5,142 respectively. The appellant is entitled to her costs if any.
Signed at Ottawa, Canada, this 11th day of June 2002.
"D.G.H. Bowman"
A.C.J.
COURT FILE NO.: 2001-3265(IT)I
STYLE OF CAUSE: Between Gerry McCann and
Her Majesty The Queen
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: May 8, 2002
REASONS FOR JUDGMENT BY: The Honourable D.G.H. Bowman
Associate Chief Judge
DATE OF JUDGMENT: June 11, 2002
APPEARANCES:
For the Appellant: The Appellant herself
Counsel for the Respondent: Nadine Taylor
COUNSEL OF RECORD:
For the Appellant:
Name: --
Firm: --
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-3265(IT)I
BETWEEN:
GERRY McCANN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on May 8, 2002 at Vancouver, British Columbia, by
The Honourable D.G.H. Bowman, Associate Chief Judge
Appearances
For the Appellant: The Appellant herself
Counsel for the Respondent: Nadine Taylor
JUDGMENT
It is ordered that the appeals from assessments made under the Income Tax Act for the 1997 and 1998 taxation years be allowed and the assessments be referred back to the Minister of National Revenue for reconsideration and reassessment to allow the deduction under subsection 8(1) of the Income Tax Act in the computation of the appellant's income from her office or employment of the amounts of $5,083 and $5,142 respectively.
The appellant is entitled to her costs if any.
Signed at Ottawa, Canada, this 11th day of June 2002.
|
"D.G.H. Bowman" |
A.C.J.
[1] This was the term used in the evidence. The Canada Labour Code uses the expression "Safety and Health Committee".