Date: 20010118
Docket: 2000-1477-IT-I
BETWEEN:
ROBERT BISSELL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Beaubier, J.T.C.C.
[1] This appeal pursuant to the Informal Procedure was heard at Kelowna, British Columbia on January 12, 2001. The Appellant and his chartered accountant, Earl Knowles, testified.
[2] Paragraphs 3 to 6, inclusive, of the Reply to the Notice of Appeal read:
3. In computing his tax payable for the 1997 taxation year, the Appellant claimed a deduction of $6,916.79 for an Overseas Employment Tax Credit ("OETC").
4. In so assessing the Appellant's income tax return for the 1997 taxation year, the Minister made the following assumptions of fact:
a) during the 1997 taxation year, the Appellant was an employee of the Federal Government, Industry Canada, Pacific Region (the "Employer");
b) in accordance with an "Interchange Canada Agreement" (the "Agreement") between the Employer and "Spectrocan Engineering Inc" ("S.E.I."), the Appellant was assigned to S.E.I. for a one year period from July 2, 1996 to July 1, 1997 to work in Indonesia as S.E.I.'s "Management Operations Advisor";
c) under the terms of the Agreement noted in subparagraph 4(b) above, the Appellant continued to be an employee of Industry Canada and S.E.I. reimbursed the Employer for the Appellant's salary plus any applicable benefits;
d) a statement from "AGRA Systems Limited" (formerly S.E.I.) dated November 19, 1999 indicated that the Appellant "...was an independent supplier to AGRA Systems Limited with no employer/employee relationship...";
e) S.E.I. was not the Appellant's employer and the Employer did not engage in a prescribed or qualifying activity in connection with a contract under which it carried on business outside Canada pursuant to subsection 122.3(1) of the Income Tax Act (the "Act");
f) the Employer was not a "Specified Employer" within the meaning of subsection 122.3(2) of the Act); and
g) the Appellant is not entitled to a deduction in computing tax payable in regard to the 1997 taxation year with respect of employment outside Canada pursuant to section 122.3 of the Act.
B. ISSUES TO BE DECIDED
5. The issue is whether the Appellant was entitled to a deduction from tax payable, in respect of an OETC for the 1997 taxation year.
C. STATUTORY PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT
6. He relies on sections 3 and 122.3 and subsections 5(1) and 248(1) of the Act.
[3] All of the assumptions are correct. However, the Appellant takes the position that while he was assigned to Spectrocan Engineering Inc. ("S.E.I."), S.E.I controlled him, provided his tools and facilities of employment, and integrated him into its operations, as a result of which he was an employee of S.E.I. and so he is entitled to the Overseas Employment Tax Credit.
[4] Exhibit A-1, the Letter of Agreement signed by the Appellant, Industry Canada and S.E.I. in June and July of 1996 is clear. Mr. Bissell was assigned to S.E.I., but he remained an employee of Industry Canada with salary, benefits and Industry Canada salary increases continuing to apply to him. S.E.I., and not Industry Canada, indemnified him and provided him with legal assistance (page 3). But he was an "Advisor" to S.E.I. and S.E.I. paid Industry Canada for his services. S.E.I. merely paid Mr. Bissell specified expenses. The actual contract by S.E.I. for Mr. Bissell's services appears to be between Industry Canada and S.E.I. with its attached "Conditions of Service" affixed to specify to Mr. Bissell what he could expect from S.E.I. while in Indonesia. They are titled "Terms of Assignment".
[5] The Court finds that Mr. Bissell was an employee of Industry Canada at all material times in 1997 and as such was assigned to perform duties for Industry Canada at S.E.I. Industry Canada was not a "specified employer" and any duties which Mr. Bissell undertook while on assignment were performed as an employee under the direction of Industry Canada.
[6] The appeal is dismissed.
Signed at Calgary, Alberta, this 18th day of January, 2001.
"D. W. Beaubier"
J.T.C.C.