Date: 20010905
Docket: 2000-5196-IT-I
BETWEEN:
STEVEN G. MEREDITH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Counsel for the Appellant: Jehad Haymour
Counsel for the Respondent: Michael Taylor
____________________________________________________________________
Reasonsfor Judgment
(Delivered orally from the Bench, at
Calgary, Alberta, on July 6, 2001)
McArthur J.
[1] The Appellant appeals from the Minister of National Revenue's disallowance of his claim for $6,239 overseas employment tax credit (OETC) in the 1997 taxation year. The Minister relies on section 122.3 of the Income Tax Act. The parties acknowledge that the issue boils down to whether the Appellant was an employee of Stem Applications Inc. (the Company) during the l997 taxation year. The problem arises in the following manner.
[2] For the Appellant to qualify for OETC, he must have been employed for more than six months by the Company during the l997 taxation year. There is no need to deal with several additional hurdles, which I believe the parties acknowledge as having been satisfied. The question is answered by applying the criteria in Wiebe Door Services Ltd. v. M.N.R. [1986] 3 F.C. 553to the facts in this appeal which include the following.
[3] The Appellant caused the Company to be incorporated in l993. He was a one-man company. He is a highly specialized engineer who has expertise in installing and maintaining computers and related machinery used in the manufacturing process of fruit cans, soft drink cans and the like. He referred to one manufacturing client's plant in the United States producing 2,000 cans per minute. In l997, the Appellant withdrew $47,560 from the Company which he described as salary.
[4] No corporate Minute Book or similar documentation was placed in evidence but I draw an inference that the Appellant was the sole director. His former wife held 50% of the shares but had no input or control in the operations of the Company. In l997, the Company bid successfully to perform services for, amongst others, Roeslein & Associates Inc., a complete service engineering firm out of St. Louis, Missouri and Ball Corporation, one of the world's largest manufacturers of beverage and food containers.
[5] The Appellant has built up a reputation, in this narrow field, as being highly qualified. It is obvious that Roeslein and Ball were hiring his expertise and not retaining the Company as such in that it had no other workers. Occasionally, the Company retained a subcontractor, but there was no evidence of this in l997 and the extent of this practice was very limited. In an undated letter (Exhibit A-5), probably in l997, to Roeslein under the letterhead of the Company, the Appellant states:
I am pleased to quote the following rate for contract work after our conversation today.
Normally for short term work my rate is $60.00 per hour (US funds) but I extend to Roeslein the same courtesy as a preferred client and quote the daily rate of $400.00 per day in US funds. ...
Stem supplies all commonly needed materials, equipment and software for completion of contract work. As of now, I have Allen Bradley SLC500 and PLC5 Software ...
He goes on to list perhaps another five or six items. I quote this to indicate how the Appellant portrays himself in his relationship with the Company. He intermingles the Company and himself personally, emphasizing that he treats them as one and the same. The Company is not an entity separate and apart from the Appellant.
[6] In l997, the Company entered into periodic contracts with Roeslein or container manufacturers, and the Appellant attended their manufacturing sites for various periods of time outside of Canada. The clients were paying for his expertise. They had a specific need or problem and he was asked to fix it.
[7] Both counsel made reference to Wiebe Door (supra) which refers to the four tests of control, profit or risk of loss, ownership of tools and finally, integration. In Charbonneau v. M.N.R., [1996] F.C.J. No. 1337, Décary J. referred to the Wiebe Door guidelines and emphasized that the object is to determine the overall relationship of the parties. In this appeal, the Appellant controlled the Company without direction or interference. He stated that the Company was incorporated for appearance or prestige and tax purposes. When I view the overall picture, it is apparent that the Appellant controls the Company and uses it for his own benefit from time to time when it is convenient. The Company does not use him.
[8] The Appellant paid himself an income when and if there was money in the bank. The Company had overdraft privileges but with the Appellant's personal guarantee to the bank. The Appellant personally had the opportunity of making a profit or risking a loss.
[9] The Company owned the equipment and this is the test that favours an employee relationship.
[10] The integration test does not really apply. Without the Appellant there is no Company. It was the Appellant's business.
[11] In Martin v. M.N.R., 2000 T.C.J., No. 334, Bowman J. points out that there can be an employer and employee relationship in a closely held corporation. It is a question of fact. In the present case, I conclude, taking all of the circumstances and facts into consideration, that the assumption in paragraph 8(b) of the Reply to the Notice of Appeal is correct. It was the Appellant's business and the Appellant cannot be considered an employee of the Company during the l997 taxation year. Having found this, there is no need to proceed further. The Appellant has not met a condition precedent in subsection 122.3(1.1) of the Act and the appeal is dismissed.
Signed at Ottawa, Canada, this 5th day of September, 2001.
"C.H. McArthur"
J.T.C.C.
COURT FILE NO.: 2000-5196(IT)I
STYLE OF CAUSE: Steven G. Meredith and
Her Majesty the Queen
PLACE OF HEARING: Calgary, Alberta
DATE OF HEARING: July 5, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge C.H. McArthur
DATE OF JUDGMENT: July 12, 2001
APPEARANCES:
Counsel for the Appellant: Jehad Haymour
Counsel for the Respondent: Michael Taylor
COUNSEL OF RECORD:
For the Appellant:
Name: Jehad Haymour
Firm: Fraser Milner Casgrain
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-4443(GST)I
BETWEEN:
LA BRASSERIE LABATT LIMITÉE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on June 21, 2001 at Toronto, Ontario by
the Honourable Judge Gordon Teskey
Appearances
Counsel for the Appellant: Thomas B. Akin
Jason Vincze
Counsel for the Respondent: Michael Ezri
Harry Erlichman
JUDGMENT
The appeal from the assessment made under the Excise Tax Act, notice of which bears number DGMET-885 and is dated October 26, 1998 is allowed, with costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant is entitled to one hundred percent of the ITCs in respect of food, beverages and entertainment contracted for by its employees who were reimbursed for the actual expense, provided that the Minister shall have the opportunity to audit, within a reasonable time, each and every application for these types of input tax credit in order to assess the accuracy of the amount claimed by the Appellant, in accordance with the attached Reasons for Judgment.
Signed at Edmonton, Alberta, on the 24th day of August, 2001.
|
"Gordon Teskey" |
J.T.C.C.