[OFFICIAL ENGLISH TRANSLATION]
97-2256(IT)I
BETWEEN:
DANIEL PEARSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on April 15, 1998, at Québec, Quebec, by
the Honourable Judge Guy Tremblay
Appearances
Counsel for the Appellant: The Appellant himself
Counsel for the Respondent: Catherine Letellier
JUDGMENT
The appeal from the assessments made under the Income Tax Act for the 1992, 1993 and 1994 taxation years is allowed, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Québec, Quebec, on April 27, 1998.
|
"Guy Tremblay" |
J.T.C.C.
Translation certified true
on this 11th day of June 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 19980427
Docket: 97-2256(IT)I
BETWEEN:
DANIEL PEARSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Guy Tremblay, J.T.C.C.
Issue
[1] According to the Notice of Appeal and the Reply to the Notice of Appeal, the issue is whether the appellant is correct in claiming home office expenses of $1,428, $1,576 and $1,537 for the 1992, 1993 and 1994 taxation years, respectively. According to the appellant, he is both a sales representative and a sales reviewer for Les Aliments Lesters Limitée. His territory covers the Eastern Townships, the Lower St. Lawrence, the North Shore, Beauce and Saguenay-Lac-St-Jean. For the purposes of his work, he allegedly drove 70,000 kilometres in 1992 and 66,479 kilometres in 1994.
[2] According to the respondent, the appellant did not use the home office for meeting customers in the ordinary course of performing his duties during the years at issue.
Burden of proof
[3] The appellant bears the burden of showing that the respondent's assessments are incorrect. This burden of proof derives from a number of judicial decisions, including the Supreme Court of Canada's judgment in Johnston v. Minister of National Revenue.[1]
[4] In Johnston, the Court held that the facts assumed by the respondent to support assessments or reassessments are also presumed to be true until proven otherwise. In the case at bar, the facts assumed by the respondent are described in subparagraphs (a) to (g) of paragraph 4 of the Reply to the Notice of Appeal. That paragraph reads as follows:
[TRANSLATION]
4. In making the reassessments dated May 24, 1996, for the 1992, 1993 and 1994 taxation years, the Minister assumed the following facts, inter alia:
(a) during the years at issue, the appellant was employed by Les Aliments Lesters Limitée (hereinafter "the employer"); [admitted]
(b) during the years at issue, the appellant was a commission salesperson; [admitted subject to amplification]
(c) during the years at issue, the appellant met his customers at a place other than at his employer's place of business; [admitted subject to amplification]
(d) the appellant reported the following number of kilometres as the distance he drove for employment purposes:
Kilometres for Total
Year employment purposes kilometres
1992 70,000 km 70,000 km
1994 66,479 km 74,584 km
[admitted]
(e) during the years at issue, the part of the appellant's self-contained domestic establishment for which he claimed home office expenses was not the place where he principally performed the duties of his office or employment; [denied]
(f) during the years at issue, the part of the appellant's self-contained domestic establishment for which he claimed home office expenses was not used on a regular and continuous basis for meeting his customers or other persons in the ordinary course of performing the duties of his office or employment; [denied]
(g) accordingly, for the 1992, 1993 and 1994 taxation years, the Minister disallowed the home office expenses claimed by the appellant in the amount of $1,428 for the 1992 taxation year, $1,576 for the 1993 taxation year and $1,537 for the 1994 taxation year. [denied]
Facts in evidence
[5] With respect to subparagraph 4(b) of the Reply to the Notice of Appeal, the appellant argued that, in addition to being a commission salesperson, he was also the supervisor of two sales representatives. He said that, in his field of sales, like many others, results are what matter. He has 14 years of seniority with his employer and knows his trade. The customers call the tune. One has to know how to understand them.
[6] For that purpose, customers must be met not on Mondays or Fridays but on the other days of the week between 8:30 a.m. and 5:00 p.m.
[7] On Mondays, he meets the two representatives at his home office to prepare the week's work. Given the territories to be covered (Eastern Townships, Beauce, Lower St. Lawrence, North Shore, Saguenay-Lac-St-Jean), planning must be done accordingly to achieve the best result.
[8] On the road, he works 22 to 24 hours a week meeting customers from 8:30 a.m. to 5:00 p.m. He arranges it so that he can cover his territory outside his customers' business hours. For example, when he goes to Saguenay-Lac-St-Jean, he leaves at 5:00 or 6:00 a.m. so that he can be with a customer at 8:30 a.m. He returns home in the evening. He does this two or three days a week. He updates the cards for each customer he has met during the day.
[9] He works in his office four to six hours every weekend planning programs and promotions for customers and preparing for Monday's meeting with the representatives.
[10] In 1997, his employer, after going over the sheets for all the representatives, reviewed his sheet and put the following down as a condition of employment: [translation] "40% of work done at home". According to Form T2200 signed by the employer, the appellant is obliged to rent an office or use a portion of his home: that portion is a room in which he has a desk, computer, telephone and fax machine; where he sees a few customers and contacts his employer and customers from his territories; and also where he meets with the two representatives every Monday.
[11] The appellant goes to his employer's office, which is in Montréal, every three months.
Act - Analysis
Act
[12] The provision of the Act that governs this case is subsection 8(13). It reads as follows:
8(13) Work space in home. Notwithstanding paragraphs (1)(f) and (i):
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.
[13] Subparagraph 8(13)(a)(i) cannot apply to the appellant, since he does not "principally"-that is, more than 50 percent of the time-perform the duties of his employment there.
[14] Nonetheless, the Court is of the opinion that, given that he is obliged to have an office at home and given the facts summarized above (see paragraph 10), subparagraph 8(13)(a)(ii) does apply to him.
[15] The amount claimed is not disputed by the respondent in the Reply to the Notice of Appeal.
Conclusion
[16] The appeal is allowed and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment.
Signed at Québec, Quebec, on April 27, 1998.
|
"Guy Tremblay" |
J.T.C.C.
Translation certified true
on this 11th day of June 2003.
Sophie Debbané, Revisor