T-2514-75
Marcel Provost (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Marceau J.—Montreal, February
19; Ottawa, February 25, 1976.
Income tax—Deductions—Plaintiff seeking to deduct costs
of "canvassing and seeking new clients" which he contended he
was compelled to assume in order to fulfill employment
duties—Income Tax Act, R.S.C. 1952, c. 148, ss. 5(1)(b)(v),
11(6),(9),(9a).
Plaintiff, an account supervisor, was, in addition to his basic
duties, obliged to endeavour to attract new clients when possi
ble. While he spent 75-80 per cent of his time in his office, he
was required as well to go out to meet established, or even
possible or prospective clients. To his fixed salary could be
added a bonus (profits allowing), including $25 per week
expenses for "seeking new clients". As well, he would be fully
reimbursed for all travel or representation costs necessitated by
the firm's regular clients. Plaintiff was required to account for
a salary including the $25 per week allowance, so he claimed
that in order to determine the taxable amount, he could deduct
from his gross income the automobile expenses and representa
tion costs that seeking new clients had actually cost him. He
argued that the portion of his duties so devoted was separable
from his other duties, and even characterized the whole, thus
coming within section 11(9).
Held, dismissing the appeal, the strict and cumulative condi
tions of section 11(9) were not met. The employment must be
considered as a whole. Plaintiff was a salaried employee, not
paid on commission, not ordinarily required to work away from
his employer's place of business, and was annually reimbursed
in full for costs incurred in dealing with company clients to
which his activities were mainly devoted. Such repayments
were not included in his income under section 5(1)(b)(v).
INCOME tax appeal.
COUNSEL:
M. Provost for himself.
H. Richard for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
defendant.
The following is the English version of the
reasons for judgment rendered by
MARCEAU J.: Plaintiff is appealing the decision
of the Tax Review Board, refusing him the right to
deduct in calculating his income for the years
1969, 1970 and 1971 certain "costs of canvassing
and seeking new clients", which he contends he
was compelled to assume in order to fulfil the
duties of his job, and which he alleges amounted to
$1,979.06 the first year, $2,311.90 the second and
$1,383.64 the third year.
Although simple, not seriously disputed, and
moreover proven by the evidence, the facts raise a
problem of the interpretation and application of
sections 5(1)(b)(v), 11(6) and 11(9) and (9a) of
the Income Tax Act as it was then in effect
(R.S.C. 1952, c. 148).
Plaintiff was employed by a Montreal firm
which specialized in conducting advertising cam
paigns, Maurice Watier Publicité Ltée. His basic
duties were those of account supervisor and in this
capacity, supported by a team, he advised the
firm's clients and ensured that the obligations
which the business had assumed toward them were
performed. In addition, however, he had to
endeavour to attract new clients when it was possi
ble to do so. Most of his normal working time (75
to 80 per cent) was spent in his office, but he was
also required to go out to meet already established
clients, or even possible or prospective clients. His
earnings had been determined on the basis of a
fixed salary, to which could be added an annual
bonus "if the company's profits allowed", includ
ing an allowance of $25 a week added in consider
ation of the expenses of "seeking new clients"
which he might have to assume. Moreover, upon
presentation of supporting documents, he was to be
reimbursed in full for all travel or representation
costs necessitated by the firm's regular clients.
In preparing his tax returns, plaintiff naturally
did not take into account costs for which he had
been reimbursed by his employer upon presenta
tion of supporting documents, but he was required
to account for a salary which included the allow
ance of $25 a week. It is at this point that he
claimed that in order to determine the taxable
portion, he could deduct from his gross income the
automobile expenses and those expenses, generally
called representation costs, which seeking new cli
ents had actually caused him. Apparently arguing
that the part of his duties devoted to seeking new
clients could not only be separated from the other
parts, but even characterize the whole, he
endeavoured to maintain that he came within the
conditions required by section 11(9) of the Act for
a salaried employee to be eligible to deduct costs
of this nature.'
In my opinion, the strict and cumulative condi
tions of section 11(9) were not fulfilled. The
employment held by plaintiff must be considered
as a whole, even though part of the earnings
received from it were determined in consideration
of special costs incurred by certain secondary
duties which it involved. Plaintiff was a salaried
employee, not paid on commission. He was not
ordinarily required to carry on his duties away
from his employer's place of business. Each year
he was reimbursed in full for the costs which he
had incurred through his dealings with the compa-
ny's clients, to which his activities, as account
supervisor, were mainly devoted, and these repay
ments were not included in calculation of his
income in accordance with subparagraph (v) of
paragraph (b) of subsection (1) of section 5 of the
Act.
The appeal should therefore be dismissed with
costs.
' Section 11(9):
11. (9) Where an officer or employee, in a taxation year,
(a) was ordinarily required to carry on the duties of his
employment away from his employer's place of business or in
different places,
(b) 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
(c) was not in receipt of an allowance for travelling expenses
that was, by virtue of subparagraph (v), (vi) or (vii) of
paragraph (b) of subsection (1) of section 5, not included in
computing his income and did not claim any deduction for
the year under subsection (5), (6) or (7),
there may be deducted, in computing his income from the
office or employment for the year, notwithstanding paragraphs
(a) and (h) of subsection (1) of section 12, amounts expended
by him in the year for travelling in the course of his
employment.
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.