certain expenses and disbursements incurred for living expenses in the provincial capital while in attendance at legislative sessions and for travelling expenses from Calgary to Edmonton and return for week-ends during the time of such session.
All of these deductions were disallowed by the Minister of National Revenue; and an appeal MINISTER to the Exchequer Court of Canada was dismissed.
Upon appeal to this Court,
Held that the expenses above mentioned are not such as the appellant is entitled to deduct under the provisions of the Income War Tax Act. 2. Such expenses are "not wholly, exclusively and necessarily laid out or expended for the purpose of earning the income" within the terms of section 6 (1) (a) of the Act.
3. Travelling expenses incurred by the appellant are not "travelling expenses * * * in the pursuit of a trade or business "within the meaning of the words used in section 5 (1) (f) of the Act.
Judgment of the Exchequer Court of Canada ([19461)
Ex. C.R. 18) affirmed.
APPEAL from the judgment of the Honourable Mr. Justice Cameron, Deputy Judge of the Exchequer Court of Canada (1), dismissing an appeal from the decision of the Minister of National Revenue confirming the appellant's assessment under the Income War Tax Act for the year 1941.
Leave to appeal to the Supreme Court of Canada was granted by the Chief Justice in Chambers.
Redmond Quain K.C. for the appellant.
the judgment of that Court in not holding that:
(1) The said expenses were wholly, exclusively and necessarily expended for earning the income as stipulated in section 6 (1) (a) of the Income War Tax Act; or,
(2) The said expenses consisted of travelling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a business; and therefore should be deducted from income as provided by section 5 (1) (f) of the Act.
Taxable income is defined in section 3 (d) (ii) of the Act and is said to include the salaries, indemnities or other remuneration of * * * members of Provincial Legislative Councils and Assemblies.
The sole problem therefore is whether the expenses above mentioned are such as the appellant is entitled to deduct under the provisions of the Income War Tax Act.
We do not think the words used in subsection 5 (1) (f) are apt to include the expenses now in question.
The provisions of that subsection are as follows:
The occupation of Members of Provincial Legislative Councils and Assemblies is neither a trade nor a business. The travelling expenses there mentioned are in the nature, for example, of expenses of commercial travellers. Bahamas General Trust Company et al. v. Provincial Treasurer of Alberta (1); Ricketts v. Colquhoun (2) approved in the judgment of Lord Blanesburgh in the House of Lords in the same case (3).
In our view, this is sufficient to eliminate subsection (f) of paragraph (1) of section (5) of the Act as supporting the appellant's contention.
Alternatively the appellant claims the benefit of the provisions of section 6 (1) (a) of the Act which is as follows:
This clause was considered in the case of Minister of National Revenue v. Dominion Natural Gas Co. Ltd. (4) where the then Chief Justice of this Court, at page 22, said: In that judgment, the Court followed the decision in Lothian Chemical Co. Ltd. v. Rogers (5); Robert Addie & Sons Ltd. v. Inland Revenue Commissioners (6).
In the Addie case (6) it was held that in order to be allowed, such expenditure must be laid out as part of the process of profit earning. Reference may be also made to the case of S.C.R.]
Montreal Coke and Manufacturing Company v. Minister National Revenue (1) where it was held that expenditure to be deductible must be directly related to the earning of income from the trade or business conducted.
It cannot be said here that the expenses of the appellant Rinfret cj. had been incurred in the process of earning the income and more particularly such expenses cannot be considered as having been incurred "wholly, exclusively and necessarily" for that purpose. Moreover, section 6 of the Act, subsection (f) excludes "personal and living expenses" from the deduction which may be allowed "in computing the amount of the profits or gains to be assessed".
For these reasons, the appeal is dismissed with costs. J.:-The appellant is a member of the Provincial Legislature of Alberta, representing the constituency of Calgary. The Assembly sits in Edmonton, some 200 miles from that city. He receives from the province an allowance of $2,000.00 under The Legislative Assembly Act, R. S. A. (1942) c. 4, sections 54 and 57 of which are as follows: In making his return of income to the respondent, he deducted from the sessional allowance the expenses of (a) lodging in a hotel at Edmonton in the sum of $144.35; (b) expenses for berths and incidental transportation between Calgary and Edmonton exclusive of regular fares incurred in seven round trips taken at weekends to enable the appellant to be in his constituency to confer with constituents on various matters in the sum of $43.40; (c) additional expenses for meals and other incidentals while in Edmonton over and above their cost to the appellant at home figured at $2.00 a day for 38 days, making a total of $76.00 less the sum of $27.40 representing the mileage allowance for one MAHAFFY trip to Edmonton and return under section 57.
The deductions were disallowed by the respondent; an MmNrER appeal to the Exchequer Court of Canada was dismissed, and the case is now brought to this Court.
Rand J. The Income War Tax Act defines "income" as follows: 3. (1) For the purposes of this Act, "income" means the annual net profit or gain or gratuity * * * and shall include the interest, dividends or profits * * * and also the annual profit or gain from any other source including
(d) The salaries, indemnities or other remunerations of
(1) members of the Senate and House of Commons of Canada and officers thereof;
(2) members of Provincial Legislative Councils and Assemblies. Exemptions and deductions are covered by sections 5 and 6 as follows:
5.
(f) Travelling expenses, including the entire amount expended for meals and lodging, while away from home in the pursuit of a trade or business;
6.
(a) Disbursements or expenses not wholly, exclusively and necessarily laid out or expended for the purpose of earning the income;
(f) Personal and living expenses;
The question is whether the items deducted are travelling expenses "in the pursuit of a trade or business"; or disbursements or expenses wholly, exclusively and necessarily laid out or expended for the purpose of earning the income.
and in my opinion they are neither. Whether or not attending a session of a Legislative Assembly can be deemed "business" which I think extremely doubtful, certainly making the extra trips and lodging in a hotel in Edmonton cannot be looked upon as "in the pursuit" of it. That expression had been judicially interpreted to mean "in the process of earning' the income: Minister of National Revenue v. Dominion Natural Gas Co. (1).
The sessional allowance is specifically for attendance by members at the (1) [1941] S.C.R. 19.
Cases cited
Statutes and regulations cited
-
Unresolved citations
- section 6
- section 5
- section 3
- section (5)
- sections 54
- 57
- section 57
- sections 5
- 6