Guy Tremblay [TRANSLATION]:—This case was heard in Chicoutimi, Quebec, on October 17, 1977.
1. Point at issue
The Board must determine whether the sums of $473.10 and $1,296 should be included respectively in the appellant’s income for the 1973 and 1974 taxation years, as allowances for the personal use and standby personal use of the automobile of the company, “Les Fonds Nordic Limitée,” of which the appellant is the principal shareholder.
2. Burden of proof
The burden is on the appellant to show that the assessments of the respondent are incorrect. This burden of proof derives not from one particular section of the Income Tax Act, but from a number of judicial decisions, including the judgment of the Supreme Court of Canada ‘in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.
3. Facts
3.1 In 1973 and 1974 the appellant, a member of the Quebec Bar, controlled the company Les Fonds Nordic Limitée with his wife, the other shareholders being his father, brother and sister-in-law.
3.2 The company, which deals in real estate, decided in 1971 that it would be advisable to purchase an automobile, a Volkswagen, which it still had at the beginning of 1973.
3.3 The appellant used this automobile to visit properties for sale, and so on. He maintained that he used the vehicle only for company, not personal business, even though he could have used it for personal business. There is no company resolution that the Volkswagen was not to be used for personal business. Moreover, the appellant had a vehicle of his own.
3.4 “Les Fonds Nordic Limitée’’ operated out of the offices of the appellant’s law firm. The Volkswagen was parked either outside these offices or the appellant’s residence.
3.5 During 1973, “Les Fonds Nordic Limitée” acquired the majority of shares of Radio Sept-lles Inc.
3.6 Pursuant to a decision by the board of directors of Les Fonds Nordic Limitée—a decision with which the appellant did not concur— the Volkswagen was sold on November 9, 1973 and a Continental purchased in its place.
3.7 A resolution was meanwhile passed that the Continental was only to be used for company, not personal business.
3.8 Like the Volkswagen, the Continental again was used primarily by the appellant.
3.9 In 1973 and 1974, the appellant reported that he had received from the company bonuses of $20,000 and $25,000 respectively.
3.10 On October 18, 1976 the respondent, by assessment, included in the appellant’s income for 1973 and 1974 the sums of $473.10 and $1,296 respectively, for personal use of the automobile.
3.11 The appellant filed a notice of objection on October 28, 1976, to which the respondent replied on February 9, 1977, upholding the assessment of the previous October 18.
3.12 The appellant appealed to the Board on February 24, 1977.
4: Act, Case law and Comments
Subsections 15(5) and 15(6) of the new Act apply in the case at bar:
15. (5) Where automobile made available to shareholder. Where a corporation has made an automobile available to a shareholder in a taxation year for his personal use (whether for his exclusive personal use or otherwise), the amount, if. any, by which an amount that would be a reasonable standby charge for the automobile for the aggregate number of days in the year during which it was made so available (whether or not it was used by the shareholder) exceeds the aggregate of
(a) the amount paid in the year by the shareholder to the corporation for the use of the automobile, and
(b) any amount included in computing the shareholder’s income for the year by virtue of subsection (1) in respect of the use by him of the automobile in the year,
shall be included in computing his income for the year.
15. (6) Application of subsection 6(2). Subsection 6(2) is applicable mutatis mutandis to subsection (5).
6. (2) Reasonable standby charge minimum amount. For the purposes of paragraph (1)(e) ‘‘an amount that would be a reasonable standby charge for the automobile” for the aggregate number of days in a taxation year during which it was made available by an employer shall be deemed not to be less than,
(a) where the employer owned the automobile at any time in the year, an amount in respect of its capital cost to the employer equal to the percentage thereof obtained when 1% is multiplied by the quotient obtained when such of the aggregate number of days hereinbefore referred to as were days during which the. employer owned the automobile is divided by 30 (except that if the quotient so obtained is not a full number it shall be taken to be the nearest full number or, if there is no nearest full number, then to the full number next below it), and
(b) where the employer leased the automobile from a lessor at any time in the year, an amount equal to 1/3 of the amount by which the amount payable by the employer to the lessor for the purpose of leasing the automobile for the aggregate number of days hereinbefore referred to exceeds the portion of those amounts that may reasonably be regarded as having been paid to the lessor in respect of all or part of the cost to him of insuring against
(i) loss of, or damage to, the automobile, or
(ii) liability resulting from the use of the automobile.
The Board concludes from the evidence submitted that the Act applies so far as the Volkswagen is concerned. This vehicle was made available to the shareholder even though the evidence shows that he did not so use it. The Act clearly states “whether or not it was used by the shareholder”.
How many days was the automobile made available in 1973?
This was not established by the evidence.
The Board ruled on October 7, 1977 in Herbert J Harman v MNR, [1978] CTC 2144; 78 DTC 1138, that where an automobile is used most of the day for the employer, that day cannot be counted as a day in which the automobile was made available to the employee for his personal use.
In the case at bar, no evidence was submitted (the appellant had the burden of doing so) to indicate the number of days during which the Volkswagen was used primarily for the company. The Board must therefore conclude that the vehicle was available to the appellant every day that the company owned it for that year.
As the Volkswagen was sold on November 9, 1973 the appellant had it at his disposal for 305 days.
So far as the Continental is concerned, the evidence showed that not only did the appellant not use this automobile on his personal business, but the company did not make it available to him for this purpose. Indeed, a resolution prohibited such personal use. Subsection 15(5) cannot, therefore, apply in the case at bar.
5. Conclusion
In respect of 1973, the appeal is dismissed for 305 days and allowed for the remainder of the year. In respect of 1974, the appeal is allowed. The whole is referred back to the respondent for reassessment in accordance with the above reasons for judgment.
Appeal allowed in part.