Sifto Canada – Federal Court of Appeal finds that the Federal Court may declare that transfer-pricing penalties assessed contrary to the VDP should not have been made

Sifto Canada brought a motion in the Federal Court alleging that: the Minister had reassessed it for s. 247(3) transfer pricing penalties notwithstanding that the misreported sales to its U.S. affiliate had been validly disclosed under the voluntary disclosure program; and the reassessed transfer prices were contrary to an agreement reached with the U.S. under the Mutual Agreement Article.  Sifto Canada also appealed the reassessments to the Tax Court.

Sharlow JA found that as the two proceedings dealt with distinct questions (Were the reassessed penalties invalid? If they were valid, should the Minister have granted s. 220(3.1) relief?), the Federal Court motion could continue, and noted that potentially available relief could include "a declaration that the penalties should not have been assessed in the face of the valid voluntary disclosure."

(It is not clear whether she is referring to a Henry IV, Pt. 1-style declaration: GLENDOWER-I can call spirits from the vasty deep. HOTSPUR-Why, so can I, or so can any man, but will they come when you do call for them?)

Neal Armstrong.  Summary of MNR v. Sifto Canada Corp., 2014 DTC 5083 [at 7090], 2014 FCA 140 under s. 220(3.1).