Décary, J.A.:—This is an application for judicial review pursuant to section 18.24 of the Tax Court of Canada Act of a decision rendered on November 18, 1991, by the Chief Judge of the Tax Court of Canada. The facts and the issue can be put simply.
The respondent's first fiscal year ended February 1, 1990. The federal tax payable by the respondent for its first fiscal year amounted to $16,350.28 (the "excess"). The respondent actually paid the excess on June 4, 1990. By notice of assessment dated July 20, 1990, the Minister of National Revenue (the "Minister") assessed the respondent a total of $235.36 for arrears interest with respect to the excess. The parties agree that the Minister correctly assessed the respondent arrears interest in the amount of $20.16 for the period June 1, 1990 to June 4, 1990. The only question before us is whether the respondent was liable to pay interest for the period from May 2, 1990 to June 1, 1990. The learned Chief Judge held that it was not.
At issue is the interpretation of the phrase "the end of the third month following the end of the year" in subparagraph 157(1 )(b)(i) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"). Subsection 157(1) reads as follows:
157(1) Corporations. — Every corporation shall, in respect of each of its taxation years, pay to the Receiver General
(a) either
(i) on or before the last day of each month in the year, an amount equal to '/12 of the aggregate of the amounts estimated by it to be the taxes payable under this Part and Part VI.1 by it for the year,
(ii) on or before the last day of each month in the year, an amount equal to V12 of its first instalment base for the year, or
(iii) on or before the last day of each of the first two months in the year, an amount equal to ‘/12 of its second instalment base for the year, and on or before the last day of each of the following months in the year, an amount equal to ‘0 of the amount remaining after deducting the amount computed pursuant to this subparagraph in respect of the first two months from its first instalment base for the year; and
(b) the remainder of the taxes payable by it under this Part and Part VI.1 for the year
(i) on or before the end of the third month following the end of the year, where
(A) an amount was deducted by virtue of section 125 in computing the tax payable under this Part by the corporation for the year or its immediately preceding taxation year, and
(B) the corporation is, throughout the year, a Canadian-controlled private corporation whose taxable income for the immediately preceding taxation year together with the taxable incomes of all corporations with which it was associated in the year for their taxation years ending in the calendar year immediately preceding the calendar year in which the taxation year of the corporation ended does not exceed the aggregate of the business limits (as determined under section 125) of the corporation and the associated corporations for those preceding years, or
(ii) on or before the end of the second month following the end of the year, in any other case.
The submission of counsel for the respondent, which was accepted by the Chief Judge, is to the effect that since respondent's fiscal year ended on February 1, 1990, the end of the third month following the end of that year would then have been May 31, the month of March being the first month following the month of February.
While I have some sympathy with respondent's view which is based on a very literal interpretation of a provision Parliament could surely have drafted in a more appropriate form, I have not been persuaded that its interpretation meets the “words-in-total-context approach” test formulated by MacGuigan, J.A. in Lor-Wes Contracting v. The Queen, [1985] 2 C.T.C. 79, 85 D.T.C. 5310, at page 83 (D.T.C. 5313), "with a view to determining the object and spirit of the taxing provisions.”
With respect, I think the solution lies in a plain reading of the whole phrase "on or before the end of the third month following the end of the year”.
"The end of the year" means the end of the fiscal year, not the end of the calendar year. A fiscal year ends at the moment determined by the corporation. That moment may be any day of any month; it need not be the last day of the chosen month. In the present case, the moment chosen was February 1. I note that the term “calendar year" is expressly used in clause 157(1 )(b)(i)(B).
"The end of the third month" does not mean the end of the third calendar month. Since the "year" which is referred to in the phrase here in issue is the fiscal year and since the end of that fiscal year is not necessarily the last day of the last month of that year, the end of the third month referred to in subparagraph 157(1 )(b)(i) need not be the last day of a given month and can be any day during a given month. The basis employed for the calculation of the "year" should also be used for the calculation of the "month".
“Following” is, in my view, the pivotal word. As noted by the Chief Judge, it means, in the Shorter Oxford English Dictionary: "that comes next or after; succeeding, ensuing". A "following" (which is translated by "suivant" in the French text) period of time cannot but mean a period which starts as soon as the preceding period has ended. The end of the fiscal year being any given day of a given month, the period "following" the end of the fiscal year cannot but start the moment that period ends, i.e., in the present case as soon as February 2. The interpretation given to the phrase by the Chief Judge, which has the "following" period start 28 days after the end of the fiscal year, ignores the very existence and meaning of the word “following”.
I have therefore reached the conclusion that in subparagraph 157(1)(b)(i), the word "month" in the phrase “on or before the end of the third month following the end of the year" means a period to be calculated from the day the fiscal year ends to the day numerically corresponding to that day three months later less one. In the case at bar, the last day being February 1, the period starts on February 2 and ends three months later less a day, i.e., on May 1.
I am comforted in this interpretation by the fact that it is the only one which, in my respectful view, does not lead to an absurd result. As noted by Mr. Justice Cartwright in Vandekerckhove v. Middleton (Township), [1962] S.C.R. 75, 31 D.L.R. (2d) 304, at pages 78-9 (D.L.R. 307):
There is ample authority for the proposition that when the language used by the legislature admits of two constructions one of which would lead to obvious injustice or absurdity the courts act on the view that such a result could not have been intended.
One can fairly assume that Parliament had intended that the delay prescribed for the payment of the remainder of taxes be the same for all corporations. It would be awkward indeed if in choosing the date of February 1 a corporation would automatically, by statute, be entitled to a longer delay than the corporation which had selected, for example, February 28. If the respondent's interpretation is correct, both corporations would have until May 31 to remit their taxes. Parliament can simply not be presumed to have intended to give such a windfall to the corporation that picked the date of February 1 for the end of its fiscal year (see Sheaffer Pen Co. v. M.N.R., [1953] C.T.C. 345, 53 D.T.C. 1223 (Ex. Ct.), at page 351 (D.T.C. 1227).
The respondent has relied on section 28 and subsection 35(1) of the Interpretation Act'. Subsection 35(1) obviously is not applicable to an enactment such as subparagraph 157(1 )(b)(i) where the intention of Parliament is precisely not to use a calendar month. Subsection 3(1) of the Interpretation Act provides that the Act only applies where the statute in issue does not suggest a contrary interpretation. The same logic holds true for section 28. If a particular meaning can be ascribed to section 157 of the Income Tax Act apart from section 28, then that meaning cannot be defeated by the Interpretation Act. Further, insofar as section 28, by virtue of subsection 35(1), contemplates calendar months only, it cannot apply to subparagraph 157(1 )(b)(i).
28. Where there is a reference to a period of time consisting of a number of months after or before a specified day, the period is calculated by
(a) counting forward or backward from the specified day the number of months, without including the month in which that day falls;
(b) excluding the specified day; and
(c) including in the last month counted under paragraph (a) the day that has the same calendar number as the specified day or, if that month has no day with that number, the last day of that month.
35(1) In every enactment. . ."month" means a calendar onth. . . .
Even if I were to find that section 28 is applicable, it is not inconsistent with the appellant’s position. Here, the period of time to be calculated is "the end of the third month following” February 1, 1990. Under paragraph 28(a), one counts forward three months without including February, which leads to May; and under paragraph 28(c), the corresponding day in May that has the same calendar day as February 1 is May 1.
For the above reasons I would allow this application for judicial review, set aside the decision of the Tax Court of Canada and return the matter to that Court for redetermination in accordance with these reasons. As directed by section 18.25 of the Tax Court of Canada Act, "the reasonable and proper costs of the taxpayer" should be paid by the applicant.
Application allowed.