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Citation:2005TCC143
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Date: 20050414
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Docket: 2003-4491(IT)G
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BETWEEN:
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NEWMONT CANADA LIMITED,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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AMENDED REASONS FOR ORDER
Sheridan, J.
[1] This is an application by the
Crown for an Order striking out certain paragraphs in the Notice
of Appeal filed by the Appellant, Newmont Canada Limited
("Newmont") for the taxation years 1988, 1989, 1990,
1991, 1992, 1993, 1994, 1995 and 1996. Newmont took over from its
corporate predecessors in 1995. In 1996, the Minister began
reassessing Newmont's 1988-96 taxation years. The parties
agree that:
a) Newmont is a
"large corporation"[1] within the meaning of the Income Tax
Act;
b) the impugned paragraphs in
its Notice of Appeal concern an issue (referred to, for the
purposes of this application, as the "Gold Loan Issue")
that was not described in any of its Notices of Objection to the
Minister's reassessments;
c) the Gold Loan Issue
pertains only to the 1990, 1991 and 1992 taxation years; and
d) although settlement
discussions occurred between Newmont and Canada Revenue Agency
officials, no agreement was reached nor is Newmont seeking to
enforce any such agreement.
[2] The Minister's position is
that Newmont is not entitled to appeal the Gold Loan Issue
because that issue was not described in its Notices of Objection
as required by subsection 165(1.11) of the Act. The Crown
argues that, as is the case with any taxpayer, Newmont's
right of appeal originates in subsection 169(1). As a large
corporation, however, its general right of appeal is qualified by
subsection 169(2.1) which operates to restrict a large
corporation's appeal to those issues described in its initial
notice of objection pursuant to subsection 165(1.11).
[3] Newmont challenges the Crown's
position on three grounds:
a) in respect of the
1990-92 taxation years, the Crown waived the statutory
requirements in subsection 169(2.1);
b) in respect of the 1990-92
taxation years, the Crown is estopped from relying on the
statutory requirements in subsection 169(2.1); and
c) in respect of the 1992
taxation year only, subsection 169(2.1) is not applicable because
Newmont appealed directly to the Tax Court of Canada from the
Minister's subsection 165(3) reassessment.
[4] Newmont's assessment history
for its 1988 to 1996 taxation years appears in chart form at
paragraph 9 of its Outline of Oral Argument:
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Taxation
Year
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Assessment
Objected To
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Notice of
Objection
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Response of CRA Appeals Division
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Confirmation
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Reassessment
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1988
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September 27, 1996
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December 19, 1996
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Sep 18, 2003
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-
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1989
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September 27, 1996
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December 19, 1996
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Sep 18, 2003
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-
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1990
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September 27, 1996
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December 19, 1996
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Sep 18, 2003
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-
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1991
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September 27, 1996
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December 19, 1996
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Sep 18, 2003
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-
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1992
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August 6, 1997
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October 29, 1997
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-
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Sep 18, 2003
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1993
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August 6, 1997
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October 29, 1997
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-
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Sep 18, 2003
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1994
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October 25, 1999
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December 23, 1999
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-
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Sep 18, 2003
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1995
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August 1, 2000
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October 30, 2000
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Sep 18, 2003
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-
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1996
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May 4, 2001
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June 30, 2001
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Sep 18, 2003
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-
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[5] As can be seen from the above, in
response to Newmont's objections to the reassessments of the
three taxation years in issue, the Minister confirmed by
Notice of Confirmation the assessments objected to in
respect of the 1990 and 1991 taxation years, and reassessed by
Notice of Reassessment the 1992 taxation year. It is because of
this difference in treatment i.e., confirmation versus
reassessment, that Newmont's argument regarding subsections
165(7) and 169(2.1) pertains only to the 1992 appeal. This
argument cannot be made in respect of the Minister's
confirmation of his assessments of the 1990 and 1991 taxation
years because subsection 165(7) applies only where the
Minister "reassesses" in response to a taxpayer's
objection.
[6] With respect to Grounds (a) and
(b), Newmont concedes that if the Court rejects its
interpretation of the relevant legislative provisions under
Ground (c), then its arguments based on waiver and estoppel must
also fail. For this reason, I will begin by considering
Newmont's statutory interpretation argument under
Ground (c).
Ground (c):
"Subsection 169(2.1) does not apply to
Newmont's appeal for 1992"
Part 1 - "Because it is brought under
subsection 165(7), not subsection 169(1)"
[7] Newmont's argument in support
of a right of appeal created by paragraph 165(7)(a)
appears in paragraphs 94 to 98 of its Outline of Oral
Argument:
94. Newmont's appeal
in relation to 1992-1994 is an appeal under subsection 165(7) in
that it is an appeal in response to a reassessment arising out of
a notice of objection.
95. Paragraph 165(7)(a)
reads:
"Where a taxpayer has served in accordance with this
section a notice of objection to an assessment and thereafter the
Minister reassesses the tax, interest, penalties or other amount
in respect of which the notice of objection was served or makes
an additional assessment in respect thereof and sends to the
taxpayer a notice of the reassessment or of the additional
assessment, as the case may be, the taxpayer may, without serving
a notice of objection to the reassessment or additional
assessment,
(a) appeal
therefrom to the Tax Court of Canada in accordance with section
169 ..."
(TAB 17)
96. The Federal Court of
Appeal in TransCanada Pipeline describes subsection
165(7) as permitting:
"an appeal without the prior serving of a notice of
objection when, after the serving of an initial notice of
objection, the Minister reassesses or makes an additional
assessment. In such cases, a taxpayer who is still dissatisfied
may appeal without serving a further notice of
objection."
TransCanadaPipeline Limited, supra at 5629 (TAB
29)
97. Subsection 169(2.1)
begins with the words "Notwithstanding subsections (1) and
(2),...". Thus, while subsection 169(2.1), where it applies,
can limit the issues that a large corporation may raise in an
appeal under subsection 169(1) or (2), subsection 169(2.1) does
not limit the issues that a large corporation may raise in an
appeal under paragraph 165(7)(a). If Parliament intended that
subsection 169(2.1) limit the issues a large corporation may
raise in an appeal under paragraph 165(7)(a), the section would
have read "Notwithstanding subsections 169(1) and (2) and
subsection 165(7),...".
98. Since Newmont's
1992 appeal is brought under subsection 165(7), the 169(2.1)
large corporation appeal limitation cannot apply to Newmont's
1992 appeal.
[8] When the Minister notified Newmont
by Notice of Reassessment dated September 18, 2003 of his
decision to reassess for 1992 under subsection 165(3), Newmont
relied on paragraph 165(7)(a) to forego serving another
notice of objection on the Minister in respect thereof and
appealed directly to the Tax Court of Canada. Having filed a
notice of appeal in response to the September 18, 2003
reassessment, Newmont argues that it was, in effect,
"appealing" under subsection 165(7); that is to
say, deriving its substantive right of appeal from that
provision. There being nothing in subsection 165(7) to restrict
appeals by large corporations, or to link such
"appeals" to subsection 169(2.1), Newmont concludes
that it is entitled to include the Gold Loan Issue in its Notice
of Appeal for the 1992 taxation year.
[9] I do not find these arguments
convincing. Beginning with what Newmont calls its
"appeal" under paragraph 165(7)(a), the case law
is clear[2] that a
taxpayer's right to appeal an assessment under the Income
Tax Act is rooted in section 169. In Minister of National
Revenue v. Parsons[3], the Federal Court of Appeal
stated at paragraph 2:
[2] We are all of
the opinion that the appeal must succeed on the narrow ground
that the only way in which the assessments made against the
respondents could be challenged was that provided in sections 169
and following of the Income Tax Act.
Section 169(1) of the Act reads:
Where a taxpayer has served notice of objection to an
assessment under section 165, the taxpayer may appeal to the Tax
Court of Canada to have the assessment vacated or varied after
either
a) the
Minister has confirmed the assessment or reassessed, or
b) 90 days
have elapsed after service of the notice of objection and the
Minister has not notified the taxpayer that the Minister has
vacated or confirmed the assessment or reassessed,
but no appeal under this section shall be instituted after the
expiration of 90 days from the day notice has been mailed to the
taxpayer under section 165 that the Minister has confirmed the
assessment or reassessed.
[10] Paragraph 165(7)(a), the
provision upon which Newmont relies for its right of appeal,
reads:
Where a taxpayer has served in accordance with this section a
notice of objection to an assessment and thereafter the Minister
reassesses the tax, interest, penalties or other amount in
respect of which the notice of objection was served or makes an
additional assessment in respect thereof and sends to the
taxpayer a notice of the reassessment or of the additional
assessment, as the case may be, the taxpayer may, without serving
a notice of objection to the reassessment or additional
assessment,
(a) appeal therefrom
to the Tax Court of Canada in accordance with section 169;
[Emphasis added.]
...
[11] To argue that it brought its appeal
under paragraph 165(7)(a) requires Newmont to turn a blind
eye to the qualifying final phrase of that provision. Though
paragraph 165(7)(a) permits a taxpayer to dispense with
serving another notice of objection and to proceed with an appeal
to the Tax Court of Canada, the clear wording of this provision
directs such an appeal to be "in accordance with section
169". To avail himself of the procedural relief in
subsection 165(7), a taxpayer must have served at least one
notice of objection "in accordance with
[section 165]" in response to which the Minister has
reassessed. Similarly, to exercise his right of appeal under
subsection 169(1), a taxpayer must also have first served a
notice of objection to "an assessment under section
165". With the serving of that initial notice of objection,
both provisions are simultaneously satisfied: it only makes sense
that paragraph 165(7)(a) permits the taxpayer to forego
further objection(s) at the departmental level and to seek
instead, a final ruling on the issues in dispute by appealing to
the Tax Court of Canada in accordance with section 169. That this
is the effect of subsection 165(7) was decided by the Federal
Court of Appeal in Transcanada Pipelines Limited v. The
Queen[4]:
[19] Subsection 165(7) permits
an appeal without the prior serving of a notice of objection
when, after the serving of an initial objection, the Minister
reassesses or makes an additional assessment. In such cases, a
taxpayer who is still dissatisfied may appeal without serving a
further notice of objection.
[12] For reasons not apparent to me, Newmont
relied on this passage in support of its argument that paragraph
165(7)(a) creates a substantive right of appeal[5]. While I reject the
conclusions drawn by Newmont, if indeed, there is any ambiguity
in the passage quoted above, it is resolved in the paragraph
immediately following in which the Court makes a clear
distinction between the procedural relief in subsection 165(7)
and the substantive appeal rights under
subsection 169(1):
[20] However, subsection 165(7) does not apply to permit a
subsequent appeal from a reassessment issued under
subsection 169(3)[6] that disposes of a prior appeal. Paragraph 165(7)(a),
in its context, is concerned with the taxpayer's receiving a
second reassessment in the period prior to the taxpayer filing a
notice of appeal. Paragraph 165(7)(b) is concerned with
the period after the taxpayer files a notice of appeal but before
the appeal is dealt with. A taxpayer who receives a notice of
reassessment in this period may amend the appeal to cover matters
in the reassessment. The purpose of subsection 165(7) is to save
the time and expense of the filing of a further notice of
objection when the Minister reassesses after an original notice
of objection is served and the taxpayer is still dissatisfied,
and either has not yet appealed or has appealed but the appeal
has not been decided. It does not apply after appeal proceedings
have been disposed of and, in particular, after they have been
disposed of under subsection 169(3). In other words, subsection
165(7) only applies before or during the period when the appeals
process is still in progress but is no longer available once that
process is concluded. Subsection 165(7) is of no assistance to
TCPL in the circumstances of this case.
And, as I read it, subsection 165(7) is of no assistance to
Newmont in its attempt to avoid the application of subsection
169(2.1). The Federal Court of Appeal explains that subsection
165(7) is geared toward saving "time and expense" by
providing a means to ending the cycle of objections and
reassessments that would otherwise be the lot of the chronically
dissatisfied taxpayer and a confirmation-averse minister. I am
unable to identify in either the legislation or the case law any
support for Newmont's argument that paragraph
165(7)(a) creates substantive right of appeal; it merely
relieves the still-dissatisfied taxpayer of the obligation to
continue to object until the Minister finally confirms his most
recent reassessment.
[13] Finally, at paragraph 97 of its Outline
of Oral Argument, Newmont concludes that "[i]f Parliament
intended that subsection 169(2.1) limit the issues a large
corporation may raise in an appeal under paragraph 165(7)(a), the
section would have read "Notwithstanding subsections 169(1)
and (2) and subsection 165(7),..."." With
respect, this is flawed logic. That no such qualification has
been included in the preamble to subsection 169(2.1) is
indicative of the absence of any parliamentary intention to
create a substantive right of appeal under subsection 165(7)
parallel to that in subsection 169(1).
Ground (c):
"Subsection 169(2.1) does not apply to
Newmont's appeal for 1992"
Part 2 - "Subsection 169(2.1) Requires an
Objection"
[14] In the second part of its argument
under Ground (c), Newmont argues that having filed an appeal
rather than serving a notice of objection to the
September 18, 2003 reassessment, it cannot bring its
situation within subsection 169(2.1):
99. Even if jurisdiction
for Newmont's appeal in 1992 is found in subsection 169(1)
rather than subsection 165(7), pursuant to its terms subsection
169(2.1) only applies where the assessment being appealed to the
Tax Court has been the subject of a notice of objection.
100. Subsection 169(2.1) reads as
follows:
"Notwithstanding subsections 169(1) and 169(2), where
a corporation that was a large corporation in a taxation year
(within the meaning assigned by subsection 225.1(8)) served a
notice of objection to an assessment under this Part for the
year, the corporation may appeal to the Tax Court of Canada to
have the assessment vacated or varied only with respect
to
(a) an issue in
respect of which the corporation has complied with subsection
165(1.11) in the notice, or
(b) an issue
described in subsection 165(1.14) where the corporation did not,
because of subsection 165(7), serve a notice of objection to the
assessment that gave rise to the issue
and, in the case of an issue described in paragraph
169(2.1)(a), the corporation may so appeal only with respect to
the relief sought in respect of the issue as specified by the
corporation in the notice." (emphasis added)
(TAB 17)
101. The preamble of subsection
169(2.1) states two conditions that must be satisfied before the
limitations provided for by subsection 169(2.1) apply. These
conditions are:
(a) the taxpayer is
a large corporation as defined in subsection 225.1(8), and
(b) the taxpayer
served a notice of objection to the assessment being
appealed.
102. Where these two conditions are
satisfied, the issues that the large corporation may raise in its
appeal are limited procedurally as provided in paragraphs (a) and
(b) of subsection 169(2.1). Where these two conditions are not
satisfied, subsection 169(2.1) does not apply.
103. The structure of subsection
169(2.1) is one commonly used in the Income Tax Act. There
is a preamble setting out conditions that must be met for various
consequences or rules (which are set out following the preamble)
to apply. This common grammatical structure was recognized by the
Supreme Court of Canada in Antosko v. The Queen
when considering subsection 20(14). The Supreme Court confirmed
that:
"The grammatical structure of subsection 20(14) is
similar to a number of provisions in the Act in which Parliament
lists the income tax consequences that arise when certain
preconditions are met. Usually, the preconditions are set out in
an introductory paragraph or paragraphs and the consequences in
separate subparagraphs."
Antoskov. The Queen [1994] 2 S.C.R. 312 at 332
(TAB 22)
104. The preconditions for the
application of subsection 169(2.1) are not satisfied in respect
of Newmont's appeal for its 1992 taxation year. Newmont was a
large corporation during 1992, but Newmont did not serve a notice
of objection to the September 18, 2003 reassessment. Therefore,
subsection 169(2.1) cannot apply to Newmont's appeal as it
relates to 1992.
105. Newmont served a notice of
objection to the Minister's August 6, 1997 notice of
reassessment for 1992. But Newmont's appeal as it relates to
1992 is not and cannot be an appeal of the August 6, 1997
reassessment because that reassessment was nullified and
superseded by the September 18, 2003 reassessment.
106. It is well established that a
reassessment of a taxation year nullifies any preceding
assessment of that taxation year.
"Assuming that the second reassessment is valid, it
follows, in my view, that the first reassessment is displaced and
becomes a nullity. The taxpayer cannot be liable on an original
assessment as well as on a re-assessment. It would be
different if one assessment for a year were followed by an
"additional" assessment for that year. Where, however,
the "reassessment" purports to fix the taxpayer's
total tax for the year, and not merely an amount of tax in
addition to that which has already been assessed, the previous
assessment must automatically become null."
Abraham (No. 1) v. M.N.R., 66 DTC 5451 at 5452
(Ex. Ct.) (TAB 23)
107. The Crown in its reply at
paragraphs 58 through 61 cites a decision of the Tax Appeal
Board, a decision of the Federal Court of Appeal and a decision
of the Tax Court of Canada in support of the suggestion that an
assessment which is superceded by a reassessment is not a nullity
but is just changed over time. With respect, this is a
misinterpretation of the applicable decision of the Tax Appeal
Board and of the Federal Court of Appeal. Furthermore, the Tax
Court of Canada decision cited has been superceded by a
subsequent decision of the Federal Court of Appeal in any
event.
108. In the 1968 decision of the Tax
Appeal Board in Andrulionis, the Board faced a situation
where the Crown was attempting on a procedural ground to deny the
taxpayer a right to appeal a tax assessment. The Crown had argued
that the taxpayer could not appeal directly from a reassessment
made after an objection because the reassessment resulted in the
first assessment becoming a nullity such that there was no
assessment that had been objected to. While the Board rejected
the Crown's motion to quash the appeal, it did so while
acknowledging that a reassessment nullifies the previous
assessment.
Andrulionisv. M.N.R., 68 DTC 76 (T.A.B.)
(TAB 24)
Walkemv. M.N.R., 71 DTC 5288 at 5291 (F.C.T.D.)
(TAB 25)
109. The Tax Court has confirmed that
in a situation where the CRA issues a reassessment subsequent to
the filing of an appeal with the Tax Court of Canada, the
assessment first appealed from becomes a nullity and the appeal
must either be amended or quashed.
Roland Parent v. The Queen, 2003 DTC 1002 at 1006
(T.C.C.) (TAB 26)
110. The Crown also cites the
Lambert v. The Queen decision of the Federal Court of
Appeal against the well-established principle that a
re-assessment nullifies a previous assessment. However, the
Lambert decision dealt with the question of whether a
liability to pay tax continued despite the issuance of a
reassessment. The Federal Court of Appeal concluded that a
liability to pay tax and an assessment are different things and
that a reassessment does not nullify the liability even if it
nullifies the previous assessment.
Lambert v. The Queen, 76 DTC 6373 at 6375 (FCA) (TAB
27)
111. The 1986 decision of the Tax
Court of Canada in Super Jewellers v. M.N.R. is a decision
made in the context of the interplay between criminal tax evasion
and civil tax law. To the extent that it suggests that a
reassessment is just a variance of the previous assessment and
does not nullify the previous assessment, it is not consistent
with current jurisprudence.
Super Jewellers v. M.N.R., 86 DTC 1404 (TCC) (TAB
28)
112. The Federal Court of Appeal has
recently confirmed that a reassessment of a taxpayer's total
tax liability does nullify a prior assessment:
The issuance of notices of reassessment on November 8, 1999
for those years displaced the July 11, 1995 notices of
reassessment. The July 11, 1995 notices of reassessment became
nullities and there is no relief that the Tax Court could grant
on appeal from them. They ceased to exist when the November 8,
1999 reassessments were issued and there was nothing that the Tax
Court could vary or refer back to the Minister with respect to
them. See Abrahams (No. 1) v. Minister of National Revenue
(1966), 66 DTC 5451, at 5453 (Ex. Ct.).
TransCanadaPipeline Limited v. The Queen, 2001
DTC 5625 at 5628 (F.C.A.) (TAB 29)
113. The September 18, 2003
reassessment for Newmont's 1992 taxation year fixes
Newmont's total tax liability. This is apparent from the face
of this notice of reassessment and was confirmed by Mr. Fogel on
cross-examination. Therefore, the September 18, 2003
reassessment of 1992 nullified and superseded the August 6, 1997
assessment of 1992 previously objected to by Newmont.
Paragraph 169(2.1)(b)
114. Paragraph 169(2.1)(b) does not
apply to Newmont's appeal of the September 18, 2003 notice of
reassessment of 1992. Paragraph 169(2.1)(b) can only apply if the
conditions in the preamble of subsection 169(2.1)(b) are
satisfied, i.e. "where...a large corporation...served a
notice of objection to an assessment". Newmont did not serve
a notice of objection to the September 18, 2003 notice of
reassessment of 1992.
115. Paragraph 169(2.1)(b) limits the
issues that may be raised by the large corporation to "an
issue described in subsection 165(1.14)". This refers to a
new issue raised by the Minister when reassessing pursuant to
subsection 165(3) in response to the taxpayer's notice of
objection and does not apply to Newmont.
[15] I accept Newmont's position that
the August 1997 reassessment was the "assessment"
Newmont initially objected to and that that
"assessment" was rendered a nullity by the
Minister's September 18, 2003 reassessment. I do not accept,
however, Newmont's conclusion that this nullification of the
earlier quantification of its tax liability had the dual effect
of nullifying Newmont's act of having filed a notice
of objection to the August 1997 assessment, thus making it
impossible for Newmont to appeal under subsection 169(1) and,
possible to avoid the restrictions of subsection 169(2.1).
[16] At the hearing, Newmont referred the
Court to paragraph 7 of Lambert v. R.[7] in
support of its position that a "reassessment" is not an
"assessment". This is, in my view, a misreading of
Lambert but, in any event, that case involved a taxpayer
who sought to avoid paying amounts owing for unpaid tax under a
section 223 certificate by arguing that the reassessments in
effect when the certificate was issued had been nullified by
subsequent reassessments thereby simultaneously nullifying his
indebtedness under the certificate. I accept the Crown's
position that a more complete explanation of Chief Justice
Jackett's rejection of the argument Newmont seeks to
advance appears in paragraphs 7 and 8:
[7] On examining new
assessments, we are inclined to the view that they are not
further assessments but are reassessments. This question did not,
however, have to be decided because, in our view, whichever they
are, they do not, in themselves, affect the validity of the
section 223 certificate or operate automatically to confer on the
appellant a right to have the section 223 certificate
nullified.
[8] As appears from
our review of the provisions of the Act, there is a difference
between
(a) a liability
under the Act to pay tax, and
(b) an
"assessment" (including a reassessment or a further
assessment), which is a determination or calculation of the tax
liability.
It follows that a reassessment of tax does not nullify the
liability to pay the tax covered by the previous [assessment] as
long as that tax is included in the amount reassessed.
More recently, the Federal Court of Appeal reached the same
conclusion in R. v. Loewen[8] where at paragraph 6 of
the decision, Sharlow, J.A. explained:
[6] An assessment is the determination by the Minister of the
amount of a person's tax liability: Pure Spring Co. v.
Minister of National Revenue, [1946] Ex.C.R. 471, [1946]
C.T.C. 169, (1946) 2 DTC 844. A taxpayer's initial assessment
for a taxation year typically takes into account what is reported
by the taxpayer in an income tax return. An initial assessment
may be appealed, but most appeals are from reassessments, in
which the Minister assesses additional tax to reflect specific
changes to the taxpayer's taxable income. The word
"assessment" is used to refer to assessments and
reassessments. [Emphasis added]
[17] Thus, where the Minister reassesses the
assessment (be it an initial "assessment" or a
subsequent "reassessment") and the taxpayer is still
unhappy with the result, he has two choices: he may serve another
notice of objection on the Minister under subsection 165(1), or
he may rely on subsection 165(7) to dispense with that step and
appeal directly to the Tax Court of Canada in accordance with
subsection 169(1). Newmont's argument that a reassessment of
the tax originally assessed renders a nullity the earlier
assessment[9] is
not disputed[10].
It does not follow, however, that the taxpayer is then left with
no "assessment" to appeal when the Minister reassesses
after his initial notice of objection. It simply means, as
explained in Lambert, that the Minister's most recent
calculation of the amount of tax owed by the taxpayer for that
taxation year replaces the one prior to it. Thus, although the
quantum of tax owing may change, the taxpayer's underlying
tax liability and his right to challenge each ministerial
determination of it, does not.
[18] In paragraphs 116 to 120 of the final
portion of its argument under Ground (c), Newmont refers the
Court to various cases and texts to assist in the interpretation
of subsection 169(1). In particular, Newmont cited the
Supreme Court of Canada in Shell Canada Limited v. The
Queen[11], in
which the Court directed that "... where the provision
at issue is clear and unambiguous, its terms must simply be
applied." Though expressed in the Act's typically
inelegant style, sections 165 and 169 are nonetheless clear and
unambiguous in their meaning: simply applied, their terms ensure
that whether at the objection or appeal stage, in challenging the
Minister's assessment of its tax liability, a large
corporation will be restricted to those issues described in
accordance with subsection 165(1.11). The right to object to an
assessment is rooted in subsection 165(1) which provides that a
taxpayer "may", within the time permitted, serve on the
Minister "...a notice of objection in writing, setting
out the reasons for the objection and all relevant facts".
Where that taxpayer is a large corporation, however, more
stringent requirements apply: pursuant to subsection 165(1.11),
where a large corporation objects to an assessment, it "...
shall"
(a) reasonably
describe each issue to be decided;
(b) specify in
respect of each issue, the relief sought, expressed [in a certain
manner]; and
(c) provide facts
and reasons relied on by the corporation in respect of each
issue.
[19] Where the large corporation fails to
comply with (b) or (c), subsection 165(1.12) allows for
deemed compliance where, within 60 days of receiving the
Minister's written notice of such deficiencies, the large
corporation submits the missing information. No such allowance,
however, applies in respect of the issues themselves. Subsections
165(1.13) and (1.14) operate to limit the right of a large
corporation to object to any further reassessments made in
respect of the initial objection to only those issues properly
described under subsection 165(1.11), except where new issues
have been raised by the Minister in subsequent reassessments.
Similarly, where a large corporation chooses to forego further
objections under subsection 165(7) and to appeal to the Tax Court
of Canada in accordance with subsection 169(1), subsection
169(2.1) operates to limit the issues which may be included in
that appeal to those originally identified in compliance with
subsection 165(1.11). Applied to Newmont's circumstances, the
combined effect of sections 165 and 169 is to preclude the
company from including the Gold Loan Issue in its Notice of
Appeal.
[20] The Federal Court of Appeal considered
the effect of the large corporation rules in R. v. Potash
Corporation of Saskatchewan Inc.[12]:
I recognize that this is a harsh result for PCS, and a
harsh rule for large corporations. A large corporation that
discovers an error in an income tax return after it has filed a
notice of objection or a notice of appeal may find itself barred
from taking proceedings to compel the Minister to correct the
error. However, that is the result Parliament intended.
[21] Malone, J.A. explained the purpose of
the large corporation rules at paragraph 4 of that judgment:
The Large Corporation Rules were enacted in 1995 to discourage
large corporations from engaging in a full reconstruction of
their income tax returns for a particular year, after the
objection or appeal process had started, based on developing
interpretations and the outcome of court decisions in litigation
involving other taxpayers. The reasons for these subsections are
well-stated by R.M. Beith in his paper entitled "Draft
Legislation on Income Tax Objections and Appeals" as
outlined in the Report of Proceedings of the Forty-Sixth Tax
Conference, 1994 Conference Report (Toronto: Canadian Tax
Foundation, 1995), 34:2.
One of the reasons for the legislation is to identify disputed
issues much sooner so that a taxation year's ultimate tax
liability can be determined in a timely way.
Owing to the complexity of the law and the number of issues,
for many years a number of large corporations have had some of
their taxation years left open through outstanding notices of
objection or appeals, so that they have been able to raise new
issues based on emerging interpretations and the outcome of court
decisions challenged by other taxpayers.
Recently, a particular problem was identified by the auditor
general and the Public Accounts Committee. A case dealing with
the calculation of the "resource allowance" which was
decided against the department, resulted in claims not only based
on the particular facts decided by the court but in respect of a
new issue concerning the calculation of the "resource
allowance". These claims, both directly and indirectly from
the court decision, involved significant amounts of tax and
interests.
In summary, it is essential that revenues be more predictable
and therefore that potential liabilities be identified and
resolved within a more reasonable time.
Simply put, Parliament wants the Minister of National Revenue
(the Minister) to be able to assess at the earliest possible date
both the nature and quantum of pending tax litigation and its
potential fiscal impact.
[22] In view of my conclusions,
Newmont's arguments under Ground (a) - "Waiver" and
Ground (b) - "Estoppel" must also fail. The
Act having specified the prerequisites which must be
satisfied before certain issues may be included in an appeal by a
large corporation, the Tax Court of Canada has no jurisdiction to
entertain appeals in respect of issues where those statutory
conditions have not been fulfilled. The law is well settled that
the Court's jurisdiction cannot be expanded by the consent or
agreement of the parties[13]. Similarly, the doctrine of estoppel is of no help to
Newmont; in paragraph 33 of its Written Submission, the Crown
cited the following words from the Federal Court of Appeal in
Hawkes v. The Queen[14]:
It is trite law to say that estoppel cannot apply so as to
prevent the Minister from performing the duties imposed on him by
the Income Tax Act, namely the proper assessment of
returns in accordance with the law.
and at paragraph 34, the words of Bowman, A.C.J. (as he then
was) in Consoltex v. The Queen[15]:
The doctrine [of estoppel] has no application where a
particular interpretation of a statute has been communicated to a
subject by an official of the government, relied upon by that
subject to his or her detriment and then withdrawn or changed by
the government. In such a case a taxpayer sometimes seeks to
invoke the doctrine of estoppel. It is inappropriate to do so not
because such representations give rise to an estoppel that does
not bind the Crown, but rather, because no estoppel can arise
where such representations are not in accordance with the law.
Although estoppel is now a principle of substantive law, it had
its origins in the law of evidence and as such relates to
representations of fact. It has no role to play where questions
of interpretation of the law are involved, because estoppels
cannot override the law.
[23] As conceded by Newmont at the hearing,
if waiver and estoppel are not available to Newmont, subsection
169(2.1) must apply to its appeals of the 1990 and 1991 taxation
years.
[24] Accordingly, the Crown's
application is granted, with costs for two counsel, and it is
ordered that:
a) paragraphs 40 to 52,
53(c) and 62 be struck from Newmont's Notice of Appeal;
and
b) the Crown shall have 30 days
from the date of this motion Order to file its
Reply to the Notice of Appeal.
This
Amended Reasons for Order is issued in substitution for the
Reasons for Order dated March 31, 2005.
Signed at London, Ontario this 14th day
of April, 2005.
Sheridan, J.
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