Pinard, J.:—This is an application for judicial review of the decision of the Minister of National Revenue denying the applicants’ request pursuant to subsection 220(3.1) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, C. 63) (the "Act") for the waiver of interest. The applicants specifically request: (a) a writ of certiorari, to quash and/or set aside the Minister’s decision: and
(b) an order that the Minister review the applicants’ request for a waiver of interest on the basis that subsection 220(3.1) of the Act is applicable in respect of interest accruing and payable in the 1985 and subsequent taxation years.
The facts are simple and are undisputed. By letter dated October 29, 1993, the applicants’ counsel applied on their behalf to the respondent pursuant to subsection 220(3.1) of the Act for the waiver of interest arising in respect of an assessment of tax issued in respect of their 1984 taxation year. By letter dated November 9, 1993, the respondent denied the applicants’ request on the ground that interest arising on a debt originating from an assessment with respect to the 1984 taxation year cannot be waived pursuant to subsection 220(3.1).
The issue to be decided in this application is whether the respondent correctly interpreted subsection 220(3.1) when he decided that it applied only to interest and penalties arising from assessments of tax for the 1985 and subsequent taxation years.
By virtue of subsections 161(1) and 248(11) of the Act, a taxpayer is liable to pay interest on amounts of unpaid taxes payable for a taxation year, such interests to be computed on the basis of the period during which such amounts are outstanding. The interest is to be compounded daily at the rate prescribed by the Act. Such liability for interest in respect of outstanding tax arrears accrues over time on a daily basis until either the total liability for tax and interest is extinguished by repayment of the debt or alternatively by way of waiver through the exercise of the Minister's discretion under subsection 220(3.1).
Prior to the introduction of subsection 220(3.1) into the Act, neither the Minister nor the courts had the authority to cancel or waive interest or penalties payable under the Act. The provision now reads as follows:
220(3.1) Waiver of penalty or interest. — The Minister may at any time waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by a taxpayer or partnership and, notwithstanding subsections 152(4) to (5), such assessment of the interest and penalties payable by the taxpayer or partnership shall be made as is necessary to take into account the cancellation of the penalty or interest.
The subsection contains no limitation as to over what period the discretion given to the Minister can be exercised. That restriction is now contained in subsection 127(5) of S.C. 1993, c. 24, An Act to Amend the Income Tax Act (the “Amending Act"). That subsection provides that subsection 127(2) (i.e., subsection 220(3.1) above) “applies to the 1985 and subsequent taxation years”. Subsection 127(5) reads:
127(5) Subsection (2) applies to the 1985 and subsequent taxation years.
The interpretation of a statute requires the consideration of four distinct elements, namely the words themselves, their immediate context, the purpose of the statute as manifested throughout the legislation, and extrinsic evidence of parliamentary intent to the extent admissible. Greater weight is to be given to clear words supported by their immediate context than to larger assertions of parliamentary intention (see British Columbia Telephone Co. v. Canada, [1992] 1 C.T.C. 26, 92 D.T.C. 6129 at page 31 (D.T.C. 6132) (F.C.A.); and E.A. Driedger, Construction of Statutes, 2d ed (Toronto: Butterworths, 1983) at page 87).
While the parties are in agreement with respect to these modern principles of statutory interpretation, they totally disagree on the effect of subsections 220(3.1) of the Act and 127(5) of the amending Act. On the one hand, the applicants submit that when read together and given their ordinary meaning, the effect of the subsections is that the Minister and taxpayers are entitled to rely on subsection 220(3.1) to cancel or waive any interest payable that arises in the 1985 and subsequent taxation years. On the other hand, the respondent contends that subsection 220(3.1) only applies to penalties and interest arising from assessments for the 1985 and subsequent taxation years.
It is well accepted that ‘‘the words themselves” should be given their ordinary meaning unless the context requires otherwise. Here, subsection 127(5) of the amending Act refers to "taxation years". The words "taxation year" are defined in subsection 249(1) of the Act:
249(1) For the purpose of this Act, a “taxation year” is
(a) in the case of a corporation, a fiscal period, and
(b) in the case of an individual, a calendar year,
and when a taxation year is referred to by reference to a calendar year the reference is to the taxation year or years coinciding with, or ending in, that year.
Legal dictionaries provide the following definitions of “taxation year":
TAXATION YEAR. 1. The fiscal year in relation to which the amount of tax is being computed. 2. In the case of a corporation, a fiscal period and in the case of an individual, a calendar year.
The Dictionary of Canadian Law (Toronto: Carswell, 1991) at page 1063.
TAX YEAR. The period covered by a tax return. Individuals generally file on a calendar year while corporations, trusts, and other entities may file on a fiscal year.
Black’s Law Dictionary (St. Paul, Min.: West Publishing Co., 1990) at page 1463.
From the preceding definitions, a "taxation year” refers to a year, fiscal or calendar, for which tax is computed. Tax returns cover this period. In using the term “the 1985 and subsequent taxation years” and in French "années d'imposition 1985 et suivantes”, Parliament must be referring to periods of time for which tax returns are submitted.
I believe Parliament's intent, in subsection 127(5) of the amending Act, was to limit the Minister’s discretion to waive interest payable on those returns filed for the 1985 taxation year, and for subsequent taxation years.
Whereas tax returns are filed once a year, every year, interest, on the other hand, is compounded daily. There would have been no need to include "taxation year" or "subsequent taxation year”, if the cutoff point were to be determined by reference to the accruing of interest and not the year for which a return was filed. Instead, the legislature would have limited subsection (2) to "applies after January 1, 1985” or perhaps more specifically to “applies to interest accrued after January 1, 1985". Alternatively, if Parliament had intended to refer to interest payable in a specific period of time, namely a taxation year, it could have used, as it did in S.C. 1991, c. 49, the following wording:
180(2) Subsection (1) is applicable with respect to interest and penalties paid in the 1988 and subsequent taxation years.
[Emphasis added.]
While the provision could have been drafted more clearly, the language is not “ambiguous”. The conclusion that “the 1985 and subsequent taxation years" refers to years for which tax returns are filed is a reasonable one, given a plain language, dictionary definition of the term “taxation year”. For the above reasons, the same cannot be said for the applicants’ contention that “taxation year" refers to the time during which interest accumulates. Therefore, in the case at bar, there is not enough “reasonable uncertainty” or “factual ambiguity resulting from lack of explicitness" to decide in favour of the taxpayers (see Johns-Manville Inc. v. Canada, [1985] 2 S.C.R. 46, [1985] 2 C.T.C. 111, 85 D.T.C. 5373).
The legislative history of this provision is also instructive. In 1991, c. 49, in section 181(1) read:
220(3.1) The Minister may at any time waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by a taxpayer or a partnership.
Subsection 5 of section 181 read:
181(5) Subsection 220(3.1) of the said Act, as enacted by subsection (2), is applicable with respect to penalties and interest in respect of the 1985 and subsequent taxation years.
This was changed by section 127 of 1993, c. 24:
127(2) Subsection 220(3.1) of the said Act is repealed and the following substituted therefor:
220(3.1) The Minister may at any time waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by a taxpayer or partnership and, notwithstanding subsections 152(4) to (5), such assessment of the interest and penalties payable by the taxpayer or partnership shall be made as is necessary to take into account the cancellation of the penalty or interest.
(5) Subsection (2) applies to the 1985 and subsequent taxation years.
The main changes that c. 24 seems to effect are to incorporate notwithstanding references to subsections 152(4) to 152(5). Subsection 127(5) simplifies the language in the original c. 49, at the expense of clarity. But there is no indication that Parliament’s intention has changed since the very clear wording in c. 49, which favours the Minister's position.
For all those reasons, I find that the respondent's interpretation of subsection 220(3.1) is correct in that this subsection only applies to penalties and interest arising from assessments for the 1985 and subsequent taxation years.
Consequently, the application will be dismissed.
Application dismissed.
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