Kitco – Quebec Superior Court finds that CRA and ARQ cannot collect pre-CCAA assessments by set-off against post-CCAA refund claims

Paquette J has found that CRA and ARQ could not use their statutory set-off rights to set off input tax credit and input tax refund claims generated by an insolvent company (“Kitco”) after it went into protection under the CCAA against assessments made by them (and disputed by Kitco) in which they denied ITCs and ITRs of $313 million that had been claimed and paid by Kitco before the CCAA proceedings. She found that to permit such set-off would give the Agencies an advantage over the unsecured creditors (by taking all of the post-CCAA credits for themselves) and therefore violate the principle that all unsecured creditors should be treated equally.

She also found that the statutory presumptions (e.g., ETA, s. 299(3)) that assessments are valid and binding did not apply in CCAA proceedings.

Neal Armstrong. Summaries of Métaux Kitco Inc. v. ARQ and AG, 2016 QCCS 444 under CCAA s. 21 and ETA s. 299(3).