Zone3 - Federal Court finds that a failure to give adequate reasons for the rejection of a film tax credit claim required that the claim be reconsidered

Martineau J has ordered the Canadian Audio-Visual Certification Office (“CAVCO”) to reconsider a decision to reject a leading Quebec TV producer’s application for certification of a TV series. The essential problem was that CAVCO’s advance notice of a negative determination - on the basis that the production was “in respect of a game…or contest” and, therefore, ineligible for the Canadian film or video production tax credit under Reg. 1106(1), “excluded production,” (b)(iii) – did not address the taxpayer’s position that the shows’ question-and-answer format merely served as a pretext or vehicle for effectively presenting the informational content, and did not disclose that, in fact, the application had been rejected through the mechanical application of a “decision tree” that the taxpayer did not find out about until later.

Martineau J applied the general principle that:

When the reviewing court is not in a position to determine if the decision on that point or argument falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and the law, the decision will usually be found to be unreasonable, unless the reviewing court can itself reasonably find that the outcome of the proceedings would not have changed even if the point or argument has been dealt with by the tribunal one way or the other.

This principle also potentially applies to discretionary decisions of CRA which cannot be challenged through appeal of an assessment.

Neal Armstrong. Summary of Zone3-XXXVI Inc. v. A.G. (Canada), 2016 FC 75 under Reg. 1106(1) “excluded production” – (b)(iii).