Dockets: A-413-14
A-414-14
Citation:
2016 FCA 139
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CORAM:
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NOËL C.J.
NEAR J.A.
SCOTT J.A.
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Docket:A-413-14
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BETWEEN:
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IMPERIAL OIL
RESOURCES LIMITED
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Appellant
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and
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THE ATTORNEY
GENERAL OF CANADA
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Respondent
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Docket:A-414-14
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AND BETWEEN:
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IMPERIAL OIL
RESOURCES VENTURES LIMITED
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Appellant
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and
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THE ATTORNEY
GENERAL OF CANADA
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Respondent
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REASONS
FOR JUDGMENT
NOËL C.J.
[1]
These are two appeals brought by Imperial Oil
Resources Limited (IORL) and Imperial Oil Resources Ventures Limited (IORVL)
(collectively, the appellants) from a decision of the Federal Court (2014 FC
839) wherein Gagné J. (the Federal Court judge) dismissed the appellants’
respective applications for judicial review. Both appellants were seeking refund
interest denied by the Minister of National Revenue (the Minister).
[2]
At issue in Court files A-413-14 and A-414-14 is
whether in computing the amounts paid by the appellants on account of their
respective tax liability pursuant to the Income Tax Act, R.S.C. 1985
(5th Supp.), c. 1 (the ITA), the Minister was required to credit the amount of
a tax debt remitted to them pursuant to the Financial Administration Act,
R.S.C. 1985, c. F-11 (the FAA) and pay refund interest on the resulting
overpayment. A further question arises in Court file A-414-14 as to whether
IORVL’s judicial review application was filed on time, and if not, whether an
extension of time ought to have been granted by the Federal Court judge.
[3]
For the reasons which follow, I have come to the
conclusion that the Federal Court judge did not err in denying the respective
applications and that both appeals should accordingly be dismissed.
[4]
The provisions of the ITA and the FAA which are
relevant to the analysis are set out in Annex 1 to these reasons. The
references to the FAA are to the current provisions, the parties having argued
their case on the basis that these provisions are not materially different from
those in force in 1976, when the remission was granted.
BACKGROUND
[5]
In 1975, paragraphs 12(1)(o) and 18(1)(m)
were added to the ITA effective in May, 1974, the effect of which was
respectively to require the inclusion in income of royalties receivable by a
province and prohibit the deduction of resource royalties payable to a
province.
[6]
A year later, the federal government decided to
provide relief from paragraphs 12(1)(o) and 18(1)(m) with respect
to the Syncrude Project, an oil sands development project in Alberta in which
the appellants were participants. On May 6, 1976, the Governor in Council
passed the Syncrude Remission Order, C.R.C., c. 794 (the SRO), which
provides in part as follows:
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2. In this Order,
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2. Dans le présent décret,
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…
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[…]
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royalty provisions means the
provisions contained in paragraphs 12(1)(o) and 18(1)(m) …
of the Income Tax Act;
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dispositions relatives aux redevances désigne les dispositions contenues aux alinéas 12(1)o),
18(1)m) […] de la Loi de l’impôt sur le revenu;
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…
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[…]
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3(1) Subject to subsection (2),
remission is hereby granted to each participant of any tax payable for a
taxation year pursuant to Part I of the Income Tax Act as a result of
the royalty provisions being applicable to
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3(1) Sous réserve du paragraphe (2),
remise est accordée à chaque participant de tout impôt payable pour une année
d’imposition en vertu de la Partie I de la Loi de l’impôt sur le revenu
et qui résulte de l’application des dispositions relatives aux redevances aux
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(a) amounts receivable and the
fair market value of any property receivable by the Crown as a royalty, tax,
rental or levy with respect to the Syncrude Project, or as an amount however
described, that may reasonably be regarded as being in lieu of any of the
preceding amounts;
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a)
montants à recevoir et à la juste valeur marchande des biens à recevoir par
la Couronne à titre de redevance, d’impôt, de loyer ou de prélèvement à
l’égard du projet Syncrude, ou à titre de montant, quelle que soit la manière
dont il est décrit, qui peut raisonnablement être considéré comme remplaçant
un des montants qui précèdent;
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…
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[…]
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[7]
The participants in the Syncrude Project
obtained an advance tax ruling addressing how the SRO would be administered by
the Minister (the ATR). In response to a request for clarification sought by
ruling officials prior to the issuance of the ATR, the Department of Finance confirmed
that the SRO was intended to “operate as an amendment
to the [ITA] for all purposes” (Letter to Mr. Cliff Rounding dated April
28, 1976, Appeal Book, Vol. 2, p. 543).
[8]
The next day, the ATR was issued as follows:
A. As long as the remission order is
in effect, its results for each taxation year will be that the tax remitted to
Imperial will reduce the tax otherwise payable under the Income Tax Act of
Canada to the amount which would be payable on the basis that:
1. The 50% share of the Deemed
Net Profit of the Alberta Joint Venture, and the leased substances taken in
satisfaction thereof, and the proceeds of the disposition thereof, held by
Alberta Royalty under the Alberta Crown Agreement, will not be taxable to
Imperial or Syncrude [Canada Ltd.] under the provisions of paragraphs 12(1)(o)
or 18(1)(m) of the Income Tax Act of Canada.
2. The gross production
royalty reserved to Alberta Royalty under the Alberta Crown Agreement, and the
proceeds of disposition thereof, will not be taxable to Imperial or Syncrude
[Canada Ltd.] under the provisions of paragraphs 12(1)(o) or 18(1)(m) of the
Income Tax Act of Canada.
3. The royalty prescribed to
be paid to Alberta Royalty under the leases pursuant to the provisions of The
Mines and Minerals Act of the Province of Alberta with respect to the Leased
Substances and the proceeds of disposition thereof, will not be taxable to
Imperial or Syncrude [Canada Ltd.] under the provisions of paragraphs 12(1)(o)
or 18(1)(m) of the Income Tax Act of Canada.
…
C. The instalments and other payments
of tax, interest and penalties required under the Income Tax Act of Canada for
all relevant years will be computed in accordance with the rulings above.
[9]
Throughout the years, various assessments were
issued with respect to IORL’s 1999 taxation year in which the remitted tax debt
pursuant to the SRO and the ATR was determined by first computing the taxes
payable pursuant to the ITA, and then making the same computation on the basis
that paragraphs 12(1)(o) and 18(1)(m) did not apply. Using this
approach, the Minister initially determined the amount of the remission for the
1999 taxation year to be $1,539,181 based on the tax return position adopted by
IORL. This amount was revised to $885,918 by reassessment issued on December 7,
2004 and remained unchanged when the final reassessment was issued for the
year, on September 27, 2007. The parties agree that $885,918 represents the
amount of the tax debt ultimately remitted pursuant to the SRO for the 1999
taxation year.
[10]
The record reveals that while the amount of the
remission as assessed over the years was credited by the Minister as of the
balance due date (i.e.: February 29, 2000) for the purpose of computing IORL’s
instalment obligations pursuant to section 157 of the ITA – thereby relieving
IORL of the liability for arrears interest which would otherwise have accrued
pursuant to section 161 – the Minister refused to provide the same
treatment for the purpose of determining whether IORL was entitled to refund
interest pursuant to section 164. The Attorney General of Canada (the Attorney
General or the respondent) explains this distinct treatment as follows (respondent’s
memorandum of fact and law, para. 16):
In keeping with the SRO and the ATR, the
Minister adopted an administrative accounting practice to relieve Imperial of
arrears interest arising on late or deficient instalment payments to the extent
of the remission granted under the SRO while also ensuring that refund interest
was not paid on remitted amounts. Thus, while in law remission is not available
until, by assessment, there is determination of a taxpayer’s liability and an
ascertainment of taxes payable, the Minister nevertheless credited remission
against Imperial’s tax liability as at the balance due date for administrative
accounting purposes.
[11]
IORL’s contention in this appeal is that the
Minister was bound to credit the remission for all purposes and to acknowledge
the resulting overpayment of its tax liability for the year together with the
consequential obligation to pay refund interest in conformity with
subsection 164(3) of the ITA. An “overpayment”
is defined by paragraph 164(7)(b) as “the total
of all amounts paid on account of the corporation’s liability under this
Part [i.e.: Part I] or Parts I.3, VI or VI.1 for the year minus all
amounts payable in respect thereof” (my emphasis).
[12]
The amount of the alleged overpayment is based
on the addition of the remitted tax debt to the instalment payments made by
IORL and also takes into account a decrease in the taxes payable for the year
resulting from a series of surtax carry backs. IORL sets the overpayment at
$2,012,251. However, the record reveals that the Minister had already
recognized the amount of $53,377 as an overpayment resulting from the carry
backs (Statement of Interest dated October 5, 2007, Appeal Book, Vol. 2,
pp. 573 and 575). The alleged overpayment would therefore appear to stand at
$1,958,874 rather than $2,012,251.
[13]
The decision of the Federal Court judge refusing
to treat the amount of the remitted tax debt as having been paid on account of IORL’s
taxes payable and to order the payment of refund interest on the overpayment which
would have resulted is the subject matter of IORL’s appeal.
[14]
In the companion appeal, IORVL seeks the same
relief with respect to its 1996 taxation year. However in order to obtain this
relief, it must first establish that the Federal Court judge erred in failing
to recognize that its judicial review application was filed on time and if not,
by refusing to grant the extension of time which it sought.
DECISION OF THE FEDERAL COURT
[15]
The Federal Court judge began her analysis by
addressing the standard of review. She held, citing Canada (Attorney
General) v. Imperial Oil Resources Limited and Imperial Oil Resources Ventures
Limited, 2009 FCA 325 [Imperial Oil 2009], that the question whether
the SRO and the ITA have been properly construed is to be reviewed on a
standard of correctness.
[16]
Turning to the merits, the Federal Court judge
found that the Minister properly determined that IORL was not entitled to
refund interest on taxes remitted pursuant to the SRO. She provided several
grounds in support of her conclusion.
[17]
First, relying on Imperial Oil 2009, the
Federal Court judge held that there is no statute or contract entitling IORL to
refund interest as a result of a tax remission order, even where it gives rise
to the refund of a tax debt that has been paid.
[18]
Second, she noted that the ITA does not empower
the Minister to remit tax otherwise payable and that only the FAA grants such
power. The Federal Court judge further stated that a remission under the FAA
does not create, in and of itself, an “overpayment”
within the meaning of section 164 of the ITA but, rather, relieves a portion of
a taxpayer’s tax liability. She concluded that a remission under the SRO was
not a payment on account of IORL’s tax liability.
[19]
Third, the Federal Court judge found that the
application of section 164 of the ITA was not informed by the SRO, the ATR or
the Minister’s administrative practice.
[20]
Finally, she held that the Minister had at her
disposal different means of discharging her obligations pursuant to the SRO but
that none resulted in refund interest being owed to IORL. The fact that the
Minister chose to apply the remitted amount against IORL’s tax liability does
not alter this conclusion. Indeed, in her view, “[t]he
[FAA] does not provide for the payment of interests on [an] amount that would
remain outstanding once all amounts otherwise due and payable by both parties
are offset, should the balance be in favour of the taxpayer” (reasons,
para. 53).
[21]
Turning to the application for judicial review
brought by IORVL, the Federal Court judge found that the Minister first
communicated her decision that there was no entitlement to refund interest
through the notice of reassessment issued June 10, 2003 with respect to IORVL’s
1996 taxation year. IORVL’s objection did not extend the time for making an
application for judicial review as the objection provisions under the ITA do
not allow for a challenge being brought against a remission granted pursuant to
the FAA. The 30-day delay under subsection 18.1(2) of the Federal Courts Act,
R.S.C. 1985, c. F-7 (the FCA) had therefore lapsed by some seven years when
IORVL filed its application on December 23, 2010.
[22]
The Federal Court judge further found that
granting an extension of time was not warranted, as none of the four criteria
set out in Canada (Attorney General) v. Hennelly, [1999] F.C.J. No. 846
were met. First, by seeking refund interest through the objection process under
the ITA, IORVL failed to demonstrate a continuing intention to pursue its
application. Second, in light of her reasons in the companion application, the
Federal Court judge concluded that IORVL’s argument had no merit. Third, she
held that “[t]he public interest is best served by
bringing finality to administrative decisions” (reasons, para. 71).
Finally, since IORL had initiated the proceedings on time in the companion
application, there was no reasonable explanation for the delay between the June
10, 2003 notice of reassessment and December 23, 2010, the day on which IORVL
finally made its application for judicial review.
[23]
The Federal Court judge went on to dismiss both
applications for judicial review.
POSITION OF THE PARTIES ON APPEAL
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IORL
[24]
IORL takes the position that the applicable
standard of review is correctness, as the interpretation of section 164 of the ITA
gives rise to a question of law.
[25]
On the merits, IORL submits that the Federal
Court judge asked the wrong question, i.e.: whether interest was owed on the
remission amount. Had she asked whether there was an
“overpayment” that resulted in refund interest being owed by the
Minister, she would have been bound to hold in favour of IORL. Specifically, by
focussing her analysis on the remission granted to IORL, rather than turning
her mind to the “overpayment” issue, the Federal
Court judge ignored that refund interest is claimed not only on the remission
amount of $885,918, but on the amount of $2,012,251 ($1,958,874 when regard is
had to the Statement of Interest dated October 5, 2007). IORL contends that
once the right question is asked, its entitlement to refund interest becomes
apparent given the Federal Court judge’s finding that the remission amount was
applied on account of IORL’s tax liability, as of February 29, 2000.
[26]
This is the way in which the issue was framed in
Imperial Oil 2009 (IORL’s memorandum of fact and law, para. 7, citing Imperial
Oil 2009, para. 42):
Imperial argues that it is entitled to
refund interest for 1997 because it paid more on account of its 1997 tax
liability than the amount of its 1997 tax liability as finally determined,
taking into account the amount of Part I tax remitted for 1997 by the Syncrude
Remission Order.
As the issue raised
in the present case is no different, this Court should answer the question
within the framework set out in Imperial Oil 2009.
[27]
IORL further argues that the Attorney General’s
position that the remission amount should not be taken into account in
determining whether there is an overpayment is contradicted by the Minister’s
own conduct. First, the Minister’s systems treated the remission as a payment
and counted it in the determination of any overpayment. Second, the notices of
reassessment themselves, which are valid and binding documents pursuant to
subsection 152(8) of the ITA, show that an
“overpayment” has been made. Third, the respondent’s affiant
acknowledged that the remission amount was applied against IORL’s tax liability
and treated as a payment.
[28]
This is consistent, argues IORL, with the
Federal Court judge’s statement that the remission amount was applied against
IORL’s tax liability in order to “impact on Imperial
Oil’s instalment[s] and other payment[s] of tax … under the [ITA]”
(IORL’s memorandum of fact and law, para. 59, citing reasons, para. 51). The
respondent’s contention that the remission “only
relieves [IORL] from collection” of the amount remitted cannot stand in
light of these findings (ibidem).
[29]
Finally, IORL submits that the flaws in the
respondent’s position become apparent once an alternative arrangement by way of
cheques is considered (IORL’s memorandum of fact and law, para. 62):
There is no doubt that if the Minister had
issued a cheque to Imperial in the amount of the remission and Imperial had
issued an identical cheque to the Minister, the amount would count as a payment
on account of Imperial’s tax liability.
[30]
Ultimately, what IORL is seeking is the same
treatment as that given by the Minister in respect of its instalment
obligations.
-
IORVL
[31]
IORVL adopts the arguments put forward by IORL
in the companion appeal in support of the contention that it is also entitled
to refund interest for its 1996 taxation year. The further arguments put
forward by IORVL are aimed at the Federal Court judge’s conclusion that its
application for judicial review was filed beyond the time period set out in
subsection 18.1(2) of the FCA and her refusal to extend this delay.
[32]
In essence, the position of IORVL is that the
objection procedure had to be exhausted before the Minister could decide whether
or not to honour its claim for refund interest (IORVL’s memorandum of fact and
law, paras. 24-26 and 37):
To the extent [the interpretation and
implementation of the remission order] involve[d] a decision that leads to or
is part of a reassessment, the provisions of the ITA relating to the
reassessments, including those relating to objections and appeals, are engaged.
…
It was only after Imperial had filed its
objection and the Minister advised Imperial that no refund interest would be paid,
that the Minister made a decision that could be the subject of an application
for judicial review to the Federal Court.
…
The determination of interest depends in
many ways upon findings of fact and law that must be made in determining the
taxpayer’s liability, potentially raising any number of issues that are the
proper subject of an objection and appeal to the Tax Court once the tax
liability is assessed. Where those issues are resolved satisfactorily by the
objection but the resulting implications for interest remain in dispute, it is
only the Federal Court that has the jurisdiction to resolve the dispute.
…
Whether refund interest is payable depends
on whether the reassessment is correct or whether a refund should be made. This
necessarily requires a finding regarding the taxpayer’s tax liability.
[33]
IORVL submits that requiring a taxpayer to file
an application for judicial review within 30 days of receiving a reassessment
denying refund interest inappropriately bestows to the Federal Court the task
of determining the correctness of the taxpayer’s tax liability, a determination
which falls within the exclusive jurisdiction of the Tax Court of Canada.
[34]
Given this, the Minister cannot be said to have
first communicated her decision on June 10, 2003, when the notice of
reassessment for the 1999 taxation year was issued, but on December 13, 2010,
when IORL was advised verbally that no refund interest would be paid. It
follows that IORVL’s judicial review application dated December 23, 2010 was
filed within the 30-day period set out in subsection 18.1(2) of the FCA.
[35]
Alternatively, the Federal Court judge should
have extended the delay since the conditions precedent for this exercise of
discretion were met. First, IORVL always had the intention to pursue the application
and only sought relief through the objection process based on a reasonable
perception that this was the only course open to it. Second, IORVL submits, for
the reasons advanced in support of IORL’s appeal, that its application has
merits. Third, the respondent would not suffer any prejudice as IORVL’s
position with respect to the refund interest issue was known all along.
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The Respondent
[36]
The respondent submits that the Federal Court
judge properly identified and applied correctness as the standard against which
the question raised in IORL’s appeal must be assessed.
[37]
Turning to the merits, the respondent
essentially adopts the Federal Court judge’s analysis as her own. Citing Imperial
Oil 2009, the respondent argues that IORL is not entitled to refund interest
on a payment made pursuant to a tax remission order under any statute or
contract, even if the result is a refund of a tax debt that has been paid.
[38]
The respondent provides several grounds in
support of that view. First, the SRO does not engage the refund provisions of
the ITA. A remission order is authorized under the FAA and is thus irrelevant
in determining whether there is an “overpayment”
under section 164 of the ITA. This Court correctly found in Imperial Oil
2009 that it is impossible, as a matter of law, for a remission order to
operate as an amendment to the ITA. Likewise, the ATR cannot inform the
interpretation of the ITA.
[39]
According to the respondent, a remission and a
refund resulting from the “overpayment” of a tax
liability are fundamentally different things (respondent’s memorandum of fact
and law, para. 47):
Remission is premised upon the existence
of a tax liability that is relieved by the authority of the [FAA]. This
stands in contrast to a refund from an overpayment of tax, which contemplates
the absence of a tax liability to the extent of the overpayment.
[Emphasis
in original.]
[40]
While the determination of an “overpayment” is made in accordance with the
provisions of the ITA, the respondent argues that the determination of a
remission under the SRO requires that the tax liability under the ITA be first
established and compared to the hypothetical tax liability premised upon the
non-enactment of paragraphs 12(1)(o) and 18(1)(m). Indeed, “as made clear in [Canada v. Perley, [1999] 3 C.T.C.
180 (F.C.A.), para. 5 [Perley]], remission requires as a condition
precedent to its application that there be a determination of a taxpayer’s
liability and an ascertainment of the amount of tax owed by that taxpayer”
(respondent’s memorandum of fact and law, para. 48).
[41]
The respondent is of the view that refund
interest under subsection 164(3) of the ITA is payable only in respect of a
refund under section 164 and that no such refund resulted from the remission.
[42]
Second, the respondent submits that the wording
of the ITA “encompasses only those amounts that are ‘paid
on account of the taxpayer’s liability’, and not those amounts that are applied
by the Minister against such liability as in the case of remission”
[emphasis in original] (respondent’s memorandum of fact and law, para. 54). To
hold otherwise confuses the nature of the Minister’s obligations with the way
in which they can be carried out.
[43]
The respondent further submits that the legal
character of a remission under the SRO is not affected by the “Minister’s administrative practice of crediting the
remission amount against Imperial’s assessed tax liability as at the balance
due date, even though remission had not been determined or granted at that
time” (respondent’s memorandum of fact and law, para. 68). In any event,
the fact that in the past refund interest was paid on remitted amounts or that
remitted amounts were labelled as “refund” or “payment” does not create in law an entitlement to
refund interest.
[44]
With respect to the IORVL’s appeal, the respondent
submits that the Federal Court judge’s decision refusing to grant an extension
of time is discretionary in nature and should not be interfered with absent a
misapprehension of the facts or an error of law. He adds that the role of this
Court is to step into the shoes of the Federal Court judge and determine
whether she correctly identified and applied the proper standard of review.
[45]
The respondent submits that the Federal Court
judge correctly held that IORVL’s application was statute-barred and that an
extension of time was not warranted. Indeed, “refund
interest is not an assessed amount, and as such, does not fall within the [ITA’s]
provisions for objecting to, and appealing from, an assessment” (respondent’s
memorandum of fact and law, para. 46). Accordingly, the Minister did not have
the ability to consider IORVL’s objection with respect to refund interest.
[46]
Relying on the reasons given, the respondent
submits that the Federal Court judge’s refusal to extend the time is the result
of a proper exercise of discretion.
ANALYSIS
[47]
On an appeal from a decision of the Federal
Court disposing of an application for judicial review, this Court is required
to determine “whether the court below identified the
appropriate standard of review and applied it correctly” (Agraira v.
Canada (Public Safety and Emergency Preparedness), 2013 SCC 36, para. 45,
citing Canada Revenue Agency v. Telfer, 2009 FCA 23, para. 18).
[48]
This Court has already determined that the
interpretation of the SRO and the ITA gives rise to a question of law
reviewable on the standard of correctness (Imperial Oil 2009, para. 2).
Both parties support this view and I agree that correctness is the standard
against which to assess the question which arises in the present case. That
question is whether the remission of a tax debt pursuant to the FAA can give
rise to an “overpayment” within the meaning of subsection
164(7) of the ITA.
[49]
The same issue was raised by the appellants by
way of cross-appeal in Imperial Oil 2009. However, the Court in that
case noted that the record did not allow for the computation of the alleged
overpayment. It therefore denied the appellants’ claim without making a
definite pronouncement as to whether an overpayment could result from the
remitted amount (Imperial Oil 2009, paras. 45 and 46).
[50]
In the present case, IORL properly asserts that
the missing factual foundation has been established. It contends that the
remission amount together with the other payments made on account of its taxes
for the 1999 taxation year give rise to a proven overpayment on which refund
interest is payable. In advancing this argument IORL submits that the remission
amounts had to be credited against its taxes payable as of the balance due date
the same way as they were for the purpose of computing its instalment
obligations.
[51]
I start from the basic premise that the
correctness or validity of an assessed tax liability is not affected by a
remission and must be determined on the basis of the relevant provisions of the
ITA (Imperial Oil 2009, para. 27, citing Perley). For that
reason, it is legally impossible for a remission order
“to operate as an amendment to the [ITA] for all purposes” (Imperial
Oil 2009, para. 28, quoting the letter from the Department of Finance dated
April 28, 1976, copy of which is also part of this record and relied upon by
IORL). The effect of a remission order is limited to forgiving a debt once it has
arisen pursuant to relevant provisions of the ITA, which would include in this
case paragraphs 12(1)(o) and 18(1)(m) (Perley, para. 6; Imperial
Oil 2009, para. 30).
[52]
That this is the only effect which a remission
order can have is made clear by the modes or forms of remission authorized by
the FAA which are limited to foregoing collection of the debt (paragraph 23(4)(a)
through (d)) or repaying it, if it has already been paid (paragraph 23(4)(e)).
[53]
Referring to this last form of remission, IORL
insists that if the Government had given effect to the remission by writing a
cheque equal to the remitted debt and if IORL had used the proceeds to pay its
taxes, “[t]here is no doubt … that … the amount would
count as a payment on account of [IORL’s] tax liability” (IORL’s memorandum
of fact and law, para. 62). No doubt that is so, but in order for this cheque
to be issued at the balance due date, IORL had to discharge its tax liability beforehand
since paragraph 23(4)(e) only allows for “repaying
… money paid”.
[54]
A further complication would have been the amount
of the refund cheque. Before this amount could be determined, the taxes payable
for the 1999 taxation year had to be ascertained as the SRO by its own terms
relieved IORL of “any tax payable pursuant to Part I as
a result of the royalty provisions”. The extent of this tax was not
ascertained until December 7, 2004, when the remission amount was reduced to
$885,918 and did not become final until September 27, 2007, when the last
reassessment for the 1999 taxation year was issued. That is when the
possibility that further changes be brought to the computation of IORL’s taxes
payable pursuant to Part I came to an end (Abrahams v. M.N.R., [1967] 1
Ex. C.R. 314, paras. 9 and 10). This is the process which the Federal Court
judge alluded to when she said that “[b]y definition,
in order for a debt or liability to be remitted, is has to be fully assessed
and certain” (reasons, para. 50).
[55]
A further, and in my view unsurmountable
difficulty is that in order for the remission amount to be credited against
IORL’s tax liability for the 1999 taxation year pursuant to subsection 164(1),
one would have to treat the remission order as reducing the taxes assessed for
that year, contrary to Perley, or as having amended the ITA by
eliminating the application of paragraphs 12(1)(o) and 18(1)(m),
a proposition that runs counter to the conclusion reached in Imperial Oil
2009. It follows that the appeal cannot succeed.
[56]
In so holding, I am mindful of the fact that the
Minister relieved IORL from its liability for arrears interest by crediting the
remission amount against IORL’s instalment obligations with effect as of the
balance due date. However, this treatment is not in issue in this appeal and I
need not opine on it.
[57]
As to the question that is in issue, it is clear
that an overpayment of taxes payable cannot result without some form of payment
being made beforehand, and no such payment can result from a remission order
whose sole effect is to prevent the collection of what is, and remains, a
validly assessed tax debt. Given that a remission order can do no more than
that, no amount can be said to have been “paid on account
of [IORL’s] liability” (paragraph 164(7)(b) of the ITA) by reason
of the SRO.
[58]
It follows that the Federal Court judge has not
been shown to have erred in holding that IORL had no entitlement to the payment
of refund interest, and in dismissing the application for judicial review on
this basis.
[59]
Given this conclusion, the appeal brought by
IORVL becomes moot as it also hinges on this entitlement. However, I believe it
useful to add in light of the reasons given in disposing of the first appeal, that
there is no basis for IORVL’s contention that the Minister’s refusal to pay
refund interest could only be challenged after the objection process had been
exhausted (IORVL’s memorandum of fact and law, paras. 24-26 and 37).
[60]
I refer in particular to the above finding that a
remission has no bearing on tax liability as assessed or reassessed, and
therefore cannot be the subject matter of an assessment or reassessment.
[61]
The objection procedure before the Minister and
the subsequent right to bring an appeal before the Tax Court only applies to assessed
amounts (Perley, paras. 1 and 7). An assessment determines or confirms
the liability of a taxpayer to pay specified amounts. Pursuant to subsection
152(1) of the ITA, the only amounts that can be assessed are taxes, interest
and penalties. To be clear, assessed interest is interest claimed by the
Minister pursuant to the ITA (see for example section 161), and interest payable
by the Minister pursuant to section 164 does not come within that description.
As explained by Rip J. (as he then was) in McMillen Holdings Ltd v. M.N.R.,
[1987] 2 C.T.C. 2327 (T.C.C.) [McMillen], the amount of a refund
resulting from an overpayment, although often set out on the notice of
assessment, is not an assessed amount (McMillen, para. 47). The objection
procedure does not apply to a contested refund and the Tax Court is therefore
without jurisdiction to hear an appeal pertaining to its computation (McMillen
, para. 51; see also Topol v. Canada, [2003] 4 C.T.C. 44 (F.C.T.),
paras. 11 and 12, where the Federal Court came to the same conclusion).
[62]
It follows that the Federal Court judge came to
the correct conclusion when she held that the time within which IORVL could
file its judicial review application began to run on June 10, 2003, when the Minister’s
refusal was first communicated with the result that IORVL’s application was some
seven years late in the making.
DISPOSITION
[63]
I would dismiss both appeals with costs in each
case.
“Marc Noël”
“I agree.
D. G. Near J.A.
“I agree.
A.F. Scott J.A.
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