Citation: 2005 FC 318
Ottawa, Ontario, March 4, 2005
Present: The Honourable Madam Justice Mactavish
DOROTHEA KNITTING MILLS LTD.
MINISTER OF NATIONAL REVENUE
AND CANADA REVENUE AGENCY
REASONS FOR ORDER AND ORDER
 Dorothea Knitting Mills Ltd. ("Dorothea") seeks judicial review of the decision of the Minister of National Revenue and Canadian Revenue Agency ("CRA") refusing to reinstate Dorothea's claim for a scientific research and economic development ("SR & ED) credit for the 2001 taxation year.
 Dorothea asserts that the CRA erred in improperly fettering its discretion under sections 220(2.1) and 220(3) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) ("ITA").
 Dorothea is a Canadian knitwear manufacturer. It retained Absha Consulting to assist it in claiming SR & ED credits under the ITA for the 2001 and 2002 taxation years. It is the SR & ED application for the 2001 taxation year that is in issue in this case.
 Pursuant to section 37(11) of the ITA, a taxpayer seeking to claim a SR & ED credit has to file a Form T661, Schedule 31 with the CRA, together with supporting technical information. This information is to be filed within 12 months of the taxpayer's filing date for the year in question, that is, within 18 months of the taxpayer's year-end.
 In this case, Dorothea filed the Form T661 within the 18 month period, seeking a tax credit in the amount of $566,495.50. Dorothea did not, however, file the requisite supporting technical information within the specified period. The technical information was not filed with the CRA until some three months after the filing deadline.
 The CRA disallowed the SR & ED claim because of Dorothea's failure to comply with the provisions of the ITA.
 On January 6, 2004, Neyaz Shaheen of Absha Consulting wrote to the CRA on Dorothea's behalf, asking that the CRA reconsider its decision. According to Mr. Shaheen, the CRA previously accepted applications for SR & ED credits in which the supporting technical material had not been filed in time, as long as the Form T661 was filed within the 18 month time period. In Mr. Shaheen's submission, the apparent change to CRA's administrative policy in this regard resulted in an unfairness to Dorothea.
The Decision of the Minister's Delegate
 By letter dated May 17, 2004, the Minister's delegate advised Dorothea that he would not exercise his discretion and reinstate the claim. The decision provides that:
Subsection 220(2.1) of the Income Tax Act empowers the Director to exercise ministerial discretion and reinstate a claim should there be extenuating circumstances for late filing, the claimant took reasonable steps to comply with the law, or the claimant acted on incorrect written information given by the Agency.
 The Minister's delegate goes on to state:
We have reviewed your file and the facts presented in your correspondence of February 16, 2004 (sic), and have concluded that none of these apply in your case. Consequently, your request to reinstate the claim is denied.
 Did the CRA err in improperly fettering its discretion under sections 220(2.1) and
220(3) of the Income Tax Act?
Standard of Review
 Tax "fairness" decisions are discretionary in nature. It is common ground that the standard of review of such discretionary decisions is usually one of patent unreasonableness: see Sharma v. Canada Customs & Revenue Agency, 2001 DTC 5360.
 In this case, however, the Court is not being asked to re-weigh the factors considered by the Minister's delegate, and to come to a different conclusion. Rather, the question for the Court is whether the Minister's delegate erred in fettering his discretion under sections 220(2.1) and 220(3) of the ITA, by improperly imposing limits on the factors that he would consider as potentially justifying a waiver of the filing requirement.
 In my view, this question involves a consideration of the parameters of the discretion conferred by the relevant sections of the ITA. This is a question of law. Accordingly, I am of the view that the appropriate standard of review in this case is that of correctness.
Relevant Legislative Provision
 Sub-sections 220(2.1) and 220(3) of the ITA provide:
220 (2.1) Where any provision of this Act or a regulation requires a person to file a prescribed form, receipt or other document, or to provide prescribed information, the Minister may waive the requirement, but the person shall provide the document or information at the Minister's request.
220 (3) The Minister may at any time extend the time for making a return under this Act. However, the extension does not apply for the purpose of calculating a penalty that a person is liable to pay under section 162 if the person fails to make the return within the period of the extension.
220 (2.1) Le ministre peut renoncer à exiger qu'une personne produise un formulaire prescrit, un reçu ou autre document ou fournisse des renseignements prescrits, aux termes d'une disposition de la présente loi ou de son règlement d'application. La personne est néanmoins tenue de fournir le document ou les renseignements à la demande du ministre.
220 (3) Le ministre peut en tout temps proroger le délai fixé pour faire une déclaration en vertu de la présente loi. Toutefois, il n'est pas tenu compte de la prorogation pour ce qui est du calcul d'une pénalité prévue à l'article 162 si la personne qui est passible de cette pénalité ne fait pas la déclaration dans le délai prorogé.
 The respondent has pointed me to several cases which stand for the proposition that a taxpayer is not entitled to rely on the treatment afforded to other taxpayers by the CRA as evidence that it should be treated the same way in this case: see, for example, Ford Motor Co. of Canada v. Canada (Minister of National Revenue),  F.C.J. No. 505 (F.C.A.) and Sunbeam Corp. (Canada) Ltd. v. Canada,  F.C.J. No. 1295 (F.C.T.D.).
 In my view, this misconceives Dorothea's argument. Dorothea is not submitting that other taxpayers were granted an extension of time in which to file their scientific documentation to support their applications for SR & ED credits, and that, therefore, it should also be entitled to an extension of time. What Dorothea is arguing is that the past practice of the CRA was allegedly to allow applicants for SR & ED credits to file their supporting documentation late, as long as the Form T661's were filed in time. Dorothea says that it relied on this past practice, to its detriment.
 The merits of Dorothea's position in this regard are not in issue here. What is in issue is whether Dorothea's argument was properly considered by the Minister's delegate. In answering this question, it is necessary to refer back to the sections of the ITA in issue.
 Sub-section 220(3) applies to requests to extend the time for filing returns under the ITA. That is not what is in issue in this case, and accordingly, I am satisfied that the Minister's delegate did not err in failing to take this section into account in his deliberations.
 Insofar as sub-section 220(2.1) is concerned, as I read the decision of the Minister's delegate, his view was that requests for extensions of time should not be granted, unless an applicant could demonstrate that it met one of three criteria: that there were "extenuating circumstances", that the applicant has taken "reasonable steps" to comply with the law or that the applicant "acted on incorrect written information given by the Agency".
 It is not clear where these criteria come from. Counsel for the respondent has quite properly conceded that these criteria are not found anywhere in the legislation. While one might surmise that there may be departmental guidelines in place governing this type of fairness request, no such guidelines have been placed before the Court.
 The question, then, is whether the Minister's delegate improperly limited his consideration of Dorothea's request for an extension of time to examining whether the case fit one of the three criteria identified in the decision, or whether the Minister's delegate indeed made an independent judgment with respect to the merits of Dorothea's request.
 The respondent submits that the Minister's delegate did fairly consider Dorothea's arguments, but nevertheless decided not to exercise his discretion in Dorothea's favour. In support of this argument, the respondent points to the fact that the Minister's delegate made specific reference to Mr. Shaheen's letter in his decision.
 There is no discussion in the decision of the nature of the argument being put forward by Dorothea. The only reference to Dorothea's position is the statement of the Minister's delegate that he had considered the facts referred to in Dorothea's February 16, 2004 correspondence. Dorothea's submissions were actually contained in a letter dated January 6, 2004. While this may well be a typographical error, it does at least raise a question as to whether the Minister's delegate was looking at the right letter when he made his decision.
 This point was not raised by Dorothea, however, and only surfaced as a result of questions from the Court. As a result, in fairness to the respondent, I intend to proceed on the assumption that the Minister's delegate did indeed consider the arguments submitted on Dorothea's behalf on January 6, 2004.
 In his decision, the Minister's delegate stated that requests for extensions of time "should be" based on one of three identified criteria. It is clear from the letter that the reason that the request was rejected was because the Minister's delegate did not think that Dorothea's request met any of these criteria. In my view, this amounts to an error, given that a review of sub-section 220(2.1) discloses no such limitation on the discretionary power conferred on the Minister.
 As was the case in Kutlu v. Canada,  F.C.J. No. 197, the Minister's delegate appears to have imposed these criteria on himself, and elevated them to the status of decisive factors. As Justice Joyal noted in Kutlu, "There is no authority for this in the ITA, and the cases are opposed to exercising a discretionary authority in that way."
 It was open to the Minister's delegate to consider the argument put forward by Dorothea, and to accept it or reject it, as he deemed appropriate. It was not, however, open to the Minister's delegate to refuse the request simply because it did not meet criteria that have no foundation in the enabling legislation.
 As the Court noted in Kaiser v. Canada (Minister of National Revenue),  F.C.J. No. 349 (F.C.T.D.)(QL), in tax fairness cases, "Every case is required to be decided on its own merit in order that circumstances unique to that individual taxpayer are properly taken into account".
 Based upon the record before me, I am not persuaded that the Minister's delegate properly turned his mind to the argument being advanced by Dorothea. For these reasons, the application for judicial review is allowed, with costs.
THIS COURT ORDERS that:
1. This application for judicial review is allowed, with costs. The matter is remitted to a different Minister's delegate for re-determination.
"Anne L. Mactavish"
NAMES OF COUNSEL AND SOLICITORS OF RECORD
STYLE OF CAUSE: DOROTHEA KNITTING MILLS LTD.
MINISTER OF NATIONAL REVENUE
AND CANADA REVENUE AGENCY
DATE OF HEARING: FEBRUARY 28, 2005
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR ORDER
AND ORDER BY: MACTAVISH, J.
DATED: MARCH 4, 2005
Mr. Albert G. Formosa
(416) 365-1110 FOR THE APPLICANT
Ms. Annette Evans
(416) 973-9048 FOR THE RESPONDENTS
SOLICITORS OF RECORD:
Barristers and Solicitors
Suite 1600, The Exchange Tower
130 King Street West
Toronto, Ontario M4P 1L3 FOR THE APPLICANT
John H. Sims, Q.C.
DEPARTMENT OF JUSTICE
130 King Street West
Suite 3400, Box 36
Toronto, Ontario M5X 1K6 FOR THE RESPONDENTS