Keurig Canada – Court of Quebec finds that the ARQ did not need the equivalent of ITA s. 152(9) to amend its pleadings with an additional reason for failure of a Quebec bump

The taxpayer was assessed under the Quebec general anti-avoidance rule respecting its engaging in “Quebec bump” transactions, which used Class 12 property (namely, a coffee roaster) purchased from a supplier for $820 thousand to generate a non-capital loss of $541 MILLION. After the taxpayer had launched its appeal, counsel for the ARQ realized through a review of documents previously provided that the roaster likely did not qualify as Class 12 depreciable property, and sought to amend the ARQ’s pleadings to allege this as an additional ground for dismissing the appeal.

After noting that the Quebec Taxation Act did not contain a provision equivalent to ITA s. 152(9) (permitting the raising of additional arguments by the government), Lavigne J nonetheless granted the requested amendment, noting that the source of the ARQ’s error was the taxpayer’s returns, which stated falsely (it was alleged) that the roaster was a Class 12 property. She stated:

It was not for the ARQ to find the error. The burden was on the taxpayer to submit accurate tax returns. …

It would be contrary to the interests of justice for the ARQ to be precluded from a defence based on the facts, which were erroneously presented by the plaintiff, even though the file is at the stage of an appeal from the notice of assessment.

Neal Armstrong. Summary of Keurig Canada Inc. v. Agence du revenu du Québec, 2019 QCCQ 451 under ITA s. 152(9).