Denso – Federal Court finds that CRA had reasonably not accepted a late ETA s. 156 election where the companies had carelessly not found out about the new filing requirement
S. 156(4)(b)(ii) permits the Minister to allow a late-filed ETA s. 156 nil consideration election. Due to confusion as to the required effective date of the new requirement to file such elections with CRA rather than merely keeping signed copies on hand, and in response to a CRA audit inquiry in this regard, two closely related companies filed (somewhat late) an election with a stated effective date of January 1, 2016, not January 1, 2015. On a subsequent audit of the 2015 year, CRA focused on this error, and (in November 2017) the companies filed a request to have an amended election accepted with the correct effective date (of January 1, 2015). This was rejected, and assessments for over $30M were made of the 2015 year.
In rejecting a request for judicial review of CRA’s refusal to accept the late-filed amended election, Zinn J stated:
The Denso Companies say that their actions were not negligent nor careless given they had hired and relied on the advice of tax consultants who provided them erroneous advice. … [T]he consultant was contacted after a well-published deadline had already passed, and only after the Denso Companies were alerted to the need by the review officer in February 2016. It was open to the Minister to conclude, as was done, that the Denso Companies had not taken adequate precautions to keep abreast of their compliance obligations, actions that amount to carelessness and negligence.
Neal Armstrong. Summary of Denso Manufacturing Canada Inc. v. Canada (National Revenue) 2020 FC 360 under ETA s. 156(4)(b)(ii).