This
appeal
relates
strictly
to
whether
the
respondent's
assessment
of
interest
on
certain
arrears
of
income
taxes
is
in
accordance
with
the
provisions
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act").
Facts
The
essential
facts,
as
summarized
by
the
respondent's
reply
to
the
notice
of
appeal,
are
as
follows:
(b)
the
appellant
corporation
came
into
existence
as
the
result
of
the
November
1,
1989
amalgamation
of
two
predecessor
corporations
known
as
607654
Ontario
Ltd.
and
607655
Ontario
Ltd.;
(c)
both
of
the
above
predecessor
corporations
had
refundable
dividend
tax
on
hand
(RDTOH)
at
the
amalgamation
date;
(d)
the
RDTOH
of
607654
Ontario
Ltd.
as
at
October
31,
1989
was
$73,359.58,
whereas
the
RDTOH
of
607655
Ontario
Ltd.
on
that
date
was
$11,533.88;
(e)
the
appellant
(amalgamated)
corporation
filed
its
first
corporate
tax
return
with
a
fiscal
year
ending
on
February
28,
1990
and
filed
its
final
tax
return
with
a
fiscal
year
ending
on
March
6,
990;
(f)
the
above
tax
returns
were
both
initially
assessed
on
September
21,
1990;
(g)
in
initially
assessing
the
appellant
for
the
fiscal
year
ending
February
28,
1990,
the
Minister
adjusted
the
appellant's
reported
RDTOH
as
of
that
date
to
$673,928
which
included
the
$11,533.88
balance
of
RDTOH
transferred
from
607655
Ontario
Ltd.;
(h)
as
607654
Ontario
Ltd.
failed
to
submit
the
required
information
upon
the
initial
filing
of
its
October
31,
1989
tax
return,
the
$73,359.58
RDTOH
balance
of
607654
Ontario
Ltd.
was
not
transferred
to
the
appellant
corporation's
RDTOH
account
until
the
former
corporation's
reassessment
on
November
29,
1990,
which
was
subsequent
to
the
September
21,
1990
assessment
date
for
the
appellant's
first
tax
return;
(i)
the
Minister
was
not
in
a
position
to
increase
the
appellant's
RDTOH
account
and
issue
the
proper
dividend
refund
for
the
March
26,
1990
fiscal
period
at
the
initial
assessment
date
of
September
21,
990;
(j)
the
reassessment
of
the
appellant's
March
26,
1990
return
of
income
occurred
on
April
1,
1992,
and
the
full
dividend
refund
then
became
available
for
application
to
the
balance
of
taxes
owing
with
respect
to
the
fiscal
period
ending
February
28,
(k)
the
appellant's
outstanding
balance
of
taxes
owing
with
respect
to
the
February
28,
1990
fiscal
period
was
not
paid
until
April
1,
1992,
the
date
of
reassessment
of
the
March
26,
1990
fiscal
period,
when
the
additional
dividend
refund
became
available
for
application
to
the
balance
of
taxes
owing
for
the
prior
fiscal
period;
(l)
arrears
interest
assessed
for
the
fiscal
period
ending
February
28,
1990
was
based
on
the
amount
of
taxes
for
that
period
that
remained
unpaid
from
September
22,
1990
to
the
reassessment
date
of
April
1,
1992;
(m)
the
federal
tax
payable
by
the
appellant
for
the
fiscal
period
ending
February
28,
1990
which
was
unpaid
on
April
1,
1992,
(subsequent
to
the
offsetting
against
the
unpaid
balance
of
taxes
of
the
adjusted
dividend
refund
assessed
on
that
date)
amounted
to
$27,400.79
(the"excess");
(n)
prescribed
interest
on
the
excess
from
September
22,
1990
to
the
date
of
reassessment
amounts
to
$5,809.75.
Law
The
most
relevant
provisions
of
the
Act
are
subsections
161(1),
129(1),
129(2)
and
152(1)
which
read:
161(1)
Where
at
any
time
after
the
day
on
or
before
which
a
taxpayer
is
required
to
pay
the
remainder
of
his
tax
payable
under
this
Part
for
a
taxation
year,
(a)
the
amount
of
his
tax
payable
for
the
year
under
this
part
exceeds
(b)
the
aggregate
of
all
amounts
each
of
which
is
an
amount
paid
at
or
before
that
time
on
account
of
his
tax
payable
and
applied
as
at
that
time
by
the
Minister
against
the
taxpayer's
liability
for
an
amount
payable
under
this
Part
for
the
year,
the
person
liable
to
pay
the
tax
shall
pay
to
the
Receiver
General
interest
at
the
prescribed
rate
on
the
excess
computed
for
the
period
during
which
that
excess
is
outstanding.
129(1)
Where
a
corporation
was,
at
the
end
of
any
taxation
year,
a
private
corpora*
tion
and
a
return
of
its
income
for
the
year
has
been
made
within
three
years
from
the
end
of
the
year,
the
Minister
(a)
may,
upon
mailing
the
notice
of
assessment
for
the
year,
refund
without
application
therefor
an
amount
(in
this
Act
referred
to
as
its
“
dividend
refund"
for
the
year)
equal
to
the
lesser
of
(i)
/4
of
all
taxable
dividends
paid
by
it
in
the
year
on
shares
of
its
capital
stock,
and
(ii)
its
refundable
dividend
tax
on
hand
at
the
end
of
the
year;
and
(b)
shall,
with
all
due
dispatch,
make
such
a
refund
after
mailing
the
notice
of
assessment
if
application
therefore
has
been
made
in
writing
by
the
corporation
within
(i)
the
six-year
period
referred
to
in
paragraph
152(4)(b),
where
that
paragraph
applies,
and
(ii)
the
three-year
period
referred
to
in
paragraph
152(4)(c),
in
any
other
case.
129(2)
Instead
of
making
a
refund
that
might
otherwise
be
made
under
subsection
(1),
the
Minister
may,
where
the
corporation
is
liable
or
about
to
become
liable
to
make
any
payment
under
this
Act,
apply
the
amount
that
would
otherwise
be
refundable
to
that
other
liability
and
notify
the
corporation
of
that
action.
152(1)
This
Minister
shall,
with
all
due
dispatch,
examine
a
taxpayer's
return
of
income
for
a
taxation
year,
assess
the
tax
for
the
year,
the
interest
and
penalties,
if
any,
payable
and
determine
(a)
the
amount
of
refund,
if
any,
to
which
he
may
be
entitled
by
virtue
of
sections
129,
131,
132
or
133
for
the
year,
or
(b)
the
amount
of
tax,
if
any,
deemed
by
subsection
119(2),
120(2),
120.1(4),
122.2(1),
127.1(1),
127.2(2),
144(9),
210.2(3)
or
(4)
to
have
been
paid
on
account
of
his
tax
under
this
Part
for
the
year.
Submissions
The
appellant
submits
that
there
should
have
been
no
interest
charged
for
the
period
September
22,
1990
to
April
1,
1992
because
during
that
time
the
respondent
was
in
fact
a
debtor
to
the
appellant
if
the
final
determination
of
the
refundable
dividend
is
considered.
^^This
in
effect
is
stating
that
there
was
an
offset
effective
as
of
September
21,
The
respondent
points
to
subsection
129(2)
which
gives
the
Minister
the
ability
but
not
the
obligation
to
offset
a
refundable
dividend
against
a
tax
liability
and
to
a
line
of
consistent
authorities
that
there
can
be
no
offset
against
the
liability
to
pay
income
taxes.
Findings
I
accept
the
respondent's
submission
that
no
offset
is
allowable.
However,
this
does
not
totally
settle
the
matter.
It
is
clear
from
subsection
152(1)
of
the
Act
that
the
Minister
must
determine
the
refund
provided
for
in
section
129
with
“all
due
dispatch”.
It
appears
from
the
respondents
reply
and
other
documentation
submitted
that
from
and
after
November
29,1990
the
Minister
was
in
a
position
to
correctly
establish
the
ultimate
refundable
dividend
which
made
the
appellant
a
creditor
rather
than
a
debtor.
Was
delaying
the
determination
until
April
1,
1992
acting
with
“due
dispatch”?
Considering
the
chain
of
events,
assessments
and
reassessments
in
this
case,
all
of
which
lead
to
the
conclusion
that
the
Minister
should
have
been
well
aware
of
the
dividend
amount
on
or
shortly
after
November
29,1990
and
considering
further
that
no
acceptable
reason
was
ever
given
for
the
delay
to
April
1,
1992,
I
find
that
all
due
dispatch”
was
not
exercised
and
accordingly
that
the
interest
in
question
was
incorrectly
calculated.
I
find
further
that,
in
the
circumstances,
the
Minister
should
have
determined
the
refund
and
reassessed
within
two
months
of
the
November
29,
1990
date
and
that
consequently
the
correct
amount
of
interest
chargeable
is
interest
from
September
22,
1990
to
January
29,
1991.
The
appeal
is
allowed
and
the
matter
is
referred
back
to
the
Minister
of
National
Revenue
for
reconsideration
and
reassessment
accordingly.
Appeal
allowed
in
part.
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