1455257 Ontario – Federal Court of Appeal notes that CRA cannot arbitrarily reject an s. 152(4)(b)(i) extension request and that s. 160 extends to post-transfer interest
The validity of a s. 160 assessment of the taxpayer turned in part on whether the affiliate from which the taxpayer had received a transfer of property in 2003 should be regarded as having had its taxable income for 2000 reduced by a portion of its non-capital loss for 2002 that the affiliate had not claimed because the taxpayer and the affiliate had not found out about that additional loss until 2011, when the taxpayer made an ATIP request following the s. 160 assessment of it.
The taxable income of the affiliate for 2000 had arisen as a result of a 2005 settlement which had reduced a 2001 non-capital loss (and, thus, reduced the loss carryback to 2000), thereby leaving 2000 unsheltered. Noël C.J. confirmed the finding below that the affiliate had failed to request the carryback of the 2002 loss on a timely basis which, in light of the six-year extension for such requests under s. 152(4)(b)(i), implied a request deadline (which was not met) of August 13, 2007, i.e., six years after the original assessment of the 2000 year.
In this regard, he stated that, had such a request been made:
The Minister’s decision to give effect to such a [s. 152(4)(b)(i)] request is arguably discretionary given the use of the word “may” in subparagraph 152(4)(b)(i) but even then, this discretion would have to be properly exercised. A request made pursuant to subparagraph 152(4)(b)(i) cannot be arbitrarily refused.
Noël C.J. also agreed with the Tax Court’s rejection of the taxpayer’s submission that given that the word “pour” used in the French version of s. 160(1)(e)(ii) was narrower than “in respect of” used in the English version, s. 160 did not extend to interest that had accrued on the tax payable subsequent to the 2003 transfer date, stating (at paras. 46-47):
The phrase “in respect of” is broad and all encompassing … and the word “pour” in the French text can have a similarly broad meaning. …
It can be seen that both texts can be read so as to capture interest that accrues on the transferor’s liability from the year of the transfer onwards. This aligns with the purpose of subsection 160(1) which is to allow for the collection of “the total of all amounts” that the transferor is liable to pay under the Act without any distinction as to the makeup of these amounts … and without any time limitation. …