Urie,
J:—This
is
an
appeal
from
the
judgment
of
the
Trial
Division
ordering
the
appellant
to
refund
to
the
respondent
the
sum
of
$474,008.59.
The
respondent
cross-appeals
from
the
failure
of
the
trial
judge
to
order
(a)
the
repayment
by
the
appellant
of
the
sum
of
$14,193.61
being
interest
charged
by
the
appellant
and
paid
by
the
respondent,
and
(b)
interest
on
the
sum
awarded
namely
$474,008.59
and
on
the
sum
of
$14,193.61
from
the
date
or
dates
of
payment
thereof
by
the
respondent.
The
issue
for
determination
is
whether
or
not
the
respondent
is
entitled
to
an
“allowable
refund’’
as
defined
by
subsection
133(8)
of
the
Income
Tax
Act
as
amended
by
section
1
of
SC
1970-71-72,
c
63
(hereinafter
called
“the
Act’’),
for
its
1972
taxation
year.
The
respondent,
it
is
conceded,
is
a
non-resident-owned
investment
corporation
within
the
meaning
of
paragraph
133(8)(d)
of
the
Act.
It
was
incorporated
on
January
5,
1971
and
its
1972
taxation
year
was,
it
is
agreed,
from
February
28,
1971
until
February
26,
1972.
At
the
commencement
of
its
1972
taxation
year,
its
retained
earnings
amounted
to
$64,919,006.
Its
taxable
income
during
the
1972
taxation
year
amounted
to
$3,160,057.29
upon
which
the
tax
payable
by
the
respondent
calculated
on
the
basis
of
15%
of
its
taxable
income
was
$474,008.59.
During
its
1972
taxation
year
the
respondent
paid
taxable
dividends
aggregating
$4,700,000
as
follows:
June
1,
1971
|
$
750,000
|
December
29,
1971
|
$2,000,000
|
February
24,
1972
|
$1,950,000
|
Withholding
tax
at
the
rate
of
15%
was
paid
on
those
dividends.
section
133
of
the
amended
Act
provides
a
special
tax
treatment
for
non-resident-owned
investment
corporations.
They
are
taxed
at
the
rate
of
15%
on
their
income
and
25%
on
their
net
taxable
gains
realized
in
Canada.
In
general
terms
it
is
further
provided
that
when
a
non-resident-owned
investment
company
distributes
its
income
earned
since
the
coming
into
force
of
the
amended
Act,
by
way
of
taxable
dividends
to
its
shareholders,
the
tax
paid
by
the
company
on
the
income
earned
by
it
after
the
coming
into
force
of
the
amended
Act
is
to
be
refunded
to
the
company.
Subsection
133(6)
creates
the
right
to
the
refund.*
The
respondent’s
application
for
a
refund
of
the
$474,008.59
tax
paid
on
its
income
for
the
1972
taxation
year
was
rejected
in
the
following
terms:
You
are
advised
that
the
earliest
a
refund
of
the
special
tax
under
section
133(9)(a)
of
the
Income
Tax
Act
can
be
applied
for
is
with
the
1973
Tax
Return.
The
learned
trial
judge
found
that
the
appellant
erred
in
refusing
to
make
the
refund
to
the
respondent
and
gave
judgment
directing
the
appellant
to
refund
to
the
respondent
the
tax
paid
on
its
income,
viz,
$474,008.59.
Early
in
his
reasons
for
judgment
he
succinctly
stated
the
problem
in
this
case
which,
as
already
pointed
out,
he
resolved
in
favour
of
the
respondent.
He
stated
[at
p
434]:
The
special
problem
presented
in
this
case
arises
by
reason
of
the
particular
fiscal
year
of
the
plaintiff
(partly
in
1971
and
1972),
and
what
I
might
term
the
“transitional”
provisions
in
section
133
relating
to
those
years.
Counsel
for
the
defendant
stated
in
argument:
.
.
.
the
plaintiff
is
entitled
to
a
refund
in
respect
of
the
tax
.
.
.
it
has
paid
.
.
.
The
only
issue
is
whether
this
amount
is
to
be
refunded,
in
respect
of
dividends
paid
in
1972,
or
whether
the
right
to
refund
will
arise,
when
taxable
dividends
are
paid
at
a
time
subsequent
to
the
end
of
its
1972
taxation
year.”*
[*
If
the
plaintiff
has
not
paid,
or
does
not
pay,
any
dividends
after
the
end
of
its
1972
taxation
year,
then,
on
the
defendant’s
interpretation
of
the
section
in
question,
the
plaintiff
will
never
receive
an
allowable
refund
in
respect
of
the
tax
levied.]
The
defendant’s
position
is,
that
on
the
correct
construction
of
the
statutory
provisions,
the
plaintiff
did
not
(at
the
material
dates)
have
any
taxable
income,
and
its
cumulative
taxable
income,
for
the
purposes
of
the
formula,
is
therefore
nil.
The
plaintiff
disagrees.
The
term
“allowable
refund’’
is
defined
in
the
Act
by
paragraph
133(8)(a)
reading
as
follows:
(a)
“allowable
refund”
of
a
non-resident-owned
investment
corporation
for
a
taxation
year
means
the
aggregate
of
amounts
each
of
which
is
an
amount
in
respect
of
a
taxable
dividend
paid
by
the
corporation
in
the
year
on
a
share
of
its
capital
stock,
equal
to
that
proportion
of
the
dividend
that
(i)
the
corporation’s
allowable
refundable
tax
on
hand
immediately
before
the
dividend
was
paid
is
of
(ii)
the
greater
of
the
amount
of
the
dividend
so
paid
and
the
corporation’s
Cumulative
taxable
income
immediately
before
the
dividend
was
paid:
From
this
it
will
be
seen
that
there
is
derived
the
following
equation
for
the
calculation
of
the
allowable
refund:
Paragraphs
133(9)(a)
and
(b)
provide
the
keys,
if
they
can
be
discerned,
to
the
meaning
and
calculation
of
“allowable
refundable
tax’’
and
“cumulative
taxable
income’’.
The
relevant
portions
of
those
sections
for
the
purposes
of
this
appeal
read
as
follows:
133.
(9)
.
.
.
(a)
“allowable
refundable
tax
on
hand”
.
.
.
at
any
particular
time
means
the
amount
.
.
.
by
which
the
aggregate
of
(i)
all
amounts
.
.
.
in
respect
of
any
taxation
year
commencing
after
1971
and
ending
before
the
particular
time,
equal
to
the
tax
under
this
Part
payable
by
the
corporation
for
the
year,
and
(ii)
15%
of
the
amount
determined
under
subparagraph
(b)(ii)
in
respect
of
the
corporation.*
exceeds
the
aggregate
of
amounts
each
of
which
is
(v)
an
amount
in
respect
of
any
taxable
dividend
paid
by
the
corporation
on
a
share
of
its
capital
stock
before
the
particular
time
and
after
the
commencement
of
its
first
taxation
year
commencing
after
1971,
equal
to
the
amount
in
respect
of
the
dividend
determined
under
paragraph
(8)(a);
and
(b)
“cumulative
taxable
income”
.
.
.
at
any
particular
time
means
the
amount
.
.
.
by
which
the
aggregate
of
(i)
its
taxable
incomes
for
taxation
years
commencing
after
1971
and
ending
the
particular
time,
and
(ii)
where
the
corporation’s
1972
taxation
year
commenced
before
1972,
the
amount
.
.
.
by
which
its
taxable
income
for
that
year
.
.
.
exceeds
the
aggregate
of
amounts
each
of
which
is
(v)
the
amount
of
any
taxable
dividend
paid
by
the
corporation
on
a
share
of
its
capital
stock
before
the
particular
time
and
after
the
commencement
of
its
first
taxation
year
commencing
after
1971.
Subparagraphs
(ii)
in
each
of
paragraphs
(9)(a)
and
(9)(b)
of
section
133
deal
with
what
was
conveniently
described
as
“the
straddle
year’’,
being
a
taxation
year
which
commenced
before
the
coming
into
force
of
the
amended
Act
on
January
1,
1972.
Thus,
it
was
said,
the
subparagraphs
are
applicable
to
the
respondent’s
1972
taxation
year.
The
sole
issue
on
this
appeal,
therefore,
appears
to
be
whether
or
not
the
taxable
dividends
of
$4,700,000
paid
by
the
respondent
in
the
straddle
year
results
in
the
respondent
being
entitled
to
the
refund
claimed
by
it
and
awarded
to
it
by
the
learned
trial
judge.
There
are
three
principles
which,
it
seems
to
me,
emerge
from
the
complex
language
of
paragraphs
(8)(a),
(9)(a)
and
(9)(b)
of
section
133
In
the
determination
of
an
allowable
refund
for
a
corporation:
(1)
no
such
refund
is
payable
unless
taxable
dividends
have
been
paid
by
the
corporation;
(2)
at
least
for
corporations
whose
taxation
years
did
not
commence
until
after
December
31,
1971,
the
corporation
must
have
had
taxable
income
before
the
dividends
were
paid;
and
(3)
because
that
is
so
and
because
by
definition*
“taxable
income”
is
income
for
a
taxation
year
minus
permitted
deductions,
again
at
least
for
corporations
whose
taxation
years
did
not
commence
until
after
December
31,
1971,
there
has
to
have
been
a
complete
taxation
year
in
which
the
corporation
had
taxable
income
upon
which
it
was
taxed
before
the
payment
of
the
dividends
can
trigger
the
right
to
a
refund
of
tax
paid
on
the
corporation’s
taxable
income;
that
is,
there
is
a
time
lag
of
one
year
before
the
refund
of
tax
becomes
allowable.
Neither
counsel
for
the
appellant
or
respondent
took
issue
with
this
view
of
the
principles
applicable,
as
I
understood
their
submissions.
Their
agreement
as
to
those
principles
did
not,
however,
extend
to
agreeing
that
in
the
fact
situation
present
in
this
case,
the
respondent
was
entitled
to
claim
and
to
have
refunded
to
it
the
tax
paid
on
its
taxable
income
for
its
1972
taxation
year
starting
as
it
did,
on
February
28,
1971.
The
appellant
contended
that
the
respondent’s
1972
taxable
income
could
not
be
calculated
until,
at
the
earliest,
after
the
close
of
business
on
February
26,
1972.
Therefore,
in
the
calculation
of
any
allowable
refund
purportedly
generated
by
the
payment
of
the
$4,700,000
in
dividends
in
its
1972
taxation
year
(which
payments
were
made
before
not
after
the
taxable
income
for
the
year
was
capable
of
ascertainment)
the
equation
earlier
referred
to
would
read
as
follows:
Since
the
numerator
of
the
fraction
is
‘‘nil’
because
there
was
no
taxable
income
“immediately
before
the
dividend
was
paid”
as
required
by
paragraph
133(8)(a),
there
can
be
no
allowable
refund.
The
respondent’s
interpretation
of
the
subsections
in
question
is
conveniently
summarized
in
the
reasons
for
judgment
of
the
learned
trial
judge
as
follows
[p
436]:
Counsel
for
the
plaintiff
turns
first
to
cumulative
taxable
income
and
subparagraph
133(9)(b)(ii).
Subparagraph
(i)
is
not
applicable
to
this
case,
but
counsel
stresses
the
taxation
years
there
referred
to
must
not
only
have
commenced
after
the
calendar
year
1971
but
have
ended
before
the
date
of
each
payment
of
dividends.
Subparagraph
(ii),
it
is
pointed
out,
does
not
State
the
taxation
year
there
referred
to
(the
straddle
year)
must
have
ended
before
the
“particular
time”.
It
follows
then,
argues
the
plaintiff,
the
company’s
taxable
income
for
1972
is
to
be
included
in
this
calculation,
even
though
it
was
not
or
could
not
be
computed
until
after
the
date
of
payment
of
the
dividends,
and
indeed,
until
after
the
completion
of
its
fiscal
year
(February
26,
1972).
The
language
of
subparagraph
(ii)
is,
counsel
submits,
clear
and
unambiguous;
there
3
no
requirement
stated
that
the
taxable
income
must
in
fact
have
been
ascertained
before
the
date
of
dividend
payments;
the
legislators
intended,
in
respect
of
those
non-resident-owned
investment
corporations
whose
fiscal
period
overlapped
both
sides
of
January
1,
1972
and
who,
in
the
straddle
year,
paid,
as
this
plaintiff
did,
dividends
before
the
commencement
of
the
new
Act
(not
knowing
what
its
terms
might
be)
should
be
able
to
take
advantage
of
the
refund
provision.
The
plaintiff
submits
a
similar
interpretation
should
be
put
on
subparagraph
133(9)(a)(ii)
in
respect
of
allowable
refundable
tax
on
hand.
Counsel
put
it
this
way:
‘‘As
in
the
case
of
cumulative
taxable
income,
when
one
is
calculating
allowable
refundable
tax
on
hand
at
any
particular
time,
one
includes
tax
payable
for
taxation
years
other
than
the
straddle
year,
only
if
those
years
have
ended
before
the
particular
time;
but
one
includes,
in
any
event,
the
amount
specified
in
respect
of
the
straddle
year,
whether
or
not
it
has
ended
before
the
particular
time.”
The
trial
judge
gave
effect
to
these
submissions
when
he
held
[p
437]:
In
respect
of
the
straddle
year
provisions,
however—subparagraphs
133(9)(b)(ii)
and
133(9)(a)(ii)—there
is
no
stipulation
that
the
fiscal
period
must
have
ended
before
the
dividend
payment
date.
Nor
is
there
any
Stipulation
(or
language
requiring
that
interpretation)
that
the
taxable
income,
and
therefore
the
amounts
of
tax
payable,
be,
at
that
precise
time,
ascertained
or
capable
of
precise
ascertainment.
In
my
view
those
subparagraphs
mean
that
the
taxable
income
in
the
one
case,
and
the
tax
in
the
other,
are
to
be
included
in
those
particular
calculations
even
though
the
precise
amounts
may
not
be
arrived
at
until
some
time
after
the
dividends
were
in
fact
paid.
Respondent’s
argument
based
in
the
first
instance
on
its
interpretation
of
the
“cumulative
taxable
income”
section,
viz,
paragraph
133(9)
(b),
necessitates
acceptance
of
the
proposition
that
subparagraph
(ii)
of
that
paragraph
can
stand
by
itself
in
providing
the
denominator
for
the
arithmetic
equation
derived
from
paragraph
133(8)(a)
for
calculating
a
corporation’s
allowable
refund
for
a
taxation
year.
In
my
opinion,
the
Subparagraph
cannot
be
so
viewed
for
two
reasons:
(1)
As
stated
earlier,
one
of
the
principles
applicable
to
‘‘allowable
refunds”
is
that
they
can
only
be
claimed
for
a
taxation
year
which
ended
before
the
dividends
generating
the
right
to
a
refund
were
paid.
In
the
straddle
year
this
would
mean,
in
the
case
of
the
respondent,
that
the
dividends
paid
in
the
1972
taxation
year
could
not
apply
because
the
taxable
income
for
that
year
could
not
have
been
calculated
until
after
February
26,
1972,
a
date
after
the
dividends
had
been
paid.
Paragraph
133(8)(a)
clearly
supports
the
view
that
the
calculation
envisaged
by
that
section
could
be
made
only
in
respect
of
the
cumulative
taxable
income
of
a
corporation
immediately
before
the
dividend
was
paid.
(2)
The
respondent’s
argument
assumes
that
subparagraph
(ii)
of
paragraph
133(9)(b)
is
disjunctive
from
subparagraph
(i).
That
this
is
not
so
is
demonstrated
by
the
presence
of
the
conjunctive
“and”
at
the
end
of
subparagraph
(i).
As
a
result,
it
seems
to
me,
the
purpose
of
the
subparagraph
is
shown.
That
purpose
is
to
determine
by
how
much
the
aggregate
of
the
taxable
income
of
the
corporation
from
(i)
years
after
1971
and
(ii)
from
a
taxation
year
which
begins
during
1971
and
ends
after
January
1,
1972
exceeds
the
aggregate
of
certain
other
amounts
calculated
under
subparagraphs
(iii),
(iv)
and
(v).
Its
purpose
is
not
to
enable
the
application
of
the
“allowable
refund”
provisions
to
a
taxation
year
commencing
at
some
date
in
1971
and
ending
at
some
date
in
1972
by
itself.
It
is
for
use,
in
applicable
cases,
as
part
of
the
calculation
of
the
cumulative
taxable
income
of
a
corporation
for
the
denominator
of
the
arithmetic
equation
established
by
paragraph
133(8)(a)
to
calculate
the
‘‘allowable
refund”
of
the
corporation.
There
was
thus
no
necessity,
in
my
view,
for
including
the
words
“ending
before
the
particular
time”
in
this
subparagraph
as
was
necessary
in
subparagraph
(i).
That
is,
it
was
not
necessary
to
specify
that
the
taxable
income
be
established
before
the
particular
time
for
the
calculation
under
subparagraph
(il)
because
the
figure
reached
under
it
is
merely
part
of
the
aggregate
figure
established
by
adding
to
it
the
calculation
under
subparagraph
(i)
which
does
specify
the
termination
date,
viz,
a
taxation
year
commencing
after
1971
and
ending
before
the
payment
of
the
taxable
dividend.
That
this
reasoning
is
correct
is
borne
out
by
the
wording
of
subparagraph
(v)
of
paragraph
133(9)(b).
For
convenience,
I
repeat
it
here:
(v)
the
amount
of
any
taxable
dividend
paid
by
the
corporation
on
a
share
of
its
capital
stock
before
the
particular
time
and
after
the
commencement
of
its
first
taxation
year
commencing
after
1971.
The
applicable
amount
under
that
subparagraph,
together
with
the
applicable
amounts
under
subparagraphs
(iii)
and
(iv)
(in
this
case
there
would
have
been
no
additions
under
(iii)
and
(iv))
is
subtracted
from
the
aggregate
of
the
amounts
under
subparagraphs
(i)
and
(il)
to
ascertain
the
corporation’s
cumulative
taxable
income
at
the
particular
time.
If
the
interpretation
of
the
learned
trial
judge
was
correct,
no
such
subtraction
would
be
required
because
the
dividends
paid
in
the
straddle
year
were
paid
prior
to,
not
after,
the
commencement
of
the
respondent’s
first
taxation
year
after
1971.
They
thus
do
not
fall
within
the
description
of
‘‘taxable
dividends’’
which
are
to
be
deducted
from
the
aggregate
of
the
two
kinds
of
taxable
income
referred
to
in
subparagraphs
(i)
and
(ii).
No
wording
is
used
in
subparagraph
(v)
enabling
the
inclusion
of
an
amount
for
dividends
paid
in
the
"straddle
year”.
In
my
view,
clear
support
is
thereby
provided
for
the
interpretation
I
have
heretofore
given
as
to
the
effect
of
the
inclusion
of
subparagraph
(ii)
in
paragraph
133(9)(b).
The
same
reasoning
applies
equally
to
the
interpretation
of
subparagraph
(ii)
of
paragraph
(9)(a)
reinforced
by
subparagraph
(v)
of
that
paragraph
employing,
as
it
does,
the
same
language
as
subparagraph
(v)
of
paragraph
(9)(b).
In
summary,
if
the
respondent’s
argument
were
to
prevail,
and
as
upheld
by
the
learned
trial
judge,
a
corporation
whose
1972
taxation
year
straddled
the
calendar
years
1971
and
1972,
could
claim
an
allowable
refund
immediately
after
the
close
of
its
1972
year,
although
the
dividends
had
been
paid
prior
to
that
date.
That
is,
it
would
not
have
to
wait
a
year
to
claim
an
allowable
refund
whereas
those
corporations
whose
1972
taxation
year
was
the
calendar
year,
would
have
to
wait
until
the
following
taxation
year
to
do
so.
In
my
view,
such
a
submission
is
illogical
and
ignores
what
the
subsections
appear
to
contemplate
although,
to
say
the
least,
the
language
used
therein
lacks
precision
and
clarity.
Accordingly,
I
would
allow
the
appeal
with
costs
and
confirm
the
Minister’s
assessment.
As
a
result
of
course,
the
cross-appeal
should
be
dismissed
with
costs.
MacKay,
DJ
(dissenting):—I
am
not
persuaded
that
the
trial
judge
was
in
error
in
reaching
the
conclusion
which
he
did
in
respect
of
the
respondent’s
claim
to
the
allowable
refund
of
$474,008.59.
In
the
case
of
a
non-resident-owned
investment
corporation
the
legislative
policy
has
been
and
is
to
relieve
against
taxation
of
both
the
corporation’s
income
and
dividends
paid
to
its
non-resident
shareholders.
Prior
to
1970
the
scheme
for
the
taxation
of
non-resident-owned
investment
corporations
was
simple—it
provided:
(1)
that
non-resident-owned
investment
companies
be
taxed
at
a
flat
rate
of
15%
of
its
taxable
income
for
the
taxation
year;
(2)
that
dividends
paid
by
a
non-resident-owned
corporation
to
its
non-resident
shareholders
would
not
be
subject
to
any
withholding
tax.
The
present
legislation
is
a
more
complicated
scheme
involving
the
payment
by
the
corporation
of
both
tax
on
the
corporation’s
income
and
a
withholding
tax
on
the
dividends
paid
to
the
non-resident
Owners
and
providing
for
a
system
of
refunds
to
the
corporation.
It
would
seem
to
be
obvious
that
the
purpose
of
Parliament
under
both
the
old
and
the
new
Act
is
to
relieve
against
what
may
be
described
as
double
taxation
in
the
case
of
foreign-owned
investment
corporations.
In
the
present
case
that
purpose
would
be
defeated
if
effect
is
given
to
the
submissions
of
counsel
for
the
appellant.
The
position
taken
by
the
Department
in
this
case
is
that
the
allowable
refund
should
be
claimed
in
respect
of
the
respondent’s
taxation
year
of
1973
and
not
that
of
1972.
Paragraph
3
of
the
statement
of
defence
is
as
follows:
3.
He
denies
paragraph
7
of
the
Statement
of
Claim,
as
amended,
and
says
that
as
of
June
1,
1971,
29
December
1971
and
24
February,
1972,
the
Plaintiff’s
allowable
refundable
tax
on
hand
under
section
133(9)(a)
of
the
Act
was
nil,
but
admits
for
the
purpose
of
this
action,
that
immediately
after
the
close
of
its
1972
taxation
year,
the
Plaintiff’s
allowable
refundable
tax
on
hand
determined
under
section
133(9)(a)
was
$474,008.59.
Section
7
of
the
statement
of
claim
is:
7.
The
Plaintiff's
allowable
refundable
tax
on
hand
immediately
before
payment
of
the
said
dividends
as
determined
under
Section
133(9)(a)
of
the
Income
Tax
Act
was
$474,008.59.
Under
section
133
the
allowable
refund
cannot
exceed
the
tax
payable
on
the
corporation’s
income
so
that
if
the
corporation’s
tax
on
income
for
1973
was,
for
example,
$100,
that
is
the
most
that
could
be
claimed
as
an
allowable
refund
and
if,
as
is
the
case
here,
the
corporation
had
no
taxable
income
for
the
taxation
year
of
1973,
no
refund
could
be
claimed.
I
do
not
think
Parliament
could
have
intended
this
result.
In
Salmon
v
Duncombe
(1886),
11
App
Cas
627
at
634,
Lord
Hobhouse
said:
It
is,
however,
a
very
serious
matter
to
hold
that
when
the
main
object
of
a
statute
is
clear,
it
shall
be
reduced
to
a
nullity
by
the
draftsman’s
unskillfulness
or
ignorance
of
law.
It
may
be
necessary
for
a
Court
of
Justice
to
come
to
such
a
conclusion,
but
their
Lordships
hold
that
nothing
can
justify
it
except
necessity
or
the
absolute
intractability
of
the
language
used.
and
in
Highway
Sawmills
Ltd
v
MNR,
[1966]
SCR
384
at
393;
[1966]
CTC
150
at
157;
66
DTC
5116
at
5120,
Cartwright,
J
said:
The
answer
to
the
question
of
what
tax
is
payable
in
any
given
circumstances
depends,
of
course,
upon
the
words
of
the
legislation
imposing
it.
Where
the
meaning
of
those
words
is
difficult
to
ascertain
it
may
be
of
assistance
to
consider
which
of
two
constructions
contended
for
brings
about
a
result
which
conforms
to
the
apparent
scheme
of
the
legislation.
I
think
that
the
statements
of
Lord
Hobhouse
and
Cartwright,
J
in
these
two
cases
are
relevant
in
the
present
case.
In
the
Appeal
Book,
p
20
is
the
following
letter
dated
April
27,
1972
from
the
Interpretation
Division
of
the
Department
of
National
Revenue
to
the
firm
of
chartered
accountants
who
were
the
auditors
for
the
respondent
company:
This
is
in
reply
to
your
letter
of
April
13,
1972
in
which
you
asked
us
whether
a
non-resident-owned
investment
Corporation
is
entitled
to
offset
its
allowable
refund
as
calculated
under
paragraph
133(8)(a)
of
the
Income
Tax
Act
against
its
tax
liability
as
determined
in
its
return
for
a
taxation
year.
The
policy
of
our
collections
division
is
that
the
full
amount
of
the
tax
liability
should
be
remitted
and
the
Company
will
subsequently
be
issued
a
cheque
in
respect
of
the
allowable
refund.
However,
as
has
been
the
practice
in
the
past
in
similar
situations,
it
is
expected
that
many
Corpor-
ations
will
desire
to
pay
only
the
net
amount
and
this
practice
will
be
accepted
by
the
Department.
This
letter
was
written
after
the
close
of
the
respondent’s
1972
taxation
year
and
was
in
respect
of
the
respondent’s
tax
position
for
that
year.
Following
the
receipt
of
this
letter,
the
respondent,
setting
off
its
allowable
refund
against
the
tax
on
its
1972
income,
filed
a
tax
return
showing
“nil”
taxes
payable
for
that
year.
The
Department
served
on
the
respondent
an
assessment
notice
dated
December
6,
1972
as
follows:
Federal
Tax
$474,008.59.
Total
refund
nil.
Refundable
dividend
tax
“nil”.
Balance
unpaid
includes
interest
of
$13,061.09
on
late
or
deficient
installments
and
on
balance
of
tax
payable
from
due
date
of
the
balance.
With
this
assessment
was
a
notice
as
follows:
You
are
advised
that
the
earliest
a
refund
of
the
special
tax
under
section
133(9)(a)
of
the
Income
Tax
Act
can
be
applied
for
is
with
the
1973
tax
return.
Therefore
your
claim
for
a
refund
for
this
year
has
been
disallowed.
Notice
of
objection
to
this
assessment
was
filed
by
the
respondent.
Under
date
of
June
20,
1974
a
notification
by
the
Minister
confirming
the
1972
assessment
was
served
on
the
respondent
together
with
a
form
notifying
it
of
its
right
to
appeal
the
assessment
to
either
the
Tax
Review
Board
or
to
the
Federal
Court—both
of
these
documents
are
stated
to
be
in
reference
to
the
respondent’s
1972
taxation
year.
The
present
action
was
then
commenced
by
a
statement
of
claim
filed
on
September
12,
1974—the
claim,
understandably
in
view
of
the
notice
accompanying
the
Minister’s
confirmation
of
the
assessment,
is
framed
as
an
appeal
from
the
1972
assessment
and
as
amended,
claims
payment
of
the
allowable
refund
of
$474,008.59
and
the
items
of
interest
that
are
the
subject
of
the
cross-appeal.
The
respective
viewpoints
as
to
the
meaning
to
be
given
to
the
relevant
legislation
are
fully
set
out
in
the
reasons
of
Mr
Justice
Collier,
the
trial
judge,
and
those
of
my
brothers
Urie
and
Le
Dain
and
need
not
be
restated.
I
am
of
the
view
that
it
was
open
to
the
trial
judge
to
reach
the
conclusion
which
he
did
and
I
would
dismiss
the
appeal
with
costs.
The
respondent
cross-appeals
in
respect
of
the
dismissal
of
its
claims:
(1)
that
the
defendant
be
ordered
to
pay
to
the
plaintiff
the
sum
of
$14,193.61
being
interest
charged
by
the
defendant
and
paid
by
the
plaintiff:
(2)
that
the
defendant
be
ordered
to
pay
the
plaintiff
interest
on
the
said
amounts
of
$474,008.59
and
$14,933.61
from
the
dates
of
payment
thereof
of
these
sums
by
the
plaintiff.
As
to
the
claim
for
repayment
of
the
sum
of
$14,193.61,
the
trial
judge
said
[p
438]:
The
plaintiff
claims
repayment
of
the
interest
charged
of
$14,193.61
and
for
interest
on
the
two
sums
set
out
above.
In
my
opinion
there
is
no
power
to
grant
the
relief
sought.
The
assessment
by
the
Minister,
which
levied
a
tax
of
$474,008.59
and
the
interest,
is
itself
not
before
the
Court.
There
was
not
here
an
appeal
by
the
taxpayer
from
an
assessment.
The
relief
powers
of
the
court
applicable
to
actions
of
that
nature
are
not
available
in
this
case.
I
cannot
therefore
require
the
defendant
to
make
a
refund
in
the
sum
of
$14,963.61.
I
do
not
agree.
The
Department
claimed
this
amount
in
its
notice
of
assessment
and
this
is
an
appeal
from
that
assessment.
Agreeing
as
I
do
with
the
trial
judge’s
finding
that
the
plaintiff
was
entitled
to
the
allowable
refund
in
respect
of
its
1972
tax
year
there
was
no
right
to
charge
interest.
I
would
allow
the
cross-appeal
in
respect
of
this
item
and
direct
that
the
sum
of
$14,193.61
be
repaid
to
the
plaintiff.
As
to
the
claim
for
interest
on
the
amounts
of
$474,008.59
and
$14,933.61
the
trial
judge
held
that
section
164,
subsections
(3)
and
(4)
did
not
apply.
I
am
of
the
opinion
that
when
those
subsections
are
read
together
with
the
definition
of
overpayment
in
subsection
(7)
they
do
apply
in
respect
of
this
claim
and
I
would
allow
the
crossappeal
in
respect
of
these
items
and
direct
payment
of
these
items
of
interest.*
The
respondent
is
entitled
to
its
costs
of
the
cross-appeal.