Collier, J:
1 The plaintiff is claiming from the defendant an “allowable refund” of $474,008.59 and certain other relief. The claim is founded on subsection 133(6) of the Income Tax Act.[FN1: <p>RSC 1952, c 148 as amended by section 1 of SC 1970–71–72, c63. The amending provisions are commonly referred to as the new<em>Income Tax Act</em>or the new Act. I shall adopt that description.</p>]
2 The facts are not in dispute. The plaintiff is a non-resident-owned investment company (paragraph 133(8)(d)). Its fiscal period at the material times was from February 28 to February 26. The calendar year relevant for tax purposes was 1972. For its fiscal period ending February 26, 1972 its taxable income was $3,160,057.29. Tax of $474,008.59 was leviable. The plaintiff calculated its allowable refund was equal to the tax payable and did not remit payment. The Minister of National Revenue contended the allowable refund was nil and that in any event the taxpayer had to remit the tax, even though there might ultimately be a refund of the full amount. The taxpayer was then charged interest of $14,193.61. The tax and interest were paid on January 22, 1973.
3 Prior to the end of its fiscal year, the plaintiff paid to its shareholders taxable dividends, as follows:
June 1, 1971 $ 750,000
December 29, 1971 $2,000,000
February 24, 1972 $1,950,000
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$4,700,000
4 Those dividends, of course, had been subject to withholding tax. As I understand it, one of the purposes of section 133 is to return to non-resident-owned investment companies some part of the tax paid by them on their taxable income when some portion of that taxable income has been distributed in the form of taxable dividends. The formula for calculating the amount of the refund is set out in the section.
5 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.[FN2: <p>If the plaintiff has not paid, or does not pay, any dividends after theend of its 1972 taxation year, then, on the defendant's interpretation of thesection in question, the plaintiff will never receive an allowable refund inrespect of the tax levied.</p>]
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.6 To understand the intricacies of the problem it is necessary to set out the applicable provisions of the statute. To attempt a solution to the problem, I am faced with the scary task of trying, for my first time, to penetrate a portion of the jungle of unpruned verbiage found in the new Act:
133. (8) In this section- (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
(ii) the greater of the amount of the dividend so paid and the corporation's cumulative taxable income immediately before the dividend was paid;
(9) In paragraph (8)(a),- (a) “allowable refundable tax on hand” of a corporation at any particular time means the amount, if any, by which the aggregate of
(i) all amounts each of which is an amount 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
- (iii) an amount in respect of the 1972 taxation year or any taxation year referred to in subparagraph (i), equal to 25% of the amount, if any, by which the aggregate of the corporation's taxable capital gains for the year from dispositions after 1971 of property described in paragraph (1)(c) exceeds the aggregate of
(A) its allowable capital losses for the year from dispositions after 1971 of property described in that paragraph, and
(B) the amount deductible from its income for the year by virtue of paragraph (2)(c)
(iv) 1/3 of any amount paid or credited by the corporation after the commencement of its 1972 taxation year and before the particular time, as, on account or in lieu of payment of, or in satisfaction of interest, or
(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” of a corporation at any particular time means the amount, if any, by which the aggregate of
(i) its taxable incomes for taxation years commencing after 1971 and ending before the particular time, and
- (ii) where the corporation's 1972 taxation year commenced before 1972, the amount, if any, by which its taxable income for that year exceeds the aggregate of
(A) all amounts received by the corporation as described in paragraph 196(4)(b), and
(B) the lesser of the amount determined under paragraph 196(4)(e) in respect of the corporation and the amount, if any, by which, the aggregate of amounts determined under paragraphs 196(4)(d) to (f) in respect of the corporation exceeds the aggregate of amounts determined under paragraphs 196(4)(a) to (c) in respect of the corporation,
exceeds the aggregate of amounts each of which is- (iii) an amount in respect of the 1972 taxation year or any taxation year referred to in subparagraph (i), equal to the amount, if any, by which the aggregate of the corporation's taxable capital gains for the year from dispositions after 1971 of property described in paragraph (1)(c) exceeds the aggregate of
(A) its allowable capital losses for the year from dispositions after 1971 of property described in that paragraph and
(B) the amount deductible from its income for the year by virtue of paragraph (2)(c)
(iv) 4/3 of any amount paid or credited by the corporation, after the commencement of its 1972 taxation year and before the particular time, as, on account or in lieu of payment of, or in satisfaction of interest, or
(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.
7 The formula, or equation, for calculating the allowable refund appears to be reducible to the following (I have substituted AR for al lowable refund, ART for allowable refundable tax on hand, CTI for cumulative taxable income, and D for dividend):
AR = ART X D
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CTI or DIt is then necessary to determine ART and CTI. The “particular time” referred to in the definitions is, in this case, immediately before the payment of the three amounts of dividends (June 1, 1971, December 29, 1971, and February 24, 1972).8 Fortunately for me, counsel advised the definitions of allowable refundable tax on hand and cumulative taxable income can be restricted (for the purposes of the facts and issue in this action) to the following:
133. (9) ...- (a) “allowable refundable tax on hand” ... at any particular time means 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,
(ii) 15% of the amount determined under subparagraph (b)(ii) in respect of the corporation [the amount referred to is its taxable income for 1972] ...
- (b) “cumulative taxable income” ... at any particular time means the aggregate of
(i) its taxable incomes for taxation years commencing after 1971 and ending before 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 ...
9 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)[FN3: <p>Counsel for the plaintiff used this convenient term to describe thefiscal period in question: it straddled the two calendar years 1971 and 1972,as well as the expiry of the old Act and the commencement of the new.</p>] 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 is 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.
10 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 include, in any event, the amount specified in respect of the straddle year, whether or not it has ended before the particular time.
11 The defendant fastens on the words in subparagraph 133(9)(b)(ii) “... its [the plaintiff's] ... taxable income for that year ...” [“that year” meaning the corporation's 1972 taxation year]. Counsel for the defendant says the plaintiff's taxation year in question ended February 26, 1972; at any date before then it had no taxable income because taxable income can only be ascertained at or after the close of the fiscal period; at the date of each payment of dividends taxable income had not, and could not, be ascertained; it was therefore zero or nil; when one then goes to the formula set out in subsection 133(8), the allowable refund becomes nil.
12 I do not dissent from the defendant's submissions that, generally speaking, in order to calculate income or taxable income for a year, one cannot normally arithmetically do so until after the end of that particular business period. In my view, the legislators had that general proposition in mind in respect of all taxation years (fiscal periods) commencing after 1971; those fiscal periods must end before the time or times of the dividend payments; it follows (not by express statutory words, but only by logic) that the taxable income,[FN4: <p>Subparagraph 133(9)(b)(i).</p>] and therefore the amounts of tax payable,[FN5: <p>Subparagraph 133(9)(a)(i).</p>] are either ascertained at the date of dividend payment, or capable of precise ascertainment.
13 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.
14 The plaintiff is, in my opinion, entitled to succeed on the main branch of its claim. The defendant shall therefore make a refund to the plaintiff of the sum of $474,008.59.
15 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.[FN6: <p>See section 177 and subsection 178(1).</p>] I cannot therefore require the defendant to make a refund in the sum of $14,963.61.
16 To my mind, equity and justice demand, in view of the result reached in this action, the plaintiff should be refunded the interest paid. The tax collector has had, for a period of time, the use of what is in effect double moneys. The plaintiff, in its calculations, felt there was, for practical purposes, a set-off. It did not remit tax, as technically required, and then wait for a refund. It seems unjust the revenue department should, in addition to the use of the $474,008.59, keep the interest charged on that now refundable sum. As I have stated, I have not the power to make the direction sought. The power to do what appears in the circumstances to be right may lie elsewhere.[FN7: <p>See the<em>Financial Administration Act</em>, RSC 1970, c F-10.</p>]
17 Finally, the plaintiff seeks interest from the date of payment of the refundable tax and interest (January 22, 1973) to the date of judgment. The plaintiff is really asking for pre-judgment interest.[FN8: <p>In some jurisdictions pre-judgment interest, in proper cases, can begiven. See, in England, Law Reform (Miscellaneous Provisions) Act, 1934,section 3 and Administration of Justice Act 1969, section 22; in BritishColumbia, SBC 1974, c 65.</p>] It is said authority to make this type of award can be found in subsections 164(3) and (4). In my view, those provisions are applicable to the type of refunds or overpayments specified in that section. No such provisions are found in respect of the refunding authorizations of section 133. The claim for interest is therefore rejected.
18 In the result there will be judgment that the defendant make a refund of $474,008.59. The plaintiff is entitled to its costs.
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