TPine – Federal Court of Appeal indicates that it is unclear whether revised s. 152(9) precludes CRA from advancing a further argument based on a different transaction

The original Crown Reply had stated that the Minister had assessed TPine’s return to disallow a CCA deduction on the basis that the Class 10 and 16 assets in question were included in the same equipment that TPine had sold and for which it had claimed a cost-of-goods sold deduction. TPine appealed the Tax Court’s allowance of an amendment to the Reply (which the Crown sought to justify under s. 152(9)) to include the alternative basis for the assessment that, if TPine was successful in challenging the CCA denial, the TPine cost-of-goods-sold deduction should be reduced by an equivalent amount.

Webb JA indicated that in interpreting the previous version of s. 152(9), the Federal Court of Appeal “has not allowed the Minister to raise a new argument based on a transaction that did not form the basis on which a taxpayer was assessed” (para. 85). Here, that test was not a barrier to the new pleaded basis of assessment. The central allegation of the Minister was that it was “the same equipment that resulted in the CCA claim and in the deduction for the cost of goods sold” (para. 86). Thus the two alternate assessment bases were joined at the hip: if TPine had sold those assets, it followed “that the claim for CCA was a valid claim and no amount should have been claimed for the cost of goods sold” (para. 88); and if it had not sold the assets, it followed that the cost-of-goods sold deduction should be reduced.

Since s. 152(9) permitted the new pleading even under its more restrictive previous version as judicially interpreted, the same result should follow under the current version of s. 152(9) that applied to this amendment. However, in commenting on the current version of s. 152(9), Webb JA stated (at para. 90):

The principles that the Minister cannot appeal an assessment and the Minister cannot reassess beyond the expiration of the normal reassessment period are still valid principles that would need to be taken into account in determining what alternative basis or argument the Minister may advance. In interpreting and applying the previous version of subsection 152(9) of the Act, this Court has also limited an alternative argument to the same transaction that is in dispute. It is not clear how the amendments would alter this principle.

Neal Armstrong. Summaries of TPine Leasing Capital Corporation v. Canada, 2024 FCA 83 under s. 152(4)(a)(i), s. 152(9) and s. 152(1).