C.W. Carry – Federal Court finds that it was unreasonable for CRA to deny a request for relief from a mistake on the basis that it was the taxpayer, not CRA, that made the mistake

19 December 2024 - 11:45pm
Email this ContentEmail this Content

A CRA audit of the CEWS benefits received by the Applicant revealed that, due to a transposition error of an employee, it had made an erroneous choice of methods (the Alternative Method rather than the General Method) resulting in the overpayment of CEWS benefits to it of over $1 million. The Applicant sought to change the due date for its first qualifying period (Q2) by requesting CRA to use the combination of ss. 125.7(10) and 125.7(16) to both extend the time for filing an application for Q2 and to enable the Applicant to revoke the election of the Alternative Method and elect for the General Method. It justified the availability of a s. 125.7(16) extension on the basis of not yet being a qualifying entity in Q2.

CRA denied the request on the basis that:

  • S. 125.7(16) could not be used because, based on the Applicant’s revenue, it could not possibly become a qualifying entity; (Battista J found that this was jumping the gun – the Applicant was requesting the extension of the time for determining whether it was a qualifying entity);
  • S. 125.7(16) accorded CRA with the discretion to accept late-filed s. 125.7 applications but not to change the due date for the claim period; (this simply was an incorrect reading of the s. 125.7(16) wording); and
  • The onus was on the Applicant to submit accurate original wage subsidy applications on time and the error was not caused by CRA.

Regarding the third ground, Battista J found that this CRA “logic would result in the refusal of extensions in virtually all cases of mistake and the discretion to allow for extensions based on mistakes would be rendered meaningless” and that the decision should “have explained how the decision was responsive to its context, specifically, the purpose and nature of the CEWS program and the factual context”.

The decision was quashed and remitted for redetermination.

Neal Armstrong. Summary of C.W. Carry Ltd. v. Canada (Attorney General), 2024 FC 1983 under s. 125.7(16).