3 November 1989 Administrative Letter 74176 F - Assessing Practice

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Subject: Subsection 185(1) of the Income Tax Act (the "Act")

This is in response to your memorandum of July 25, 1989, as supplemented by your memorandum of August 31, 1989, in which you requested our opinion as to the interpretation of subsection 185(1) of the Act.

Subsection 185(1) of the Act provides that:

     "The Minister shall, with all due dispatch, examine each election made by a corporation in accordance with subsections 83(2), 130.1(4) or 131(1), assess the tax, if any, payable under this Part in respect of the election and send a notice of assessment to the corporation."

Your specific enquiry is whether the Minister must send a notice of assessment in situations where it is determined that no tax under Part III of the Act is payable.

Current Assessing Practice

21(1)(b)

Opinion

In our view, subsection 185(1) of the Act does not technically require the Minister to send a notice to a taxpayer in respect of an election specified in that provision where no tax under Part III of the Act is payable in respect of such election for the reasons described below.

Subsection 185(1) only refers to the sending of a notice of assessment.  A notice of assessment is the final step in the process which constituted an assessment, Scott v. m.N.R. 60 DTC 1273 (Ex. Ct.).  Since a nil assessment does not constitute an assessment (The queen v. Gary Bowl Limited, 74 DTC 6401 (F.C.A.)), it follows that a notice of assessment does not encompass a notice that no tax is payable.  This conclusion is supported by reference to the analogous provisions of Part I of the Act which distinguish between a notice of assessment and a notification that no tax is payable (see, for example, subsection 152(4) of the Act).  Therefore, subsection 185(1) does not require the Minister to send notification that no tax under Part III of the Act is payable. 

We note, however, that it does not follow from the above conclusion that the Minister has an unlimited time period to determine whether tax under Part III of the Act is payable in respect of an election specified in subsection 185(1).  That provision requires the Minister to determine with all due dispatch whether any such tax is payable.  Thus the failure to issue a notice that no tax under Part III is payable would not generally enable the Minister to avoid the limitation period for assessing or reassessing tax set out in subsection 152(4) of the Act, as incorporated by subsection 185(3).

The comments contained in the immediately preceding paragraph should, however, not be construed as requiring the Minister to a notice of assessment under subsection 185(1) or a notification that no tax under Part III is payable to a taxpayer within a short time period after receipt of the election form, which seems to be the concern expressed in your memorandum of August 31. 

21(1)(b)

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