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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
November 4, 1996
Verification, Enforcement and Policy & Legislation
Compliance Research Branch Branch
Tax Incentive Audit Section J.A. Szeszycki
Mara Praulins (613) 957-8953
963005
Refundable Investment Tax Credit and Loss Carry Back
This is in reply to your memorandum of September 10, 1996 in which you requested our technical view as to the limitations, if any, on the Minister in reassessing a statute-barred return under the circumstances outlined below.
The facts as set out in your enquiry include:
1.A corporate taxpayer has filed amended returns claiming refundable scientific research and experimental development ("SR&ED") investment tax credits for the 1989 to 1994 taxation years. All claims were filed on time.
2.Valid waivers were filed for the 1989 and 1990 taxation years.
3.The 1990 return initially reported a loss of $XXXXXXXXXX which was carried back to the 1987 taxation year. The 1987 taxation year is now statute-barred.
4.The amended 1989 return reported eligible SR&ED expenditures for that year and the taxpayer requested a refund of the SR&ED investment tax credit in the amount of $XXXXXXXXXX.
5.Such a refund requires an income inclusion in the following year (1990) in the amount of the previous year's refund. The inclusion would reduce the previously assessed 1990 loss from $XXXXXXXXXX to $XXXXXXXXXX. Since the 1987 year is already statute-barred, the 1990 loss application does not appear to be open to reassessment.
You have asked our opinion on whether, under the circumstances described above, the Minister has any discretion regarding the reassessment of a return that is now beyond the normal reassessment period and a waiver has not been filed within that period in prescribed form. In our view, once the return is beyond the normal reassessment period as defined in subsection 152(3.1) of the Act, the Minister is prohibited from making a reassessment unless the circumstances described in subsections 152(4.3), 152(5) and 152(6) are present.
You have also asked whether, in our view, the wording of subsection 164(1) of the Act obliges the Minister to issue the investment tax credit refund requested by the taxpayer. You have noted that subsection 152(4) of the Act uses the word "may" in describing the Minister's obligations in respect of a request for a reassessment while paragraph 164(1)(b) uses the term "shall" with respect to the issuance of a refund, including an investment tax credit refund. It is our view that the filing of amended returns including claims for investment tax credit refunds, constitutes a taxpayer request for a reassessment of those returns. Information Circular 75-7R3 sets out the Department's general policy with respect to the reassessment of returns. Paragraph 4 outlines the circumstances and criteria that must be met before the Department will reassess a return creating a refund. In our view, if the conditions are considered met, the onus would be placed on the Department to justify a refusal to accede to the reassessment request. Once the reassessment is made and the overpayment of tax created, the wording of paragraph 164(1)(b) of the Act clearly obliges the Minister to refund the amount of the overpayment.
As to whether the Minister can refuse the reassessment of the 1989 taxation on the basis that a reassessment of the 1987 taxation year is prohibited, there is no provision in the Act which would support the denial of a reassessment of a particular year on that basis.
If we can be of any further technical assistance in this matter please advise.
John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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