19 April 1998 Internal T.I. 9804357 - DATE OF ASSESSMENT; PART I.3 & VI

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.

Principal Issues:

Whether the date or original assessment for Part I purposes begins the “normal reassessment period” (as that term is defined in subsection 152(3.1)) with respect to an assessment of capital tax pursuant to Parts I.3 or VI. (Note: A single notice of assessment is used by the department to inform a taxpayer about tax liability under more than one Part.) In a factual case a corporation filed their T2 for 1992 and 1993 within the time limitations for filing. No capital tax returns were filed with respect to those years. A recent audit revealed that capital tax returns should have been prepared for both 92 & 93. The taxpayer corporation contends that the department is unable to assess 92 & 93 since they are now statute-barred.

Position TAKEN:

No since the key is whether a return that is required to be filed under a specific Part has, in fact, been filed. In most cases however it is anticipated that the required Part I, I.3 or VI returns will be filed at the same time therefore the returns under Parts I, I.3 & VI (where applicable) would have identical original assessment limitations; the normal reassessment period would be the same. The fact that a single notice of assessment is used to assess more then one Part under the Act is not determinative.

Reasons FOR POSITION TAKEN:

Section 181.6 & 190.2 establish the filing dates for purposes of Part I.3 and VI respectively. The fact that this date coincides with the date for filing a return of income under Part I is not determinative. An assessment under each Part however stands on its own and therefore the question that must be answered is whether the required return has been filed. The answer will be dependent upon the particular facts. Section 181.7 & 190.21 ascribe the assessing characteristics of section 152 to each of Parts I.3 and VI where the normal reassessment period is determined. These characteristics depend upon the filing of a return of capital. In the case presented the taxpayer corporation had not filed a capital tax return with respect to its 92 & 93 taxation years therefore the normal reassessment period could not have begun until that time in accordance with subsection 152(4) making such modifications as the circumstances require.

			April 8, 1998

	NORTH YORK TAX SERVICES OFFICE	HEADQUARTERS
	Industry Specialist Services	G.Donell
(613) 957-3496
	Attention: Doug Mitchell
	             Banking Specialist
			7-980435

Assessment Date for Part I.3 and Part VI Tax

This is in reply to your memorandum of February 17, 1998 in which you have asked us to clarify the date of assessment and the resulting starting date for statute-barred purposes with respect to capital tax pursuant to either of Parts I.3 or VI. Specifically you have asked whether the date of original assessment for Part I purposes begins the “normal reassessment period” as that term is defined in subsection 152(3.1) of the Income Tax Act (the “Act”), for purposes of Parts I.3 or VI. We understand that this request is prompted by an audit of a corporate taxpayer. In the course of the audit it was determined that capital taxes were payable from 1992 although the corporation had never filed a capital tax return. Representatives of the corporation contend that the Department is precluded from assessing capital tax for the 1992 and 1993 taxation years, which are now statute-barred.

Section 181.6 & 190.2 (which contain similar wording) establish the filing dates for purposes of Part I.3 and VI respectively. Section 181.6 reads in part,

“Every corporation...liable to pay tax under this Part for a taxation year shall file with the Minister, not later than the day on or before which the corporation is required by section 150, to file its return of income for the year under Part I, a return of capital for the year in prescribed form...”

Section 181.7 & 190.21 provide that certain provisions of Part I relating to assessments, interest, penalties, objections and appeals are equally applicable to Parts I.3 and VI respectively making such modifications as the circumstances require. Paragraph 152(4)(c) as it would apply with respect to Part I.3 would be read, in part, as follows;

“...the Minister may at any time assess tax for a taxation year...payable under Part I.3 by a taxpayer or notify in writing any person by whom a return of capital for a taxation year has been filed that no tax is payable for the year, and may

...

(c) within the normal reassessment period for the taxpayer in respect of the year,...

reassess or make additional assessments, or assess tax, interest or penalties...”

The definition of “normal reassessment period” in subsection 152(3.1) establishes the starting point in the assessing period that begins with “...the day of mailing of a notice of original assessment...” with respect to a particular Part (I, I.3, VI etc.) and that ends either three or four years (paragraphs 152(3.1)(a) & (b)) from that time depending upon the nature of the taxpayer.

An assessment under each Part of the Act should be regarded as separate assessments. The fact that the Department generally uses a single notice of assessment to inform a taxpayer of assessments under more than one Part of the Act or that the filing date, for purposes of both Parts I.3 and VI, coincides with the required date for filing a return of income under Part I is not determinative although the required filing date will be relevant for purposes of assessing a penalty under section 235 of the Act. The question that must be answered is whether the required return has been filed. In the audit before you the taxpayer corporation has not filed a capital tax return with respect to its 92 & 93 taxation years therefore the normal reassessment period has not begun. Although the Part I normal reassessment period for the 92 & 93 taxation years appears to have terminated the reassessment period for purposes of Parts I.3 or VI can only begin once the taxpayer has filed the respective capital tax returns.

We hope that our comments have been of assistance.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch
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