MEGlobal – Federal Court of Appeal confirms that the Tax Court could not consider a proposed downward transfer-pricing adjustment

In objections of MEGlobal to reassessments of three of its taxation years to reflect upward transfer pricing adjustments under s. 247(2), it included requested downward adjustments pursuant to s. 247(10) (i.e., for a reduced product sale price). The Minister then vacated the reassessments, but with the requested downward adjustments being refused. The taxpayer filed an appeal to the Tax Court from such further reassessments, which was dismissed - and also timely filed a (now futile) judicial review application in the Federal Court (the years were now statute-barred).

Webb JA noted that, although in light of Dow Chemical, the Tax Court lacked jurisdiction to review the Minister's denial of the downward transfer pricing adjustment, MEGlobal nonetheless argued that the Tax Court could determine whether applying s. 247(2) “in isolation” would result in a downward transfer pricing adjustment.

In rejecting this argument, Webb J stated:

Even if the Tax Court were to find that the application of subsection 247(2) of the Act, in isolation, would result in the reductions as proposed by MEGlobal, the matter could not be referred back to the Minister for reconsideration and reassessment, as no reassessment to reflect a downward transfer pricing adjustment could be issued in the absence of the opinion of the Minister that the circumstances are such that it would be appropriate to make such adjustments.

Furthermore, the Minister had effectively made it clear that his opinion was that no downward pricing adjustment should be granted because the counterparty was a UAE resident which would not be subject to income tax on the increased income proposed to result to it.

Neal Armstrong. Summary of MEGlobal Canada ULC v. Canada, 2026 FCA 24 under s. 247(10).