Docket: A-132-15
Citation:
2016 FCA 74
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CORAM:
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RYER J.A.
WEBB J.A.
RENNIE J.A.
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BETWEEN:
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BAKORP
MANAGEMENT LTD.
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Appellant
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and
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THE MINISTER OF
NATIONAL REVENUE
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Respondent
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REASONS
FOR JUDGMENT
WEBB J.A.
[1]
Bakorp Management Ltd. (Bakorp) has appealed the
decision of Pizzitelli J. of the Tax Court of Canada (2015 TCC 36) in relation
to his interpretation of subsection 187(2) of the Income Tax Act, R.S.C.
1985, c.1 (5th Supp.) (the Act) in relation to the facts of this case.
[2]
For the reasons that follow, I would dismiss
this appeal.
I.
Background
[3]
The facts in this case are not in dispute.
Bakorp filed its tax returns for 1993 and 1995 and reported a Part IV tax
liability in each return. The balance due date for the purposes of the Act
for the payment of Bakorp’s Part IV tax liability for 1995 was June 30, 1995. Bakorp,
in its tax return for 1995, determined that its Part IV tax liability for that
year was $13,333,059. On June 10, 1995 (which was before the balance due date),
Bakorp paid the balance that it had determined was due for 1995 (the 1995 Final
Payment). The Part IV tax liability for 1993 and 1995 was originally assessed
as filed.
[4]
However, as a result of subsequent
reassessments, the Part IV tax liability for 1993 was increased significantly
and the Part IV tax liability for 1995 was reduced by $6,333,059 (the
Overpayment). On February 3, 2000, the Minister applied the Overpayment to the
outstanding Part IV tax liability for 1993. The Overpayment was less than the
1995 Final Payment.
[5]
The Tax Court Judge determined that, for the
purposes of calculating the amount of interest payable under subsection 187(2)
of the Act in relation to the amounts reassessed for 1993, the “day of payment” of the Overpayment was February 3,
2000.
II.
Statutory Provision
[6]
The relevant provision of the Act is
subsection 187(2) which provides that:
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187(2) Where a corporation is liable
to pay tax under this Part and has failed to pay all or any part thereof on
or before the day on or before which the tax was required to be paid, it
shall pay to the Receiver General interest at the prescribed rate on the
amount that it failed to pay computed from the day on or before which the tax
was required to be paid to the day of payment.
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187(2) Une société qui n’a pas payé tout ou
partie d’un impôt dont elle est redevable en vertu de la présente partie, au
plus tard à la date où elle était tenue de le payer, doit verser au receveur
général des intérêts sur le montant qu’elle n’a pas payé, calculés au taux
prescrit pour la période allant de la date où elle était tenue de payer
l’impôt jusqu’à la date du paiement.
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III.
Issue
[7]
The only issue in this appeal is whether the
interest charged in relation to the amounts reassessed for the Part IV tax
liability for 1993 should be calculated on the basis that the “day of payment” of the Overpayment is the date that
the Overpayment was applied to the Part IV tax liability for 1993 (February 3,
2000) or the earlier date (June 10, 1995) on which Bakorp paid the 1995 Final
Payment to the Minister of National Revenue (Minister), albeit on account of
its 1995 Part IV tax liability at that time.
IV.
Analysis
[8]
Bakorp acknowledges that under Part IV of the Act,
each year is assessed separately. Bakorp also acknowledges that the Overpayment
was not applied to its 1993 Part IV tax liability until February 3, 2000.
However, Bakorp submits that a distinction should be drawn between when the
Overpayment was applied and the day of payment of that amount. Bakorp submits
that the 1995 Final Payment was greater than the Overpayment and the “day of payment”, for the purposes of determining the
interest amount under subsection 187(2) of the Act in relation to the reassessment
issued for 1993, should be June 10, 1995.
[9]
On the issue of statutory interpretation, the
Supreme Court of Canada in The Queen v. Canada Trustco Mortgage Company,
2005 SCC 54, 2005 D.T.C. 5523 (Canada Trustco), has given us this
guidance:
[10] It has been long established as a
matter of statutory interpretation that 'the words of an Act are to be read in
their entire context and in their grammatical and ordinary sense harmoniously
with the scheme of the Act, the object of the Act, and the intention of
Parliament': see 65302 British Columbia Ltd. v. Canada, [1999] 3 S.C.R.
804, at para. 50. The interpretation of a statutory provision must be made
according to a textual, contextual and purposive analysis to find a meaning
that is harmonious with the Act as a whole. When the words of a provision are
precise and unequivocal, the ordinary meaning of the words play a dominant role
in the interpretive process. On the other hand, where the words can support
more than one reasonable meaning, the ordinary meaning of the words plays a
lesser role. The relative effects of ordinary meaning, context and purpose on
the interpretive process may vary, but in all cases the court must seek to read
the provisions of an Act as a harmonious whole.
[10]
Bakorp submits that the words “day of payment” refer to the date that Bakorp made
the 1995 Final Payment – June 10, 1995. However, Bakorp does acknowledge that
it may be possible to also interpret “day of payment”
as the day that the payment amount is applied to the tax liability for 1993 –
February 3, 2000.
[11]
Bakorp then submits that any such ambiguity can
be resolved by the contextual analysis. In this case, Bakorp refers to
subsection 161(1) of the Act as support for its argument that “paid” should be distinguished from “applied”. This subsection provides that:
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161(1) Where at any time after a
taxpayer’s balance-due day for a taxation year
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161(1)
Dans le cas où le total visé à l’alinéa a) excède le total visé à l’alinéa b)
à un moment postérieur à la date d’exigibilité du solde qui est applicable à
un contribuable pour une année d’imposition, le contribuable est tenu de
verser au receveur général des intérêts sur l’excédent, calculés au taux
prescrit pour la période au cours de laquelle cet excédent est impayé :
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(a) the total of the taxpayer’s
taxes payable under this Part and Parts I.3, VI and VI.1 for the year
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a) le total des impôts payables par le
contribuable pour l’année en vertu de la présente partie et des parties I.3,
VI et VI.1;
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exceeds
(b) the total of all amounts each of which is an amount
paid at or before that time on account of the taxpayer’s tax payable and
applied as at that time by the Minister against the taxpayer’s liability for
an amount payable under this Part or Part I.3, VI or VI.1 for the year,
the taxpayer
shall pay to the Receiver General interest at the prescribed rate on the
excess, computed for the period during which that excess is outstanding.
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b) le
total des montants représentant chacun un montant payé au plus tard à ce
moment au titre de l’impôt payable par le contribuable et imputé par le
ministre, à compter de ce moment, sur le montant dont le contribuable est
redevable pour l’année en vertu de la présente partie ou des parties I.3, VI
ou VI.1.
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[12]
Bakorp submits that because paragraph 161(1)(b)
of the Act refers to both “an amount paid”
and “applied”, that two different actions are
contemplated. Although section 161 does not apply to Part IV, Bakorp submits
that Parliament still contemplated two different actions for the purposes of
the Act. Since subsection 187(2) of the Act only refers to “payment”, Bakorp submits that only the action of
payment is relevant for that subsection.
[13]
I am unable to accept the argument of Bakorp for
two reasons. One is related to the history of subsection 161(1) of the Act
and the other is related to the wording of subsection 164(3) of the Act.
[14]
Prior to April 20, 1983, subsection 161(1) of
the Act only referred to the “day of payment”
and provided that the ending date for the calculation of interest on overdue
amounts was the “day of payment”. It was
amended, applicable after April 19, 1983, following the decision of this Court
in Rath v. The Queen, [1983] 1 F.C. 42, [1982] F.C.J. No. 71. In Rath
this Court addressed the interpretation of the former subsection 161(1) of the Act
which provided as follows:
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161(1) Where the amount paid on account of tax payable by a taxpayer
under this Part for a taxation year before the expiration of the time allowed
for filing the return of the taxpayer's income is less than the amount of tax
payable for the year under this Part, the person liable to pay the tax shall
pay interest at a prescribed rate per annum on the difference between those
two amounts from the expiration of the time for filing the return of income
to the day of payment.
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161(1)
Lorsque la somme, versée au titre de l’impôt payable par un contribuable pour
une année d’imposition en vertu de la présente Partie avant l’expiration du
délai accordé pour l’envoi de la déclaration de revenu du contribuable, est
inférieure au montant de l’impôt payable pour l’année en vertu de la
présente Partie, la personne responsable du paiement de l’impôt doit
acquitter des intérêts, au taux annuel prescrit, sur la différence entre ces
deux sommes, pour la période allant de l’expiration du délai imparti pour la
déclaration du revenu au jour du paiement.
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[15]
The taxation years in issue in that case were
1974 and 1975. For each year Mr. Rath was an employee. His employer deducted
amounts from his salary and remitted such amounts on his behalf as payment towards
his tax liability for those years. In filing his returns for those years he
claimed significant amounts for moving expenses which initially were accepted
as deductions in computing his income. As a result, he received refunds for
each year.
[16]
Mr. Rath was later reassessed and he was
required to repay the refunds (or a significant part of such refunds). In
applying subsection 161(1) of the Act, as it was then worded, this Court
simply compared the amount that he had paid, as a result of the source deductions,
towards his tax liability for 1974 and 1975 to his tax liability for those
years, as finally determined. This Court found that interest could only be
charged on the difference between those two amounts, even though Mr. Rath had
received a refund for both 1974 and 1975 that he had to subsequently repay. As
a result, he was not required to pay interest on the amount that he had
received as a refund and which he was required to repay, for the period that he
had such refund.
[17]
Subsection 161(1) of the Act was amended in
1983 to refer to amounts that not only had been paid but also, at the
particular time in question, had been applied against a tax liability. For the
period of time that Mr. Rath had his “refund”,
this amount would not have been applied, at that time, against his tax
liability.
[18]
Since subsection 161(1) of the Act was
amended to address a particular situation which is not applicable in this case,
I do not agree that its use of “paid” and “applied” should inform the interpretation of “day of payment” for the purposes of subsection 187(2)
of the Act.
[19]
The second reason that I am unable to accept
Bakorp’s argument is also related to the contextual analysis contemplated by Canada
Trustco. While subsection 161(1) of the Act does not apply for the
purposes of Part IV, subsection 164(3) of the Act does apply for the
purposes of Part IV as a result of the provisions of subsection 187(3) of the Act.
[20]
Subsection 164(3) of the Act provides for
the payment of interest on amounts that are refunded, repaid or applied to
another liability of a taxpayer. Therefore, this provision will apply to the
Overpayment in relation to 1995. In reading “the
provisions of an Act as a harmonious whole”, it is necessary to consider
how interest will be calculated on the Overpayment for 1995 to determine
whether Bakorp could be getting an unintended benefit if its interpretation of
subsection 187(2) of the Act is adopted in relation to 1993.
[21]
This subsection is as follows:
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164(3) If, under this section, an
amount in respect of a taxation year (other than an amount, or a portion of
the amount, that can reasonably be considered to arise from the operation of
section 122.5 or 122.61) is refunded or repaid to a taxpayer or applied to
another liability of the taxpayer, the Minister shall pay or apply interest
on it at the prescribed rate for the period that begins on the day that is
the latest of the days referred to in the following paragraphs and that ends
on the day on which the amount is refunded, repaid or applied:
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164(3)
Si, en vertu du présent article, une somme à l’égard d’une année d’imposition
est remboursée à un contribuable ou imputée sur tout autre montant dont il
est redevable, à l’exception de tout ou partie de la somme qu’il est
raisonnable de considérer comme découlant de l’application des articles 122.5
ou 122.61, le ministre paie au contribuable les intérêts afférents à cette
somme au taux prescrit ou les impute sur cet autre montant, pour la période
commençant au dernier en date des jours visés aux alinéas ci-après et se terminant
le jour où la somme est remboursée ou imputée :
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(a) if the taxpayer is an individual, the day that is 30
days after the individual’s balance-due day for the year;
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a) si
le contribuable est un particulier, le trentième jour suivant la date d’exigibilité
du solde qui lui est applicable pour l’année;
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(b) if the taxpayer is a corporation, the day that is 120
days after the end of the year;
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b) si
le contribuable est une société, le cent vingtième jour suivant la fin de
l’année;
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(c) if the taxpayer is
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c) si le contribuable est :
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(i) a corporation, the day that is 30 days after the day on which
its return of income for the year was filed under section 150, unless the
return was filed on or before the corporation’s filing-due date for the year,
and
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(i) une société, le trentième jour suivant celui où sa déclaration
de revenu pour l’année a été produite en conformité avec l’article 150, sauf
si la déclaration a été produite au plus tard à la date d’échéance de
production qui lui est applicable pour l’année,
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(ii) an individual, the day that is 30 days after the day on which
the individual’s return of income for the year was filed under section 150;
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(ii) un particulier, le trentième jour suivant celui où sa
déclaration de revenu pour l’année a été produite en conformité avec
l’article 150;
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(d) in the case of a refund of an overpayment, the day on
which the overpayment arose; and
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d) dans
le cas du remboursement d’un paiement en trop d’impôt, le jour où il y a eu
paiement en trop;
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(e) in the case of a repayment of an amount in controversy,
the day on which an overpayment equal to the amount of the repayment would
have arisen if the total of all amounts payable on account of the taxpayer’s
liability under this Part for the year were the amount by which
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e) dans
le cas du remboursement d’une somme en litige, le jour où il y aurait eu un
paiement en trop égal à la somme remboursée si le total des sommes payables
sur ce dont le contribuable est redevable en vertu de la présente partie pour
l’année était égal à l’excédent du total visé au sous-alinéa (i) sur la somme
visée au sous-alinéa (ii) :
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(i) the lesser of the total of all amounts paid on account of the
taxpayer’s liability under this Part for the year and the total of all
amounts assessed by the Minister as payable under this Part by the taxpayer
for the year
exceeds
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(i) le total des sommes versées sur ce dont il est redevable en
vertu de la présente partie pour l’année ou, s’il est moins élevé, le total
des sommes qui, selon la cotisation établie par le ministre, sont à payer en
vertu de la présente partie par le contribuable pour l’année,
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(ii) the amount repaid.
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(ii) la
somme remboursée.
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[22]
Although the exact date for the commencement of
the interest paid to Bakorp in relation to the Overpayment for 1995 is not
certain, it was before February 3, 2000 as Bakorp acknowledged that it had been
paid interest in relation to the Overpayment. Bakorp’s argument related to the “day of payment”, in applying subsection 187(2) of the
Act to the calculation of interest payable by Bakorp in relation to
Bakorp’s Part IV tax liability for 1993, would not affect the commencement date
for the payment of interest by the Crown to Bakorp under subsection 164(3) of
the Act in relation to the Overpayment for 1995.
[23]
Subsection 164(3) of the Act provides
that the ending date for the payment of interest for 1995 is the date the
Overpayment is applied to another liability of Bakorp (in this case Bakorp’s
liability for 1993). The date the Overpayment was applied to Bakorp’s liability
for 1993 was February 3, 2000. Therefore, if Bakorp’s argument that the “day of payment” of the Overpayment is June 10, 1995 when
applying subsection 187(2) of the Act to its 1993 Part IV tax liability,
then Bakorp would not only have the benefit of a reduction in interest payable
by it for its liability for 1993 based on the amount of the Overpayment from
June 10, 1995, but it would also have the benefit of a payment of interest to
it for 1995 for a significant overlapping period in relation to the same
amount. It could not have been the intention of Parliament that a single amount
could, for the same period of time, give rise to both a reduction of interest
payable on overdue taxes for one year and also give rise to refund interest for
another year.
[24]
As a result, in my view, in reading “the provisions of an Act as a harmonious whole”, the “day of payment” in subsection 187(2) of the Act
is the day that payment is applied to the particular taxation year in issue.
Since the Overpayment was treated as a payment towards the 1993 Part IV tax
liability of Bakorp on February 3, 2000, this is the day of payment for the
purposes of applying subsection 187(2) of the Act to determine the
amount of interest payable by Bakorp on its Part IV tax liability for 1993.
[25]
I would therefore, dismiss the appeal with
costs.
"Wyman W. Webb"
“I agree.
C. Michael Ryer J.A.”
“I agree.
Donald J. Rennie
J.A.”
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