Dockets: T-1-05
T-2155-10
Citation:
2014 FC 839
Ottawa, Ontario, September
2, 2014
PRESENT: The
Honourable Madam Justice Gagné
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Docket: T-1-05
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BETWEEN:
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IMPERIAL OIL RESOURCES LIMITED
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Applicant
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and
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THE ATTORNEY GENERAL OF CANADA
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Respondent
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Docket: T-2155-10
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AND
BETWEEN:
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IMPERIAL OIL RESOURCES VENTURES LIMITED
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Applicant
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and
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THE ATTORNEY GENERAL OF CANADA
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Respondent
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JUDGMENT AND REASONS
Overview
[1]
These are two
applications for judicial review brought by Imperial Oil Resources Limited
(file T-1-05) and Imperial Oil Resources Venture Limited (file T-2155-10)
[collectively “Imperial Oil”] against the Minister of National Revenue
[Minister] relating to the Syncrude Remission Order, CRC, c 794 [SRO],
an initiative undertaken in 1976 by the federal government to provide some
federal tax relief to participants in the Syncrude (oil sands) Project in
northern Alberta. This tax relief served to counterbalance increased royalty charges by the Albertan government that, as of
1974, had to be included in the participants’ taxable income. In essence, until
2003, the Syncrude participants were entitled to a remission of federal tax
paid on the amount they paid Alberta in royalty charges.
[2]
These applications
were heard concurrently with file T-1382-06. Reasons for that file, dealing
with the remission entitlement for the 2001 taxation year, will be addressed in
a companion judgment. These three files are test cases; 44 other files are
currently in abeyance before this Court.
[3]
The common arc for
the present applications centres on Imperial Oil’s belief that a remission order is the same as a refund of a tax overpayment under
section 164 of the Income Tax Act, RSC 1985, c 1 (5th Supp)
[ITA], with the result that the federal government would owe interest on the
remission ultimately granted to it for a given year, much like it does in
instances of an overpayment to the Canada Revenue Agency [CRA] by a taxpayer.
[4]
The Minister contends that no interest is owed
on the remissions, as they are tax liabilities relieved by the CRA, and not
“overpayments” as defined by section 164 of the ITA. In practice, the Minister
applies the remission granted to Imperial Oil’s tax liability owed to the
federal government for a given taxation year; as such, the remission does not
reduce its tax liability, but merely affects its collection.
[5]
More specifically, file T-1-05 is an application
for judicial review of the Minister’s decision not to grant the interest
accrued on an alleged “overpayment” of taxes paid to the CRA for the 1999
taxation year.
[6]
Meanwhile, file T-2155-10
is an application about timely filing for Imperial Oil’s claim for refund
interest accrued during the 1996 taxation year. The question at issue is “when”
the Minister can be said to have made a decision regarding the payment of
refund interest for the purposes of determining when the time limitation set
out in subsection 18.1(2) of the Federal Courts Act, RSC, 1985, c-7
[FCA], starts to run. Should the application not be time-barred, then Imperial
Oil is seeking refund interest on the remission amount from that year.
[7]
For the reasons discussed below, these
applications for judicial review will be dismissed. Imperial Oil is not owed
refund interest pursuant to the SRO. Moreover, I find the application in file
T-2155-10 to be time barred.
Background
[8]
Imperial Oil is involved in the exploration for
and the production of petroleum, natural gas, other hydrocarbons and minerals.
By way of its various subsidiaries, it is a participant in a joint venture
created pursuant to the Syncrude Project Ownership and Management Agreement,
which had been put into place for the purposes of the acquisition, development,
construction, maintenance and operation of the Syncrude Project [Syncrude Joint
Venture].
[9]
As the Federal Court of Appeal explains in Canada
(Attorney General) v Imperial Oil Resources Limited, 2009 FCA 325 [Imperial
Oil], which dealt with a previous disagreement on the manner in which the
SRO should be taken into account in determining Imperial Oil’s rights and
obligations under the ITA, for the 1997 taxation year:
[3] Generally, a
provincial royalty on the production of a non-renewable resource represents the
share of the resource that is reserved or payable to the province pursuant to a
provincial law or a contract between the province and the producer. Prior to
the events that gave rise to this case, a royalty reserved to a province was
excluded from the producer’s income as determined for income tax purposes, and
a royalty payable to a province was deductible in computing the producer’s
income.
[4] In the early 1970s, the provinces made
significant changes to the structure and quantum of provincial resource
royalties, to the extent that the federal government perceived a threat of
serious erosion to the federal income tax base. The federal government
responded with amendments to the Income Tax Act. The amendments were intended to ensure that federal
tax relief for royalties would be limited to an amount the federal government
considered appropriate. The amendments were enacted on March 13, 1975,
effective after May 6, 1974.
[10]
The first amendments included the enactment of
paragraphs 12(1)(o) and 18(1)(m) of the ITA. By the combined
operation of those provisions, a resource producer, in computing its income for
income tax purposes, was required to include and could not deduct any resource
royalty payable to a province.
[11]
During the period when the resource royalty
amendments were being made to the ITA, the development
of the oil sands in northern Alberta was in its beginning stages. In 1975, the
oil companies involved in that development (including the corporate
predecessors of Imperial Oil) worked out a contractual royalty arrangement with
Alberta called the “Alberta Crown Agreement”, the purpose of which was to
evidence the agreement between the province of Alberta and the Syncrude Joint
Venture participants concerning the royalty receivable by Alberta with respect to
the Syncrude Project [Syncrude Royalties].
[12]
As a counterbalance to this new royalty
arrangement, resource producers became entitled to a federal abatement,
replaced in 1976 by a new statutory deduction called the “resource allowance.”
These measures provided tax relief as a surrogate for what the federal
government considered to be a reasonable royalty on resource profits.
[13]
In that vein, on May 6, 1976, the Governor in Council enacted the SRO, which provides
in relevant part:
3. (1) Subject to subsection (2), remission
is hereby granted to each participant of any tax payable for a taxation year
pursuant to Part I of the Income Tax Act as a result of the royalty
provisions being applicable to
(a) amounts receivable and the fair market
value of any property receivable by the Crown as a royalty, tax, rental or levy
with respect to the Syncrude Project, or as an amount however described, that
may reasonably be regarded as being in lieu of any of the preceding amounts;
[…]
[14]
Prior to enacting the SRO, the federal
government had considered two options: providing the relief promised to the
participants by way of an amendment to the ITA or by way of a remission order
pursuant to the Financial Administration Act, RSC 1985, c F-11 [FAA].
It ultimately elected to proceed by way of the latter. As such, the SRO was
enacted under subsection 17(1) of the FAA, as it read in 1976. It is undisputed
that subsection 17(1) as it then read is substantially the same as subsection
23(2) today:
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23. (2) The
Governor in Council may, on the recommendation of the Treasury Board and when
he considers it in the public interest, remit any tax, fee or penalty.
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23. (2) Sur
recommandation du Conseil du Trésor, le gouverneur en conseil peut, s’il le
juge d’intérêt public, faire remise de tous droits, taxes ou pénalités.
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[15]
To elaborate upon the SRO, an Advance Tax Ruling
[ATR] was issued on April 29, 1976. The ATR addressed the treatment of Imperial
Oil’s obligations and liabilities under the ITA. Therefore, in accordance with
the SRO and the ATR, Imperial Oil was entitled to remission of specific tax
payable in the circumstances described in the SRO and was given, via remission,
related relief from its ITA obligations and liabilities. Meanwhile, instalments
and other payments of tax, interest and penalties would be calculated on this
basis. Its relevant parts read as follows:
A.
As long as the remission order is in effect, its
results for each taxation year will be that the tax remitted to Imperial will
reduce the tax otherwise payable under the Income Tax Act of Canada to the
amount which would be payable on the basis that:
1. The
50% share of the Deemed Net Profit of the Alberta Joint Venture, and the leased
substances taken in satisfaction thereof, and the proceeds of the disposition
thereof, held by Alberta Royalty under the Alberta Crown Agreement, will not be
taxable to Imperial or Syncrude under the provisions of paragraphs 12(1)(o) or
18(1)(m) of the Income Tax Act of Canada.
2. The
gross production royalty reserved to Alberta Royalty under the Alberta Crown
Agreement, and the proceeds of disposition thereof, will not be taxable to
Imperial or Syncrude under the provisions of paragraphs 12(1)(o) or 18(1)(m) of
the Income Tax Act of Canada.
3. The
royalty prescribed to be paid to Alberta Royalty under the leases pursuant to
the provisions of The Mines and Minerals Act of the Province of Alberta with
respect to the Leased Substances and the proceeds of disposition thereof, will
not be taxable to Imperial or Syncrude under the provisions of paragraphs 12(1)(o)
or 18(1)(m) of the Income Tax Act of Canada.
[. . .]
C.
The instalments and other payments of tax,
interest and penalties required under the Income Tax Act of Canada for all
relevant years will be computed in accordance with the rulings above.
[16]
Imperial Oil argues that the SRO was to
nonetheless operate as an “amendment to the ITA.” In this respect, it cites an
April 28, 1976 letter sent by a senior official with the Department of Finance
to the rulings officials:
At your request I am writing to confirm that
it was the government’s clear intention to have the attached remission order
operate as an amendment to the Income Tax Act for all purposes.
[17]
The administration of the SRO caused no
controversy until 1997, when a dispute arose as to the proper amount of the
remission order and related interest for that year. In Imperial Oil, the
Federal Court of Appeal overturned a Federal Court ruling holding that there
had been an underpayment of remission.
[18]
Relevant for our purposes, Imperial Oil had
cross-appealed the Federal Court’s decision, which had initially awarded
interest on the remission underpayment based on subsection 31(2) of the Crown
Liability and Proceedings Act, RSC, c C-50. Imperial Oil argued before the
Federal Court of Appeal that a remission is the same as a refund of a tax
overpayment under the ITA, with the result that interest would accrue on the
entire amount of the remission for 1997, not just on the amount of the alleged
shortfall.
[19]
The Federal Court of Appeal, in Imperial Oil,
dismissed the cross-appeal on its factual basis for the 1997 fiscal year, but
did not express an opinion on the legal argument. I reproduce the relevant discussion
from the decision:
[38] The Syncrude Remission Order by
its terms remits tax payable under Part I of the Income Tax Act. The Syncrude
Remission Order does not mention interest.
[39] I note from item C of the advance
income tax ruling quoted above that the tax authorities determined in 1976 that
the Syncrude Remission Order should be administered on the basis that
the determination of Imperial’s liability to pay interest on unpaid Part I tax,
or on late or deficient instalments of Part I tax, must take the remitted Part
I tax into account. Neither party suggests that this is incorrect in law. The
issue raised in the cross-appeal is a different one, which is whether Imperial
is entitled to interest on the remitted tax pursuant to section 164 of the Income
Tax Act.
[40] I agree with the Crown that there is
no statute or regulation providing any entitlement to interest on a payment
made to a person pursuant to a remission of tax, even if the remission order
results in a refund of a tax debt that has been paid. I also agree that
there is no merit to the argument of Imperial that it should be entitled to an
award of interest on the basis that if no interest is paid, the Crown is
unjustly enriched.
[41] It remains only to consider the
argument of Imperial that, because the Syncrude Remission Order reduces
Imperial’s Part I tax payable, the amount of the remission should be taken into
account in determining the entitlement of Imperial to refund interest pursuant
to section 164 of the Income Tax Act. Justice O’Reilly did not address
this point in his reasons but ordered that interest would be payable on the
amount of his judgment according to subsection 31(2) of the Crown Liability
and Proceedings Act. The Crown had conceded, appropriately in my view, that
if Imperial was entitled to judgment for a shortfall in the remission for 1997,
subsection 31(2) of the Crown Liability and Proceedings Act would apply
to the judgment.
[42] Refund interest is payable under
section 164 of the Income Tax Act only on an “overpayment” for a
particular year. A taxpayer’s “overpayment” for a year is defined in subsection
164(7) essentially as the amount by which the total of all amounts paid on
account of the taxpayer’s tax liability for that year exceeds the amount of the
liability. Imperial argues that it is entitled to refund interest for 1997
because it paid more on account of its 1997 tax liability than the amount of
its 1997 tax liability as finally determined, taking into account the amount of
Part I tax remitted for 1997 by the Syncrude Remission Order.
[43] In my view, Imperial has not
established its entitlement to refund interest for 1997.
[44] It is possible to discern from the
record the amount of Imperial’s 1997 tax liability as assessed under the Income
Tax Act and Regulations, and it is also possible to discern the
amount of the Part I tax remission for that year. However, it is not possible
to discern what payments, if any, Imperial made on account of its 1997 tax
liability.
[45] Therefore, even if I were to assume
that Imperial’s argument on the cross-appeal is correct in law, it is
impossible to determine from the record whether Imperial is entitled to refund
interest. That is because the record does not establish that the total of
all payments made by Imperial on account of its 1997 tax liability was greater
than its 1997 tax liability after taking the remission into account.
[46] In these circumstances, Imperial’s
cross-appeal must fail on the facts. It is not necessary to express an opinion
on Imperial’s legal argument on the cross-appeal, and I decline to do so.
[Emphasis added.]
That is the main
issue raised by the present applications.
[20]
Imperial Oil argues that for about 20 years
prior to the decision in Canada v Perley, [1999] 3 CTC 180 (FCA) [Perley],
the Minister and the Syncrude participants applied the SRO as an integral part
of the ITA—interpreting the SRO as if it simply permitted the deduction of the
Syncrude Royalties in computing taxable income. In particular, prior to 1998,
there was no separate line in the corporate tax return on which a Syncrude participant
could itemize a deduction of Syncrude Royalties pursuant to the SRO (or the
taxes otherwise payable that would be remitted pursuant to the SRO). The
practice of the Syncrude participants (accepted by the Minister) was that they
simply obtained the relief afforded by the SRO by not including the Syncrude
Royalties in the computation of their taxable income.
[21]
For his part, the Minister argues that his decision
that refund interest was not payable on remission was consistent with his past
administration of the SRO. In particular, a practice existed to remove
remission from the calculation of refund interest. While this was not always
successfully done, it was the Minister’s intention to not allow interest on
remission. In essence, previous unintended mistakes by a CRA computer program
should not serve as precedent to bar the Minister from refusing to pay interest
it never legally owed.
Issues and Standard of
Review
[22]
These applications for judicial review raise the
following issues:
1.
Whether Imperial Oil is entitled to refund
interest for the 1999 taxation year, computed in accordance with section 164
and subsection 248(11) of the Income Tax Act; and
2.
Whether the application relating to the 1996
taxation year was filed within the time limitation set out in subsection
18.1(2) of the FCA, or, alternatively, whether this Court should extend the
deadline for filing this application to the date such application was filed. If
so, whether the Imperial Oil is entitled to refund interest for the 1996
taxation year.
[23]
The parties agree that the applicable standard
of review concerning the proper interpretation of the SRO and the ITA is
correctness, as it is a question of law (Imperial Oil at para 2).
The 1999 taxation year (T-1-05 file)
The Parties’ position
[24]
The parties agree that the Minister was
obligated to pay Imperial Oil the SRO amount for the 1999 taxation year and
that, instead of paying that amount to Imperial Oil, the Minister applied it to
Imperial Oil’s tax liability for the year.
[25]
The parties also agree as to the SRO amount for
that year. Initially, the Minister determined that Imperial Oil was entitled to
remission in respect of the 1999 taxation year of approximately $1.5 million.
On December 7, 2004, the Minister made a revised determination of Imperial Oil’s
remission entitlement, reducing the SRO amount to $885,918, effective February 29,
2000 (Imperial Oil’s balance due-date for the 1999 taxation year).
[26]
In his Notice of Reassessment dated September
27, 2007, the Minister confirmed that the remission amount was $885,918 and
that Imperial Oil had no entitlement to refund interest on this amount.
Imperial Oil’s total federal income tax liability for the 1999 taxation year
was $12,617,222.
[27]
Pursuant to the SRO, the Minister then remitted
the amount of $885,918 with respect to Imperial Oil’s 1999 taxation year.
[28]
In accordance with the ATR, Imperial Oil was
required to make instalment payments in the amount of $14,217,301.92 during its
1999 taxation year. It made instalment payments of $4,200,000. As a
consequence, Imperial Oil was charged instalment interest and penalty totalling
$470,345.47.
[29]
In keeping with the SRO and the ATR, the
Minister adopted an administrative accounting practice to relieve Imperial Oil
of arrears interest arising on late or deficient instalment payments to the
extent of remission granted under the SRO, while also ensuring that refund
interest was not paid on remitted amounts. Thus, while in law remission is not
available until liability is determined by assessment (Perley), the
Minister nevertheless credited remission against Imperial Oil’s tax liability as
at the balance due date for administrative accounting purposes.
[30]
In doing so, the Minister decided that Imperial
Oil’s claim for “refund interest” on remission was not supported by the ITA,
the SRO, the ATR or the tax reporting of Imperial Oil.
[31]
Meanwhile, Imperial Oil argues that the Minister
issued these four separate refunds in its favour, in respect of its 1999
taxation year (totalling $2,012,251):
1.
$46,435 was refunded on June 4, 2001;
2.
$377,454 was refunded on October 7, 2005;
3.
$648,967 was refunded on July 26, 2006, and
4.
$939,295 was refunded on October 5, 2007.
[32]
As such, the taxes payable were less than the
total payments on account of its tax liability ($15,643,107 versus
$17,608,823). The difference, says Imperial Oil, was owed as a refund, with
interest.
[33]
By asserting that no refund interest is payable
to it in the circumstances, says Imperial Oil, the Minister is simultaneously
interpreting related provisions of the ITA in an inconsistent manner:
1.
The Minister correctly determined that Imperial Oil
was entitled to a refund pursuant to subsection 164(1), on the basis that an
overpayment existed within the meaning of subsection 164(7) (treating the SRO amount
as an amount paid on account of Imperial Oil’s liability); and
2.
However, the Minister incorrectly determined
that Imperial Oil was not entitled to refund interest pursuant to subsection
164(3) even though the applicable threshold for payment of refund interest
pursuant to that subsection is the issuance of a refund, a threshold that has
been clearly established in the circumstances.
[34]
According to Imperial Oil, the Minister cannot
have it both ways, particularly in light of the fact that subsections 164(1),
164(7) and 164(3) dictate the following analysis:
1.
Was there an overpayment within the meaning of
subsection 164(7)?
2.
If so, then subsection 164(1) would provide for
a refund of that overpayment;
3.
Subsection 164(3) would require the Minister to
pay refund interest at the prescribed rate on that refund over the period
described in subsection 164(3).
[35]
Once question 1 is answered in the affirmative,
the results of questions 2 and 3 automatically follow. There is no separate
determination of the amount of the overpayment when determining whether
subsection 164(3) would permit the payment of refund interest.
[36]
Imperial Oil also argues that the interpretation
of the refund interest provisions advanced by the respondent is inconsistent
with a textual, contextual and purposive analysis of the refund and refund
interest provisions of the ITA and the SRO.
[37]
A textual interpretation of overpayment, as
defined in subsection 164(7) requires one to take into account all amounts paid
on account of the taxpayer’s liability for the year when determining whether an
“overpayment” exists (and so including the SRO amount).
[38]
Moreover, a contextual and purposive analysis
requires that the Minister compute Imperial Oil’s refund interest entitlement
in a manner consistent with the ATR and the express intention of the federal
government to have the SRO operate as if it were an amendment to the ITA. In
particular, at the time the SRO was issued, the parties agreed that the
computation of instalment obligations, tax liabilities and interest would take
into account the impact of the SRO with respect to the Syncrude Royalties and
the parties proceeded on that basis. The ATR and the SRO were prepared
simultaneously.
[39]
The Minister disagrees, saying that at no time
prior to April 24, 2007 did the total of all amounts paid by Imperial Oil on
account of Imperial Oil’s Parts I, I.3, VI or VI.1 tax liability for its 1999
taxation year exceed the amounts payable by Imperial Oil as fixed by the
Minister’s reassessment. It was only by reassessments to allow loss carry backs
that Imperial Oil’s payments on account of tax eventually exceeded their tax
liability as of April 24, 2007, and at that time only to the extent of
$53,377.00. The Minister duly calculated refund interest of $1,389.37 on the
overpayment of $53,377.00 in accordance with section 164 of the ITA.
[40]
Furthermore, the Minister determined that the
amounts of $46,535, $377,454, $648,967 and $939,295 remitted pursuant to the
SRO were not refunded, repaid or applied to another liability of Imperial Oil within
the meaning of section 164 of the ITA. The Minister decided that the relevant
portion of Imperial Oil’s tax payable was remitted by operation of the SRO, not
the ITA, and only after the tax payable had been fixed by the Minister’s
reassessment.
[41]
Zul Ladak, the CRA’s Oil & Gas Industry
Specialist, who is involved in an advisory capacity in the administration of
the SRO, explains that the Minister proceeded on the basis that Imperial Oil had
made no overpayment of tax within the meaning of paragraph 164(7)(b) of
the ITA. For corporations, an overpayment of tax is defined in paragraph
164(7)(b) of the ITA as “the total of all
amounts paid on account of the corporation’s tax liability under this Part or
Parts I.3, VI or VI.1 for the year minus all amounts payable in respect
thereof”.
[42]
The Minister also concluded that section 23 of
the FAA provides authority to the Governor in Council to “remit any tax or penalty, including any interest paid or
payable thereon” but that section 23 provides no authority to pay any
amount except by way of repayment or remittance. The Minister therefore
proceeded on the basis that neither the SRO, which was made pursuant to section
23 of the FAA, nor its enabling statute, contemplated the payment of “refund
interest.”
[43]
As for the ATR, the Minister believed it to be
consistent with his position respecting section 164 of the ITA.
[44]
The Minister’s decision was also consistent with
Imperial Oil’s income tax reporting, which also did not treat the SRO as an
amendment to the ITA.
Analysis
[45]
A remission order, such as the SRO, is not an
agreement nor a contract – it is an exceptional measure available for granting
relief to a taxpayer when the desired result could not be otherwise achieved
within the tax legislation (Gladstone v Canada (Attorney General),
2005 SCC 21 at para 20). Remission relieves a taxpayer from the effect of the
application of legislation to which the rest of Canadian society is subject. As
such, it is a “discretionary animal of the Minister”
(Pacific Vending Ltd v Canada, [2001] TCJ No 299 (QL) at para 7). As
this implies, the extent of relief granted by the legislature is not subject to
a duty of fairness or the intervention of a court (Janda Products Canada Ltd
v Canada (Minister of National Revenue), 2004 FC 1516 at para 21).
[46]
The Minister properly determined that Imperial Oil
is not entitled to refund interest on remission as:
1.
there is no entitlement to refund interest on
remission under any contract or statute;
2.
there is no entitlement to refund interest on
remission under the ITA as:
i)
remission is not an amount refunded within the
meaning of section 164 of the ITA;
ii)
remission granted under the FAA did not create,
in and of itself, an overpayment of tax for purposes of section 164 of the ITA;
iii)
remission under the SRO is not a payment on
account of Imperial Oil’s tax liability, but rather a relief of a portion of
that liability; and
3.
the proper interpretation of the refund
provisions of the ITA is not informed or altered by the SRO, the ATR or the
Minister’s administrative practice (see Imperial Oil at para 28).
[47]
As a general rule, unless a statute or contract
expressly provides for it, interests cannot be claimed against the Crown. And
as the Federal Court of Appeal reminded Imperial Oil in Imperial Oil at
para 40, “there is no statute or regulation providing
any entitlement to interest on a payment made to a person pursuant to a remission
of tax, even if the remission order results in a refund of a tax debt that has
been paid”. Hence Imperial Oil’s efforts to convince the Court that when
the Minister decided to apply the SRO payments against Imperial Oil’s tax
liability, he acted in the statutory power granted by the ITA and that, in
doing so, the remission amount that offset Imperial Oil’s tax liability for
that year was paid on account of Imperial Oil’s liability within the meaning of
subsection 164(7) of the ITA and had the effect of creating an overpayment.
[48]
However, under the ITA, the Minister does not
have the power to remit taxes otherwise payable by a taxpayer. This power is
only granted by the FAA and, in this particular case, by the SRO.
[49]
It seems to me that Imperial Oil is confusing
the nature of the Minister’s obligation with the way it is or it has been
carried out.
[50]
Under the SRO, the Minister had the power and
duty to remit a producer’s tax liability under subsections 12(1)(o) and
18(1)(m) of the ITA, including interests accrued thereon. By definition,
in order for a debt or liability to be remitted, it has to be fully assessed
and certain. However, depending on the circumstances, the remission could be
made by issuing a cheque in reimbursement of tax paid for a given year, by offsetting
amounts equally due and payable once the final assessment is made or by
releasing the taxpayer’s debt as contemplated in the final assessment. Those
are simply different mechanisms through which the Minister can execute his duty
under the SRO. Which ever mechanism is chosen, it does not create an obligation
on the Minister, when acting pursuant to the SRO, to pay refund interest under
the ITA.
[51]
The Minister has chosen to apply the remission
amount against Imperial Oil’s tax liability as a mean to implement the SRO and
more specifically its impact on Imperial Oil’s “instalments
and other payment of tax, interests and penalties required under the Income Tax
Act of Canada” (see point C of the ATR).
[52]
The SRO is closely tied to subsections 12(1)(o)
and 18(1)(m) of the ITA as those provisions serve in establishing the
quantum of the SRO payments to the producer. However, the substance and nature
of the SRO payment are as determined in subsection 23(2) of the FAA.
[53]
The taxpayer’s duty to pay taxes arises from the
ITA whereas the Minister’s power and duty to remit a portion of the taxes paid
or payable arise from the FAA. The latter does not provide for the payment of
interests on amount that would remain outstanding once all amounts otherwise
due and payable by both parties are offset, should the balance be in favour of
the taxpayer.
[54]
Finally, the mere fact that the Minister has
paid interests on SRO payments in the past, as they were added automatically by
the Minister’s computer program, does not create an obligation on the Minister,
nor does it modify the SRO or the FAA.
The 1996 taxation year (T-2155-10)
The parties’ position
[55]
On June 10, 2003, the Minister made a revised
determination of Imperial Oil’s remission entitlement for the 1996 taxation
year, adjusting the SRO amount to $11,682,097. The parties now agree that this
is the correct amount of Imperial Oil’s remission entitlement.
[56]
The Minister did not send a cheque to Imperial Oil
in respect of its remission entitlement. Rather, as he did for the 1999 taxation
year, he applied the SRO amount as a payment on account of Imperial Oil’s tax
liability.
[57]
Much like 1999, Imperial Oil argues that in
addition to this amount, it also made instalment payments totalling
$172,286,000 As such, the taxes payable with respect to the 1996 taxation year
($174,515,164) were less than the total payments on account of Imperial Oil’s
tax liability as of Imperial Oil’s balance due-date for that year (being
$183,968,070).
[58]
By way of a Notice of Objection dated August 26,
2003, Imperial Oil requested that it be paid refund interest in respect of its
1996 taxation year and sought relief of at least $5,000,000 in additional
interest. In doing so, Imperial Oil has acknowledged that it was seeking relief
through the administrative process of objections, or through the Tax Court, but
not the Federal Court.
[59]
Imperial Oil claims that an oral communication
from a CRA official on December 13, 2010, constitutes the first time it was
told that CRA would not pay refund interest as requested by its Notice of
Objection.
[60]
The Minister disagrees, saying the Notice of
Reassessment in 2003 did so. Moreover, the CRA had previously, and on various
occasions, confirmed to representatives of Imperial Oil that there is no
entitlement to refund interest resulting from the remission. In addition, prior
to 2003, Imperial Oil had even applied for judicial review in respect of the
interest issue in 2002 in Imperial Oil, and this, on the basis of a
Notice of Reassessment.
Analysis
[61]
The Court agrees with the respondent that this
application is time-barred. The application was not filed until seven years
after the Minister first communicated his decision to Imperial Oil.
Accordingly, this Court finds that this application should not be allowed to
proceed. There are no reasons to justify granting an extension to the filing
deadline.
[62]
The time limit for making a judicial review
application is set out in subsection 18.1(2) of the FCA:
An application for judicial review in
respect of a decision or an order of a federal board, commission or other
tribunal shall be made within 30 days after the time the decision or order
was first communicated by the federal board, commission or other tribunal
to the office of the Deputy Attorney General of Canada or to the party directly
affected by it, or within any further time that a judge of the Federal Court
may fix or allow before or after the end of those 30 days. [Emphasis added.]
[63]
The words “first communicated” signify that “some positive action was required on the
part of the decision maker in order to communicate his decisions to the parties
directly affected” (Atlantic Coast Scallop
Fishermen’s Association v Canada (Minister of Fisheries and Oceans), 189 NR
220, [1995] FCJ No 1347 at para 6).
[64]
As conceded by Imperial Oil, the Minister’s position
that it had no entitlement to refund interest with respect to its 1996 taxation
year was communicated on the Notice of Reassessment dated June 10, 2003. That
communication which was consistent with prior practice was treated as a
decision.
[65]
The time for filing an application for judicial
review is not extended by filing a Notice of Objection under the ITA. Remission
is granted by authority of the FAA, which provides no statutory right of
appeal. Consequently, the CRA had no authority to reconsider the Minister’s
decision under the provisions for an objection to an assessment made under the
ITA. Therefore, at best, the Notice of Objection amounts to an improper request
that the Minister reconsider his determination, which does not extend the time
for filing an application for judicial review.
[66]
The oral communication that Imperial Oil relies
on is misplaced. The CRA officer advised Imperial Oil that the Minister would
not pay refund interest, as its objection could not be considered under the
appeal provisions of the ITA. This does not amount to a fresh determination of
Imperial Oil’s entitlement to refund interest. A refusal to reconsider an
earlier decision does not extend the time for seeking judicial review of the
decision as first communicated.
[67]
Moreover, this Court finds no reason to grant an
extension of time. The test applicable when using this discretionary power is
set out in Canada (Attorney General) v
Hennelly, [1999] FCJ No 846 at para 3:
1. a continuing intention to pursue
his or her application;
2. that the application has some
merit;
3. that no prejudice to the respondent arises from the
delay; and
4. that a reasonable explanation for
the delay exists.
[68]
None of these criteria are satisfied.
[69]
Imperial Oil elected to pursue the issue of
refund interest for the 1996 taxation year through the statutory scheme for
objections to assessment under the ITA, the recourse from which is an
appeal to the Tax Court of Canada. It was only seven years later that it
demonstrated its intention to pursue an application before this Court.
[70]
Considering, for the reasons set out above,
Imperial Oil had no right to refund interest, this application has no merit.
[71]
The public interest is best served by bringing
finality to administrative decisions “so as to ensure their effective implementation without delay and to
provide security to those who comply with the decision or enforce compliance
with it, often at considerable expense” (Canada v Berhad, 2005 FCA 267 at para 60).
[72]
Finally, Imperial Oil timely filed its companion
applications. There is no reasonable explanation for the seven year delay in
the case at bar.
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