Chevron Canada Resources Ltd. v. R., [1997] 2 CTC 2624, 97 DTC 1173

Bowman T.C J .:

This is an application pursuant to section 173 of the Income Tax Act for the determination of a question. The question stated by the parties is the following:

The parties agree that the question to be determined by this Honourable Court is whether any of the reasons for the Notices of Objection can reasonably be regarded as relating to a matter that gave rise to the Reassessments and that was not conclusively determined by this Court so that the Taxpayer’s entitlement to file the Notices of Objection to the Reassessments is not precluded by the provisions of subsection 165(1.1) of the Act.

In brief, the question arises in the following circumstances. The taxpayer, Chevron, had filed objections to assessments for a number of years, including 1985 and 1986. Several issues were raised. The assessments for 1985 and 1986 were confirmed and the taxpayer filed a notice of appeal to this court. Some of the issues were settled and a consent to judgment was issued. Reassessments were issued for 1985 and 1986 and Chevron has now filed further objections to those assessments to raise as issues, matters dealt with in the decision of the Federal Court of Appeal in Gulf Canada Ltd, v. R., (1992), 92 D.T.C. 6123 (Fed. C.A.) (FCA). The question is whether it is entitled to do so in light of subsection 165(1.1) of the Income Tax Act.

Subsections 165(1) and (1.1) read as follows:

(1) A taxpayer who objects to an assessment under this Part may serve on the Minister a notice of objection, in writing, setting out the reasons for the objection and all relevant facts,

(a) where the assessment is in respect of the taxpayer for a taxation year and the taxpayer is an individual (other than a trust) or a testamentary trust, on or before the later of

(i) the day that is one year after the taxpayer’s filing-due date for the year, and

(ii) the day that is 90 days after the day of mailing of the notice of assessment; and

(b) in any other case, on or before the day that is 90 days after the day of mailing of the notice of assessment.

(1.1) Notwithstanding subsection (1), where at any time the Minister assesses tax, interest or penalties payable under this Part by, or makes a determination in respect of, a taxpayer

(a) under subsection 67.5(2), subparagraph 152(4)(b)(i) or subsection 152(4.3) or (6) or 164(4.1), 220(3.4) or 245(8) or in accordance with an order of a court vacating, varying or restoring the assessment or referring the assessment back to the Minister for reconsideration and reassessment,

(b) under subsection (3) where the underlying objection relates to an assessment or a determination made under any of the provisions or circumstances referred to in paragraph (a), or

(c) under a provision of an Act of Parliament requiring an assessment to be made that, but for that provision, would not be made because of subsections 152(4) to (5),

the taxpayer may object to the assessment or determination within 90 days after the day of mailing of the notice of assessment or determination, but only to the extent that the reasons for the objection can reasonably be regarded as relating to a matter that gave rise to the assessment or determination and that was not conclusively determined by the court, and this subsection shall not be read or construed as limiting the right of the taxpayer to object to an assessment or a determination issued or made before that time.

The facts are agreed to and are set out at length, together with supporting documents, in the reference under section 173 of the Income Tax Act. I shall not reproduce them in their entirety. The reference forms part of the record should the matter go higher. In summary they are as follows.

The applicant was reassessed for 1985 and 1986 on January 27, 1989 and August 9, 1990. It filed waivers for those years in which it waived the normal reassessment period in respect of:

The manner of accounting for Chevron Canada Resources Limited’s gross revenues from the sale of liquid petroleum gases in the calculation of adjusted business income, as that term is defined in and for the purposes of subsection 5203(1) of the Income Tax Regulations.

The computation of resource profits and resources allowance, in accordance with Regulations 1204, 1210 and paragraph 20 (l)(V.l) of the Income Tax Act; and other allowances as permitted under Part XII of the Regulations to the Income Tax Act, and computation of net income for tax purposes.

It filed notices of objection to the assessments for 1985 and 1986 on April 7,1989 and November 6, 1990 respectively. The reassessments were confirmed on December 31, 1991. On March 25, 1992 the applicant appealed from the reassessments to this court. It raised four issues, as follows:

(a) are delay lease rentals on undeveloped lands deductible from income or capitalized and added to Canadian Oil and Gas Property Expenses (“COGPE”);

(b) are Scientific Research and Experimental Development Expenses (“SR & ED”) and Crown lease rentals on unproductive lands required to be deducted in the computation of resource profits for the purposes of resources allowance;

(c) is interest income properly characterized as active business income or investment income for the purposes of calculating its Manufacturing and Processing (“M & P”) profit; and

(d) are royalties in respect of liquefied petroleum gases (“LPG’s”) deductible in calculating income.

The applicant amended its notice of appeal on December 20, 1993 to withdraw the fourth issue referred to above, relating to the deductibility in computing income of royalties in respect of liquefied petroleum gases. The withdrawal of this issue in this court was part of the settlement of another action under the Petroleum and Gas Revenue Tax Act in the Federal Court, Trial Division.

Minutes of settlement dated September 9, 1994 were signed. By those minutes a number of issues between the parties for the years from 1983 to 1989 were settled. So far as the two years that were appealed to this court were concerned, the minutes of settlement provided that “the Applicant’s appeal from the reassessments for the Applicant’s 1985 and 1986 taxation years be allowed and referred back to the Minister for reconsideration and reassessment in accordance with the Consent To Judgment attached hereto”.

The 1983, 1984, 1987, 1988 and 1989 taxation years were to be reassessed to treat some of the short term investment income as income from an active business, the freehold delay rental payments were to be treated as COGPE (except for 1987) and the scientific research expenditures and crown lease recital payments were not to be deducted under paragraph 1204(1)(f) of the Income Tax Regulations or otherwise in calculating resource profits.

The consent to judgment for 1985 and 1986 read as follows:

The Applicant and the Respondent consent to Judgment allowing the appeal with respect to the Applicant’s 1985 and 1986 taxation years, without costs, and referring the matter back to the Minister of National Revenue for reconsideration and reassessment on the basis that:

(a) $2,284,161 of the Applicant’s income from its short term investments in its 1985 taxation year and $662,861 of the Applicant’s income from its short term investments in its 1986 taxation year constitute income from an active business for the purposes of calculating the Applicant’s manufacturing and processing deduction pursuant to section 125.1 of the Income Tax Act; and

(b) neither the Applicant’s scientific research expenditures nor its crown lease rental payments are to be deducted under paragraph 1204(l)(f) of the Income Tax Regulations, or otherwise, in the calculation of resource profits for the purpose of paragraph 20(l)(v.l) of the Income Tax Act. The Applicant is not entitled to any further relief. [1] .

The judgment was signed by Chief Judge Couture on September 20, 1994 and it read as follows:

Upon reading the Consent to Judgment filed:

The appeals from the assessments made under the Income Tax Act for the 1985 and 1986 taxation years are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the terms of the attached Consent to Judgment.

At the time that the parties were negotiating the minutes of settlement and the consent to judgment in the Tax Court of Canada, the Federal Court of Canada in Gulf Canada Ltd. (supra) had decided that SR & ED and pre- production capital cost allowance (“CCA”) were not required deductions in the calculation of taxable production profits.

As a result of this decision the Canadian Association of Petroleum Producer (“CAPP”), on behalf of the petroleum industry, negotiated with the Department of National Revenue in an attempt to find an agreement whereby the issue of other expenses not required to be deducted in computing resource profits for the purpose of calculating a taxpayer’s resource allowance under paragraph 20(1)(v. 1) of the Income Tax Act could be resolved.

The types of expenses involved in this issue included lease rentals on unproductive lands, SR & ED costs, pre-production CCA, pre-production operating expenses and general and administrative costs.

I shall set out in full paragraphs 17 to 20 of the agreed facts, as I consider them to be of some considerable importance:

17. At no time subsequent to the start of the discussions between the Industry and Revenue Canada and before the date scheduled for trial did Chevron take any steps to request an adjournment of the trial or otherwise take any other measures to protect the right to have the calculation of its resource allowance adjusted in respect of the expenses detailed in paragraph 15.

18. By September, 1994, the discussions between the Industry and Revenue Canada were ongoing but the parties had not settled on the terms of a Memorandum of Understanding relating to the treatment of all of the expenses set forth in paragraph 15. The Crown’s concessions in the Minutes of Settlement in respect of the SR & ED and Crown lease rentals on unproductive land were as a result of the Crown’s understanding of the facts and the legal consequences flowing therefrom by virtue of the decision in the Gulf case.

19. Both parties to the Minutes of Settlement and the Consent to Judgment in the Tax Court Action knew at the time of such documents being filed with the Court that the resource allowance issue was under negotiation with a view to arriving at a Memorandum of Understanding. Discussions had advanced to the point where it was acknowledged that concessions would be made by Revenue Canada in respect of the expenses set forth in paragraph 15. No agreement existed with respect to how the various amounts would be calculated and the results of the discussions were unknown at the time. No amendments to the Notices of Appeal filed with the Tax Court of Canada with respect to the 1985 and 1986 taxation years were made to claim additional adjustments in calculating resource allowance based on the types of expenses set forth in paragraph 15.

20. Apart from obtaining an adjournment of the trial, the filing of the Minutes of Settlement and Consent to Judgment were the only alternative available to either the Taxpayer or the Crown by which they could avoid a trial in respect of the expenses not required to be deducted in the calculation of resource allowance, an issue which had effectively been determined in the decision of the Federal Court of Appeal in the Gulf case and which was under discussion between the Industry and Revenue Canada.

On or about December 9, 1994 a Memorandum of Understanding was reached and on December 9, 1994 Mr. R.M. Beith, Interim Assistant Deputy Minister, Appeals, wrote to the CAPP as follows:

This letter is further to various meetings and discussions between representatives of the Canadian Association of Petroleum Producers (CAPP) and Revenue Canada regarding the implications of the 1992 Court of Appeal decision in The Queen vs. Gulf Canada Limited for the treatment of, among other things, corporate general and administrative expenses (G&A) in the computation of resource profits and the resource allowance under the regulations to the Income Tax Act.

Revenue Canada agrees in principle to the G&A allocation principles described in your letter of September 16, 1993. The attached schedule describes the basis upon which we propose to finalize the treatment of G&A, scientific research and experimental development expenditures, capital cost allowance prior to the year of commencement of production and pre-production expenses. After verification of claims, reassessments will be issued for those taxpayers who agree with the proposal and who have raised, or who will have the right to raise, the issues in a valid notice of objection or on appeal, or who have filed a valid waiver. Revenue Canada’s position is that the resulting revised resource profits figure will also be utilized for any corresponding adjustments required to PGRT returns similarly open for reassessment. A reassessment will not be issued in respect of a taxation year for which rights to object or appeal have expired. The time for issuing reassessments can be kept to a minimum by ensuring that claims contain sufficient detail and that supporting documentation is readily available for verification.

To avoid possible delays in providing refunds due to the required verification and processing, we intend to issue repayments of amounts in dispute under subsection 164(4.1) of the Act in advance of the actual reassessments in respect of these issues. To obtain repayments, taxpayers will be asked to indicate agreement in principle with the proposal and submit, on a year-by-year basis, an estimate of their claims for these issues, where they have not already done so, an estimate of their expected refund for taxes and interest and a statement as to the amount of tax that they have paid in respect of the year. If these figures agree with our estimates, repayments to the extent of 75% of the disputed amount will be issued as soon as possible without verification. Repayments can be issued under subsection 164(4.1), only if these issues are the subject of a valid objection or appeal.

Revenue Canada will not issue a refund or repayment for a particular year in respect of these issues to the extent that it has reason to believe that adjustments may be required in respect of other issues that would have the effect of reducing any refund or repayment to which the taxpayer will ultimately be entitled.

If the terms of the proposal in the attached schedule are acceptable to CAPP, I would appreciate a letter indicating your agreement in principle as soon as possible. We will then begin the process of dealing with individual taxpayers.

Before reproducing the memorandum of understanding attached to Mr. Beith’s letter there is one point that deserves mention and that leads me to question why this matter is before the court at all. Mr. Beith stated that reassessments would be issued for those taxpayers who agree with the proposal and who have, inter alia, “filed a valid waiver”. In fact, Chevron did file a valid waiver for 1985 and 1986. According to Sarchuk J. in Loukras v. Minister of National Revenue [1990] 2 C.T.C. 2044 (T.C.C.) once a taxpayer has filed a waiver for a taxation year the Minister can assess as often as he sees fit. [2] Thus I fail to see how Chevron falls outside the administrative guidelines outlined by Mr. Beith. My function is, however, not to decide whether the Department of National Revenue is adhering to its own rules, but rather to decide whether Chevron is entitled, as a matter of law, to file new notices of objection for 1985 and 1986.

The Memorandum of Understanding reads as follows:

Memorandum of Understanding Calculation of Resource Profits — Regulation 1204 Pre-July 23, 1992 Amendments

Agreement in principle has been concluded as to the manner in which certain expenditures are to be deducted for purposes of computing resource profits under Regulation 1204. The agreed upon method of deduction or allocation will be applicable up to the effective date of the amendments to Regulation 1204 which were issued in draft form on July 23, 1992.

Following verification, reassessments based on this memorandum will be made to all years open for reassessment under an objection, appeal or waiver or in respect of changed loss years for which a loss determination has not been issued.

1. Scientific Research and Experimental Development (SR & ED)

SR & ED expenditures claimed by taxpayers, which have been accepted by the Department as so qualifying, are not to be deducted in the calculation of resource profits.

2. Pre-Production Capital Cost Allowance (CCA)

CCA for years prior to that in which production commences will not reduce resource profits.

3. Pre-Production Expenses

Pre-Production Expenses (i.e. environmental impact studies, marketing surveys, lease rentals in respect of non-producing properties) will not be deducted in calculating resource profits.

4. General & Administrative Expenses (G & A)

The allocation of G & A for purposes of computing resource profits is as set out in the September 16, 1993 letter from the Canadian Association of Petroleum Producers, a copy of which is attached.

Reassessments to be issued pursuant to this memorandum will be conditional upon the Department’s receipt of an agreement in writing to waive all objection and appeal rights with respect to the adjustments covered by this memorandum of understanding.

By notices of reassessment dated February 14, 1995 for the 1985 and 1986 taxation years, Chevron was reassessed to give effect to the judgment of the Tax Court of Canada.

On February 28, 1995, Chevron filed notices of objection to those assessments for 1985 and 1986 and raised the following issues:

(a) delay lease rentals should not have been capitalized as COGPE (1985 and 1986 taxation years);

(b) royalties on LPG’s should be deductible in calculating income (1985 and 1986 taxation years);

(c) royalties paid on miscible flood injectants should be deductible in computing income until the product is recovered from the project (1985 and 1986 taxation years); and

(d) the calculation of resource profits and in particular, the following expenses should not be deducted in the calculation of resource profits:

(i) lease rentals on unproductive lands,

(ii) scientific research and experimental development costs,

(iii) pre-production capital cost allowance,

(iv) pre-production operating expenses, and

(v) general and administrative costs.

Chevron has a number of other taxation years both before and after 1985 that are under objection which will be reassessed in accordance with a settlement based upon the Memorandum of Understanding between the industry and the Department of National Revenue to allow an increase in its resource allowance on the grounds that the types of expenses referred to in the notices of objection should not be deducted in calculating resource profits for the purpose of determining Chevron’s resource allowance in those other years.

The conflicting positions of the parties are set out in Part E of the reference as follows:

1. The position of the Minister of National Revenue is that the Notices of objection cannot reasonably be regarded as relating to a matter that gave rise to the Reassessments and that the matter has been conclusively determined by this Court with the consequence that the Notices of Objection are invalid.

2. The position of the Taxpayer is that one of the matters which gave rise to the Reassessments was the Taxpayer’s entitlement to resource allowance pursuant to paragraph 20(1)(v.1) of the Act in each of its 1985 and 1986 taxation years and that that matter was not conclusively determined by the Court since the Judgment does not address the deductibility, in computing resource profits, of pre-production capital cost allowance, pre-production operating expenses and general and administrative costs. Accordingly, the Notices of Objection are valid in respect of the deduction, in computing resource profits, of pre-production capital cost allowance, pre-production operating expenses and general and administrative costs, notwithstanding subsection 165(1.1) of the Act.

I shall begin the analysis by considering what was raised in the original notices of appeal, what was disposed of by the consent to judgment and what Chevron now seeks to raise in its notice of objection.

(a) Delay rentals:

(i) claimed as current expense by Chevron, capitalized as COGPE by the Minister;

(ii) not dealt with in consent to judgment;

(iii) raised again in new notices of objection.

(b) Resource allowance: scientific research and development costs and Crown lease rentals

(i) not deducted by Chevron in computation of resource profits;

(ii) deducted by Minister in computation of resource profits;

(iii) dealt with in consent to judgment and to be treated as nondeductible in computing resource profits.

(c) Resource profits: lease rentals on unproductive lands

(i) not deducted by Chevron in computation of resource profits;

(ii) deducted by Minister in computation of resource profits;

(iii) not dealt with in consent to judgment and raised again in notices of objection.

(d) Manufacturing and processing profits: interest income on short term investments

(i) included by applicant in M & P profits;

(ii) not included by Minister;

(iii) settled in consent to judgment.

(e) Royalties on LPGs:

(i) deducted by Chevron in computation of income;

(ii) disallowed by Minister;

(iii) withdrawn by Chevron by amended notice of appeal in accordance with Federal Court settlement in RGRT appeal;

(iv) raised again in notices of objection.

(f) Royalties on miscible flood injectables:

(i) not raised in original notices of appeal;

(ii) not dealt with in consent to judgment;

(iii) raised for first time in new notices of objection.

(g) Resource profits: pre-production CCA, pre-production operating expenses and general and administrative costs

(i) not raised in original notice of appeal;

(ii) not dealt with in consent to judgment;

(iii) raised for first time in new notices of objection.

I shall start with the obvious. The points that have already been specifically dealt with in the consent to judgment and in the Federal Court settlement (deduction of royalties on LPG’s, income from short term investments, deduction of SR & ED and Crown lease rental payments in the computation of resource profits) clearly cannot be raised again in the new notices of objection. I say this quite apart from subsection 165(1.1). These points have been settled.

The remaining points raised in the new notices of objection fall into two categories:

(A) those that were raised in the original notices of appeal and not dealt with in the consent to judgment; and

(B) those that are now raised for the first time in the new notices of objection.

Items within category (A) are

(i) deductibility of delay rentals (paragraph (a) above);

(ii) lease rentals on unproductive lands (paragraph (c) above).

Items in category (B) are

(i) royalties on miscible flood injectables;

(ii) the deduction of pre-production capital cost allowance, pre-production operating expenses and general and administrative expenses in the computation of resource profits.

Mr. McKenzie, counsel for the applicant, contends that the effect of subsection 165(1.1) is to displace the concept of res judicata whereas Mr. Lefebvre, counsel for the respondent, contends that its purpose is to ensure that res judicata continue to apply after an appeal for a taxation year has been disposed of by the court. Mr. Lefebvre and Mr. McKenzie approach the matter from very different points of view. Mr. Lefebvre’s position is that subsection 165(1.1) is restrictive of a taxpayer’s right to object, whereas Mr. McKenzie’s position is that it expands that right. I think that the answer lies somewhere between those two positions, and that one should endeavour to interpret subsection 165(1.1) in a manner that gives effect to its wording and to the purpose that it seeks to achieve in the overall scheme of the objection and appeal provisions of the Income Tax Act.

Subsection 165(1.1) was added in 1994 applicable to objections made after December 17, 1991. It seems apparent that Parliament must have assumed that without the addition of subsection 165(1.1), subsection 165(1) gave to a taxpayer an unlimited right to object to a reassessment whether it was issued following a notice of objection or pursuant to the judgment of a court or pursuant to any of the sections mentioned in the opening words of paragraph 165(1.1)(«). There was no specific limitation on the right of objection conferred by subsection 165(1). The practical result was that if a taxpayer filed an objection to an assessment and raised, say, issues A, B and C and the Minister reassessed to give effect to the taxpayer’s position on issues A and B but not on issue C, the taxpayer could file a new notice of objection raising again issue C. Presumably the taxpayer could also, in the new notice of objection, raise new issues D and E. This could go on indefinitely until the Minister confirmed the assessment, at which time the taxpayer’s only option was to file an appeal to the court.

If the taxpayer appealed and raised issues C, D and E, and if the court dealt with all three issues, and allowed the appeal with respect to issue C but rejected the taxpayer’s position with respect to issues D and E and a reassessment were issued to give effect to the judgment, I should not have thought it would have been open to the taxpayer to file a new objection to that reassessment with respect to issues D and E. Those issues are res judicata. This view is consistent with the decision in Doyle v. R., (1981), 80 D.T.C. 6260 (Fed. C.A.). That case supports two propositions, which are set out in two short passages from judgment of Mahoney J. at pages 6261 and 6262 respectively:

The Plaintiff contends that a reassessment, notwithstanding that it ensues upon an appeal and judgment in respect of a prior assessment, is itself subject to objection and appeal by the taxpayer. That is unexceptionable; otherwise, the taxpayer would be denied access to the Courts to ensure that the reassessment, in fact, accorded with the judgment.

The right to appeal a reassessment ensuing upon a judgment is not a right to have the issues, decided by that judgment, retried. It is not an alternative procedure by which the taxpayer, if entitled to do so, may seek to vary or vacate the original judgment. An action such as this, seeking that result, is an abuse of the process of the Court.

These propositions are, I believe, unassailable as far as they go. They do not however go so far as to establish that issues not raised or dealt with by the court could not be raised in an objection or appeal against an assessment issued following a judgment.

This matter was considered by Judge Garon in Cie Price Ltée c. R., (1993), 95 D.T.C. 428 (T.C.C.). In that case the taxpayer sought to challenge a reassessment issued pursuant to a judgment rendered by the Federal Court. The question was whether in making that assessment the Minister was obliged to take into account further deductions in computing its logging tax credit. Judge Garon held that it could not. The case appears to be a reasonably straightforward application of the principles stated in Doyle.

I do not, however, need to decide here whether, once an appeal is disposed by a court, the assessment, prior to the addition of section 165(1.1), could not have been challenged on the basis of new issues. That is not the issue that is before me. The sole question that the parties have asked the court to decide is whether “the reasons for the objection can reasonably be regarded as relating to a matter that gave rise to the assessment and that was not conclusively determined by the court.”

As I understand Mr. Lefebvre’s position, it is that Chevron with respect to the taxation years 1985 and 1986 could have negotiated a pro tanto judgment, or specifically in the consent to judgment reserved its right to file new notices of objection raising the issues that it now seeks to raise [3] . Having failed to do, even though it was clear that at the time the consent to judgment for 1985 and 1986 was being negotiated, both the Minister and Chevron were aware that negotiations relating to the new issues arising from the Gulf Canada decision were proceeding, Chevron, on the Crown’s view of the matter, missed its chance to raise these issues. If this is no more than a slip-up by Chevron I would be reluctant to deprive it of the opportunity of raising issues for 1985 and 1986 that it is entitled to raise for other years. [4]

What, then, does subsection 165(1.1) do? I do not accept that insofar as it deals with assessments following a judgment it does no more than confirm the rule of res judicata. That rule was well established and was in no danger that inroads would be made upon it. Its purpose is obviously broader than that. I cannot believe that Parliament intended the effect of this somewhat obscure piece of drafting to be limited to performing the largely unnecessary function of protecting a rule that was in no threat of erosion in any event. Second, it appears, from its opening words “notwithstanding subsection (1)” (which gives an unqualified right to object to an assessment (subject only to considerations of res judicata)) to be intended to operate as a restriction on, or derogation from, subsection 165(1). Third, it permits the filing of a notice of objection to an assessment, and it contemplates doing so even though the assessment is issued pursuant a court order. It must contemplate a broader range of objection than that discussed by Mahoney J. in the first principle stated by him in the quotation above from Doyle. The right to object to an assessment that does not conform to a judgment of a court has always existed. It needed no amendment to confirm or to confer that right.

The right to object to an assessment made pursuant to a judgment is limited by two conditions:

(a) the reasons for the objection must reasonably be regarded as relating to a matter that gave rise to the assessment; and

(b) the matter to which the objection relates was not conclusively determined by the court.

The first condition:

“reasonably be regarded as relating to a matter that gave rise to the assessment” or “dans la mesure où il est raisonnable de considérer que les motifs d’opposition sont liés à une question qui a donné lieu à la cotisation”

could have been more felicitously expressed. Since, however, it forms part of a restriction on the right to object it must be read as limiting in some measure the matters to which the objection can be related. On one view the “matter” that gave rise to the assessment is the income of the taxpayer. This interpretation is, I think, too broad because it would deprive the limitation implicit in the condition of any effect. Therefore we have two unacceptable extremes in the interpretation of the provision — one that confers a right to object solely for the purpose of correcting an assessment that does not conform to a judgment and one that confers a completely open-ended right to object. The former, at least insofar as it deals with assessments following a judgment, would render subsection 165(1.1) unnecessary because that right has always existed. Moreover the right to object to an assessment under subsection 165(1.1) is premised on the assessment being “in accordance with” anorder of a court. The latter interpretation would permit a taxpayer to reopen completely and on any grounds a year that was reassessed under any of the sections referred to under paragraph 165(1. l)(tz) and this would defeat the effect of the limitation. I think the answer lies somewhere between the two extremes.

It should be observed that the types of reassessment with which we are dealing fall into two categories:

(a) reassessments made pursuant to a specific statutory provision beyond the normal reassessment period, many of which can be described as consequential upon a particular event or claim that requires in the intents of consistency that such reassessment be made; and.

(b) reassessments made pursuant to a court order.

Those falling within category (a) obviously cannot be limited by the second condition that the matter not have been conclusively determined by the court. It is, however, somewhat easier to see how the first limitation can be applied to such assessment. For example, subsection 67.5(2) permits the Minister to issue assessments denying the deduction of certain illegal payments beyond the normal reassessment period. Subsection 165(1.1) might arguably restrict the right of a taxpayer to object to items other than the denial of the deduction of the illegal payments.

The position is, however, less clear where we are dealing with a consent to judgment that deals with certain items and does not deal with others. The “matter” that gave rise to the reassessments following the consent to judgment was the deductibility of certain types of expenses and the computation of resource profits. I think that both of these matters, broadly speaking, are matters that gave rise to the assessments.

The second condition, that the specific matter should not have been conclusively determined by the court, has been met. The court did not deal with the deductibility in computing income of delay rentals, royalties on miscible flood injectables and the non-deductibility in computing resource profits of lease rentals on unproductive lands, pre-production CCA, pre-production operating expenses and general and administrative expenses.

I think that these items may be raised in the new notices of objection. I do not, however, think that the question of royalties on LPGs can be raised again because this item was withdrawn in conformity with the Federal Court settlement. Subject to that qualification, I think that the answer to the question stated is in the affirmative.

I make no order as to costs.

Application granted.