Iris Technologies –Federal Court of Appeal discusses respective roles of Tax Court and Federal Court in reviewing CEWS claims

CRA, which had taken the view that Iris Technologies in fact had not experienced a significant decline in its qualifying revenues during COVID, denied Iris’ CEWS (wage subsidy) claims – initially on the basis of exercising its discretion under s. 164(1.6), which provides that the Minister, before the time for filing the taxpayer’s return for the year, “may refund to the taxpayer all or any part of the [deemed CEWS] overpayment” arising under s. 125.7(2). Iris then made a judicial review application to the Federal Court in which it sought inter alia an order requiring payment of its claimed CEWS amounts.

Rennie JA discussed the relative roles of the Tax Court and the Federal Court in a matter such as this:

Whether there is an “amount” that is “deemed” to be an overpayment [under s. 125.7(2)] is not discretionary. It is determined according to the statutory formula, and it is for the Tax Court to ensure that the formula was correctly applied. If, following the Tax Court determination there is, in fact, an overpayment which the Minister refuses to refund, the Federal Court has jurisdiction to review the refusal to refund the overpayment. Iris’ application is, in this sense, premature. The Minister has a discretion to refund, but it is contingent on the existence of an overpayment under the ITA. Whether the Minister erred in determining that there was no overpayment is to be adjudicated in the Tax Court; whether the Minister erred in refusing to refund an overpayment is for the Federal Court to decide. …

Rennie JA went on to find that in substance Iris’ application was a challenge to the Minister’s determination, reflected in the subsequent notice of determination, that Iris had not generated a CEWS (deemed overpayment) amount under s. 125.7(2), and found that Iris’ judicial review application should be struck.

Neal Armstrong. Summaries of Canada (Attorney General) v. Iris Technologies Inc. 2021 FCA 223 under s. 164(1.6), s. 244(9) and General Concepts – Evidence.