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., 2021 FCA 223-- summary under Subsection 152(3.4) Summary Under Tax Topics- Income Tax Act- Section 152- Subsection 152(3.4) 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). ... 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 made pursuant to s. 152(3.4), 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. ...

The relevant QSTA provisions, which were broadly similar in this regard to ETA ss. 225(1) – A(a), 228(2) and 222(1), required that a person receiving payment of a policy premium collect the tax thereon as agent for the Minister and remit such tax to the Minister. ... In going on to confirm the imposition of penalties on the taxpayers pursuant to s. 59.2 of the Tax Administration Act, (generally calculated as 15% of the amounts they had remitted one month late), the Court stated (at paras. 34, 36-37, TaxInterpretations translation): The defence of due diligence allows for the avoidance of administrative penalties imposed by a statute where an error of fact is made in good faith, but not where there is an error of law. … The tax system is based on the principle of self-assessment and therefore transparency on the part of the taxpayer. ...

. … It is unclear from the Decision what, if any, factors have been considered [by the decision maker] … in this case. ...

. … The fact that the agent and the principal are related companies does not change this principle. [See] Stubart …. As the trial judge concluded, we are dealing with clear contracts and uncontradicted evidence that confirm that the designation of the transactions as services agreements does reflect their true legal effects. ...

Accordingly, Taxation Act s. 99 (equivalent to the ½ step-up rule in ITA s. 13(7)(e)) did not apply to reduce the capital cost to 501 of the acquired software. ... The fact that a deduction, in the abstract, could have been allowed in respect of a property cannot, however, permit that property to be characterized as a purely depreciable property to SherWeb, when the evidence demonstrated that it had lost that character by reason of the various expenditures on programmers' salaries, and the SR&ED credits that were accorded to it year after year. … One cannot escape the fact that, to SherWeb, the Software has never been treated as a depreciable asset, and so continually until the time "immediately before the transfer" to the respondent. ...

For instance, the taxpayers now argued that each of the principals could have chosen to not form a Serviceco, whereas the terms of the Partnership Agreement appeared to provide that there was no such choice – so that “the evidence and factual findings in the Tax Court may well have been different had the parties been focussed before the Tax Court on the issue [now] raised by the Appellants …” (para. 29). ...

. … [T]he sum received as rentals from the Park Strand should I think be regarded as having accrued to the appellant and his wife and son predominantly, if not entirely, in their capacity as owners of the property rather than as traders, and I also think that the rentals should be regarded as having accrued predominantly, if not entirely, from the use by tenants of the property in the sense that they represent payments for the tenants’ occupation thereof rather than payments arising from the process of letting apartments and providing certain limited services such as heat of which the tenants have the benefit. … There may well be cases wherein the extent of various services provided by the landlord under the terms of the leasing contract is such that the rental paid by the tenant can be regarded as in a substantial measure a payment for such services as well as for the use of the property and the interrelation of the use of the premises with the use of such services may be so extensive that the whole sum paid could readily be regarded not as mere rental of property but as true receipts of a business of providing apartments and services to tenants but I do not regard this as a case of that kind. ...

Khanna’s testimony that they shared the income from the rental properties they owned … nothing on the record address[ed] her involvement in or knowledge about the details of the rental business” (para. 17). ... She concluded (at para. 27): … As this Court has said, “[w]ilful blindness pivots on a finding that the taxpayer deliberately chose not to make inquiries in order to avoid verifying that which might be such an inconvenient truth. ...

However, the taxpayer (a Canadian resident with a French rental property), like others, was granted transitional relief so that in 2019 she received a tax credit from the French government equal to the French tax otherwise payable by her on her 2018 income – so that in 2019 she only had to pay the current tax on her 2019 rental income. ... The Tax Convention refers to income, regardless of when the tax is to be paid to or collected by the tax authorities. … Thus, since Mr. ...

The assessments were issued for the improper purpose of depriving the Federal Court of jurisdiction to hear administrative law grievances raised by Iris- as to which Rennie JA noted (at para. 13) that “where the true purpose of the application is to seek practical relief against the exercise of a discretion, the bar in section 18.5 does not apply” – but went on to indicate that such was not the case here. ... Issuing a declaration that does not quash or vacate the assessments would serve little or no purpose …. ...