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8 June 2021- 11:15pm 2276230 Ontario – Federal Court states that a CRA requirement for information need not be demonstrated by it to be proportional to the matter at issue Email this Content CRA had requested that three taxpayers provide information (characterized by it as routine business information) pursuant to ETA s. 288(1) (similar to ITA s. 231.2(1)) and when many of the requests were either not answered at all or only partially by the last of the extended deadlines, it sought a compliance order. Before granting the compliance order, Pentney J cited (at para. 19) Cameco for the proposition that “the fact that the requests may involve substantial documentation which the taxpayer may view as not proportional to the matter is not a relevant consideration,” and further stated (at para. 29): [T]here is no evidence to suggest that the CRA audit has been launched for any purpose other than to ensure compliance with the ETA, or that the request for information was so wide, extraordinary, or unusual as to give rise to questions about its legitimacy in the context of the audit (assuming that such a claim could be brought, in the face of the wide authority granted to the Minister to set the timing, scope, and nature of the audit …). ...

4 August 2021- 10:59pm Alexion – Federal Court of Appeal indicates that, post-Vavilov, Courts should no longer “cooper up” administrative decisions under review Email this Content The Patented Medicine Prices Review Board found that the appellant (Alexion) had priced a drug (Soliris) excessively given that the list price was higher than the price in one of the seven countries used for comparison purposes. ... This sometimes put reviewing courts in the invidious and uncomfortable position of acting as a ghostwriter for administrators, coopering up their decisions. … Vavilov recognizes the shortcomings in the former law and fixes them. ...

18 August 2021- 11:07pm Nadeau – Court of Quebec finds that lump sums paid pursuant to a CBCA oppression action of two terminated shareholder-employees were retiring allowances Email this Content The Superior Court of Quebec found: that the two taxpayers, who were minority shareholders, employees and directors of a private family corporation (“Comairco”), were the victims of oppression in that they had been summarily dismissed from their positions in order that their sharing in the profits of Comairco through bonuses and dividends could be substantially reduced; and that their suit for oppression pursuant to s. 241 of the CBCA should be answered inter alia through the Court’s order that the shareholding of each be redeemed for $4.5 million and that they be paid lump sums (of $65,000 and $50,000, respectively) by reason of their wrongful dismissal. ... Agence du revenu du Québec, 2021 QCCQ 4638 under s. 248(1) – retiring allowance. ...

23 August 2021- 11:33pm Tellza – Federal Court finds that it was not unreasonable for CRA’s to exercise its audit power by requesting a copy of all electronic records for a 20-month period Email this Content CRA issued a letter to Tellza under ETA s. 288(1) (similar to ITA s. 231.1(1)) to obtain all of Tellza’s electronic accounting data for a 20-month period. ... After having noted that the word “document” (used in s. 288(1)), was effectively defined in s. 123(1) to include “any other thing containing information, whether in writing or in any other form ” (her emphasis), she also rejected the contention of Tellza that “the request for records in an electronically readable format, along with the system administrator’s user ID and password, where applicable, falls outside the scope of the inspection power in the ETA s 288(1).” ...

30 August 2021- 11:04pm Dupuis – Quebec Court of Appeal notes that there is no time limit for a notice of objection to be responded to Email this Content The taxpayer argued that the ARQ, in taking over three years to reassess in response to its objections, had failed to act with “all due dispatch” as required by the Quebec equivalent of ITA s. 165(3). The Court noted that the taxpayer had the option of appealing directly to the Court of Quebec after 180 days, or seeking a waiver of interest that accumulated due to undue delay (here, in fact, the ARQ had waived 16 months’ interest), and then stated: The fact that no time limit is set for the assessment in response to a Notice of Objection is a deliberate choice by the legislature and is understandable. … The Court of Quebec, like the Tax Court of Canada, has made it clear on numerous occasions that its powers do not include the power to set aside a notice of assessment on the basis that the Minister has not acted with dispatch. ...

7 September 2021- 11:33pm Kallis – Tax Court of Canada adopts a restrictive interpretation of what constitutes a money-lending business Email this Content The taxpayer used funds that he had generated from a successful career in the oil and gas industry to make interest bearing loans to third parties. ... The Queen 2021 TCC 58 under s. 18(1)(b) – capital loss v. loss- debt. ...

19 September 2021- 9:55pm CAE – Tax Court of Canada finds that an unconditionally repayable loan with a 2.5% yield was government assistance Email this Content CAE, which was engaged in manufacturing flight simulator systems, incurred over $700 million in R&D expenditures on further developing such systems, as to which it received “contributions” over a five-year period of $250 million from Industry Canada. ... The Queen, 2021 CCI 57 under s. 127(9) – government assistance and s. 37(1)(d). ...

22 September 2021- 10:53pm Castle Building – Federal Court finds that it was not unreasonable of CRA to refuse a late ETA s. 156 election based on a corporation’s failing to file nil returns Email this Content A parent corporation (“Castle”) made some of its taxable supplies of building materials to its wholly-owned subsidiary (“CBS”), which on-sold the goods to retailers. There was a s. 171(1) billing election in place between them, so that Castle was responsible for the GST/HST reporting of CBS’s sales- and so that if CBS had bothered to register and file GST/HST returns (which it did not), they would have been nil returns (assuming that a s. 156 election applied to Castle’s sales to CBS – otherwise, Castle was required to charge GST/HST, with CBS effectively being required to claim ITCs). ...

24 September 2021- 12:26am Pomeroy Acquireco – Federal Court of Appeal indicates that amendments to pleadings need only assist (and not be prejudicial) to be allowed Email this Content The taxpayer opposed a proposed amendment by the Crown (raised before trial) to its pleadings to raise an argument that the subject transaction was a sham and that shares acquired as part of the transaction should have their value discounted to reflect the corporations’ latent tax liabilities. ... A court should give significant consideration to amendments which further the ability of the trial court to determine the questions in controversy …. ...

27 September 2021- 10:42pm Seica – Quebec Court of Appeal applies the tax shelter definition on a property-by-property basis, and excludes interest from cost Email this Content Each taxpayer acquired rights to use software licences (treated as Class 12 property) for $190,000, and a franchise right for the non-exclusive right to distribute the software licences in specified territories (treated as eligible capital property), for $10,000. ... Agence du revenu du Québec, 2021 QCCA 1401 under s. 237.1(1) – tax shelter. ...