Section 169

Cases

Canada (National Revenue) v. ConocoPhillips Canada Resources Corp., 2014 FCA 297, rev'g 2013 FC 1192

appeal to Tax Court available for decision of CRA to treat a Notice of Objection as invalid

The taxpayer claimed that it did not learn about a reassessment allegedly mailed on November 7, 2008 until April 14, 2010. When its Notice of Objection dated June 7, 2010 was rejected on grounds of untimeliness, it obtained a decision of the Federal Court (2013 FC 1192) setting aside the decision of the Minister not to consider the objection.

In reversing this judgment, Dawson J.A. noted that s. 18.5 of the Federal Courts Act insulates a decision from judicial review if there is an express right of appeal to the Tax Court, and stated (at para. 8):

[C]onocoPhillips' proper recourse was to commence an appeal to the Tax Court under paragraph 169(1)(b) of the Act and to demonstrate in that appeal that its notice of objection was filed on a timely basis. It is within the jurisdiction of the Tax Court to determine whether the notice of reassessment was in fact mailed as the Minister alleges. This it will do on a full evidentiary record with regard to the statutory presumption found in subsection 244(14) of the Act (which presumes a notice of reassessment to have been mailed on its date). See: Walker v. Canada, 2005 FCA 393, 344 N.R. 169, at paragraphs 11 to 13. It is open to ConocoPhillips to request that the question of the timeliness of its notice of objection be determined before the trial pursuant to Rule 58(1)…

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 18.5 appeal to Tax Court required for decision of CRA to treat a Notice of Objection as invalid 218

Conocophillips Canada Resources Corp. v. Canada (National Revenue), 2014 DTC 5014 [at 6598], 2013 FC 1192, rev'd supra

Federal Court has exclusive jurisdiction over Minister's decision that objection was out of time

On 3 May 2010, the Minister supplied the taxpayer with a copy of a Notice of Reassessment dated 26 April 2010, bearing a "date of mailing" notation of 7 November 2008. The taxpayer served the Minister with a Notice of Objection on 7 June 2010. After receiving detailed submissions that the Notice of Reassessment had not been received until May 2010, the relevant CRA official (Mr. Kassam) rejected the Objection, on the basis that it had not been served within 90 days of the mailing of the Notice of Reassessment and no application for an extension of the time to do so had been made within the following year.

Campbell J granted the taxpayer's application to have Mr. Kassam's rejection of the Objection set aside. Such rejection was not reasonable. In reaching this decision, Mr. Kassam "was not sufficiently engaged with the evidence so as to form an independent opinion on the evidence" (he instead relied on the opinion of a subordinate) and there was "no transparent and intelligible justification for Mr. Kassam's finding that the Assessment was mailed" (para. 26).

Before so concluding, Campbell J stated (at para. 8) that he agreed with the taxpayer "that no right of appeal exists to the Tax Court...[as] s. 169(1)(b) ... does not apply to the present circumstances because the conditions precedents do not exist" (before then paraphrasing the provision without discussing it). He then stated (at para. 9):

[T]he purpose of the present Application is not to challenge the validity of the Assessment but to remove the Decision that is an obstacle placed in Conoco's path towards a proper consideration by the Minister of its Objection. I find that the present Application is within the jurisdiction of this Court and Conoco has no other access to justice besides the filing of the present Application.

Clearwater Seafoods Holding Trust v. Canada, 2013 DTC 5132 [at 6218], 2013 FCA 180

The appellant Trust was a subsidiary of an income fund. As part of a plan of arrangement to in effect replace the income fund by a public corporation ("Seafoods Inc."), the Trust was wound up into the income fund, and the income fund was wound up into Seafoods Inc., in each case, in reliance on the rollover provisions of s. 88(1), as modified by s. 88.1(2).

The Trust had commenced a tax appeal four months prior to the plan of arrangement. Because the Trust no longer existed, its counsel applied under Rule 29 for an order that Seafoods Inc. be substituted as the new appellant. Rule 29(1) can apply "where at any stage of a proceeding the interest or liability of a person ... is transferred or transmitted to another person by assignment, bankruptcy, death, or other means." The trial judge agreed with the Minister that the motion should be dismissed - the appeal could not be continued because the appellant had ceased to exist.

Sharlow JA stated (at para. 13):

In my view, there has been in this case a transmission of the liability of the Taxpayer Trust to another person by "other means" – which I take to include the termination of the existence of the taxpayer. The disposition of property of the Taxpayer Trust resulted automatically in the termination of the Taxpayer Trust and the transmission of its federal income tax liability to one or more other persons. That is a sufficient basis for concluding that the circumstances are within the language and intended purpose Rule 29(1).

The matter was referred back to the Tax Court for confirmation of (likely routine) factual matters respecting the appropriateness of applying Rule 29.

460354 Ontario Inc. v. The Queen, 92 DTC 6534 (FCTD)

S.241(1)(a) of the Business Corporations Act, 1982 (Ontario) permitted a corporation which had been dissolved to appeal to the Tax Court and, later, to the Federal Court, from a reassessment issued after the date of dissolution.

Attorney General of Canada v. Bowen, 91 DTC 5594 (FCA)

Where the Minister did everything possible to properly notify the taxpayer of the Minister's Notice of Confirmation including three mailings of the notification by registered mail which were refused, and which were not received because the taxpayer had not left the proper address while he is out of Canada, the Minister was not required to ensure actual receipt by the taxpayer of such notification before the 90-day period commenced to run.

Nova Ban-Corp Ltd. v. Tottrup, 89 DTC 5489 (FCTD)

A creditor of a corporation ("Container Port"), which alleged that Container Port's president ("Tottrup") had acceded to an excessive assessment of taxes which should have been payable by Tottrup himself, was granted leave (well after the one year limit in s. 167(5) of the Act) by the Queen's Bench of Ontario pursuant to ss.232 and 234 of the CBCA to commence a derivative action in the Federal Court. In the Federal Court, Strayer, J. held that the Federal Court had no jurisdiction over Tottrup or Container Port with respect to the subject matter of the Federal Court action, and that "there is no court which will entertain a challenge to federal income tax assessment other than one brought by the taxpayer; nor entertain such a challenge except in the form of an appeal; nor entertain an appeal except within the prescribed time limits."

Mackay Construction Ltd. v. The Queen, 89 DTC 5097 (FCTD)

The taxpayer unsuccessfully appealed to the Tax Court after the Minister had issued a notice of confirmation without the taxpayer first filing a notice of objection. The Federal Court had jurisdiction to hear the appeal of the taxpayer from the Tax Court decision because the issuing of the notice of confirmation was a fresh step prescribed by statute which could be the foundation of an appeal to the Tax Court, and because, in any event, the Federal Court's jurisdiction was founded upon a decision of the Tax Court having been rendered and a procedural defect which occurred prior to that time was not relevant.

The Queen v. Gary Bowl Ltd., 74 DTC 6401, [1974] C.T.C 457 (FCA)

No appeal lies from a nil assessment.

Okalta Oils Ltd. v. Minister of National Revenue, 55 DTC 1176, [1955] CTC 271, [1955] S.C.R. 824

The taxpayer was not able to appeal a "nil" reassessment to the Tax Appeal Board. The word "assessment" referred to the actual sum in tax which the taxpayer is liable to pay and there, accordingly, was no assessment to appeal.

Words and Phrases
assessment

See Also

Davis v. The Queen, 2015 DTC 1105 [at 621], 2015 TCC 79 (Informal Procedure)

argument, that tax court does not satisfy Canadians' rights to have things heard by an independent person, would lead to a procedural paradox

Among other arguments of similar calibre, the taxpayer argued that neither the Tax Court nor its judges could be considered to satisfy Canadians' rights to have things heard by an independent court. Boyle J dismissed this argument, noting that "had I agreed with him, my opinion became worthless" (para. 6).

Nottawasaga Inn Ltd. v. The Queen, 2014 DTC 1021 [at 2628], 2013 TCC 377 (Informal Procedure)

In 2011 the Minister reassessed the taxpayer's 2007 taxation year (the old reassessment) by denying the deduction of various expenses and capital cost allowance claims. After being requested to carry back subsequent losses to 2007, the Minister reassessed to reduce the tax payable in 2007 to nil. Under the new reassessment, the taxpayer was still required under s. 161(7) to pay the interest that had accrued on the additional income from 2007 before the loss carry-back. The taxpayer appealed on the basis that the old reassessment overstated the 2007 income, so that the resulting interest was too high.

Pizzitelli J found that the Tax Court lacked the jurisdiction to grant the relief the taxpayer sought on the basis that the new reassessment was a nil assessment. The interest owing did not transform the nil assessment into an assessment. Pizzitelli J stated (at para. 19):

A nil assessment does not in my mind describe circumstances where no total taxes, interest and penalties are assessed. It more properly describes the situation where no taxes are claimed.

Although the term "nil assessment" has been used to refer to an assessment that is for a nil amount (and therefore cannot be appealed), more accurately, an "assessment" for a nil amount is not an assessment at all, but rather a notice under s. 152(4) that "no tax is payable" (paras. 19-20, citing Interior Savings Credit Union and Okalta Oils). Moreover, an assessment of interest (or penalties) is distinct from an assessment of tax (paras. 22-23, citing McFadyen).

To vary an interest assessment, a taxpayer must either show that interest was computed incorrectly (which was not in issue), or show that the underlying tax was incorrect (which the taxpayer could not do because there was no assessment in effect for 2007).

Words and Phrases
nil assessment

SoftSim Technologies Inc. v. The Queen, 2012 DTC 1187 [at 3473], 2012 TCC 181

The taxpayers' counsel entered a settlement agreement with the Minister, which the Minister sought to enforce under s. 169(3). The taxpayers argued that their counsel had not been authorized to enter a settlement offer.

D'Auray J. found that the taxpayers had in fact intended to authorize a settlement. The taxpayers had sent counsel an email stating that they had "decided to settle," that the "decision is final," and to "please make the arrangements with them and we will come to sign the deal." The surrounding evidence likewise indicated a clear understanding that the matter was being settled. The taxpayers' attempts to advance an alternative explanation for their words and conduct were not compelling.

Mcfadyen v. The Queen, 2008 DTC 4513, 2008 TCC 441

In the course of finding that the taxpayer was estopped from raising the issue of residency after the Federal Court of Appeal had already ruled on the matter (see summary under res judicata), Rip CJ also noted that an assessment of interest on federal taxes did not, in itself, confer a right to appeal those taxes. He stated (at para. 19):

Subsection 152(1) of the Act provides for the Minister to assess tax for the year as well as interest and penalties. An assessment of interest is distinct from an assessment of tax, it is the result of a tax assessment.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Res Judicata 140

Graham v. The Queen, 92 DTC 1012 (TCC)

Before going on to find that the Crown had failed to provide admissible evidence that the taxpayer's appeal to the Tax Court was out of time, Bowman J. stated (p. 1014):

"If the Attorney General seeks to strike out an appeal from an assessment on the ground that the taxpayer has failed to meet the required time limit, she must establish on the basis of clear and admissible evidence that, following a notice of objection, the Minister either confirmed the assessment or reassessed and that the notification of confirmation or notice of reassessment was sent to the taxpayer by registered mail on a particular date and that no appeal was filed within 90 days thereof. On such a motion the copy of the notification of confirmation or notice of reassessment and the proof of registration and date of mailing should be properly put in evidence."

Hill v. MNR, 91 DTC 1094 (TCC)

Bonner J. stated (pp. 1094-1095):

"It is now well settled that where there has been a failure by the Minister of National Revenue to act with all due dispatch as required by paragraph 165(3)(a) of the Act, the taxpayer's remedy is to launch an appeal following the expiry of the 90-day period under paragraph 169(b) of the Act. The existence of that remedy makes it illogical to argue that the legislation must be construed as providing that an otherwise valid assessment loses its force and validity as a result of delay on the part of the Respondent in confirming."

Lornport Investments Ltd. v. The Queen, 91 DTC 5044 (FCTD)

The taxpayer validly objected to a reassessment which was issued within the three-year period, then the Minister issued a second reassessment which increased the amount of assessed tax and which, following a notice of objection thereto, was found by the Associate Senior Prothonotary to be invalid because it was statute-barred. Rouleau J. found that because the second reassessment thus was a nullity, it did not have the effect of displacing the first reassessment.

Bowen v. MNR, 90 DTC 1625 (TCC)

Because the taxpayer had never received the notices of confirmation sent to him by the Minister, the time for making an appeal under s. 169 has not started to run, with the result that the one-year period for applying for an extension under s. 167(5)(a) also had not begun to run.

Lornex Mining Corp. Ltd. v. MNR, 88 DTC 6399, [1988] 2 CTC 195 (FCTD)

The court had no jurisdiction to entertain an appeal from a "nil" assessment, notwithstanding that $172,668 in provincial tax was owing, because the Court had no jurisdiction to entertain an appeal from an assessment of provincial tax.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 172 - Subsection 172(2) 36

The Queen v. Bowater Mersey Paper Co. Ltd., 87 DTC 5382, [1987] 2 CTC 159 (FCA)

After the Minister reassessed the taxpayer's 1981 and 1982 taxation years on January 4, 1984 by reclassifying class 29 properties as class 2 properties, and then on March 6, 1984 issued "nil" assessments for those years by carrying back investment tax credits earned in the taxpayer's 1983 year, the taxpayer in April of 1984 filed notices of objection to the January 4, 1984 notices of reassessment. Since the March 6, 1984 reassessments replaced the January 4, 1984 reassessments, the January 4, 1984 assessments "were no longer in existence and could not, for that reason, be the subject of an appeal."

It was also noted that a taxpayer has no right of appeal from alleged errors made by the Minister in calculating the tax owed by him. "The right of appeal that exists is from the result of the calculation made by the Minister, not from those calculations."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 172 - Subsection 172(2) 129

Gibbs v. MNR, 84 D.TC. 6418, [1984] CTC 434 (FCTD)

An assessment made against a taxpayer can only be challenged pursuant to the provisions of section 169 and following of the Act. An application under section 18 of the Federal Court Act for an order quashing assessments, was dismissed.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 172 - Subsection 172(2) 37

MNR v. Parsons and Flemming, 84 DTC 6345, [1984] CTC 352 (FCA)

It follows from s. 29 of the Federal Court Act that the only way in which assessments made agains taxpayers can be challenged is by following the procedures set out in Division J. An assessment cannot be quashed by the Court pursuant to s. 18 of the Federal Court Act.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 172 - Subsection 172(2) 48

Millers Credit Jewellers Ltd. v. The Queen, 84 DTC 6205, [1984] CTC 218 (FCTD)

Although a "Notice of Reassessment" was cryptic when read by itself, it referred to "the net income previously assessed", and an examination of the previous Notice of Reassessment (which had been received by the taxpayer before it filed its Notice of Objection) would have revealed in some detail the adjustments that were being made to the taxpayer's income. The second Notice of Reassessment accordingly was valid, and the taxpayer's argument failed - that no notice of confirmation or reassessment should be regarded as having been made after serving the Notice of Objection, so that the 90-day time period under s. 172(2) had not yet begun to run.

Midwest Oil Production Ltd. v. The Queen, 82 DTC 6092, [1982] CTC 107 (FCTD), aff'd 83 DTC 5304, [1983] CTC 338 (FCA)

A taxpayer is not prevented from raising an issue on an appeal to the Federal Court only because the issue was not raised in the taxpayer's notice of objection or, if applicable, before the Tax Review Board. It is the Minister's assessment, not his reasons for it, that is the subject matter of the appeal.

MacIsaac v. The Queen, 83 DTC 5258, [1983] CTC 213 (FCTD)

A statement of claim requesting the issuance of a writ of mandamus (directing the Minister to exclude $40,411 from the taxpayer's 1979 return) and of prohibition (prohibiting the further collection of 1979 taxes) was thus in substance a purported appeal from the notice of assessment for the 1979 taxation year. The appeal thus was a nullity because the taxpayer had not filed a notice of objection. Furthermore, the taxpayer could not rely on alleged commitments made by Department employees after the time for filing a notice of objection had expired.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 172 - Subsection 172(2) 86

Kingsdale Securities Co. Ltd. v. The Queen, 74 DTC 6674, [1975] CTC 10 (FCA)

The court should not consider an argument that is raised for the first time after the cases for both parties have been closed at trial "unless it is satisfied beyond all reasonable doubt that all requisite evidence had been adduced to enable the Defendant to rebut the Plaintiff's new position." Here, the Court of Appeal was not satisfied that the Crown had adduced all requisite evidence bearing on the taxpayer's fresh contention that alleged trusts were declaratory trusts rather than settled trusts.

Administrative Policy

CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 8

time stamping of items received
available with membership password at http://www.cba.org/CBA/sections_NSCTS/main/GST_HST.aspx

TSD staff will no longer receive correspondence directly from the public. Drop boxes are available for taxpayer use at CRA locations and they are emptied of their contents twice daily. The contents are stamped by CRA mail operations the same day they are received. For the first clearance each morning, items are date stamped with the previous day's date. Also, if a taxpayer wishes to have proof of filing or payment, they can file or pay electronically to be provided with a confirmation number and the option to print a copy.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(1) time stamping of items received 91

S4-F7-C1 - Amalgamations of Canadian Corporations

Amalco can continue objection

1.63 If an assessment (or reassessment) has been received by a predecessor corporation prior to amalgamation and the predecessor corporation has filed a notice of objection prior to amalgamation, the new corporation will possess the rights arising from the filing of that notice of objection and will be able to appeal to the Tax Court of Canada within the time limits set out in section 169. Similarly, if an assessment (or reassessment) has been received by a predecessor corporation and the predecessor corporation commenced an appeal prior to amalgamation, the new corporation will be able to continue the appeal.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 100 - Subsection 100(2.1) s. 100(2.1) applies to non-qualifying amalgamation 58
Tax Topics - Income Tax Act - Section 111 - Subsection 111(12) application following amalgamation 103
Tax Topics - Income Tax Act - Section 116 - Subsection 116(1) deemed tcp following amalgamation 155
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.1) continuity of s. 13(5.1) on amalgamation 126
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1) Amalco can continue objection and receive refunds 145
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) reserve after amalgamation 50
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Shareholder shareholder need not hold shares 82
Tax Topics - Income Tax Act - Section 251 - Subsection 251(3.1) deemed non-arm's length relationship on amalgamation 164
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(b) realted party, majority and 50% group exceptions 448
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(iii) reserve after amalgamation 50
Tax Topics - Income Tax Act - Section 66.7 - Subsection 66.7(7) successoring where non-wholly owned amalgamation 85
Tax Topics - Income Tax Act - Section 69 - Subsection 69(13) no disposition of predecessor property on general principles 103
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1.4) s. 87(5) not applicable 104
Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(3) non-87 amalgamation/no FX gain 159
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) no deemed dividend to dissenter on amalgamation 81
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) election filing by Amalco 103
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.1) s. 87(1.1) qualifies for all s. 87 purposes 60
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.2) successoring where non-wholly owned amalgamation 85
Tax Topics - Income Tax Act - Section 87 - Subsection 87(10) deemed listing of temporary Amalco shares 114
Tax Topics - Income Tax Act - Section 87 - Subsection 87(11) gain if high PUC is sub shares 47
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1) presumptive satisfaction of s. 87(1)(a)/dissent and squeeze-outs onside 260
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(a) new corp/deemed year end coinciding or not with acquisition of control 0
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(b) Amalco must follow predecessor's valuation method subject to truer picture doctrine 58
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(c) reserve after amalgamation 103
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(d) cost amount carryover 135
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(e.1) s. 100(2.1) applies to non-qualifying amalgamation 58
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(o) no continuity rule for non-security options 133
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(q) pre-amalgamation services 96
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.11) loss-carry back to parent 159
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.1) dovetailing with s. 88(1.1) 38
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3.1) 328
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3) PUC shifts 181
Tax Topics - Income Tax Act - Section 87 - Subsection 87(4) fractional share cash/ACB or value shift/implied non-recognition for predecessor shares 247
Tax Topics - Income Tax Act - Section 87 - Subsection 87(7) dovetailing with s. 78 and 112(12) 171
Tax Topics - Income Tax Act - Section 87 - Subsection 87(9) allocation of s. 87(9)(c)(ii) excess as parent chooses 218
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) late designation 106
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) dovetailing with s. 87(2.1) 56
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) partnership dissolution on amalgamation 123
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) deemed non-arm's length relationship on amalgamation 415
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) deemed non-arm's length relationship on amalgamation 323
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(14) class continuity on non-arm's length amalgamation 311
Tax Topics - Income Tax Regulations - Regulation 8503 - Subsection 8503(3) - Paragraph 8503(3)(b) pre-amalgamation services 96

91 C.R. - Q.66

The taxpayer can raise issues not identified in the Notice of Objection.

Subsection 169(1) - Appeal

Cases

1455257 Ontario Inc. v. Canada, 2016 FCA 100

dissolved corporation cannot appeal to Tax Court

The Court overruled its earlier decision in (495187, a.ka. Sarraf) and found that an Ontario corporation which has been dissolved cannot file a Notice of Appeal.

Under the OBCA, a dissolved corporation cannot initiate legal proceedings, but proceedings can be taken against it. Sarraf considered that a court appeal was a mere continuation of proceedings which had been commenced against the corporation by the Minister’s assessment – but Dawson JA found that Sarraf had failed to consider that the current appeal procedures were quite different from the Income War Tax Act procedures considered in a yet earlier decision.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Ontario - Business Corporations Act - Section 242 dissolved corporation cannot launch appeal/voluntarily dissolved corp cannot be revived by Companie Branch 248
Tax Topics - General Concepts - Stare Decisis prior decisons overruled only if manifestly wrong 75

Canada v. Doiron, 2012 DTC 5103 [at 7081], 2012 FCA 71

legal fees did not relate to a law practice that was suspended

The taxpayer, a lawyer, received a four-year sentence and was suspended from practising law as a result of his conviction for obstruction of justice in respect of his defence of a client. The Court disallowed the claim of input tax credits connected with the taxpayer's legal fees. Because the taxpayer was already suspended from the practice of law when the fees were incurred, they could not have been incurred in connection with any commercial activity.

The taxpayer's argued that referral fees he received for referring clients to other lawyers was a commercial activity entitling him to the input tax credits, but the Court found there was no connection between that activity and the fees he incurred in his criminal defence.

Canada v. Quigley, 2009 DTC 6206, 2009 FCA 287

As the only issue in the taxpayer's appeal to the Tax Court was whether the Minister had erred in determining that the taxpayer was resident in Newfoundland for provincial income tax purposes, the Crown's motion to quash the taxpayer's appeal was allowed.

Canada v. General Motors of Canada Limited, [2009] GSTC 64, 2009 FCA 114

The registrant ("GMCL") was entitled to input tax credits for the GST on fees it paid to third-party pension fund managers given that it was liable under agreements with them to pay for their services (and even though it would either be reimbursed by the pension funds or the pension funds would pay the funds directly) and given that it acquired their services as an integral part of the overall compensation package which it provided to its employees in that without a profitable pension plan, its capacity to successively compete in the marketplace would have been diminished.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) services for pension plans represented compensation costs relating to taxable sales 129

Canada v. Interior Savings Credit Union, 2007 DTC 5342, 2007 FCA 151

The taxpayer was not able to file a valid notice of objection or appeal with respect to a notice of assessment which included an allegedly incorrect calculation of the taxpayer's preferred rate amount given that in its objection and appeal the taxpayer was not objecting to the taxes assessed.

Bormann v. Canada, 2006 DTC 6147, 2006 FCA 83

In dismissing the taxpayer's appeal for taxation years in which there was no federal tax, interest or penalty assessed, the Court stated (p. 6148) that "the jurisprudence is clear that a taxpayer can neither object to nor appeal from a nil assessment.

398722 Alberta Ltd. v. Canada, [2000] FCJ No. 644 (CA)

The registrant was required to build an apartment building as a condition precedent for obtaining a permit to build a hotel, and argued that the residential housing operation therefore was an integral part of is hotel business and thus was a "commercial activity". The Court held that input tax credits under s. 169(1) were not available to a registrant who was fulfilling an obligation to meet another business objective rather than a commercial activity, so that the registrant here was not entitled to an input tax credit in respect of the GST payable on a deemed self supply of the apartment building on its substantial completion.

MNR v. Minden, 62 DTC 1044 (Ex Ct)

After noting that the notice of reassessment of the taxpayer was accompanied by an erroneous statement, Thorson P. stated (at p. 1050):

"In considering an appeal from an income tax assessment the Court is concerned with the validity of the assessment, not the correctness of the reasons assigned by the Minister for making it. An assessment may be valid although the reason assigned by the Minister for making it may be erroneous."

Cole v. Canada (Attorney General), 2005 DTC 5667, 2005 FC 1445

The availability of an appeal right to the taxpayer under s. 169(1) did not lessen the obligation of the Minister to assess with "all due dispatch". A refusal of the Minister to waive interest that accrued against the taxpayer was referred back to the Minister for reconsideration partly on the basis that the Minister had delayed considering the taxpayer's objection for the taxation years in question on the basis that there was litigation respecting an earlier taxation year of the taxpayer.

Transcanada Pipelines Ltd. v. The Queen, 2001 DTC 5626, 2001 FCA 314

Following the serving of notices of objection by the taxpayer to 1995 reassessments and a settlement of the issues raised in notices of objection following the filing of appeals to the Tax Court, in 1999 the Minister issued new reassessments of the relevant taxation years pursuant to s. 169(3). The taxpayer then served notices of objection against the new reassessments raising issues that had not been included in his prior appeals but were set out in the original notices of objection. Rothstein J.A. rejected the taxpayer's submission that an appeal under s. 169(1) was from specific issues and, instead, found that following the issuance of the 1999 reassessments, the 1995 reassessments became nullities and there was nothing that the Tax Court could vary or refer back to the Minister with respect to them. Furthermore, no notice of objection could be served from an assessment made under s. 169(3).

See Also

Pietrovito v. The Queen, 2017 TCC 119

taxpayer could not correct a clear error in appealing only one of the two taxation years in dispute

In each of the 2001 and 2002 taxation years, the taxpayer made a donation to the John McKellar Charitable Foundation (the “Foundation”) and claimed the corresponding tax credits, which were disallowed by the Canada Revenue Agency (the “CRA”). The taxpayer duly serviced notices of objection for both taxation years. In 2012, the taxpayer sent two separate emails to his representative, one with a copy of the 2001 Notice of Confirmation (NOC) and the other with a copy of the 2002 NOC. The representative mistakenly forwarded only the 2001 NOC to the taxpayer’s counsel, who then prepared a notice of appeal (NOA) in respect of the 2001 reassessment only. The taxpayer sought to amend the previously filed NOA so that the 2002 Reassessment would also be part of the appeal instituted by the taxpayer in 2012.

Lafleur J declined to extend the Wells case, and dismissed the motion, stating (at para 36, 37, and 39):

… I fail to see in the omission of the mention of the 2002 taxation year and the 2002 Reassessment in the Notice of Appeal a mere clerical error. I am of the view that the addition of the 2002 Reassessment to the Notice of Appeal would be a fundamental measure.

… I am aware that the underlying facts are similar and it would be improbable for the Appellant to have decided to appeal from the 2001 Reassessment without appealing from the 2002 Reassessment. However, that is of no relevance.

… I am of the view that the principles governing amendments of pleadings have no application in the present case. Divisions I and J of the Act provide for detailed mechanisms for objecting to and appealing from income tax assessments. The Appellant should abide by these mechanisms in order to appeal from the 2002 Reassessment and more particularly, with sections 169 and 167 of the Act, if such an application is necessary.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 167 - Subsection 167(5) - Paragraph 167(5)(a) time period not suspended where taxpayer reasonably believed appeal had been filed 331
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 54 failure to appeal 2nd taxation year not curable through amendment 73

Shreedhar v. The Queen, 2016 TCC 254 (Informal Procedure)

assessment with interest is not a nil assessment

Boyle J found that the doctrine that a taxpayer cannot appeal a nil assessment does not apply to a notice of assessment which assesses nil tax but also includes interest (in this case, $2.10).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1) assessment of nil tax and $2 of interest could be objected to 126

Beggs v. The Queen, 2016 TCC 11 (Informal Procedure)

refusal to grant Reg. 105 waiver not an assessment/remedy in Federal Court

CRA determined to not grant a waiver of withholding under Reg. 105 from fees to be paid to the appellants in connection with a proposed performance in Canada. The appellants filed Notice of Objection and filed appeals in the Tax Court on the basis that they thereby had been assessed.

After stating (at para. 22) that “if a withholding of tax is not an assessment, a waiver authorizing a Canadian taxpayer to not withhold the 15% on the fees payable to a non-resident is also not an assessment,” Favreau J stated (at paras. 26-7):

The Appellants submitted that CRA made a determination that they were liable to pay tax in Canada and that, this determination was equivalent to an assessment. I do not agree… .[A] waiver is not a determination of the tax liability of a non-resident but it is a decision with regards to giving permission to a Canadian taxpayer or a non-resident payor to not withhold taxes on amounts payable to a non-resident. The tax liability of the non-resident can only be determined by an assessment after a review of his or her tax return.

…[T]he Appellants will always have the opportunity to turn themselves to the Federal Court of Canada in order to force the Minister to change its decision as stated by Justice Bowie in Kravetsky.

Words and Phrases
assessment
Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 105 - Subsection 105(1) refusal to grant Reg. 105 waiver not an assessment/remedy in FC 66

Izumi v. The Queen, 2014 DTC 1114 [at 3254], 2014 TCC 108

motion to set aside default judgment granted despite long delay

The taxpayer changed his address after filing his appeal with the Tax Court. He notified CRA of the change but not the Tax Court. He failed to attend a hearing, resulting in default judgment for the Minister.

Rossiter ACJ granted the taxpayer's motion to set aside the default judgment, despite that the motion was brought eighteen months after the judgment, well beyond the 30-day limit in s. 140(2) of the Rules (which the Tax Court has the discretion to extend pursuant to Rule 12(1)). The taxpayer reasonably believed that his appeal was being held in abeyance pending the outcome of related cases, and none of the other relevant factors (e.g. prejudice to other litigants, merit of the appeal) gave a compelling reason not to set aside judgment, especially given the significant prejudice to the taxpayer if the appeal did not proceed (para. 18).

Pylatuke v. The Queen, 2014 DTC 1019 [at 2620], 2013 TCC 364

notice of assessment by registered mail

Favreau J found that the Minister had failed to establish that the 90 day limitations period had commenced on 19 February 2012 because she had brought no specific evidence of having mailed the notice of reassessment. It was especially appropriate to require such specific evidence in the present case, where the assessment was sent by registered mail (para. 16).

Favreau J further noted that the taxpayer's receipt of a statement of account on 2 March 2012, showing that a reassessment was issued on 19 February 2012, did not have the effect of validating the reassessment (para. 17).

Cameco Corporation v. The Queen, 2014 TCC 45

appeals from superceded reassessments were nullities

Subsequent to the taxpayer's appeal of reassessments, fresh reassessments (to which the taxpayer filed fresh objections) were made which superceded the earlier ones. Rip CJ found (at para. 9) that "since all previous assessments are nullities as a result of the earlier reassessments having been displaced, so must the appeals from these assessments be nullities."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence proportionality principle 182
Tax Topics - Income Tax Act - Section 232 - Subsection 232(1) - Solicitor-Client Privilege basis for claim not disclosed 113

Clearwater Seafoods Holdings Trust v. The Queen, 2012 DTC 1177 [at 3447], 2012 TCC 186, rev'd supra

The taxpayer was the subsidiary trust of an income fund. As part of a plan of arrangement to in effect replace the income fund by a public corporation ("Seafoods Inc."), the taxpayer was wound-up into the income fund, and the income fund was wound up into Seafoods Inc., in each case, in reliance on the rollover provisions of s. 88(1), as modified by s. 88.1(2). All liabilities of the taxpayer were assumed by the income fund on the taxpayer's winding-up, and it was dissolved; and similarly (it would appear) on the winding-up of the income fund.

D'Arcy J. dismissed the taxpayer's motion to have the appellant in the taxpayer's appeal (which had been filed four months before its winding-up) changed to Seafoods Inc.. (The motion was made under s. 29 of the Rules.) He stated (at paras. 29, 32):

In my view, an agreement by which a party assumes another party's tax liability cannot be binding on the Minister.

...

That Seafoods Inc. may now have the legal obligation, as between itself and the Trust, to pay any income tax debt of the Trust does not change the fact that any such debt is still owed by the Trust to the Crown. Further, the assumption/assignment of any such debt does not result in the transfer by the Trust of its rights of appeal in respect of the relevant assessments.

D'Arcy J. declined to decide whether the taxpayer itself could continue the appeal in light of its winding up, because that issue was not before the Court and the evidence was inadequate.

McIntosh v. The Queen, 2011 DTC 1116 [at 625], 2011 TCC 147

The taxpayer alleged that his employer had under-reported source deductions on his T4 slips. D'arcy J. found that the Tax Court of Canada lacked jurisdiction to hear the case. The Tax Court may only hear appeals from an assessment - matters pertaining to the "tax payable" in a taxation year. The taxpayer's appeal concerned tax collection - a matter of "tax owing" - and that is outside the Tax Court's authority.

Uddin v. The Queen, 2009 DTC 1331, 2009 TCC 471 (Informal Procedure)

Woods, J., in dismissing the taxpayer's appeal, applied the finding in Main Rehabilitation Co. Ltd. v. The Queen, 2004 DTC 6763, that "the Tax Court does not have the jurisdiction to set aside an assessment on the basis of an abusive process at common law or in breach of section 7 of the Charter."

Khan v. The Queen, 2009 DTC 804, 2009 TCC 248 (Informal Procedure)

The Crown had failed to discharge the onus on it to show that the reassessment in question, which allegedly started the one year and ninety-day period running, had been mailed to the correct address.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Onus 39

Interior Savings Credit Union v. The Queen, 2006 DTC 3351, 2006 TCC 411

The taxpayer filed a valid notice of objection when it objected to an assessment of its 2004 taxation year, even though it was not objecting to the amount of tax assessed and, instead, was objecting to the calculation by the Minister of its preferred rate amount. The assessment was not a nil assessment and, in any event, it had been found that tax credits may be appealed in a nil assessment year.

Parent v. The Queen, 2003 DTC 1002, 2003 TCC 509

After the Minister issued a Notice of Confirmation of a previous reassessment of the taxpayer that reflected additional income alleged to arise from a particular transaction, the Minister issued a further reassessment which also included tax arising from alleged shareholder benefits conferred on the taxpayer. Mogan T.C.J. found that as this further reassessment fixed the tax liability of the taxpayer for the year rather than merely an amount of tax in addition to that which had already been assessed, the previous reassessment was rendered a nullity. The taxpayer was given until a specified date to file an amended notice of appeal challenging the subsequent reassessment, failing which the previously commenced appeal would be quashed.

Imperial Oil Ltd. v. The Queen, 2003 DTC 179, 2003 TCC 46, aff'd 2003 FCA 289

taxpayer entitled to appeal the basis on which it filed

An argument of the Crown that a taxpayer is not entitled to object to an assessment based on its own return of income or an assessment that does not result in an adverse adjustment, was rejected. Bowman A.C.J. stated (at p. 183) that:

"There must be very compelling reasons to find that a taxpayer's rights under the Income Tax Act are implicitly restricted where the rights are explicitly conferred and no restrictions are explicitly expressed."

In affirming this finding, Sharlow JA stated (at para. 5):

According to subsections 165(1) and 169(1) of the Income Tax Act, the right to object and appeal may be asserted when the Minister makes an assessment. These provisions make no distinction between an objection to an assessment that is inaccurate because of an act or omission of the taxpayer, and an objection to an assessment that is inaccurate because of an act or omission of the Minister, whether the result of an audit or not.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Ordinary Meaning 76

Wells v. The Queen, [2001] 4 CTC 2950 (TCC)

amendment to correct failure to include both assessed taxation years

The taxpayer had donated an art work in the 1994 taxation year. The notice of appeal which was filed by the appellant made reference to a reassessment for the 1995 taxation year only, but the amount indicated included taxes owing for both the 1994 and 1995 taxation years. Tardif J granted the taxpayer’s motion for leave to amend on the ground that the purpose of the motion was not to amend the notice of appeal to add a new taxation year after the expiry of the time period prescribed by the Act to appeal but was:

essentially to complete and clarify that which is implicit from the whole of the facts described in the Notice of Appeal. In other words, the purpose of the motion [was] not to gain the right to add a fundamental element since the whole of the facts alleged implies the reality that was not expressly stated, that is, the reference to 1994. This interpretation is moreover in keeping and consistent with the progress of the case since the filing of the notice of objection dated July 28, 1997 (paras. 16 and 17).

Edwards v. Minister of Finance (Ontario), 99 DTC 5475 (Ont. C.T. (G.D.))

Before going on to find that the taxpayer had not appealed on a timely basis as required by the provisions of the Retail Sales Tax Act, Caputo, J. stated (at p. 5478) that:

"Therefore it would appear that a party loses his statutory right of appeal if he misses a statutory deadline for making that appeal."

Administrative Policy

3 June 2014 Internal T.I. 2013-0489471I7 - Subsection 171(1)

appeal from varied assessment

Is a taxpayer prohibited from appealing to the Tax Court under s. 169(1) where the Minister varies an assessment pursuant to s. 165(3)? Before referring to the variation rather than replacement of an assessment as "unlikely," CRA stated:

Paragraph 169(1)(b) does not refer to the Minister varying an assessment. As such, if the Minister were to vary the assessment, then after 90 days have elapsed, the Minister would not have notified the taxpayer that the Minister has vacated or confirmed the assessment. As a result, the condition in paragraph 169(1)(b) would be met, thus allowing the taxpayer to appeal to the Tax Court.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.3) no power to reassess following order to vacate or vary 99
Tax Topics - Income Tax Act - Section 171 - Subsection 171(1) no power to reassess following order to vacate or vary 99

Subsection 169(2.1) - Limitation on appeals by large corporations

Cases

Devon Canada Corporation v. Canada, 2015 FCA 214

large corporations can appeal new issues which were rejected by CRA Appeals, and perhaps may raise new issues within 1 year of Objection

A large corporation ("Devon") objected to assessments, denying the deduction of stock option surrender payments made by two of its predecessors in 2001, on the basis that they were fully deductible, with its objections held in abeyance for a number of years pending the Imperial Tobacco decision. In 2012, Devon specifically raised for the first time arguments, in the alternative, that deductions should be allowed under s. 20(1)(b) (including under s. 111(5.2)) or 20(1)(e). Following confirmation, these alternative arguments were also raised in its Notice of Appeal.

After finding (at para. 25) that "the issue raised by Devon in its original notice of objection that the Surrender Payments were deductible under section 9…(and therefore not on account of capital) cannot be considered to include the alternative and inconsistent arguments related to paragraphs 20(1)(b) and 20(1)(e)," Webb JA stated (at paras. 30, 31, 33):

The interpretation of the reference to "notice of objection" in subsection 169(2.1) of the Act that would be harmonious with the Act, is that this "notice of objection" would include any amendments or additional submissions that are accepted by the Minister. As noted above, the Large Corporation Rules were introduced to allow the Crown to know at the objection stage the nature and quantum of tax litigation.

CRA…responded to Devon in relation to the merits of its submissions with respect to paragraphs 20(1)(b) and 20(1)(e)… and…in the notices of confirmation, stated that the basis of the objection included the argument that the predecessors of Devon should be entitled to a deduction under paragraph 20(1)(b)… . Therefore, the Minister explicitly accepted that the issue related to paragraph 20(1)(b)…was part of the objection.

[S]ince the Minister accepted these submissions, it is a moot point whether the Minister could have refused to accept them on the basis that they were made well after the time permitted for filing a notice of objection or for seeking an extension of time to file a notice of objection, had expired.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1.11) large corporations can appeal new issues which were rejected by CRA Appeals, and perhaps may raise new issues within 1 year of Objection 91

Bakorp Management Ltd. v. Canada, 2014 DTC 5063 [at 6870], 2014 FCA 104

new timing argument raised on appeal

In 1992 the taxpayer, a large corporation under the Act, redeemed shares of a corporation not connected to the taxpayer for $338,213,849, resulting in a deemed dividend under s. 84(3), before s. 55(2) applied to convert a portion thereof into proceeds of disposition. Some of the redemption proceeds were not immediately payable. The taxpayer included $52,912,264 of the proceeds in its income in its 1995 return and paid Part IV tax thereon. The Minister reassessed the taxpayer to reduce the the 1995 deemed dividend which was subject to Part IV tax by $25,332,237.

The taxpayer's Notice of Objection indicated that this decrease to the 1995 deemed dividend should be reversed, without further discussion. The taxpayer's Notice of Appeal stated instead that no amount of deemed dividend should be included in "taxable [sic] income" in 1995. The Minister moved to have the taxpayer's appeal dismissed on the ground that it did not comply with s. 169(2.1).

After referring (at para. 34) to "the purpose of allowing the Minister to know the nature and quantum of tax litigation at the earliest possible date," Webb JA found that the issue raised in the Notice of Objection (where the taxpayer "was taking the position that it had filed its Part IV return correctly" for 1995 (para. 35)), did not match the position taken by the taxpayer on appeal (that the taxpayer received deemed dividends only in 1993 when the shares were redeemed), although the Notice of Appeal itself did not identify this issue (para. 39). Accordingly, the taxpayer had not complied with the requirement in s. 165(1.11) to raise this timing issue at the Objection stage.

The relief sought also did not match. Webb JA stated (at para. 47):

Asking for a full refund of all Part IV tax paid in relation to 1995, cannot be said to be the relief identified in the notice of objection, in which Bakorp was not asking for a full refund of all Part IV tax paid in 1995 but rather was asking to pay more Part IV tax that had been reassessed.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1.11) new timing argument raised on appeal 330

Canada v. Potash Corp. of Saskatchewan, 2004 DTC 6002, 2003 FCA 471

precluded from expanding base for resource profit computation

The Minister reassessed the taxpayer and set out precise items of income which were being disallowed as part of resource profits and, in filing a notice of objection, the taxpayer objected to the disallowance of those same items, describing them in the same fashion as the Minister. The taxpayer was precluded from later having its notice of appeal in respect of the same matter amended to include five new items of income in the computation of resource profits. However, Malone J.A. noted, obiter, (at p. 6007) that "it is arguable that there may be situations where an amendment to a notice of appeal could be permitted if the amendment goes only to quantum and does not entail the raising of a new issue".

Malone J.A. also stated (at para. 4):

The Large Corporation Rules were enacted in 1995 to discourage large corporations from engaging in a full reconstruction of their income tax returns for a particular year, after the objection or appeal process has started, based on developing interpretations and the outcome of court decisions in litigation involving other taxpayers

See Also

Rio Tinto Alcan Inc. v. The Queen, 2016 TCC 172

raising general question of deductibility of fees and listing s. 20(1)(e) did not satisfy s. 165(1.11)

In its Notice of Objection, the taxpayer (a large corporation) raised the issue as to whether expenses incurred by it in connection with a hostile bid “were deductible in the computation of the income of Alcan for the period” and listed various paragraphs of s. 20(1) including s. 20(1)(e), but without otherwise advancing any argument that the expenses were deductible under s. 20(1)(e) – which it did not do until it provided written arguments after the completion of the Tax Court hearing.

Hogan J stated (at paras. 198-200):

Citing paragraph 20(1)(e) in the Notice of Objection, without more, does not reasonably describe the issue of entitlement to deduct the Disputed Expenses under that paragraph.

Even if the issue had been reasonably described by the Appellant, the Appellant did not satisfy the condition set out in paragraph 165(1.11)(c), which requires a large corporation to provide the facts and reasons relied upon in respect of each issue. Bakorp indicates that simply listing a provision as a provision that is being relied upon does not identify the legal argument being put forward under that provision. ...

Leaving aside the Large Corporation Rule, procedural fairness alone dictates that the Appellant should not be allowed to raise this issue at this late stage. The Appellant never advised the Respondent that it would raise this issue. … Furthermore, the Appellant did not raise this argument during the hearing.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Legal and other Professional Fees investment dealer fees incurred respecting the advisability of making hostile takeover were fully deductible under s. 9 393
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(bb) investment dealer fees re advisability of making hostile takeover were fully deductible 515
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(cc) legal fees incurred in securing regulatory approval for a hostile bid related to the bidder's business of earning income from shares and interaffiliate sales 170
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(g) takeover bid circular costs did not qualify 96
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure fees incurred in order to acquire shares were excluded/butterfly expenses excluded as taxpayer was not in the business of implementing corporate reorganizations 343
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) failure to advance evidence showing allocation of fees to share consideration 131
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) expenses incurred in butterfly spin-off recognized as disposition expenses 61
Tax Topics - Statutory Interpretation - French and English Version finding common meaning of 2 versions of s. 20(1)(bb) 102

Ford Motor Company of Canada Limited v. The Queen, 2015 TCC 39

Minister was presumed to understand the scope and quantum of issues that had been raised during audit

Boyle J found that all that is required respecting issue identification is that the Minister (as opposed to a third party, such as a Tax Court Justice) "be able to understand the scope and quantum of the issue from its description in the notice of objection" – so that it was sufficient for the notice of objection to reference a description of the issues previously provided to CRA.

See summary under ETA s. 306.1(1).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 306.1 - Subsection 306.1(1) issues raised in Objection were understandable in light of previous materials provided to CRA 268

Devon Canada Corporation v. The Queen, 2014 DTC 1192 [at 3727], 2014 TCC 255, rev'd 2015 FCA 214

claims for full deductibility imply claims for lesser deductions

The taxpayer (a large corporation) objected on the basis that stock option surrender payments were fully deductible under s. 9, whereas its notices of appeal also advanced deductibility under ss. 20(1)(e), 20(1)(b), and 111(5.2) in the alternative.

After observing (at para. 11) that "if the proposed additional argument would result in the large corporation seeking completely different relief than was previously sought, the courts are more likely to consider the argument to be a new issue rather than a reason," Graham J found (respecting ss. 165(1.11)(a) and 169(2.1)(a)) that the taxpayer's s. 20(1)(e) argument was were merely a change in reasons, not in the issues (i.e. deductibility). However, the taxpayer's ss. 20(1)(b) and 111(5.2) arguments raised a new issue given that a s. 111(5.2) deduction would be in respect of the taxpayer's full cumulative eligible capital balance rather than only the surrender payments at issue here.

Respecting the requirement in s. 165(1.11)(b) to specify relief, that requested under s. 20(1)(e) for the particular years was less than that sought under s. 9(1). Graham J found (at para. 23) that "if a certain amount of relief is specified in a Notice of Objection, a less favourable amount of relief is automatically included," noting (at para. 24) that "if a large corporation's appeal involves numerous small expenses…it would be unreasonable to expect the large corporation to express its relief sought… on an expense-by-expense basis."

Graham J identified a gap in the legislation where the Minister confirms assessments of a large corporation, but on an entirely different basis than in the original assessment. He stated that it may be appropriate to allow the taxpayer to appeal in such a situation, but that issue did not arise here where the Minister was maintaining the original basis of assessment and was merely adding additional explanations regarding ss. 20(1)(b) and 111(5.2).

Canada v. Telus Communications (Edmonton) Inc., 2005 FCA 159

due diligence defence not raised

The taxpayer was a specified person and raised in its Notice of Appeal in the Tax Court of Canada the issue of due diligence with respect to automatic penalties under the ETA upon being assessed for additional net tax. In Telus' appeal before the Tax Court, the Crown moved to strike the amendments to the Notice of Appeal originally filed which added the issue of the due diligence defence to the penalties.

In finding for the Crown, Desjardins JA stated (at para. 21):

[T]he issue of due diligence was never raised in any notice of objection. The respondent's request to vacate "associated interest and penalties", which was mentioned only in its notice of objection to the reassessment, was not a reference to the issue of due diligence but was consequential to the reduction of interest and penalty flowing from the requested reduction of the net tax adjustments. The respondent cannot therefore raise due diligence in its amended notice of appeal before the Tax Court.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 306.1 - Subsection 306.1(1) due diligence defence not raised 164

Newmont Canada Limited v. The Queen, 2005 DTC 617, 2005 TCC 143

The taxpayer unsuccessfully submitted that because it had appealed to the Tax Court pursuant to s. 165(7)(a) rather than filing a Notice of Objection to a reassessment of the Minister following its initial notice of objection for the taxation year in question, it was not precluded by s. 165(1.11) and s. 169(2.1) from raising an issue not raised in its initial Notice of Objection. Sheridan J. stated (at p. 620) that she was unable to identify "any support for Newmont's argument that paragraph 165(7)(a) creates [a] substantive right of appeal; it merely relieves the still-dissatisfied taxpayer of the obligation to continue to object until the Minister finally confirms his most recent reassessment".

Subsection 169(2.2) - Waived issues

Cases

Abdalla v. Canada, 2019 FCA 5

taxpayers had given valid waivers given full knowledge of the rights which they had unequivocably waived

Rossiter CJ had found that the taxpayers had given valid waivers of their right to appeal: even though the waiver letter drafted by CRA was “poorly worded … if read in its entirety … there is a sufficient and adequate explanation in the letter [such] that a person would have full knowledge of the rights being waived.” In affirming this finding, Gleason JA stated (at para. 4):

[T]wo elements [are] required to show a valid waiver: (1) full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them communicated to the other party: Saskatchewan River Bungalows Ltd. v. Maritime Life Insurance Co., [1994] 2 S.C.R. 490 at p. 500… . [T]he above two requirements for a valid waiver were met in light of the terms of the Agreement.

She also noted (at para. 5) that “the Tax Court correctly held that the burden was on the appellant to establish that there had been [undue] influence” and that the taxpayers had not provided any evidence of such undue influence.

See Also

Savics v. The Queen, 2019 TCC 71

waiver does not preclude appeal where settlement agreement improperly implemented

The taxpayer was allocated losses for the initial years of his membership of three LPs and income-account gains for a subsequent year. CRA initially reassessed to deny both the taxpayer’s allocated losses and to reverse the subsequent year’s gains allocation on the basis that the LPs did not exist (i.e., on the basis that the partners were not carrying on business in common with a view to profit). A subsequent settlement agreement provided for the reinstatement of much of the losses but was silent on the treatment of the gains (although it did reference an ability of CRA to reassess to make “consequential” adjustments).

In agreeing to the settlement, the taxpayer provided a waiver of any right of appeal an implementing assessment. Sommerfeldt J indicated (at para. 22) that, even in the absence of s. 169(2.2) “a waiver of a right of appeal against a tax assessment is valid,” but that “if a settlement-implementing reassessment is not in keeping with the agreement that the taxpayer and the fiscal authority have reached, a waiver of the right to appeal will not preclude the taxpayer from appealing in respect of the aspect of the reassessment that does not coincide with the settlement agreement,” and noted that in light of Sattva, regard must be had to the factual matrix surrounding the settlement agreement in interpreting its terms (including the reference to permitted “consequential adjustments” by the Minister).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 169 - Subsection 169(3) a settlement agreement referring to partnership loss allocations included partnership gains allocations 516

Abdalla v. The Queen, 2017 TCC 222 (Informal Procedure), aff'd 2019 FCA 5

a “poorly worded” CRA-drafted waiver nonetheless was good enough to effect a valid waiver of appeal rights when signed

Each of the taxpayers, whose credits for participating in a gifting tax shelter had been denied, had signed an Agreement to be Bound and Waiver of Objection and Appeal Rights (the “Waivers”) agreeing to be bound by the final decision in Mariano. The lead taxpayer in this case took the position that the Waivers were not enforceable because a) there was no valid consideration exchanged for the taxpayer’s promise; b) the CRA created conditions whereby the taxpayer’s consent was not fully informed; and c) the Waivers were obtained by way of undue pressure brought to bear on the taxpayer by the CRA.

Respecting the first issue, Rossiter CJ stated (at paras 15 and 16):

W.J. Alan & Company Limited v El Nasr Export & Import Company, [1972] 2 QB 189, [1972] 2 All ER 127 … held that no consideration needed to be moving from the party which benefits from the waiver. …

…If I am in error … that [no] consideration is required, I am of the view that there is good and valid consideration flowing to the Appellant. The Appellant received the benefit of not having to spend any time or effort or cost because her appeal did not proceed … [and] the Respondent held the Appellant’s objections in abeyance, and ensured the Appellant’s assessments would be confirmed in accordance with the lead case.

After referring to the statement in Saskatchewan River Bungalows, [1994] 2 S.C.R. 490 at para. 20 that “Waiver will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them.” Rossiter CJ found that this test was satisfied here, stating (at para. 19) that although the letter was “poorly worded… if read in its entirety … there is a sufficient and adequate explanation in the letter [such] that a person would have full knowledge of the rights being waived” and (at para. 23) “the Appellant knew or ought to have known what she was signing.”

Respecting “undue pressure,” he stated (at para 26):

The case law … appears to point quite strongly that where CRA says to the Appellant either sign the waiver or we will close the file that is not undue pressure (McGonagle v The Queen, 2009 TCC 168... .

Accordingly, all 27 taxpayers were bound by the Waivers.

Words and Phrases
waiver

Taylor v. The Queen, 2010 DTC 1189 [at 3449], 2010 TCC 246

In finding that a waiver signed by the taxpayer of his rights to appeal, which he had agreed to in a meeting with CRA where it agreed to waive gross negligence penalties, was binding on the taxpayers, Woods, J. noted (at para. 68) that the evidence did not establish that there was "an inequity of bargaining power due to ignorance, need or distress" and that there was not a sufficient evidentiary foundation for her to conclude that the settlement was more favourable to the government than to the taxpayer.

Administrative Policy

AD-19-01 Audit Agreement and Waiver of Objection Rights Guidelines 2019-02-19

Binding nature of audit agreements recognized

An audit agreement is an agreement between the CRA and a taxpayer where the parties set out the terms under which one or more audit issues will be assessed based on a common understanding and interpretation of the facts, audit policy and law applicable at that time. …

Rosenberg … addresses the binding nature of an agreement reached between the CRA and a taxpayer provided that neither party breaks their commitment to the agreement, and provided that the fact pattern relied upon in reaching the agreement does not change.

Binding audit agreement requires full disclosure and waiver

For the audit agreement to be binding, the taxpayer must:

  • disclose all material facts in elections, returns, applications, and other submissions as applicable, related to the issue(s) dealt within the audit agreement;
  • waive their right to object to the assessment of the issue(s) and provide a signed copy of the Waiver of Objection Rights to the CRA; and
  • in some instances, agree to pay the resulting taxes, penalties and interest owing as a result of the agreed upon assessment within the timeframes specified in the audit agreement.

… The waiver is a statement voluntarily signed by a taxpayer, or an authorized representative, to the effect that the taxpayer gives up both the right to object to, and to appeal, one or more issues identified in the audit agreement and set out in the waiver. More specifically, subsection 165(1.2) of the Income Tax Act (ITA) and subsection 301(1.6) of the Excise Tax Act (ETA) restrict a taxpayer from objecting to the assessment of an issue where the right of objection has been waived in writing. Further, subsection 169(2.2) of the ITA and subsection 306.1(2) of the ETA restrict a taxpayer from appealing the assessment of an issue where the right of objection or appeal has been waived in writing.

Waiver signifies that no further recourse

The waiver must contain statements to the effect that:… the impact of … subsection 165(1.2) of the ITA or subsection 301(1.6) of the ETA … have been explained and are understood to mean that no further recourse to any authority with respect to the assessment by the CRA of the waived issues is available upon signing the waiver.

International issues

Given that waivers do not extend treaty time limits and may not restrict a taxpayer's right to the mutual agreement procedure, they may not be of any assistance when dealing with cross-border transactions with a treaty country where the treaty provides a mutual agreement procedure to resolve disputes.

The relevant International Advisory Services Section Manager of the International Tax Division must be consulted in all cases where an audit agreement is being considered for a transfer pricing issue.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) 460

Subsection 169(3) - Disposition of appeal on consent

Cases

University Hill Holdings Inc. (Formerly 589918 B.C. Ltd.) v. Canada, 2017 FCA 232

settlement agreement terms were sufficiently clear to be enforceable

The Appellants were members of two film production tax-shelter limited partnerships (“collectively, “Glenelg”). A lawyer who was acting for them had entered into a settlement agreement with CRA which focused on a different LP with the same promoter, but which stipulated that the members of Glenelg would be assessed on a “basis consistent” with that for the other LP members. The Appellants appealed inter alia on the basis that the Tax Court Judge had erred in his interpretation of the Settlement Agreement as applied to the Appellants?

In dismissing their appeal, Boivin JA stated (at paras 56 and 57):

…[T]he parties had continued their settlement discussions and modified the wording of the agreement before finalizing it… .

…[T]he Tax Court Judge applied “the “cardinal presumption” that [the parties] have intended what they have said”… and concluded that “[t]he settlement constitutes a binding agreement satisfying the basic principles of contract law, including that there was a meeting of the minds and that the terms of the Settlement Agreement are sufficiently certain”… . I see no reason to interfere with this conclusion… .

He went on to note that the Galway principle did not preclude a settlement agreement which stipulated the disallowance of various categories of expenses or round percentages thereof given that this was not inconsistent with s. 67, which could be applied to disallow only a portion of expenses.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) a settlement agreement agreeing as to round percentages of expenses that were unreasonable accorded with Galway 299

See Also

984274 Alberta Inc. v. The Queen, 2019 TCC 85

voidness of assessment against 2nd taxpayer to a settlement agreement meant that it could not be assessed under s. 169(3)

In its 2003 taxation year, the taxpayer’s parent (Henro) transferred 84 acres of Alberta land to it on a s. 85(1) rollover basis. The taxpayer then sold the land and realized a capital gain. Its 2003 return reported that gain and was assessed as filed, later in 2003. In 2009, the taxpayer purported to deliver a waiver of the normal reassessment period for its 2002 year. In 2010, after assessing Henro on the basis that the land was inventory, so that its drop-down occurred on a non-rollover basis, the Minister assessed the taxpayer to reduce its 2003 capital gain to nil and made a payment to the taxpayer of $2.6M comprising a refund of the 2003 capital gains tax of $1.8M plus refund interest.

In 2014, the Minister and Henro entered into a settlement agreement pursuant to s. 169(3) to which the taxpayer also was a signatory. It provided that CRA would reinstate the 2003 capital gain in computing the taxpayer’s 2003 income, and reduce Henro’s business income for 2003 by the same amount. The Minister assessed the taxpayer in 2015 for the indicated taxable capital gains plus a return of the refund interest and for arrears interest.

Smith J found that the 2010 reassessment was void because the waiver purportedly permitting it had been given beyond the normal reassessment period. Accordingly, the settlement agreement only related to (valid) proceedings against Henro and not against the taxpayer. It followed that “the taxpayer” whose consent was referred to in s. 169(3) was Henro and not the taxpayer. Accordingly, the 2015 assessment of the taxpayer was void to the extent that it purported to implement the terms of settlement pursuant to s. 169(3), and the taxpayer was not precluded by s. 165(1.2) from objecting to the 2015 reassessment of it.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(ii) reassessment made pursuant to late waiver was void 32
Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) reassessment made pursuant to late waiver could not be cured by s. 152(8) 45
Tax Topics - Income Tax Act - Section 164 - Subsection 164(1) invalid reassessment could not establish a refund amount 259
Tax Topics - Income Tax Act - Section 160.1 - Subsection 160.1(1) refund made pursuant to a void reassessment was not made pursuant to the Act (and also was not a “refund” on ordinary principles) so that s. 160.1(1) unavailable 472

Savics v. The Queen, 2019 TCC 71

a settlement agreement referring to partnership loss allocations included partnership gains allocations

The taxpayer (and about 1200 other investors) was assessed on the basis that three limited partnerships in which he had invested did not exist (as the partners were not carrying on business in common with a view to profit), with the result that losses that had been allocated to him by the LPs for initial years (e.g., 1995 and 1996, and (income account) gains that were so allocated to him for subsequent years (e.g., 1997 and 1998), were excluded from the revised computation of his income for those years. In 2012, the taxpayer accepted (in connection with waiving any right of appeal pertaining to the 1995 and subsequent years) a settlement agreement which provided that much of the LP losses allocated to the investors would be allowed and that related interest and carrying expenses personally incurred by them also would be allowed and that capital gains from the dispositions of their units would be included in the computation of their income – but was silent as to the treatment of the gains that had been allocated to them by the LPs. Pursuant to the settlement agreement, CRA reassessed to allow the agreed losses for 1995 and 1996 and to include LP gains in the income of the taxpayer for 1997 and 1998. At issue was the taxpayer’s appeal of the inclusion of his computed share of LP gains for 1998.

Sommerfeldt J indicated (at para. 22) that, even in the absence of s. 169(2.2) “a waiver of a right of appeal against a tax assessment is valid,” but that “if a settlement-implementing reassessment is not in keeping with the agreement that the taxpayer and the fiscal authority have reached, a waiver of the right to appeal will not preclude the taxpayer from appealing in respect of the aspect of the reassessment that does not coincide with the settlement agreement,” and noted that in light of Sattva, regard must be had to the factual matrix surrounding the settlement agreement in interpreting its terms (including the reference to permitted “consequential adjustments” by the Minister), He then found that CRA’s reassessment was consistent with the settlement agreement, stating (at para. 42) that:

[T]he Settlement is premised on the recognition of the existence of the Partnerships … . A logical result or inference (i.e., a consequence) of this premise is that the losses and gains allocated by the Partnerships are also to be recognized. In other words, recognizing the gains was a result or consequence of the recognition of the existence of the Partnerships, such that the inclusion of the gains in computing Mr. Savics’ income for 1998 was, for the purposes of … the Minutes … a consequential adjustment. It would be inconsistent to recognize the existence of the Partnerships and to deduct the losses allocated by the Partnerships, but not to include the gains allocated by the Partnerships. …

Furthermore, given that “Galway precludes a taxpayer and the Crown from arriving at a settlement that has no basis in the ITA” (para. 43), and in light of the valid existence of the LPs, “a settlement that did not recognize the inclusion of those gains in his income for 1998 would be indefensible on the facts” (para. 45).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 169 - Subsection 169(2.2) waiver does not preclude appeal where settlement agreement improperly implemented 235

CBS Canada Holdings Co. v. The Queen, 2018 TCC 188

CRA could repudiate a settlement based on factual inaccuracy only where that agreed fact had “no bearing to reality”

At issue was the quantum of non-capital loss that was available for carry-forward for deduction in the taxation year (“TY”) of the taxpayer (“CBS”) ended on March 7, 2007. Following a CBS appeal and protracted negotiations with the Justice lawyer, CBS and Justice executed Minutes of Settlement including a Schedule specifying the portion of a $23.4 million non-capital loss to be allowed for the March 7, 2007 TY and a net capital loss to be denied for the subsequent TY. However, shortly thereafter, the Justice lawyer:

advised CBS counsel that “Contrary to its prior understanding, the CRA has recently discovered that there are no non-capital losses available for carry forward to the taxation years under appeal” and cannot issue reassessments contrary to the provisions of the Income Tax Act.

After finding that a settlement agreement had been reached (given the parties’ mutual intention to create legal relations, the flowing of consideration, sufficiently clear terms, and a matching on all essential terms), Lyons J went on to note (at para. 62) that:

University Hill … reaffirmed the principles in Galway and CIBC and commented that settling the quantum of expenses is not an all or nothing function and involved a compromise of facts, therefore, “the Court will only interfere if the agreed‑upon facts clearly have no bearing to reality.”

In finding that this “bearing to reality” test was satisfied, she stated (at paras. 77 and 78):

I … find that the [non-capital loss] existed and was available for carry-forward to the March 2007 TY having flowed from the Pool from years prior to the 2007 Years that had been reassessed by the Minister based on the CRA records which included CBS’ filings.

I conclude that the agreed fact in the Minutes - that the $24,366,301 is available - is grounded in objective reality. As such, the agreement to reassess on that basis is defensible on the facts (and the law) and the agreement is therefore binding, valid and enforceable against the Minister.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) settlement agreement was grounded in reality 125

Granofsky v. The Queen, 2016 TCC 181, aff'd 2017 FCA 119

taxpayer’s counsel can consent in writing to reassessment of the taxpayer

After the taxpayer had appealed reassessments (for unreported income totalling $3,128,324) to the Tax Court, an out-of-court settlement document was signed by Ms. Tremblay (the taxpayer’s counsel), with reassessments pursuant to s. 169(3) then following. The taxpayer argued inter alia that no consent had been made by him personally as required under s. 169(3).

D’Auray J found that Ms. Tremblay had been given a mandate to settle, made clear by an email response from the taxpayer that stating: “accepted ok” (para 35). D’Auray J further stated (at para 42):

In my view, when a party is represented by counsel, such counsel, for the purpose of settling an appeal, may consent in writing on behalf of the taxpayer in order for the Minister to issue a reassessment.

Scott JA in the Court of Appeal agreed with this finding, stating (at para. 6) that

[T]he counsel of record…was entitled to provide, for the purpose of executing the [settlement] Agreement, the "consent in writing" referred to in subsection 169(3).

D'Auray J also stated (at para. 44):

Subsection 169(3) of the Act does not require an out-of-court settlement signed by both parties. Subsection 169(3) of the Act states: “The Minister may at any time reassess, with the consent in writing of the taxpayer.” The procedure under 169(3) is different from a Consent to Judgment pursuant to section 170 of the Tax Court of Canada Rules (General Procedure) where both parties have to consent in writing.

Bolton Steel Tube Co. Ltd. v. The Queen, 2014 DTC 1102 [at 3202], 2014 TCC 94

s. 169(3) reassessment cannot increase quantum of previous assessment

In 2007 the Minister reassessed the 1996 taxation year of the taxpayer ("Bolton") by adding $602,998 in alleged unreported sales to Bolton's reported income of $1,260,074 (for a total of $1,863,072) - but later conceded that Bolton's income had been overstated by $403,219 at most.

The Minister subsequently accepted a Bolton offer to settle by varying the 2007 reassessment "in order to add $403,219 to Bolton's income." The Minister treated "Bolton's income" as referring to its income as reassessed rather than as reported, and accordingly reassessed by adding $403,219 to the $1,863,072 of income assessed in 2007.

In response to a Crown submission that s. 169(3), by overriding s. 152(5), permits the parties to enter into settlements which increases the tax from a previous assessment, Campbell J stated (at para. 33) that "the principle that the Minister may not increase tax from a previous reassessment, is a general limitation placed on the Minister's ability, as well as the Court's, to increase an assessment of tax."

Moreover, having regard to the "factual matrix, surrounding the settlement offer," the Minister's interpretation of its terms could not prevail - so that Bolton's agreement under the settlement agreement did not satisfy the requirement under s. 169(3) for it to consent to the addition of the phantom income to its income (para. 44).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence terms of agreement established with regard to "factual matrix" 110
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) reassessment to add fictitious income was void 312

169(4)

See Also

208539 Alberta Ltd v. The Queen, 2011 TCC 106 (Informal Procedure)

ITC documentation requirements do not apply to Division III tax on importations

The sole shareholder of the company paid the $96,124.78 amount demanded by Canada Customs for under-reported amounts on importation, and then claimed an ITC for the amount shown as GST. S. D’Arcy J. found that $17,039 of this amount was collected by Canada Customs as GST paid on importation and that when the shareholder paid the amount in question, he did so as agent of the company, so that it was entitled to the ITC.

As well, D’Arcy J. found that the Customs correspondence constituted the documentation required by s.169(4), and that the documentation requirements of the Input Tax Credit Information (GST/HST) Regulations do not apply to Division III tax on importations, stating (at para. 26):

It is clear from the wording of the regulations that the regulations are only intended to apply to tax paid by a recipient to a supplier under Division II of the GST Act. The regulations do not apply to tax collected by Canada Customs under Division III of the GST Act.