Section 171

Subsection 171(1) - Disposal of Appeal


Canada v. Oxford Properties Group Inc., 2018 FCA 30

GAAR question as to determining a provision’s object was subject to correctness standard

Before overturning the findings below that the transactions in question had not abused ss. 97(2) and 100(1), so that s. 245 applied, Noël CJ stated (at para. 39):

The inquiry as to whether there has been an abuse gives rise to a question of mixed fact and law and is therefore subject to the standard of palpable and overriding error … . However, the abuse analysis proceeds in two stages. The first stage requires the determination of the object, spirit and purpose of the provisions giving rise to the tax benefit while the second turns on whether the provisions, so construed, were frustrated by the tax benefit achieved (Trustco at para. 44). The object, spirit and purpose of a provision is discerned by way of statutory interpretation (Copthorne at para. 70). This gives rise to a question of law and is an extricable part of the analysis. It is therefore subject to the standard of correctness (Trustco at para. 44; Housen at paras. 8, 37).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) using the s. 88(1)(d) bump on newly-formed rental property LPs to avoid indirect recapture income under s. 100(1) was abusive 975
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) s. 88(1)(d) bump is intended to permit the transfer of ACB that otherwise would be lost to another property that is taxed in the same way 371
Tax Topics - Income Tax Act - Section 98 - Subsection 98(3) - Paragraph 98(3)(c) s. 98(3)(c) bump is intended to avoid gain realization where there has been no economic gain 267
Tax Topics - Income Tax Act - Section 69 - Subsection 69(11) 3-year time limitation in s. 69(11) did not establish safe harbor for avoidance of recapture on sale after that period 382
Tax Topics - Income Tax Act - Section 100 - Subsection 100(1) purpose is to ensure that latent recapture will be recognized on sale to tax exempt 254
Tax Topics - Income Tax Act - Section 97 - Subsection 97(2) object includes ultimate taxation of the deferred gain 234
Tax Topics - Statutory Interpretation - Hansard, explanatory notes, etc. statement that amendment was for “clarification” was self-serving 209
Tax Topics - Statutory Interpretation - Interpretation Act - Subsection 45(2) determination of whether amendment merely clarified requires review of pre-amendment state of law 146
Tax Topics - Income Tax Act - Section 245 - Subsection 245(2) consequential s. 245(2) adjustment must be scaled to the abuse 391

Kruger Incorporated v. Canada, 2016 FCA 186

Minister implicitly directed to reduce taxpayer's income below that originally filed

A reassessment added back $72M to the taxpayer’s income for 1998, being the difference between its claimed mark-to-market loss on its options of $91M, and the 1998 amortization as to $19M of net option premiums. Noël CJ considered that premium amortization did not accord with mark-to-market accounting, and directed the Minister to reassess on the basis that the taxpayer was entitled to use the mark-to-market accounting, but without deferring or amortizing any portion of the premiums paid or received during 1998. This might effectively have been a direction to reduce the taxpayer's taxable income to below that originally reported.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Timing non-statutory mark-to-market accounting was permissible under s. 9 468
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Inventory derivatives not held for resale are not inventory 175

Imperial Oil Resources Limited v. Canada (Attorney General), 2016 FCA 139

Tax Court has no jurisdiction to hear an appeal on the computation of refund interest

The second taxpayer (“IOVRL”), like the first, took the position that remission payments should be treated in the same manner for purposes of entitling the taxpayer to refund interest under s. 164(3) as instalment payments. The Minister first communicated her decision that there was no entitlement to refund interest through a notice of reassessment issued June 10, 2003 with respect to IORVL’s 1996 taxation year. Noël CJ noted (at para. 21) that:

IORVL’s objection did not extend the time for making an application for judicial review as the objection provisions under the ITA do not allow for a challenge being brought against a remission granted pursuant to the FAA. The 30-day delay under subsection 18.1(2) of the Federal Courts Act…had therefore lapsed by some seven years when IORVL filed its application on December 23, 2010 [for judicial review of the Minister’s failure to grant refund interest].

In rejecting “IORVL’s contention that the Minister’s refusal to pay refund interest could only be challenged after the objection process had been exhausted” well after 2003, Noël CJ stated (at para. 61):

The objection procedure before the Minister and the subsequent right to bring an appeal before the Tax Court only applies to assessed amounts… . An assessment determines or confirms the liability of a taxpayer to pay specified amounts. Pursuant to subsection 152(1) of the ITA, the only amounts that can be assessed are taxes, interest and penalties. To be clear, assessed interest is interest claimed by the Minister pursuant to the ITA (see for example section 161), and interest payable by the Minister pursuant to section 164 does not come within that description. As explained by Rip J….in McMillen, the amount of a refund resulting from an overpayment, although often set out on the notice of assessment, is not an assessed amount (McMillen, para. 47). The objection procedure does not apply to a contested refund and the Tax Court is therefore without jurisdiction to hear an appeal pertaining to its computation… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 164 - Subsection 164(7) remission payment did not generate interest entitlement 299

Jaft Corporation v. Canada (AG), 2014 DTC 5080 [at 7056], 2014 MBQB 59

superior court declined jurisdiction to consider equitable remedy that bore heavily on parallel tax court proceedings

CRA had found that the applicant's research into solutions for Sick Building Syndrome based on air treatment qualified for scientific research and experimental development credits. In proceeding to develop related products, the applicant employed several individuals on terms that their compensation be based "solely on the work done that meets the requirements of SR&ED." The applicant applied the presumed SR&ED credits towards payroll remittances. CRA found that the work did not qualify, and the taxpayer applied to have the employment contracts rescinded or declared void ab initio.

McKelvey J dismissed the application on jurisdictional grounds. "[R]escission, if granted, would serve to alter the essence of the litigation before the TCC" (para. 26). She did not address the applicant's argument that the application was essentially for equitable relief (the equitable doctrine of rescission being broader than the common law doctrine of void ab initio), which the Tax Court has no jurisdiction to grant - although she went on to find, in the alternative, that such relief should not be granted in any event (see summary under General Concepts - Rescission).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Rectification & Rescission attempt to rescind employment contracts, on the basis that employees had not satisfied scientific research & experimental development requirements, was retroactive tax-planning 210

SRI Homes Inc. v. Canada, 2012 DTC 5135 [at 7284], 2012 FCA 208, allowing appeal from 2011 TCC 386

inadequate reasons

The trial judge's reasons essentially paraphrased: an agreed statement of facts, the Minister's assertions, a copy of the Minister's framing of the issues, and (very briefly) the taxpayer's and (somewhat more extensively) the Minister's arguments. The two closing paragraphs stated "I agree with the reasoning outlined by [Minister's counsel] in his argument" and "the appeals are dismissed, with costs."

The Court found that the trial judge's reasons were inadequate, failed to satisfy the taxpayer's right to procedural fairness and remitted the matter back to the Tax Court for redetermination by a different judge. The Court applied the "functional approach" set out in R. v. R.E.M., 2008 SCC 51, which provides (at R.E.M. para. 25):

[The functional approach requires] reasons sufficient to perform the functions reasons serve - to inform the parties of the basis of the verdict, to provide public accountability and permit meaningful appeal. The functional approach does not require more than will accomplish these objectives.

In the present circumstances the trial judge's reasons did not serve their proper function:

  • The reasons failed to account for the competing theories put before the court. The judge accepted, without explanation, the Minister's framing of issues and ignored the taxpayer's.
  • The Minister's reasons that the trial judge "agreed" with were internally inconsistent. They relied on different characterizations of events, and it was unclear which the trial judge had chosen (or that he had chosen any at all).
  • The judge failed to reference any of the viva voce evidence adduced by the taxpayer in a three day trial, so that there was no basis for an appellate court to know which evidence had been rejected by him.
  • The trial judge rejected a supposed taxpayer argument that the taxpayer had not made, suggesting that the judge had not understood the issues before him.

Canada v. Nunn, 2007 DTC 5111, 2006 FCA 403

sham finding not argued

The trial Judge on her own initiative, without this issue being raised in the pleadings or argued, had found that an investment by the taxpayer was a sham. Malone J.A. found that this amounted to a violation of a principle of natural justice and set aside the judgment.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Sham misrepresentation element of sham 87
Tax Topics - General Concepts - Tax Avoidance misrepresentation element of sham 87

Rezek v. Canada, 2005 DTC 5373, 2005 FCA 227

impermissible new theory

Absent the finding of the Tax Court judge that a convertible hedge is a separate property, the appeals of the taxpayer would have been allowed. Therefore, this finding constitute an impermissible new basis of assessment after the limitation period for assessing had expired.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 150 - Subsection 150(1) - Paragraph 150(1)(d) s. 39(4) elections that were made with late-filed returns were valid as being made "in the taxpayer's return" 146
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property 129
Tax Topics - Income Tax Act - Section 39 - Subsection 39(4) 144
Tax Topics - Income Tax Act - Section 96 spouse carrying on linked legs of integrated trading transactions 204
Tax Topics - Statutory Interpretation - Resolving Ambiguity 54

Pedwell v. The Queen, 2000 DTC 6405 (FCA)

The Tax Court Judge had erred in finding the taxpayer liable on a basis different from that in the Minister's notice of reassessment which was at issue in the tax appeal. The reassessment was quashed.

La Compagnie Price Limitée v. The Queen, 95 DTC 428 (TCC)

The Minister reassessed the taxpayer in accordance with a Federal Court judgment issued pursuant to a consent to judgment (as subsequently varied). The taxpayer objected to the reassessment on the basis that it did not properly compute its logging tax credit. In dismissing the taxpayer's appeal, Garon TCJ. noted that the reassessment accorded in every respect with the consent judgment and (at p. 433):

"If this Court were permitted to consider and decide a question that has not been examined and the decision rendered following a consent to judgment by the parties, it would follow that this Court would have the power vary its own judgment. We know that it is clearly recognized that a court of justice may vary one of its judgments only in certain quite specific circumstances that are described in ... Gunnar Mining ..."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Stare Decisis 141

The Queen v. Optical Recording Laboratories Inc., 90 DTC 6647, [1990] 2 CTC 524 (FCA)

A reassessment, which was in the same amount as a previous assessment except that it assessed accrued interest, was therefore a reassessment rather than an additional assessment within the meaning of the Abrahams case, and thereby rendered the first assessment void. However, the voiding of the first assessment did not affect the validity of collection proceedings which had been undertaken pursuant to that unpaid assessment.

Sharip v. The Queen, 87 DTC 5206, [1987] 1 CTC 302 (FCTD), aff'd 88 DTC 6484, [1988] 2 CTC 344 (FCA)

Until such time as a formal decision pursuant to s. 171(4) has been made, the judge has the power to reconsider his decision as to the disposition of the case. After the making of a formal decision, he can amend it to correct an error (in this case, allowing the appeal when it was apparent from the judge's amended reasons for judgment that he intended to dismiss the appeal).

McCambridge v. The Queen, 79 DTC 5412, [1979] CTC 473 (FCA)

"If Parliament had intended to provide that one means of disposing of an appeal could be by way of filing a notice of discontinuance, it would have been an easy matter to so provide in the statute." The taxpayer, after advising the Tax Review Board in writing that his appeal was withdrawn, was entitled to have his appeal heard by the Board, because the Board had not responded to the letter of withdrawal by issuing a judgment.

Vineland Quarries and Crushed Stone Ltd. v. MNR, 70 DTC 6043 (Ex Ct)

permissible alternative basis

The taxpayer filed a notice of appeal to an assessment by the Minister which reflected a disallowance of a portion of the taxpayer's capital cost allowance claims on the basis that the taxpayer's business was principally mining, so that the taxpayer was not eligible to treat the depreciable assets in question as being Class 19 assets. After filing his Reply, the Minister later sought to amend the Reply by seeking, in the alternative, the denial of capital cost allowance claims made by the taxpayer on another class of assets ("Schedule E assets") on the basis that if (contrary to the Minister's submission) the taxpayer's business was not principally that of mining, those assets were not eligible (Schedule E) assets.

In allowing this amendment, Cattanach J. indicated that the Minister, through this amendment, was not seeking to increase the amount of his assessment, but merely reducing the amount of the downward adjustment in the Minister's assessment if it were found that the basis of the Minister's assessment was wrong.

See Also

Canadian Imperial Bank of Commerce v. Canada, 2021 FCA 96

Tax Court not bound by an admission contrary to the interpretation of an agreement reviewed by it

After finding that, under an agreement between the appellant (CIBC) and Aeroplan, the supply made by Aeroplan to CIBC was essentially labelled as promotional services rather than the supply of property (the Aeroplan Miles), so that such supply should be classified as the supply of a promotional service for GST purposes, Webb JA went on to state (at paras. 62, 66):

At the hearing of the appeal, CIBC raised an additional ground of appeal ... that the Tax Court Judge erred in finding that the predominant supply was promotional and marketing services because the Crown had not raised this argument before the Tax Court Judge. …

The Tax Court Judge was not bound by any admission that CIBC was paying for Aeroplan Miles in light of the agreement, which was properly tendered as evidence at the Tax Court hearing, and which clearly states that the payments made by CIBC were in consideration of Aeroplan “referring or arranging for Aeroplan Members and other members of the public to make Card Applications”.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply agreement between bank and Aeroplan labelled the bank as receiving promotional services rather than purchasing Aeroplan Miles (being, mooted gift certificates) 477
Tax Topics - Excise Tax Act - Section 181.2 Aeroplan Miles were considered, by the sole Justice addressing the issue, to be gift certificates since no significant conditions to their redemption 348
Tax Topics - Excise Tax Act - Section 309 - Subsection 309(1) Tax Court not bound by an admission contrary to the evidence before it 173
Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 27 - Subsection 27(1.3) fresh argument could not be made by taxpayer at the Court of Appeal level 190

Leonard v. The Queen, 2021 TCC 33

Court not bound by an erroneous admission by one of the parties

After noting an admission by the Crown that the taxpayer had realized a loss on mortgage debt on foreclosure proceedings notwithstanding that, as part of the foreclosure proceedings, he had obtained a deficiency judgment against the mortgagor (so that the debt remained outstanding, unless it had been novated), Sommerfeldt J stated (at para. 80):

[W]hile this Court will not generally look behind a formal admission by a party, this Court is not bound by an admission that is shown, through properly tendered evidence, to be contrary to the facts. … Accordingly, where an admission is contradicted by the evidence, the admission should be regarded as having been made in error.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss - Debt loss on mortgage that was acquired in order to acquire the underlying property under foreclosure proceeding on income account was also from an adventure 347
Tax Topics - Income Tax Act - Section 9 - Timing cost of mortgage debt acquired as adventure not deductible when expended 53
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition foreclosure proceedings resulted in disposition of the mortgage but not of the debt it had previously secured 471
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition - Paragraph (b) - Subparagraph (b)(i) on a foreclosure, the taxpayer disposed of his mortgage, even though the debt it secured remained outstanding 429
Tax Topics - General Concepts - Evidence Manitoba law, being where the Tax Court hearing was held, was the lex fori governing the mortgage foreclosure proceeding at issue regarding a U.S. property 178

Dow Chemical Canada ULC v. The Queen, 2020 TCC 139

the range of s. 171 remedies can be applied to an assessment that does not implement a requested s. 247(10) downward adjustment

In reassessing the taxpayer under s. 247(2), the Minister did not allow a requested “downward” adjustment under s. 247(10) (to increase the interest expense on a loan from a Swiss affiliate by $3.26 million) because of a limitation period in the Canada-Switzerland Tax Treaty. A Rule 58 question was put to the Tax Court, which was essentially whether it was the Tax Court that had jurisdiction regarding the taxpayer’s challenge to this denial, or whether the only recourse was to the Federal Court for judicial review of the Minister’s decision to disallow.

Monaghan J found that the Tax Court had jurisdiction over the reassessment, including as it related to the denial of the downward adjustment. True, a decision under s. 247(10) is one for the Minister to make and, in that sense, it is a discretionary (although it is non-discretionary in that it must be made.) However, “that decision must be made judicially, i.e., in accordance with proper legal principles” (para. 144). This situation was similar to the line of cases finding that the Exchequer Court could review whether the Minister’s exercise of a right under the Income War Tax Act to disallow (through a corresponding assessment) expenses that the Minister determined to be unreasonable was “well-founded in fact and law” (para. 126).

If the Tax Court determines that the Minister’s determination under s. 247(10) was not “correct in fact and law” (para. 201), the resulting assessment can, for example, be sent back to the Minister for redetermination.

Monaghan J stated (at para. 213):

… The Tax Court will address all challenges to the correctness of the assessment made after the transfer pricing provisions have been applied, including whether the conditions for their application are met, the amount of any adjustments, the liability for penalties and whether the Minister exercised her discretion properly. Once the Tax Court decides to allow an appeal of an assessment on the basis that the Minister did not act properly in exercising her discretion, the powers available to it under section 171 provide it with the relevant remedies.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(10) TCC has jurisdiction to review whether a CRA denial of a downward s. 247(10) adjustment was “correct in fact and law" 806
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(11) s. 247(11) only addresses penalty assessments 197

Rousseau v. Agence du revenu du Québec, 2020 QCCA 1308

Court of Quebec lacked jurisdiction under equivalent of ITA s. 171(1) to consider source deduction issue

The taxpayer, who had been employed in Alberta and been subject to source deductions based on the federal and Alberta rates, was found by the Court of Quebec to be a Quebec resident. The taxpayer now submitted that the Court of Quebec should have recognized his right to deduct the Alberta portion of the source deductions made to CRA. The Court of Appeal rejected this submission on the basis that, under the Quebec equivalent of ITA s. 171(1) (TAA s. 93.1.21), the Court of Quebec lacked jurisdiction to consider this issue.

After referring to three germane federal decisions (Neuhaus, 2002 FCA 391, Boucher and Paradis), the Court stated (at paras. 25, 27, TaxInterpretations translation):

The same solution applies here. The jurisdiction of the Court of Quebec under TAA section 93.1.21 is limited to the assessment by the Minister. …

It must be concluded that the question of the deduction of a portion of the withholding taxes made by the Government of Canada does not fall within the jurisdiction of the Court of Quebec … .

Wiegers v. The Queen, 2019 TCC 260 (Informal Procedure)

no jurisdiction to order the renewal of a settlement offer or cancellation of interest

The taxpayers, who had participated in a gifting tax shelter, claimed that they had not learned of a settlement offer made to other participants in the program (which inter alia offered to waive interest from the date of the reassessments until the time of the offer). In rejecting the taxpayers’ request that the Tax Court cancel the accumulated interest on their assessments, MacPhee J stated (at para. 24):

The case law is clear: if a taxpayer wants a review of the Minister’s decision concerning interest relief he must file an application for judicial review at the Federal Court under section 18.1 of the Federal Courts Act … .

In also rejecting their request for an order requiring the respondent to make a settlement offer consistent with that previously made, he stated (at para. 27):

[I]t remains clear and obvious, upon a review of the jurisdiction of the Tax Court as listed at section 171 of ITA, I cannot force either the Minister nor the Respondent to remake an expired settlement offer to an appellant.

Sterritt v. The Queen, 2018 TCC 117 (Informal Procedure)

the Ontario Superior Court of Justice or the Federal Court, not TCC, had the jurisdiction to order a refund

The taxpayer stopped filing his tax returns beginning with the 2003 taxation year. Following a request by CRA, in February 2014 the taxpayer filed his late returns for 2003 and subsequent years and claimed a refund for overpayment of taxes for his 2003 year, which the Minister denied on the basis of the claim not having been filed within 10 calendar years of the end of the 2003 taxation year.

Russell J dismissed the taxpayer’s application for an order to the Minister to pay him a refund, stating (at para. 8):

…[S]eeking that the Minister be ordered to issue the refund is not an aspect of deciding if an assessment or reassessment or a notice of loss determination is right or wrong. Thus it is not within the jurisdiction of this Court. It likely is within the jurisdiction of Ontario’s Superior Court of Justice as the Appellant resides in Ontario and as well within the jurisdiction of the Federal Court.

Isah v. The Queen, 2018 TCC 28 (Informal Procedure)

TCC has jurisdiction to address incorrectly computed assessment interest

The taxpayer, through the services of a now elusive “Mr. K,” had claimed charitable donations totalling approximately $18,000 for his 2009 to 2011 taxation years, which were fictitious except as to one $45 donation. After confirming the Minister’s reassessments including for gross negligence penalties, Russell J stated (at para 17):

…I note that the Appellant is unhappy that he was assessed interest in the appealed reassessments. I believe at the hearing I advised that interest relief was not a matter over which this Court has jurisdiction (unless the wrong interest rate was used or otherwise a wrong calculation of the interest was made, thereby affecting the balance of the appealed (re)assessment). Rather, it is the Minister per subsection 220(3.1) of the Act who has discretionary jurisdiction to waive or cancel interest (and penalties), with right of judicial review of these discretionary decisions to the Federal Court per section 18.1 of the Federal Courts Act.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 161 - Subsection 161(1) TCC has jurisdiction to correct incorrectly computed assessment interest 105

R & S Industries Inc. v. The Queen, 2017 TCC 75

Tax Court had jurisdiction to consider change to description of consideration in s. 97(2) election form

R & S Industries was unsuccessful in a motion to have the Federal Court direct CRA to reconsider its decision to not permit R & S Industries to file an amended s. 97(2) election form so as to change the agreed amounts. R & S then appealed to the Tax Court with a view to convincing the Court that the allocation of consideration between partnership-interest and non-partnership interest consideration set out on the (T2059) election form did not reflect the actual agreed allocation. CRA viewed this as an attempted end run around R & S’s inability to amend its election, and sought to have the appeal dismissed on jurisdictional grounds.

Graham J considered that there was a crucial distinction between the T2059’s agreed amounts, which could not be altered by the Minister, and the allocation of the consideration, which was a purely factual matter which was merely recorded on the T2059, and which either CRA or the taxpayer were free to challenge in the Tax Court as not according with the actual facts. Accordingly, the Crown’s jurisdictional challenge was dismissed.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 97 - Subsection 97(2) taxpayer is not bound by the statement of boot set out in its s. 97(2) election form 367

Deluca v Canada, 2016 ONSC 3865

no tort damages against CRA for tort damages based on its denial of deductions

The taxpayer used proceeds of a loan from “Barter World Canada Inc.” to acquire “TradeBux” from another Barter World entity (as well as to make a cash prepayment of the loan interest), donated the TradeBux to a registered charity (“LWIF”) and received a receipt equal to their alleged value. He could earn TradeBux through referrals and completing surveys online so as to repay the loan. In addition to appealing CRA’s disallowance of his charitable credits to the Tax Court of Canada, he brought this claim in Superior Court alleging principally that CRA’s negligence in failing to revoke LWIF’s charitable registration until a subsequent year caused him to make the charitable donations in question, thereby resulting in damages.

In considering whether this claim came within the exclusive jurisdiction of the Tax Court, and before striking the statement of claim in its entirety, Dunphy J stated (para 24) that the taxpayer could not “plead by way of tort damages as against the Crown in right of Canada the value of the very benefit he is ineligible to receive from the same Crown in right of Canada by the terms of a statute of Parliament (in this case, the ITA).” However, on the basis that the taxpayer pleaded some damages that were independent of the failure to qualify for the benefit of the tax deduction, Dunphy J found that he could not strike the entire claim, but instead struck so much of the damages claim as is measured by reference to the plaintiff’s inability to receive the claimed tax benefit (para 25).

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Subsection 15(1) tax shelter participants are not an analogous class 95
Tax Topics - General Concepts - Negligence, Fiduciary Duty and Fault CRA has no duty to protect taxpayers from participating in tax shelters 362

Delle Donne v. The Queen, 2015 TCC 150

reserve could be claimed on appeal

Respecting an argument that the taxpayer was required by s. 20(1)(l) or (p) to have "included" the interest in income before being entitled to the reserve – whereas, in fact, neither income nor deduction appeared in the return (although an explanatory letter was attached) - Owen J stated "in any event…it is well established that it is open to a taxpayer to amend his return through the appeal process [citing Imperial Oil, 2003 FCA 289, at para. 10]" (para. 91). See summary under s. 20(1)(p)(i).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Investment Contract "debt" exists irrespective of demand 99
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(l) doubtful debt reserve claimed implicitly as at the year end in light of subsequently revealed information 542
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(p) - Subparagraph 20(1)(p)(i) bad debt deduction taken as at Dec. 31 in light of information available at April 30, and could be claimed implicitly or on appeal 478

Descarries v. The Queen, 2014 DTC 1143 [at 3412], 2014 TCC 75 (Informal Procedure)

free to raise an interpretation not advanced by either party

Hogan J found that the transactions at issue abused the object of s. 84.1, a general anti-avoidance rule analysis which the Crown had not suggested, and had raised this fresh point with counsel who then argued it before him (see summary under s. 245(4)). He stated (at para. 45):

…I do not believe that I am bound when deciding on a question of law to agree to an interpretation on which the parties agree.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) use of outside basis to step up PUC abused s. 84.1 544
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) holdco distribution made out of loan from still-operating sub - s. 84(2) did not apply 521

Fio Corporation v. The Queen, 2014 TCC 58

inherent jurisdiction to void reassessments which breach undertaking

The taxpayer was reassessed for its 2007 and 2008 taxation years, appealed to the Tax Court and then was further reassessed based on documents which it had provided on discovery. The further reassessments had breached the rule in Juman v. Soucette, 2008 SCC 8, that "information obtained on discovery…is subject to the implied undertaking [that] it is not to be used by the other parties, except for the purpose of that litigation." D'Arcy J found that the Tax Court had the ability to vacate the further reassessments, stating (at para. 71), that:

[A]ny statutory limits place on the Tax Court's jurisdiction when disposing of an appeal of an assessment ... do not apply in respect of a breach of an implied undertaking.

However, rather than vacating the further reassessments, he ordered that the discovered documents could not be used in any other proceeding.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) implied undertaking of confidentiality during discovery 196
Tax Topics - Income Tax Act - Section 241 s. 241 does not override implied undertaking rule 153
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Act - Section 17.2 time of commencement of appeal 150

Anonby v. The Queen, 2013 DTC 1154 [at 859], 2013 TCC 184 (Informal Procedure)

no declaration as to source deductions, or vacating of reassessment that would increase substantive liability

The taxpayer reported $42,000 of employment income on his return, and received a refund of approximately $4,000 based on $13,000 of source deductions (including $11,000 of income tax) having been withheld. CRA later concluded that no deductions had been made - therefore, the taxpayer was reassessed on the basis that his income was the $29,000 he actually received, so that the amount of tax shown on the reassessment was less than that in the original assessment. However, as his account was no longer credited for source deductions, his refund was denied an a balance of taxes owing was shown.

The taxpayer sought an order vacating the reassessment and leaving the original assessment (on $42,000) in place on the basis that the employer had deducted but failed to remit $11,000 of deductions.

C Miller J found that the Tax Court lacked the authority to make such an order. Firstly, whether deductions have in fact been collected is a matter for the Federal Court, not the Tax Court. However, C Miler J found that there was nothing to preclude him from making a finding of fact confirming that the taxpayer received net pay (para. 26).

Secondly, C Miller J found that "it is well-settled that the Court cannot increase the assessment under appeal" (para. 30). This follows from the principles that the Minister may not appeal an assessment, and that allowing an increase to such an assessment would constitute an "indirect" appeal (paras. 28-29).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1) no declaration as to source deductions, or vacating of reassessment that would increase substantive liability 241

Blackburn Radio Inc. v. The Queen, 2012 DTC 1213 [at 3580], 2012 TCC 255

no further reassessment permitted if order to vacate or vary

In 2009 the Tax Court found that a 2004 reassessment in respect of the taxpayer's 1999 taxation year had been made outside of the limitations period and vacated it. The Minister issued a reassessment in 2009 purporting to give effect to the Tax Court's decision, and purported to make consequential reassessments for 2000 and 2005 pursuant to s. 152(4.3).

Woods J. found that the consequential assessments could not be supported by s. 152(4.3) because, among other reasons, the 2009 assessment was statute-barred. The Minister argued that it was required to make the 2009 reassessment in order to comply with the Tax Court's decision. Woods J. stated (at para. 43):

I would have thought that the authority of the Tax Court of Canada to determine tax liability is clear by the precise wording in subsection 171(1) of the Act. Under this provision, if an appeal is allowed, the Court can either vacate the assessment, vary it, or refer the assessment back to the Minister for reconsideration and reassessment. If the assessment is vacated or varied, s. 171(1) does not contemplate that a further reassessment would be made.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 133
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.3) no further reassessment permitted if order to vacate or vary 298

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

D'Auray J. found that the Court had jurisdiction to enforce a settlement agreement between the taxpayers and the Minister. S. 169(3) provides that the Minister may make a reassessment with the taxpayers' consent, and the Court's powers under s. 171(1)(b) are adequate to give effect to the agreed reassessment.

Du-Perré c. La Reine, 2006 DTC 2965, 2004 TCC 773

In finding that in the Minister's Reply to the Notice of Appeal of the taxpayer, the Minister was entitled to allege that a number of transfers of property at an undervalue had been made to the taxpayer between December 28, 1996 and June 6, 1997, rather than there only being one transfer on December 28, 1996 as originally had been assumed by him at the time of his reassessment, Lamarre J. stated (at p. 2967) that "the Minister is free to raise any argument in support of his assessment as long as there is no prejudice to the Appellant by the surprise effect of the Minister's new allegation (see Loewen v. R. ... 2004 FCA 146, 2004 DTC 6321)"

Paradis v. The Queen, 2004 TCC 676 (Informal Procedure)

Tax Court had no jurisdiction to refund of alleged excessive source deductions or address collection matters

The Minister assessed the taxpayer’s return as filed, and applied the resulting refund amount by way of set-off against a student loan amount owing by him. The taxpayer did not challenge the amount of tax payable according to the notice of assessment, but noted that although he had worked in Ontario and was subject to source deductions as if he were an Ontario resident, he was a Quebec resident, and that the CCRA should give him back the excess withholding in order that the taxpayer could apply that amount to what he owed to Quebec.

In finding that she lacked the jurisdiction to address this issue, Lamarre J stated:

This Court's jurisdiction is, pursuant to section 12 of the Tax Court of Canada Act ... and sections 169 and 171 ..., restricted to having assessments vacated or varied if the amounts assessed are erroneous. If they are not, this Court can only confirm the assessment. The collection of taxes or the manner in which the government handles tax refunds are not matters within this Court's jurisdiction under the legislation. …

[A]s there is no valid appeal instituted before this Court under section 169 of the Act, the appellant's relief, if any, is most probably to be had by way of a declaration under subsection 18(1) of the Federal Courts Act.

Sudbrack v. The Queen, 2000 DTC 2521, Docket: 98-2386-IT-G (TCC)

Bowman A.C.J. found that The Queen v.Continental Bank of Canada, 98 DTC 6501, [1998] 2 S.C.R. 358 merely applied the long-standing rule governing litigation in appellate courts that litigants were prevented from raising points on appeal which were not pleaded and argued in the trial court, and did not stop the Crown from raising, prior to trial, alternative bases for supporting an assessment which had not been considered when the assessment was made.

Wendy Ann Eves Curoe v. Minister of National Revenue, 91 DTC 782, [1991] 1 CTC 2513 (TCC)

The taxpayer, which did not receive notification of the Tax Court hearing, was successful in having that judgment set aside on the basis of the inherent jurisdiction of the court.

Laskaris v. MNR, 90 DTC 1364, [1990] 1 CTC 2464 (TCC)

The taxpayer's accountant and a Revenue Canada appeals officer send an application to the Tax Court to withdraw the taxpayer's appeal with the intention that the taxpayer would re-file his appeal following the receipt of a notice of confirmation. Upon the dismissal of the appeal in response to this application, the taxpayer was precluded from filing a fresh Notice of Appeal. In addition, Sarchuk J. noted that the Tax Court would not have had the jurisdiction to accept a "discontinuance" or "withdrawal" of an appeal, rather than taking one of the actions listed in s. 171(1).

McMillen Holdings Ltd. v. MNR, 87 DTC 585, [1987] 2 CTC 2327 (TCC)

no jurisdiction to order payment of refund interest

The taxpayer, which had received a dividend refund for its taxation year ended July 31, 1982, on August 22, 1983, appealed to the Tax Court requesting a variance of the reassessment (dated December 19, 1983) of its 1982 year to provide that refund interest accrued on its refund claim (net of income tax payable) from July 31, 1982 until the date of the August 22, 1983 payment thereof, i.e., that the refund amount represented an "overpayment", within the meaning of s. 164(7) for its 1982 taxation year.

After finding that a dividend refund was not an "overpayment of tax" such as would entitle a taxpayer to payment of interest, Rip T.C.J further found that the Court had no jurisdiction to order payment of interest, stating:

An assessment by its very nature is a determination of liability of a taxpayer. An amount of money owed to the taxpayer by the Crown on account of interest is not an amount which is subject to an assessment or an assessed amount of money.

Rip T.C.J. found that the Court only had jurisdiction to hear and dispose of an appeal from an assessment and such was not in issue here, stating:

This Court has jurisdiction to render a decision where the amount of tax, interest or penalty payable, as assessed pursuant to subsection 152(1) of the Act, are in issue, but has no jurisdiction where the items of assessment are not in issue: The Queen v. B. & J. Music Ltd., 80 DTC 6219 (F.C.T.D.), per Grant, D.J., at page 6223….

The due exercise of this Court's jurisdiction on matters arising under the Act is to hear and determine an appeal from a tax assessment. I cannot overemphasize that the Court's original jurisdiction is to hear and determine appeals in matters arising under the Act; an action against the Crown based on the Act, but is not an appeal from an assessment, is not an appeal arising under the Act, which is within the jurisdiction of this Court.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 164 - Subsection 164(7) dividend refund not an overpayment of tax 210

Dominion Stores Ltd. v. Dep. MNR, 82 DTC 6214, [1982] CTC 235, 82 DTC 6217 (FCA)

It was stated that a concession by the respondent that the processing of ground beef constituted "the manufacture or production of goods" for purposes of the Excise Tax Act did not bind the Tariff Board. As the jurisdiction of the Board was conferred upon it by statute, not the respondent, it could make a finding that ground meat processing was not "manufacture or production."

Administrative Policy

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

no power to reassess following order to vacate or vary

Was the Minister permitted to issue a reassessment in order to give effect to a Court's order to vacate or vary an assessment under s. 171(1)? CRA stated:

In Blackburn Radio Inc. v The Queen, 2009 TCC 155…the Court correctly determined that the Minister does not have the authority to issue a reassessment to give effect to the Court's order to vacate or vary the assessment. Further, if a reassessment by the Minister is permitted or required in order to give effect to the Court's order to vacate or vary the assessment, this would render subparagraphs 171(1)(b)(i) and (ii) meaningless.

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 107
Tax Topics - Income Tax Act - Section 169 - Subsection 169(1) appeal from varied assessment 106


Zahra Nurmohamed, "Settling Tax Disputes - An Unsettling Proposition", Tax Litigation, Vol. X, No. 3, 2002, p. 638

Discussion of the Galway Doctrine.

McGregor, "Resolving Tax Disputes: A Justice Perspective", 1994 Conference Report, c. 30

Includes a discussion of the perceived judicial constraints upon the nature of a settlement that may be reached.

Paragraph 171(1)(b)


Canada v. CBS Canada Holdings Co., 2020 FCA 4

Tax Court order could contemplate increased taxes for 1 taxation year in implementing settlement agreement

Justice and the taxpayer (CBS) 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 taxation year and a net capital loss to be denied for the subsequent taxation year. After finding that this agreement bound the Crown insofar as the first taxation year was concerned, Woods JA noted that the Tax Court order giving effect to the agreement had the likely effect of not only reducing CBS’ tax for its taxation year ended March 7, 2007 but of also increasing tax for the subsequent taxation year – and then addressed the issue as to whether such an increase in tax for one of the taxation years was permissible under the ITA, and stated, in the affirmative (paras. 44-45):

It is significant that, in both Harris and Last, it was the Crown and not the taxpayer that sought an increase in tax. In effect, the Minister was attempting to appeal its own reassessment.

The facts in this appeal are quite different. It is CBS and not the Crown that seeks an order requiring a reassessment that may give rise to an increase in tax. The Crown is not attempting to appeal its own reassessment. Accordingly, the Harris principle has no application on these facts and cannot serve to prevent the appeal being allowed in accordance with the settlement agreement.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 169 - Subsection 169(3) Galway did not permit the Crown to resile from a settlement agreement negotiated in good faith 283

Subparagraph 171(1)(b)(iii)


Almadhoun v. Canada, 2018 FCA 112

TCC, after finding against the taxpayer, improperly directed CRA to “seriously” consider interest relief and tax remission
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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 122.6 - Eligible Individual - Paragraph (e) unsuccessful refugee claimant who was subsequently permitted to stay on compassionate grounds did not qualify 330
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Subsection 15(1) immigrant status not a protected s. 15 characteristic 261
Tax Topics - Statutory Interpretation - Ordinary Meaning supposed purpose cannot supplant clear language 79

Subsection 171(2)


Patel v. Canada, 2020 FCA 27

an appeal can be bifurcated under s. 171(2)

In reversing a decision of the Tax Court judge that s. 171(2) could not be applied to the appeal of the two taxpayers, Nadon J.A. stated (at paras. 2-3):

[T]he provision clearly allowed the judge, if he was so inclined in the exercise of his discretion, to give effect to the parties’ request to bifurcate the issues, as per their letter to the Tax Court … .

We also wish to say that considering that subsection 171(2) of the Act is applicable and thus not a bar to the parties’ request, the fact that the parties are in agreement with respect to the manner in which their tax appeals should proceed, is a highly relevant, although not determinative, consideration in the exercise of the discretion to allow or not the parties’ request.