Section 306.1

Subsection 306.1(1)

Cases

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 - Income Tax Act - Section 169 - Subsection 169(2.1) due diligence defence not raised 164

See Also

Club Intrawest v. The Queen, 2016 TCC 149, varied 2017 FCA 151

objecting to quantum was sufficient particularity
varied on other grounds

The Appellant charged annual time share maintenance fees to its individual members in October of each year, but charged its two members who were corporate developers on a monthly basis. In assessing the Appellant for various October reporting periods in respect of GST that the Appellant had not charged on the maintenance fees, CRA included the annual amount of the fees charged to the developers. After finding that this method did not comply with s. 168(1), D’Arcy J stated (at paras. 341-342):

Counsel for the Respondent argued that section 306.1 precluded the Appellant from raising this issue, since the Appellant is a specified person as defined in section 301 and did not raise the calculation of its net tax issue in its notice of objection.

I do not accept this argument. The Minister, under subsection 296(1), assessed the Appellant’s net tax for each October reporting period. In my view, the Appellant raised the application of section 225(1) as soon as it objected to the amount of the net tax it was assessed.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency annual fees charged by non-share corporation to its members were not reimbursements for expenses incurred by it as their agent 371
Tax Topics - Excise Tax Act - Section 142 - Subsection 142(1) - Paragraph 142(1)(d) s. 142(1)(d) only applies to a supply exclusively re real property 594
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Service payment of condo operating expenses was a service 201
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply single supply of covering all time share operating costs 164
Tax Topics - Excise Tax Act - Section 168 - Subsection 168(1) GST collectible based on invoicing times 77
Tax Topics - General Concepts - Ownership beneficial owner did not transfer property risk 177
Tax Topics - General Concepts - Evidence foreign law assumed the same 93

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

issues raised in Objection were understandable in light of previous materials provided to CRA

The appellant, a "specified person" under ETA s. 301, referred in its notice of objection to requests it had made to an auditor in the course of a CRA audit to allow unclaimed input tax credits and to allow foreign exchange adjustments. Although in neither case was the nature of the requested adjustments specified, those particulars had previously been communicated to CRA (i.e., ITCs for specified unclaimed items - and a change to a more accurate methodology for FX translation, which CRA resisted on "consistency" grounds). The requested adjustments' amounts were precisely specified in the notice of objection.

The Minister moved to essentially disallow raising the issues in the notice of appeal. After noting (at para. 50) that there were "no discernible differences to the courts' approach, analysis or application" of the ITA large corporation and ETA specified person rules, and before dismissing the Crown's motion, Boyle J stated (at paras. 57, 59):

It is the Minister who needs to be able to understand the scope and quantum of the issue from its description in the notice of objection. The reader of a notice of objection who should reasonably be able to understand or recognize the particular issue from the contents of the notice of objection is not the hypothetical reasonable Canadian, nor is it a Tax Court judge.

...The evidence in this case wholly satisfies me that both objectively and subjectively the Minister should have and did understand from the Notice of Objection filed by the Appellant that these two specific issues which had been specifically raised during the audit which gave rise to the reassessment, were being objected to.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 169 - Subsection 169(2.1) Minister was presumed to understand the scope and quantum of issues that had been raised during audit 72

British Columbia Transit v. The Queen, [2006] GSTC 103, 2006 TCC 437

additional reasons can be raised in Notice of Appeal

After having incurred substantial GST in acquiring a transit system for exempt use, the appellant commenced to lease the system to another municipal transit entity for rent of $1 per year, but with the lessee being obligated to pay municipal taxes imposed on the leased premises (which amounted to around $2 million per year). C Miller J found that this lease represented a supply of the system for consideration other than nominal consideration (so that there was a change of use under ss. 209(2) and 199(3) entitling the appellant to recover the basic tax content of this asset), on the basis that the municipal tax obligation represented valuable consideration. Before so concluding, C Miller J noted that the Notice of Objection had not referred to the property taxes, and found that the appellant was not precluded from relying on this fact, stating (at paras. 40, 42):

There is no change to the amount at issue before me from what was set out in the Notice of Objection, nor has the issue changed. The issue has always been the entitlement to the ITCs.

…[I]t is the issue and quantum that is of significance to the Minister, not the facts and reasons that the Respondent points to as the failure. …[A]t the 1994 Tax Conference Mr. Beith went on to say…:

[I]n contrast to the requirements with respect to issue and quantum, additional facts and reasons can be raised in appeals.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(1.1) lease consideration not nominal because of property tax obligation 172
Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(3) lessor required to demonstrate taxable-supply-for-consideration purpose 140
Tax Topics - Excise Tax Act - Section 153 - Subsection 153(1) lease consideration not nominal because of property tax obligation 55

Paragraph 306.1(1)(a)

See Also

Jayco, Inc. v. The Queen, 2018 TCC 34

issue of multiple supplies not raised in Notice of Objection (or Notice of Appeal)

The appellant (Jayco), a U.S.-resident registrant and a specified person, was assessed on the basis that its sales of recreational vehicles to Canadian dealers were made in Canada and that the consideration therefor included its freight transportation charges included on its invoices. In agreeing with the Crown that Jayco was precluded from raising at trial a submission that it was making a separate supply of (international) freight transportation services, D’Auray J stated (at paras. 66, 68):

Since Jayco did not raise the issue in its Notice of Appeal, it was not entitled to do so at trial. …

[Furthermore] … a specified person is not allowed to raise an issue in its Notice of Appeal, unless the issue was first raised in its Notice of Objection. Here, Jayco had not raised the issue of the taxability of freight transportation service in its Notice of Objection.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 142 - Subsection 142(1) - Paragraph 142(1)(a) under the UCC goods were delivered by a U.S. manufacturer outside Canada/”symbolical” delivery can occur under a bill of lading 565
Tax Topics - General Concepts - Agency statement in agreement that taxpayer was not an agent was not followed in practice 140