Section 171

The Minister assessed the taxpayer for gross negligence penalties and assessed no other penalties. The Minister's Amended Reply argued, in the alternative, that the taxpayer should be liable for penalties under ss. 162(7) and (10) for failing to file T1134 (or T1135) information returns. Before ordering that such alternative argument should be struck, Graham found (at para. 26) that the Court did not have “the power to order the Minister to assess a previously unassessed penalty” as “[p]enalties are imposed by the Minister, not by the Court” and further noted (at para. 28) that the penalties referred to in the alternative argument had nothing to do with the s. 163(2) gross negligence penalty so that the former were not a lesser version of the latter.

The taxpayer alleged that it had over-remitted source deductions on the remuneration of its employees. After its request to the ARQ for a refund had been refused, it filed a Notice of Objection.

In finding that the Court of Quebec lacked jurisdiction to consider such appeal, Couture JCQ noted that no assessment had been made in respect of the source deductions at issue and that s. 93.1.2 of the Tax Administration Act (Quebec) (the “TAA”) (similar to ITA s. 171(1)) only accorded the Court of Quebec jurisdiction to deal with an assessment.

TAA Section 21.1, which permitted the filing of a Notice of Objection where the Minister had failed to timely respond to a refund request, had no application since the ARQ had responded to RTI’s refund request by denying it.

The Tax Court judge sent a draft judgment (to disallow the taxpayers’ appeal) to the parties and asked for their comments on any “typographical, grammatical, punctuation, or [any] similar error[s] or any omissions” and any “comments in respect of the written presentation of…[the] decision”, but not so as to revisit the substance of the decision. The taxpayers then asked the judge to receive and consider further submissions (based on the documents already before the court), which the judge refused, as this would amount to a re-argument of the appeal. Stratas JA confirmed this refusal, stating (at para. 9) that this “smack[ed] as an attempt to appeal to the Tax Court to revisit a decision it had already made.”

In closing, Stratas JA stated (para. 12):

It is for the Tax Court alone—not the parties—to vet its judgment and supporting reasons for typographical, grammatical, punctuation and similar errors.

Mr. Gillies sought a Tax Court decision regarding his 2016 and 2017 taxation years that he was not responsible to the Minister for tax under the Act that his then employer had withheld from income paid to him qua employee, but had not remitted to the Minister. After referring (at para. 14) to the statement in Boucher that “Parliament has not empowered the Tax Court to determine a dispute as to whether or not tax has been withheld at source from particular payments” and (at para. 15) to that in McIntosh that “the jurisdiction of this Court is limited to appeals from an assessment”, Russell J concluded (at para. 16):

I will issue judgment quashing this appeal, on the basis that this Court is without jurisdiction to address the matter of an employer withholding but not remitting tax payable under the Act, which is “a collection problem” falling within subsection 222(2) of the Income Tax Act, which assigns jurisdiction to the Federal Court.

Webb JA found that the Tax Court could make a mixed finding of fact and law (as to the nature of a supply made having regard to the ETA definition of a financial service) that was on a basis different than argued by either party.

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”.

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.

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.

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 … .

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.

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.

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.

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.

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).

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).

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.

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.

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).

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.

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.

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)"

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.

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.

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.

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).

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.

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."