Federal Court


Income tax

Administration and enforcement

Minister failing to consider CRA’s knowledge of ongoing CCA process and taxpayer’s intention

After taxpayer filed waiver allowing 2001 taxation year to remain open for reassessment, Minister reassessed it for taxation years 2001-2003 by increasing income attributed for sales to related U.S. company and disallowing deductions for payment of royalties to related Irish company. Taxpayer objected, requesting that objections be held in abeyance pending resolution of its two requests for assistance from Canadian Competent Authority (CAA). CCA decided to reverse income adjustment with respect to taxpayer’s sales to U.S. company and Minister issued second reassessments to implement such reversal. CCA issued second decision, deciding to reverse adjustments with respect to royalty payments but CRA took position that reassessments to implement decision were statute-barred since second reassessments had closed taxpayer’s objections by operation of Income Tax Act. Minister denied taxpayer’s request for reassessments to give effect to favourable decision of CCA. Taxpayer applied for judicial review. Application granted. Taxpayer expressed clear intention that taxation years be reassessed in accordance with both of CCA decisions and waiver was implicit in its requests for abeyance. Reasons provided in decision were inadequate. Minister’s decision was unreasonable as she relied primarily on absence of explicit waiver request and on discharge of objections by second reassessments without considering substance of taxpayer’s requests for abeyance and CRA’s knowledge of ongoing CCA process and taxpayer’s intention. Conclusion that taxpayer did not provide either express or implied waiver did not fall within range of possible outcomes.

Kerry (Canada) Inc. v. Canada (Attorney General) (2019), 2019 CarswellNat 875, 2019 FC 377, Elizabeth Walker J. (F.C.).

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