Federal Court


Income tax

Administration and enforcement

Minister fettered her discretion by undue reliance on T2 Statute-barred Credits Guide

Taxpayer, which was commercial and residential painting business, did not file corporate income tax returns for two taxation years. Canada Revenue Agency (CRA) issued notional assessments for those taxation years, including penalties, and proceeded to collect balance owing by way of garnishment. After garnishments, taxpayer hired accountant to file outstanding T2 tax and taxpayer reported net income which resulted in net tax owing being less than garnished amounts, difference which represented statute-barred credit (SBC). Taxpayer made two requests to Minister to re-appropriate SBC to their outstanding payroll balance, but Minister denied requests, because amount was not compliant and taxpayer did not resolve non-compliance within reasonable time. Taxpayer brought application for judicial review of Minister’s decision to deny taxpayer statute-barred credits. Application dismissed. It was found that decision of Minister’s delegate was not reasonable. When assessing request for re-apportionment of SBC, Minister should also have regard to whether denial of request might possibly result in Minister’s inability to collect outstanding tax arrears from taxpayer. Taxpayer had filed affidavits that stated that Minister’s continued denial of taxpayer’s request to apply existing tax credits to current arrears caused significant financial hardship. Accordingly, Minister’s decision was unreasonable because it was not apparent or transparent that taxpayer’s financial hardship was factor in decision-making process. Minister fettered her discretion by undue reliance on T2 Statute-barred Credits Guide, because she did not review or weigh as factor financial hardship raised by taxpayer. Matter was returned for redetermination by different delegate of Minister and taxpayer was awarded costs in amount of $1,000.

Forbes Painting and Decorating Ltd. v. Canada (Attorney General) (2019), 2019 CarswellNat 265, 2019 CarswellNat 760, 2019 FC 160, 2019 CF 160, Keith M. Boswell J. (F.C.).

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