A-487-75
The Queen (Defendant) (Appellant)
v.
The Great Atlantic and Pacific Tea Company
Limited (Plaintiff) (Respondent)
Court of Appeal, Urie and Le Dain J.J. and
MacKay D.J.—Toronto, April 14; Ottawa, Sep-
tember 6, 1977.
Income tax — Income calculation — Allowable refund —
Non-resident-owned investment corporation — Taxable divi
dends paid in fiscal year, February 28, 1971 to February 26,
1972 — Straddle year — Allowable refund claimed —
Whether or not dividends paid in straddle year entitle
respondent to that fiscal year's refund — Income Tax Act,
R.S.C. 1952, c. 148 as amended by S.C. 1970-71-72, c. 63, ss.
133(6), 133(8)(a),(d), 133(9)(a),(b), 164(3),(4),(5).
Respondent, a non-resident-owned investment corporation
incorporated in January 1971 had a fiscal year from February
28, 1971 to February 26, 1972 that straddled the coming into
force of the Income Tax Act amendments. Respondent paid out
taxable dividends during that year and calculated its allowable
refund to be equal to the income tax levied. This is an appeal
from a Trial Division judgment ordering appellant to refund
the tax paid. Respondent cross-appeals from the Trial Judge's
failure to order (a) repayment of interest charged by the
appellant on the tax levied and owing, and (b) for payment of
interest both on the interest earned on the sum paid as tax, and
on the sum that had been paid to the appellant as interest
charges.
Held, (MacKay D.J. dissenting): the appeal is allowed.
Per Urie J.: Subparagraph 133(9)(a)(ii) cannot stand by
itself in providing the denominator of the equation, found in
paragraph 133(8)(a), for the determination of the corporation's
allowable refund. One applicable principle is that allowable
refunds can only be claimed for a taxation year which ended
before the dividends generating a right to a refund were paid.
In the straddle year, the dividend paid in respondent's 1972
taxation year could not have been calculated until after Febru-
ary 26, 1972, a date after the dividends had been paid. The
calculation envisaged in paragraph 133(8)(a) could be made
only in respect of the cumulative taxable income immediately
before the dividend was paid. Secondly, subparagraph (i) of
paragraph 133(9)(b) is not disjunctive from subparagraph (ii).
The purpose of paragraph 133(9)(b) is to determine how much
the aggregate of the taxable income from (i) years after 1971
and (ii) from a taxation year beginning during 1971 and ending
after January 1, 1972 exceeds the aggregate of certain other
amounts calculated under subparagraphs (iii), (iv) and (v). It is
not to enable the "allowable refund" provisions to apply to a
taxation year starting in 1971 and ending in 1972, by itself.
Per Le Dain J. (concurring): The appeal should be allowed
for the reasons given by Urie J. It might be added, however,
that the Trial Judge attached too much importance to the
omission of any reference to the end of the taxation year in
subparagraphs (ii) of paragraphs 133(9)(a) and (b).
Per MacKay D.J. (dissenting): It was open to the Trial
Judge to reach the conclusion he did. Since the respondent is
entitled to the allowable refund, it follows that there was no
right to charge interest. As to the claim for interest on the tax
paid and on the interest paid, when subsections 164(3) and (4)
are read with subsection (7), they do apply; this cross-appeal
should be allowed.
APPEAL.
COUNSEL:
G. W. Ainslie, Q.C., W. Lefebvre and P. Ber-
nard for (defendant) appellant.
J. A. F. Miller, Q.C., and M. A. Mogan for
(plaintiff) respondent.
SOLICITORS:
Deputy Attorney General of Canada for
(defendant) appellant.
Miller, Thomson, Sedgewick, Lewis & Healy,
Toronto, for (plaintiff) respondent.
The following are the reasons for judgment
rendered in English by
URIE J.: This is an appeal from the judgment of
the Trial Division [[1976] 1 F.C. 273] ordering
the appellant to refund to the respondent the sum
of $474,008.59. The respondent cross-appeals from
the failure of the Trial Judge to order (a) the
repayment by the appellant of the sum of
$14,193.61 being interest charged by the appellant
and paid by the respondent, and (b) interest on the
sum awarded namely $474,008.59 and on the sum
of $14,193.61 from the date or dates of payment
thereof by the respondent.
The issue for determination is whether or not
the respondent is entitled to an "allowable refund"
as defined by section 133(8) of the Income Tax
Act as amended by S.C. 1970-71-72, c. 63, s. 1
(hereinafter called the Act), for its 1972 taxation
year.
The respondent, it is conceded, is a non-resident-
owned investment corporation within the meaning
of section 133(8)(d) of the Act. It was incorpo
rated on January 5, 1971 and its 1972 taxation
year was, it is agreed, from February 28, 1971
until February 26, 1972. At the commencement of
its 1972 taxation year, its retained earnings
amounted to $64,919,006. Its taxable income
during the 1972 taxation year amounted to
$3,160,057.29 upon which the tax payable by the
respondent calculated on the basis of 15% of its
taxable income was $474,008.59.
During its 1972 taxation year the respondent
paid taxable dividends aggregating $4,700,000 as
follows:
June 1, 1971 $ 750,000
December 29, 1971 $2,000,000
February 24, 1972 $1,950,000
Withholding tax at the rate of 15% was paid on
those dividends.
Section 133 of the amended Act provides a
special tax treatment for non-resident-owned
investment corporations. They are taxed at the
rate of 15% on their income and 25% on their net
taxable gains realized in Canada. In general terms
it is further provided that when a non-resident-
owned investment company distributes its income
earned since coming into force of the amended
Act, by way of taxable dividends to its sharehold
ers, the tax paid by the company on the income
earned by it after the coming into force of the
amended Act is to be refunded to the company.
Section 133(6) creates the right to the refund.'
' 133....
(6) If the return of a non-resident-owned investment corpo
ration's income for a taxation year has been made within 4
years from the end of the year the Minister
(a) may, upon mailing the notice of assessment for the year,
refund, without application therefor, its allowable refund for
the year; and
(b) shall make such a refund after mailing the notice of
assessment if application therefor has been made in writing
by the corporation within 4 years from the end of the year.
The respondent's application for a refund of the
$474,008.59 tax paid on its income for the 1972
taxation year was rejected in the following terms:
You are advised that the earliest a refund of the special tax
under section 133(9)(a) of the Income Tax Act can be applied
for is with the 1973 Tax Return.
The learned Trial Judge found that the appel
lant erred in refusing to make the refund to the
respondent and gave judgment directing the appel
lant to refund to the respondent the tax paid on its
income, viz., $474,008.59. Early in his reasons for
judgment he succinctly stated the problem in this
case which, as already pointed out, he resolved in
favour of the respondent. He stated [at page 275]:
The special problem presented in this case arises by reason of
the particular fiscal year of the plaintiff (partly in 1971 and
1972), and what I might term the "transitional" provisions in
section 133 relating to those years. Counsel for the defendant
stated in argument:
... the plaintiff is entitled to a refund in respect of the tax
... it has paid . ... The only issue is whether this amount is
to be refunded, in respect of dividends paid in 1972, or
whether the right to refund will arise, when taxable dividends
are paid at a time subsequent to the end of its 1972 taxation
year.*
The defendant's position is, that on the correct construction of
the statutory provisions, the plaintiff did not (at the material
dates) have any taxable income, and its cumulative taxable
income, for the purposes of the formula, is therefore nil. The
plaintiff disagrees.
* If the plaintiff has not paid, or does not pay, any dividends
after the end of its 1972 taxation year, then, on the defendant's
interpretation of the section in question, the plaintiff will never
receive an allowable refund in respect of the tax levied.
The term "allowable refund" is defined in the
Act by section 133(8)(a) reading as follows:
133. (8) ...
(a) "allowable refund" of a non-resident-owned investment
corporation for a taxation year means the aggregate of
amounts each of which is an amount in respect of a taxable
dividend paid by the corporation in the year on a share of its
capital stock, equal to that proportion of the dividend that
(i) the corporation's allowable refundable tax on hand
immediately before the dividend was paid
is of
(ii) the greater of the amount of the dividend so paid and
the corporation's cumulative taxable income immediately
before the dividend was paid;
From this it will be seen that there is derived the
following equation for the calculation of the allow
able refund.
Allowable
refund= allowable refundable tax x dividend
cumulative taxable income
or dividend (whichever is greater)
i.e. AR = ART x D
CTI or D
Sections 133(9)(a) and (b) provide the keys, if
they can be discerned, to the meaning and calcula
tion of "allowable refundable tax" and "cumula-
tive taxable income". The relevant portions of
those sections for the purposes of this appeal read
as follows:
133. (9) ...
(a) "allowable refundable tax on hand" ... at any particular
time means the ... aggregate of
(i) all amounts ... in respect of any taxation year com
mencing after 1971 and ending before the particular time,
equal to the tax under this Part payable by the corporation
for the year, and
(ii) 15% of the amount determined under subparagraph
(b)(ii) in respect of the corporation [The amount referred
to is its taxable income for 1972]
exceeds the aggregate of amounts each of which is
(v) an amount in respect of any taxable dividend paid by
the corporation on a share of its capital stock before the
particular time and after the commencement of its first
taxation year commencing after 1971, equal to the amount
in respect of the dividend determined under paragraph
( 8 )(a); ..
(b) "cumulative taxable income" ... at any particular time
means the ... aggregate of
(i) its taxable incomes for taxation years commencing
after 1971 and ending before the particular time, and
(ii) where the corporation's 1972 taxation year com
menced before 1972, the amount, ... by which its taxable
income for that year ...
exceeds the aggregate of amounts each of which is
(v) the amount of any taxable dividend paid by the corpo
ration on a share of its capital stock before the particular
time and after the commencement of its first taxation year
commencing after 1971.
Subparagraphs (ii) in each of subsections (9)(a)
and (9)(b) of section 133 deal with what was
conveniently described as "the straddle year",
being, a taxation year which commenced before
the coming into force of the amended Act on
January 1, 1972. Thus, it was said, the subpara-
. graphs are applicable to the respondent's 1972
taxation year. The sole issue on this appeal, there
fore, appears to be whether or not the taxable
dividends of $4,700,000 paid by the respondent in
the straddle year results in the respondent being
entitled to the refund claimed by it and awarded to
it by the learned Trial Judge.
There are three principles which, it seems to me,
emerge from the complex language of subsections
(8)(a), (9)(a) and (9)(b) of section 133 in the
determination of an allowable refund for a
corporation:
(1) no such refund is payable unless taxable
dividends have been paid by the corporation;
(2) at least for corporations whose taxation
years did not commence until after December
31, 1971, the corporation must have had taxable
income before the dividends were paid; and
(3) because that is so and because by
definition 2 "taxable income" is income for a
taxation year minus permitted deductions, again
at least for corporations whose taxation years
did not commence until after December 31,
1971, there has to have been a complete taxa
tion year in which the corporation had taxable
income upon which it was taxed before the
payment of the dividends can trigger the right to
a refund of tax paid on the corporation's taxable
2 Section 2(1) and (2):
2. (1) An income tax shall be paid as hereinafter required
upon the taxable income for each taxation year of every
person resident in Canada at any time in the year.
(2) The taxable income of a taxpayer for a taxation year
is his income for the year minus the deductions permitted by
Division C.
income. That is, there is a time lag of one year
before the refund of tax becomes allowable.
Neither counsel for the appellant nor respondent
took issue with this view of the principles appli
cable, as I understood their submissions. Their
agreement as to those principles did not, however,
extend to agreeing that in the fact situation
present in this case, the respondent was entitled to
claim and to have refunded to it the tax paid on its
taxable income for its 1972 taxation year starting
as it did, on February 28, 1971.
The appellant contended that the respondent's
1972 taxable income could not be calculated until,
at the earliest, after the close of business on Febru-
ary 26, 1972. Therefore, in the calculation of any
allowable refund purportedly generated by the
payment of the $4,700,000 in dividends in its 1972
taxation year, (which payments were made before
not after the taxable income for the year was
capable of ascertainment) the equation earlier
referred to would read as follows:
1972 Allowable Refund= 15% of nil x $4,700,000
the greater of
$4,700,000 and
nil
Since the numerator of the fraction is "nil"
because there was no taxable income "immediately
before the dividend was paid" as required by sec
tion 133(8)(a), there can be no allowable refund.
The respondent's interpretation of the subsec
tions in question is conveniently summarized in the
reasons for judgment of the learned Trial Judge
[at pages 278-279] as follows:
Counsel for the plaintiff turns first to cumulative taxable
income and subparagraph 133(9)(b)(ii). Subparagraph (i) is
not applicable to this case but counsel stresses the taxation
years there referred to must not only have commenced after the
calendar year 1971 but have ended before the date of each
payment of dividends. Subparagraph (ii), it is pointed out, does
not state the taxation year there referred to (the straddle year)
must have ended before the "particular time". It follows then,
argues the plaintiff, the company's taxable income for 1972 is
to be included in this calculation, even though it was not or
could not be computed until after the date of payment of the
dividends, and indeed, until after the completion of its fiscal
year (February 26, 1972). The language of subparagraph (ii)
is, counsel submits, clear and unambiguous; there is no require
ment stated that the taxable income must in fact have been
ascertained before the date of dividend payments; the legisla
tors intended, in respect of those non-resident owned invest
ment corporations whose fiscal period overlapped both sides of
January 1, 1972 and who, in the straddle year, paid as this
plaintiff did, dividends before the commencement of the new
Act (not knowing what its terms might be) should be able to
take advantage of the refund provision.
The plaintiff submits a similar interpretation should be put
on subparagraph 133(9)(a)(ii) in respect of allowable refund
able tax on hand. Counsel put it this way: "As in the case of
cumulative taxable income, when one is calculating allowable
refundable tax on hand at any particular time, one includes tax
payable for taxation years other than the straddle year, only if
those years have ended before the particular time; but one
includes, in any event, the amount specified in respect of the
straddle year, whether or not it has ended before the particular
time."
The Trial Judge gave effect to these submissions
[at page 280] when he held:
In respect of the straddle year provisions, however,—sub-
paragraphs 133(9)(b)(ii) and 133(9)(a)(ii)—there is no stipu
lation that the fiscal period must have ended before the divi
dend payment date. Nor is there any stipulation (or language
requiring that interpretation) that the taxable income, and
therefore the amounts of tax payable, be, at that precise time,
ascertained or capable of precise ascertainment. In my view
those subparagraphs mean that the taxable income in the one
case, and the tax in the other, are to be included in those
particular calculations even though the precise amounts may
not be arrived at until some time after the dividends were in
fact paid.
Respondent's argument based in the first
instance on its interpretation of the "cumulative
taxable income" section viz. section 133(9)(b),
necessitates acceptance of the proposition that sub-
paragraph (ii) of that section can stand by itself in
providing the denominator for the arithmetic equa
tion derived from section 133(8)(a) for calculating
a corporation's allowable refund for a taxation
year. In my opinion, the subparagraph cannot be
so viewed for two reasons:
(1) As stated earlier, one of the principles appli
cable to "allowable refunds" is that they can only
be claimed for a taxation year which ended before
the dividends generating the right to a refund were
paid. In the straddle year this would mean, in the
case of the respondent, that the dividends paid in
the 1972 taxation year could not apply because the
taxable income for that year could not have been
calculated until after February 26, 1972, a date
after the dividends had been paid. Section
133(8)(a) clearly supports the view that the calcu
lation envisaged by that section could be made
only in respect of the cumulative taxable income of
a corporation immediately before the dividend was
paid.
(2) The respondent's argument assumes that
subparagraph (ii) of section 133(9)(b) is disjunc-
tive from subparagraph (i). That this is not so is
demonstrated by the presence of the conjunctive
"and" at the end of subparagraph (i). As a result,
it seems to me, the purpose of the subparagraph is
shown. That purpose is to determine by how much
the aggregate of the taxable income of the corpo
ration from (i) years after 1971 and (ii) from a
taxation year which begins during 1971 and ends
after January 1, 1972 exceeds the aggregate of
certain other amounts calculated under subpara-
graphs (iii), (iv) and (v). Its purpose is not to
enable the application of the "allowable refund"
provisions to a taxation year commencing at some
date in 1971 and ending at some date in 1972 ll
itself. It is for use, in applicable cases, as part of
the calculation of the cumulative taxable income
of a corporation for the denominator of the arith
metic equation established by section 133(8)(a) to
calculate the "allowable refund" of the corpora
tion. There was thus no necessity, in my view, for
including the words "ending before the particular
time" in this subparagraph as was necessary in
subparagraph (i). That is, it was not necessary to
specify that the taxable income be established
before the particular time for the calculation under
subparagraph (ii) because the figure reached
under it is merely part of the aggregate figure
established by adding to it the calculation under
subparagraph (i) which does specify the termina
tion date, viz. a taxation year commencing after
1971 and ending before the payment of the taxable
dividend.
That this reasoning is correct is borne out by the
wording of subparagraph (v) of section 133(9)(b).
For convenience, I repeat it here:
(v) the amount of any taxable dividend paid by the corporation
on a share of its capital stock before the particular time and
after the commencement of its first taxation year commencing
after 1971.
The applicable amount under that subpara-
graph, together with the applicable amounts under
subparagraphs (iii) and (iv) (in this case there
would have been no additions under (iii) and (iv))
are subtracted from the aggregate of the amounts
under subparagraphs (i) and (ii) to ascertain the
corporation's cumulative taxable income at the
particular time.
If the interpretation of the learned Trial Judge
was correct, no such subtraction would be required
because the dividends paid in the straddle year
were paid prior to, not after, the commencement of
the respondent's first taxation year after 1971.
They thus, do not fall within the description of
"taxable dividends" which are to be deducted from
the aggregate of the two kinds of taxable income
referred to in subparagraphs (i) and (ii). No word
ing is used in subparagraph (v) enabling the inclu
sion of an amount for dividends paid in the "strad-
dle year". In my view, clear support is thereby
provided for the interpretation I have heretofore
given as to the effect of the inclusion of subpara-
graph (ii) in section 133(9)(b).
The same reasoning applies equally to the inter
pretation of subparagraph (ii) of subsection (9)(a)
reinforced by subparagraph (v) of that subsection
employing, as it does, the same language as sub-
paragraph (v) of subsection (9)(b).
In summary, if the respondent's argument were
to prevail, and as upheld by the learned Trial
Judge, a corporation whose 1972 taxation year
straddled the calendar years 1971 and 1972, could
claim an allowable refund immediately after the
close of its 1972 year, although the dividends had
been paid prior to that date. That is, it would not
have to wait a year to claim an allowable refund
whereas those corporations whose 1972 taxation
year was the calendar year, would have to wait
until the following taxation year to do so. In my
view, such a submission is illogical and ignores
what the subsections appear to contemplate
although, to say the least, the language used there
in lacks precision and clarity.
Accordingly, I would allow the appeal with costs
and confirm the Minister's assessment. As a result
of course, the cross-appeal should be dismissed
with costs.
* * *
The following are the reasons for judgment
rendered in English by
LE DAIN J.: I agree, for the reasons given by
Mr. Justice Urie, that the appeal should be
allowed. I am unable, with respect, to attach the
same significance as the learned Trial Judge to the
omission in subparagraphs (ii) of paragraphs
133(9)(a) and (b) of any such reference to the end
of the taxation year as is found in subparagraphs
(i) thereof. Subparagraphs (ii) are directed to
completing the definition of what must be included
in the calculation of allowable refundable tax on
hand and cumulative taxable income. To the tax
paid and taxable income received in respect of
taxation years commencing after 1971 and ending
before the payment of dividends giving rise to
refund must be added, if applicable, the tax paid
and taxable income received in respect of a 1972
taxation year which commenced before 1972. It
was not necessary to repeat that the 1972 taxation
year in such case must have ended before payment
of the dividends in question; subparagraphs (ii) of
paragraphs 133(9)(a) and (b) clearly refer to a
taxation year that would necessarily have ended
before the taxation years contemplated by sub-
paragraphs (i) thereof. The terms of subsection
133(9) as a whole reinforce what is laid down as a
general principle by subsection 133(8) in the defi
nition of allowable refund: that the allowable
refundable tax on hand must have been established
before the dividends which give rise to the refund
were paid. It could only be so established at the
end of a taxation year. In the result, dividends paid
in the course of a 1972 taxation year cannot give
rise to allowable refund whether that year com
menced before or after the end of 1971. As Mr.
Justice Urie points out, there is no reason why the
respondent should be more favourably treated than
a taxpayer whose 1972 taxation year commenced
after 1971.
* * *
The following are the reasons for judgment
rendered in English by
MACKAY D.J. (dissenting): I am not persuaded
that the Trial Judge was in error in reaching the
conclusion which he did in respect of the respond
ent's claim to the allowable refund of $474,008.59.
In the case of a non-resident-owned investment
corporation the legislative policy has been and is to
relieve against taxation of both the corporation's
income and dividends paid to its non-resident
shareholders.
Prior to 1970 the scheme for the taxation of
non-resident-owned investment corporations was
simple—it provided:
1. That non-resident-owned investment compa
nies be taxed at a flat rate of 15% as its taxable
income for the taxation year.
2. That dividends paid by a non-resident-owned
corporation to its non-resident shareholders would
not be subject to any withholding tax.
The present legislation is a more complicated
scheme involving the payment by the corporation
of both tax on the corporation's income and a
withholding tax on the dividends paid to the non
resident owners and providing for a system of
refunds to the corporation.
It would seem to be obvious that the purpose of
Parliament under both the old and the new Act is
to relieve against what may be described as double
taxation in the case of foreign-owned investment
corporations.
In the present case that purpose would be
defeated if effect is given to the submissions of
counsel for the appellant.
The position taken by the Department in this
case is that the allowable refund should be claimed
in respect of the respondent's taxation year of
1973 and not that of 1972.
Paragraph 3 of the statement of defence is as
follows:
3. He denies paragraph 7 of the Statement of Claim, as
amended, and says that as of June 1, 1971, 29 December 1971
and 24 February, 1972, the Plaintiff's allowable refundable tax
on hand under section 133(9)(a) of the Act was nil, but admits
for the purpose of this action, that immediately after the close
of its 1972 taxation year, the Plaintiff's allowable refundable
tax on hand determined under section 133(9)(a) was
$474,008.59.
Section 7 of the statement of claim is:
7. The Plaintiff's allowable refundable tax on hand immediate
ly before payment of the said dividends as determined under
Section 133(9)(a) of the Income Tax Act was $474,008.59.
Under section 133 the allowable refund cannot
exceed the tax payable on the corporation's income
so that if the corporation's tax on income for 1973
was, for example, $100 that is the most that could
be claimed as an allowable refund and if, as is the
case here, the corporation had no taxable income
for the taxation year of 1973, no refund could be
claimed.
I do not think Parliament could have intended
this result.
In Salmon v. Duncombe (1886) 11 App. Cas.
627 at page 634 Lord Hobhouse said:
It is, however, a very serious matter to hold that when the
main object of a statute is clear, it shall be reduced to a nullity
by the draftsman's unskilfulness or ignorance of law. It may be
necessary for a Court of Justice to come to such a conclusion,
but their Lordships hold that nothing can justify it except
necessity or the absolute intractability of the language used.
and in Highway Sawmills Limited v. M.N.R.
[1966] S.C.R. 384 at 393 Cartwright J. said:
The answer to the question what tax is payable in any given
circumstances depends, of course, upon the words of the legisla
tion imposing it. Where the meaning of those words is difficult
to ascertain it may be of assistance to consider which of two
constructions contended for brings about a result which con
forms to the apparent scheme of the legislation.
I think that the statements of Lord Hobhouse
and Cartwright J. in these two cases are relevant
in the present case.
In the Appeal Book, page 20 is the following
letter dated April 27, 1972 from the Interpretation
Division of the Department of National Revenue
to the firm of chartered accountants who were the
auditors for the respondent company:
This is in reply to your letter of April 13, 1972 in which you
asked us whether a non-resident-owned investment Corporation
is entitled to offset its allowable refund as calculated under
paragraph 133(8)(a) of the Income Tax Act against its tax
liability as determined in its return for a taxation year.
The policy of our collections division is that the full amount of
the tax liability should be remitted and the Company will
subsequently be issued a cheque in respect of the allowable
refund. However, as has been the practise in the past in similar
situations, it is expected that many Corporations will desire to
pay only the net amount and this practise will be accepted by
the Department.
This letter was written after the close of the
respondent's 1972 taxation year and was in respect
of the respondent's tax position for that year.
Following the receipt of this letter, the respond
ent, setting off its allowable refund against the tax
on its 1972 income, filed a tax return showing
"nil" taxes payable for that year.
The Department served on the respondent an
assessment notice dated December 6, 1972 as
follows:
Federal Tax $474,008.59. Total refund nil. Refundable divi
dend tax "nil". Balance unpaid includes interest of $13,061.09
on late or deficient installments and on balance of tax payable
from due date of the balance.
With this assessment was a notice as follows:
You are advised that the earliest a refund of the special tax
under section 133(9)(a) of the Income Tax Act can be applied
for is with the 1973 tax return. Therefore your claim for a
refund for this year has been disallowed.
Notice of objection to this assessment was filed
by the respondent.
Under date of June 20, 1974 a notification by
the Minister confirming the 1972 assessment was
served on the respondent together with a form
notifying it of its right to appeal the assessment to
either the Tax Review Board or to the Federal
Court—both of these documents are stated to be
in reference to the respondent's 1972 taxation
year.
The present action was then commenced by a
statement of claim filed on September 12, 1974—
the claim, understandably in view of the notice
accompanying the Minister's confirmation of the
assessment, is framed as an appeal from the 1972
assessment and as amended, claims payment of the
allowable refund of $474,008.59 and the items of
interest that are the subject of the cross-appeal.
The respective viewpoints as to the meaning to
be given to the relevant legislation are fully set out
in the reasons of Mr. Justice Collier, the Trial
Judge, and those of my brothers Urie and Le Dain
and need not be restated.
I am of the view that it was open to the Trial
Judge to reach the conclusion which he did and I
would dismiss the appeal with costs.
The respondent cross-appeals in respect of the
dismissal of its claims:
1. That the defendant be ordered to pay to the
plaintiff the sum of $14,193.61 being interest
charged by the defendant and paid by the plaintiff.
2. That the defendant be ordered to pay the
plaintiff interest on the said amounts of $474,-
008.59 and $14,193.61 from the dates of payment
thereof of these sums by the plaintiff.
As to the claim for repayment of the sum of
$14,193.61, the Trial Judge said [at page 280]:
The plaintiff claims repayment of the interest charged of
$14,193.61 and for interest on the two sums set out above. In
my opinion there is no power to grant the relief sought. The
assessment by the Minister, which levied a tax of $474,008.59
and the interest, is itself not before the Court. There was not
here an appeal by the taxpayer from an assessment. The relief
powers of the court applicable to actions of that nature are not
available in this case. I cannot therefore require the defendant
to make a refund in the sum of $14,963.61.
I do not agree. The Department claimed this
amount in its notice of assessment and this is an
appeal from that assessment. Agreeing as I do
with the Trial Judge's finding that the plaintiff
was entitled to the allowable refund in respect of
its 1972 tax year there was no right to charge
interest. I would allow the cross-appeal in respect
of this item and direct that the sum of $14,193.61
be repaid to the plaintiff.
As to the claim for interest on the amounts of
$474,008.59 and $14,193.61 the Trial Judge held
that section 164 subsections (3) and (4) did not
apply. I am of the opinion that when those subsec
tions are read together with the definition of over-
payment in subsection (7) they do apply in respect
of this claim and I would allow the cross-appeal in
respect of these items and direct payment of these
items of interest 3 .
The respondent is entitled to its costs of the
cross-appeal.
3 114. ...
(3) Where an amount in respect of an overpayment is
refunded, or applied under this section on other liability, inter
est at a prescribed rate per annum shall be paid or applied
thereon for the period commencing with the latest of
(a) the day when the overpayment arose,
(b) the day on or before which the return of the income in
respect of which the tax was paid was required to be filed,
and
(c) the day when the return of income was actually filed,
and ending with the day of refunding or application aforesaid,
unless the amount of the interest so calculated is less than $1,
in which event no interest shall be paid or applied under this
subsection.
(4) Where, by a decision of the Minister under section 165
or by a decision of the Tax Review Board, the Federal Court of
Canada or the Supreme Court of Canada, it is finally deter
mined that the tax payable by a taxpayer for a taxation year
under this Part is less than the amount assessed by the assess
ment under section 152 to which the objection was made or
from which the appeal was taken and the decision makes it
appear that there has been an overpayment for the taxation
year, the interest payable under subsection (3) on that overpay-
ment shall be computed at the rate per annum prescribed for
the purposes of subsection 161(2) instead of that prescribed for
the purposes of subsection (3).
(7) In this section, "overpayment" means the aggregate of
all amounts paid on account of tax minus all amounts payable
under this Act or an amount so paid where no amount is so
payable.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.