A-43-86
Indalex Limited (Appellant)
v.
The Queen (Respondent)
INDEXED AS: INDALEX LTD. V. CANADA
Court of Appeal, Pratte, Heald and Mahoney
JJ.—Ottawa, November 13, 1986.
Income tax — Reassessment — Application to join to
appeal against original assessments appeal against reassess
ments by M.N.R. under s. 164(4.1) in accordance with Trial
Division judgment — Whether order to join necessary —
Under s. 52(b)(i) Federal Court Act, Court of Appeal to either
dismiss appeal or allow it, giving in latter case judgment Trial
Division should have given — By dismissing appeal, Court
affirming reassessment — By allowing appeal, Court referring
to assessment considered by Trial Division, not reassessment
ensuing upon judgment — S. 164(4.1) intended to benefit
taxpayers successfully appealing assessments — Antithetical
to intention if Minister's compliance with para. (d) depriving
taxpayer of further appeals in which partly successful —
Finding in Abrahams [No. 11 v. M.N.R. (1966), 66 DTC 5451
(Ex. Ct.) to effect second reassessment nullifying first reas
sessment, not applicable to s. 164(4.1) reassessments — Origi
nal assessment and reassessment necessary incidents of Trial
Division judgment — Court seized of reassessments to extent
latter made in conformity with Trial Division decision —
Order to join unnecessary — Income Tax Act, S.C. 1970-71-
72, c. 63, ss. 152(4), 164(4.1) (as added by S.C. 1984, c. 45, s.
67(2)), 177 — Federal Court Rules, C.R.C., c. 663, R. 324 —
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss. 27(1),
52(b).
Federal Court jurisdiction — Appeal Division — Income
tax — Application to join to appeal against original assess
ments appeal against reassessments made by M.N.R. under s.
164(4.1) Income Tax Act dismissed as unnecessary — No
statutory authority to initiate appeal in Court of Appeal
against income tax assessment — Resort to Court's inherent
jurisdiction to hear appeal from Trial Division decision —
Under s. 52(b)(i) Federal Court Act, Court to dismiss or allow
appeal, giving in latter case judgment Trial Division should
have given — If appeal dismissed, Court in effect affirming
reassessment — If appeal allowed, judgment on appeal to
refer to assessment considered by Trial Division, not reassess
ment ensuing upon judgment — Court of Appeal prevented
from exercising jurisdiction if reassessment ensuing upon Trial
Division judgment rendered original assessment null — Court
seized of appeal against reassessments to extent latter in
accordance with Trial Division judgment — Federal Court
Act, R.S.C. 1970 (2nd Supp.), c. 10, ss. 27(1), 52(b) — Income
Tax Act, S.C. 1970-71-72, c. 63, s. 164(4.1) (as added by S.C.
1984, c. 45, s. 67(2)).
CASES JUDICIALLY CONSIDERED
NOT FOLLOWED:
Abrahams [No. 1] v. M.N.R. (1966), 66 DTC 5451
(Ex. Ct.); Abrahams [No. 2] v. M.N.R. (1966), 66 DTC
5453 (Ex. Ct.).
WRITTEN REPRESENTATIONS BY:
T. A. Sweeney for appellant.
Charles MacNab for respondent.
SOLICITORS:
Borden & Elliot, Toronto, for appellant.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for order ren
dered in English by
MAHONEY J.: The appellant moves, pursuant to
Rule 324 [Federal Court Rules, C.R.C., c. 663],
without appearance, to join to the present appeal
an appeal in respect of reassessments made by the
Minister of National Revenue in accordance with
the judgment of the Trial Division [(1986), 86
DTC 6039] which is subject of the present appeal
and cross-appeal. The reassessments were made by
the Minister in compliance with subsection
164(4.1) of the Income Tax Act [S.C. 1970-71-72,
c. 63 (as added by S.C. 1984, c. 45, s. 67(2))]. It is
not suggested that they do not accord with the
judgment of the Trial Division. The appellant's
notice of motion was filed with a consent signed on
the respondent's behalf.
When the application first came before Mr.
Justice Stone he asked the parties for representa
tions:
(a) establishing the necessity for this application in the context
of the pending appeal;
(b) providing the legal basis upon which such an order can be
made.
The appellant has responded only to (a), taking
the position that the effect of the reassessments is
to "cancel and replace" the original assessments as
stated on the faces of the notices of reassessment.
The respondent, while maintaining her consent,
now submits that the order is not necessary
because the reassessments are really only modifi
cations of the originals. She does, however, ad
dressing (b), say that if the order is necessary,
authority to make it is to be found in the Court's
inherent jurisdiction. Without expressing a con
cluded opinion as to whether that authority exists,
I agree that inherent jurisdiction is the only possi
ble source. There is no statutory authority to ini
tiate an appeal against an income tax assessment
in the Federal Court of Appeal. Its jurisdiction is
to deal with an appeal from a judgment of the
Trial Division.
Subsection 164(4.1) of the Act was adopted
December 20, 1984, with effect from February 15,
1984. It provides:
164....
(4.1) Where the Tax Court of Canada, the Federal Court of
Canada or the Supreme Court of Canada has, on the disposi
tion of an appeal in respect of taxes, interest or a penalty
payable under this Act by a taxpayer resident in Canada,
(a) referred an assessment back to the Minister for reconsid
eration and reassessment,
(b) varied or vacated an assessment, or
(c) ordered the Minister to repay tax, interest or penalties,
the Minister shall with all due dispatch, whether or not an
appeal from the decision of the Court has been or may be
instituted,
(d) where the assessment has been referred back to him,
reconsider the assessment and make a reassessment in
accordance with the decision of the Court,
(e) refund any overpayment resulting from the variation,
vacation or reassessment, unless otherwise directed in writing
by the taxpayer, and
(/) where paragraph (c) is applicable, repay any tax, interest
or penalties as ordered,
and the Minister may repay any tax, interest or penalties or
surrender any security accepted therefor by him to any other
taxpayer who has filed an objection or instituted an appeal if,
having regard to the reasons given on the disposition of the
appeal, he is satisfied that it would be just and equitable to do
so, but for greater certainty, the Minister may, in accordance
with the provisions of this Act, the Federal Court Act or the
Supreme Court Act as they relate to appeals from decisions of
the Tax Court of Canada or the Federal Court, appeal from the
decision of the Court notwithstanding any variation or vacation
of any assessment by the Court or any reassessment made by
the Minister under paragraph (d), and any such appeal from a
decision of the Tax Court of Canada shall proceed as if it were
an appeal from the assessment that was referred back, varied or
vacated. [My emphasis.]
In providing what the Minister may do, Parlia
ment has overlooked the possibility that, as here,
the taxpayer may be partially successful in appeal
ing an assessment and may not be content with
partial success. However, since the provision pre
serving the Minister's position is expressed to be
made "for greater certainty", it is not to be con
strued as denying the taxpayer a like preservation
of his position on application of the maxim
inclusio unius est exclusio alterius. Indeed, it may
fairly be regarded as indicative of what Parliament
thought the position would be even if it had not
thought it prudent to express it "for greater
certainty".
It is suggested that the decision of Jackett P., in
Abrahams [No. 1] v. M.N.R. (1966), 66 DTC
5451 (Ex. Ct.), * lends substance to the appellant's
concern. In that case, the taxpayer had duly
objected to the reassessment of his 1961 tax return
and, in the absence of a timely reaction by the
Minister, filed a notice of appeal in the Exchequer
Court. A week after the appeal was initiated, the
Minister issued a further notice of reassessment.
As appears from Abrahams [No. 2] v. M.N.R.
(1966), 66 DTC 5453 (Ex. Ct.),** an appeal from
the second reassessment was dealt with by the
Court on its merits. Neither judgment discloses the
procedural route by which the second appeal
reached the Court. Be that as it may, in Abrahams
[No. 1], it was held that the power to reassess
under what is now subsection 152(4) of the Act
* Editor's Note: The decision was reported in the Exchequer
Court Reports under the name Abrahams, Coleman C. v.
Minister of National Revenue (No. 2), [1967] 1 Ex.C.R. 333.
** The decision was reported at [1967] 1 Ex.C.R. 314 sub
nom. Abraham, Coleman C. v. Minister of National Revenue
(No. 1).
had been properly exercised and, at page 5452,***
that:
The fact that an appeal has been initiated should not make any
difference in the application of the provision.
Assuming that the second re-assessment is valid, it follows, in
my view, that the first re-assessment is displaced and becomes a
nullity. The taxpayer cannot be liable on an original assessment
as well as on a re-assessment. It would be different if one
assessment for a year were followed by an "additional" assess
ment for that year. Where, however, the "re-assessment" pur
ports to fix the taxpayer's total tax for the year, and not merely
an amount of tax in addition to that which has already been
assessed, the previous assessment must automatically become
null.
Parliament's intention in enacting subsection
164(4.1) is clearly to benefit taxpayers who have
succeeded in appealing assessments. It would be
antithetical to that intention if the Minister's com
pliance with paragraph 164(4.1)(d) were to have
the effect of depriving unwary taxpayers of the
right to further pursue appeals in which they have
been only partly successful. Such result would, in
my opinion, be little short of entrapment. Accord
ingly, I would not extend the application of
Abrahams [No. 1 ] to reassessments made pursu
ant to subsection 164(4.1) or a judgment subject
itself to further appeal.
A judgment of the Trial Division disposing of an
appeal from an assessment under the Income Tax
Act is a judgment subject of appeal to this Court
under subsection 27(1) of the Federal Court Act
[R.S.C. 1970 (2nd Supp.), c. 10], notwithstanding
that the scope of the Trial Division's judgment is
prescribed by section 177 of the Income Tax Act.
177. The Federal Court may dispose of an appeal, other than
an appeal to which section 180 applies, by
(a) dismissing it; or
(b) allowing it and
(i) vacating the assessment,
(ii) varying the assessment,
(iii) restoring theassessment, or
*** At pp. 336-337 Ex.C.R.
(iv) referring the assessment back to the Minister for
reconsideration and reassessment.
The pertinent provisions of the Federal Court Act
are subsection 27(1) and paragraph 52(b).
27. (1) An appeal lies to the Federal Court of Appeal from
any
(a) final judgment,
(b) judgment on a question of law determined before trial, or
(c) interlocutory judgment,
of the Trial Division.
52. The Court of Appeal may
(b) in the case of an appeal from the Trial Division,
(i) dismiss the appeal or give the judgment and award the
process or other proceedings that the Trial Division should
have given or awarded,
(ii) in its discretion, order a new trial, if the ends of justice
seem to require it, or
(iii) make a declaration as to the conclusions that the Trial
Division should have reached on the issues decided by it
and refer the matter back for a continuance of the trial on
the issues that remain to be determined in the light of such
declaration;
I am unaware of any provision of the Income Tax
Act which deals with either the right to appeal to
this Court from a judgment of the Trial Division
or the procedures for such an appeal.
The judgment presently under appeal is one
authorized by subparagraph 177(b)(iv) of the
Income Tax Act. Ordinarily, in disposing of this
sort of appeal, the Court of Appeal will render a
judgment authorized by subparagraph 52(b)(i) of
the Federal Court Act and either dismiss it or,
allowing it, give the judgment it concludes the
Trial Division should have given. If the appeal is
dismissed, the judgment of the Court of Appeal
will, effectively, affirm the reassessment as the
judgment of the Trial Division will stand. If, on
the other hand, the appeal is allowed and the
Court of Appeal gives the judgment it concludes
the Trial Division ought to have given, the judg
ment on appeal must be given with reference to the
assessment considered by the Trial Division, not
the reassessment that ensued upon its judgment. It
follows that, if the Court of Appeal is to be able to
exercise all of its jurisdiction in disposing of the
appeal, the effect of a reassessment ensuing upon a
judgment of the Trial Division cannot be to render
the original assessment a nullity, at least for pur
poses of the litigation.
What is presently before this Court is the Trial
Division's judgment. Necessary incidents of that
judgment are both the original income tax assess
ments which were considered by the Trial Judge
and the reassessments which issued as a result of
her judgment. In my opinion, the reassessments, so
long as they conform to the Trial Division's judg
ment are, in fact, now before the Court. The order
sought by the appellant is, therefore, unnecessary.
I would dismiss the application. This is not a
case for costs.
PRATTE J.: I agree.
HEALD J.: I agree.
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.