Federal Appeal


Tax

Income Tax

Administration and enforcement

Interest payable by Minister on returned funds paid pursuant to jeopardy order subsequently set aside

Interest. CRA collected $12.75 million from taxpayer pursuant to jeopardy order. Jeopardy order was set aside on consent and monies were returned to taxpayer. Minister refused to pay interest on refunded amount on basis that interest was not payable on funds paid as consequence of jeopardy order, even if order was subsequently set aside. Federal Court judge dismissed taxpayer’s application for judicial review. Judge held that Minister reasonably interpreted Income Tax Act as imposing no obligation to pay interest in respect of fund seized under jeopardy order. Taxpayer appealed. Appeal allowed. Declaration was made that interest was payable. Minister’s decision to interpret s. 164(1.1) of Act such that no interest was payable to taxpayer as provided in s. 164(3) of Act on refunded amount was neither correct nor reasonable. Setting aside jeopardy order meant that s. 164(1.1) of Act should be read as if jeopardy order had never been issued and that no authorization had been granted under s. 225.2(2) of Act in respect of amount assessed. Since taxpayer had appealed reassessments and had applied in writing for refund, other conditions of subsection had been satisfied and interest was payable under s. 164(3) of Act. This interpretation was consistent with context and purpose of Act. There would be no loss to government if it paid interest on refunded amount since it would be repaid if portion of refunded amount was ultimately determined to be payable. There would be loss to taxpayer if interest was not paid on refunded amount and he ultimately owed less than refunded amount.

Grenon v. Canada (National Revenue) (2017), 2017 CarswellNat 3765, 2017 FCA 167, Wyman W. Webb J.A., A.F. Scott J.A., and Mary J.L. Gleason J.A. (F.C.A.); reversed (2016), 2016 CarswellNat 2161, 2016 FC 604, James W. O’Reilly J. (F.C.).

 


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