Tax Court of Canada


Tax

Income Tax

Administration and enforcement

Retirement of outstanding tax debts was important factor in exercise of discretion
Re-appropriation of statute-barred credit balance. Taxpayer did not file corporate tax returns within required time frames and it owed income tax, penalties and interest. Canada Revenue Agency (CRA) collected monies from taxpayer through payments and garnishment and applied it to income tax assessments. Taxpayer filed missing tax returns and was reassessed, resulting in credits. As taxpayer’s returns for three tax years were filed more than three years after tax year-end, no refund of credit balance was available to taxpayer pursuant to s. 164(1) of Income Tax Act. Taxpayer requested re-appropriation of balance of statute-barred credits from its corporate income tax account to its Harmonized Sales Tax (HST) arrears pursuant to s. 221.2(2) of Act. Minister of National Revenue denied request because there were no extraordinary circumstances which had prevented timely filing of returns. Taxpayer brought application for judicial review of Minister’s decision. Application granted and matter remitted to Minister for redetermination. Minister’s discretion was not to be exercised such that taxpayer was permitted to have statute-barred credits re-allocated absent certain factors. It was consistent with overall purpose of Act that s. 221.2(2) of Act be interpreted such that retirement of outstanding tax debts was important factor to take into account in exercise of Minister’s discretion. Factors such as taxpayer’s delinquency in tax filings and lack of extraordinary circumstances in explaining such delinquency were factors to be taken into account but were not only considerations. Minister’s decision was unreasonable because it failed to take into account relevant circumstances raised by taxpayer. Minister did not take into consideration prospect of taxpayer’s bankruptcy and resulting possibility that HST liability would not be paid if request were not granted.
Pomeroy’s Masonry Limited v. Canada (Attorney General) (2017), 2017 CarswellNat 5724, 2017 FC 952, Richard F. Southcott J. (F.C.).


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