Tax – Income Tax – Losses
Taxpayer was successor of corporations by amalgamation, and these corporations incurred substantial non-capital losses during period from 1999 to 2002. These losses were carried forward, including to 2007 taxation years. Minister reassessed 2007 taxation years and reduced carry forward amounts, because Minister took view that predecessors had incorrectly deducted rental obligations and therefore non-capital losses available for carry forward were much less than amounts claimed by taxpayer. In 2013, taxpayer appealed Minister's reassessments and in 2014, taxpayer made offer to settle appeal. Taxpayer's offer was to accept disallowance of rent deductions, and resulting reduced non-capital loss carry forwards, and to apply carry forwards to taxation years from 2002 to 2007 in manner that resulted in additional carry forward of $24 million being available in taxation year ending March 2007. Minister accepted settlement but then discovered that there were no non-capital losses available for carry forward for tax years under appeal and asked taxpayer to provide support for claim that loss carry forward was available. Taxpayer brought successful motion to allow its appeal for 2007 taxation years in accordance with settlement agreement. Tax court agreed with taxpayer's position and concluded that non-capital losses were available for carry forward, and settlement agreement was therefore binding, valid and enforceable against Minister. Minister appealed. Appeal dismissed. General rule was that parties should be bound by agreements that they made, and there was no good reason to create exception in this case. It was taxpayer, and not Crown, that sought order requiring reassessment that might give rise to increase in tax, accordingly, Harris principle had no application on these facts and could not serve to prevent appeal being allowed in accordance with settlement agreement.
Her Majesty the Queen v. CBS Canada Holdings Co (2020), 2020 CarswellNat 51, 2020 FCA 4, J.D. Denis Pelletier J.A., Judith Woods J.A., and J.B. Laskin J.A. (F.C.A.); affirmed (2018), 2018 CarswellNat 5238, 2018 TCC 188, K. Lyons J. (T.C.C. [General Procedure]).
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