TPcases

This appeal and cross-appeal arise as a result of the response provided by the Tax Court of Canada to a question submitted under Rule 58 of the Tax Court of Canada Rules (General Procedure), SOR/90-688a. The question was:

Where the Minister of National Revenue has exercised her discretion pursuant to subsection 247(10) of the Income Tax Act (“ITA”) to deny a taxpayer’s request for a downward transfer pricing adjustment, is that a decision falling outside the exclusive original jurisdiction granted to the Tax Court of Canada under section 12 of the Tax Court of Canada Act and section 171 of the ITA?

This question arose in the context of the appeal commenced by Dow Chemical Canada ULC (Dow) in relation to the reassessment of its 2006 taxation year.

The Tax Court (2020 TCC 139) provided the following answer to this question:

The Court has determined that where the Minister has decided, pursuant to subsection 247(10) of the Income Tax Act (Canada) [the ITA], to deny a taxpayer’s request for a downward transfer pricing adjustment, that decision is not outside the exclusive original jurisdiction granted to the Court under section 12 of the Tax Court of Canada Act and section 171 of the ITA provided that the assessment resulting from that decision has been properly appealed to the Court…

The Crown, in its appeal to this Court, is asking that the question as posed by the parties be answered in the affirmative. In its cross-appeal, Dow is seeking an amended response. In Dow’s view, the decision of the Minister of National Revenue (the Minister) under subsection 247(10) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the ITA) is within the exclusive jurisdiction of the Tax Court of Canada, regardless of whether an assessment has been issued.

The Revenue Agency, in its appeal to the Federal Court of Appeal, is asking that the question as posed by the parties be answered in the affirmative – that the decision is outside the jurisdiction of the tax court.

In its cross-appeal, Dow is seeking an amended response – that such a decision is within the exclusive jurisdiction of the Tax Court of Canada, regardless of whether an assessment has been issued.

Judgement of the Federal Court of Appeal

The Federal Court ruled in favour of the Revenue Agency and dismissed the cross appeal of Dow Chemicals.

The court found  that the Tax Court could not reverse the revenue agency’s (Ministers) opinion that a requested downward adjustment is inappropriate. The jurisdiction accorded to the Tax Court is only to vacate or vary an assessment or refer it back to the Minister, whereas an opinion is not an assessment.

The jurisdiction to judicially review an opinion was with the Federal Court.