Canadian Marconi Co. v. Canada, (1989) 28 F.T.R. 165 (TD)

• Judge: Joyal, J.
• Court: Federal Court (Canada)
• Case Date: June 14, 1989
• Jurisdiction: Canada (Federal)
• Citations: (1989), 28 F.T.R. 165 (TD)

Cdn. Marconi Co. v. Can. (1989), 28 F.T.R. 165 (TD)

MLB headnote and full text

Canadian Marconi Company (plaintiff) v. Her Majesty The Queen In Right Of Canada (defendant)

(T-71-88)

Indexed As: Canadian Marconi Co. v. Canada

Federal Court of Canada

Trial Division

Joyal, J.

July 5, 1989.

Summary:

A corporate taxpayer was forced to sell a division of its business. The sale proceeds were invested in short-term investments pending the acquisition of another business. The taxpayer claimed the interest earned in the years 1973-1976 was "Canadian manufacturing and processing profits" under s. 125.1 of the Income Tax Act, therefore it was entitled to the appropriate deduction for the four taxation years. The Minister of National Revenue ruled that the interest income was not income from active business, and was therefore not "Canadian manufacturing and processing profits". The taxpayer appealed.

The Federal Court of Canada, Trial Division, in a judgment reported [1982] C.T.C. 277; 82 D.T.C. 6236, dismissed the appeal. The taxpayer appealed.

The Federal Court of Appeal, in a judgment reported [1984] C.T.C. 319; 55 N.R. 81; 82 D.T.C. 6236, dismissed the appeal. The taxpayer appealed to the Supreme Court of Canada.

The Supreme Court of Canada, in a judgment reported 70 N.R. 174, allowed the appeal and remitted the matter to the Minister for the appropriate reassessments. The court held that the interest income was from business (active business income), not property, and was therefore "Canadian manufacturing and processing profits".

The taxpayer's 1977-1981 tax returns were reassessed in the same manner as the 1973-1976 returns. The taxpayer did not file any notice of objection or waiver for the 1977-1981 years, believing that the Minister would reassess if the taxpayer was successful in the Supreme Court of Canada. After the Supreme Court of Canada decision the Minister advised that notwithstanding the 1977-1981 reassessments were wrong, the four year limitation period in s. 152(4) of the Income Tax Act precluded a reassessment. The taxpayer applied for a declaration that the Minister had the power to reassess at the taxpayer's request notwithstanding s. 152(4).

The Federal Court of Canada, Trial Division, held that the Minister had the power to reassess beyond the four year limitation period notwithstanding s. 152(4).

Income Tax - Topic 7845

Returns, assessments and appeals - Assessments - Time for - Limitation period re reassessment - Section 152 (4) of the Income Tax Act provided a four year limitation period for reassessment absent fraud or a prior waiver of the limitation period - A taxpayer requested reassessment outside the four year period - There was no fraud or waiver - The Minister advised that it had no authority to reassess notwithstanding the assessment sought to be reassessed was wrong and the taxpayer paid too much tax - The Federal Court of Canada, Trial Division, held that the four year limitation period was for the sole benefit of the taxpayer; the taxpayer could waive that protection and the Minister would have the power to reassess - Public policy was relevant to the Minister only in determining whether to exercise the discretion to reassess.

Waiver - Topic 10

Waiver of statutory benefit - [See Income Tax - Topic 7845 above].

Cases Noticed:

The Queen v. A.W.C. Parsons et al., 84 D.T.C. 6345, refd to. [para. 23].

Stubart Investments Ltd. v. Minister of National Revenue (1984), 53 N.R. 241; 84 D.T.C. 6305 (S.C.C.), refd to. [para. 25].

Grand Trunk Pacific Railway v. Dearborn (1919), 58 S.C.R. 315, refd to. [para. 27].

Lechter v. Minister of National Revenue, 64 D.T.C. 5311 (Ex. Ct.), refd to. [para. 28].

Bronze Memorials Limited (No. 2) v. Minister of National Revenue, 69 D.T.C. 5420, refd to. [para. 28].

Galway v. Minister of National Revenue (1974), 2 N.R. 317; 74 D.T.C. 6247 (F.C.A.), refd to. [para. 28].

Cohen v. The Queen, 80 D.T.C. 6250, refd to. [para. 30].

Thyssen Mining Construction of Canada Ltd. v. The Queen, [1975] F.C. 81, refd to. [para. 32].

Melahn v. Commissioner of Internal Revenue (1947), 9 T.C. 769 (U.S.T.C.), refd to. [para. 34].

Kammins Ballrooms Co. Ltd. v. Zenith Investment (Torquay) Ltd., [1970] 2 All E.R. 871, refd to. [para. 35].

Howard v. Secretary of State for the Environment, [1972] 3 All E.R. 310, refd to. [para. 35].

Charron v. Minister of National Revenue, 81 D.T.C. 271, refd to. [para. 44].

Gunnar Mining Limited v. Minister of National Revenue, 70 D.T.C. 1020, refd to. [para. 45].

Morch v. Minister of National Revenue, 49 D.T.C. 649, refd to. [para. 47].

The Queen v. Taylor, 84 D.T.C. 6459, refd to. [para. 47].

Davis v. The Queen, 84 D.T.C. 6518, refd to. [para. 48].

Smerchanski v. Minister of National Revenue (1974), 2 N.R. 197; 74 D.T.C. 6197 (F.C.A.), affd. 9 N.R. 459; 76 D.T.C. 6247 (S.C.C.), appld. [para. 52].

Whitney v. Commissioners of Inland Revenue, [1926] A.C. 37, refd to. [para. 64].

Reckitt and Colman (New Zealand) Limited v. Taxation Board of Review, [1966] N.Z.L.R. 1032 (C.A.), dist. [para. 75].

Fasken v. Minister of National Revenue, [1949] 1 D.L.R. 810, refd to. [para. 75].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 125.1(1) [para. 4]; sect. 150(1), sect. 152(1) [para. 16]; sect. 152(2), sect. 152(3) [para. 17]; sect. 152(4) [para. 18]; sect. 152(5), sect. 152(6), sect. 152(7) [para. 59]; sect. 152(8) [para. 19].

Income Tax Act, Information Circular IC75-7R3, sect. 4 [para. 37].

Authors and Works Noticed:

Driedger, E.A., Construction of Statutes (2nd Ed. 1983), p. 84 [para. 25].

Halsbury's Laws of England (4th Ed.), vol. 1, paras. 23-25 [para. 34].

Counsel:

W. Lefebvre, Q.C., and P. Marceau, for the plaintiff;

Pierre Barsalou, for the defendant.

Solicitors of Record:

Ogilvy, Renault, Montreal, Quebec, for the plaintiff;

J.C. Tait, Deputy Attorney General of Canada, Ottawa, Ontario, for the defendant.

This application was heard on June 14, 1989, at Ottawa, Ontario, before Joyal, J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on July 5, 1989: