Canadian Marconi Co. v. Minister of National Revenue, (1991) 137 N.R. 15 (FCA)

• Judge: Mahoney, Stone and Desjardins, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: November 14, 1991
• Jurisdiction: Canada (Federal)
• Citations: (1991), 137 N.R. 15 (FCA)

Cdn. Marconi v. MNR (1991), 137 N.R. 15 (FCA)

MLB headnote and full text

Minister of National Revenue (appellant) v. Canadian Marconi Company (respondent)

(A-438-89)

Indexed As: Canadian Marconi Co. v. Minister of National Revenue

Federal Court of Appeal

Mahoney, Stone and Desjardins, JJ.A.

November 14, 1991.

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 tax- payer 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, in a judgment reported 28 F.T.R. 165, held that the Minister had the power to reassess beyond the four year limitation period notwithstanding s. 152(4). The Min­ister appealed.

The Federal Court of Appeal allowed the appeal.

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 reassess- ment outside the four year period - There was no fraud or waiver - The Min­ister advised that he had no authority to reassess notwithstanding that the assess­ment sought to be reassessed was wrong and the taxpayer paid too much tax - The Federal Court of Appeal agreed and held that the Minister may assess at any time but, having assessed, may only reassess within the prescribed times of having notified the taxpayer of the assessment.

Waiver - Topic 10

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

Cases Noticed:

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. 6].

Davis v. R., 84 D.T.C. 6518, consd. [para. 7].

Minister of National Revenue v. Taylor, 61 D.T.C. 1138, consd. [para. 8].

Sussex Peerage Case (1844), 8 E.R. 1034, appld. [para. 11].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 152(4) [para. 1]; sect. 152(8), sect. 248(1) [para. 10].

Counsel:

Ian McGregor and Josée Tremblay, for the appellant;

Wilfred Lefebvre and Patrice Marceau, for the respondent.

Solicitors of Record:

John C. Tait, Q.C., Deputy Attorney Gen­eral of Canada, Ottawa, Ontario, for the appellant;

Ogilvy, Renault, Montreal, Quebec, for the respondent.

This case was heard on October 30, 1991, at Ottawa, Ontario, before Mahoney, Stone and Desjardins, JJ.A., of the Federal Court of Appeal.

On November 14, 1991, Mahoney, J.A., delivered the following judgment for the Court of Appeal.