In Newfoundland Transshipment Ltd. v. Queen (2013 TCC 259), the Tax Court of Canada dismissed an application by Newfoundland Transshipment (“NTL”) for an order to extend time to serve notices of objection for its 2002 to 2005 taxation years. The application was filed in 2012, several years after the deadline for serving the objections had expired.
NTL had originally filed its returns for 2002 to 2005 on the basis that its pipeline was a Class 1 asset, with a depreciation rate of 4%. By the time it filed its 2006 return, it came to the conclusion that the pipeline was a Class 6 asset, with a depreciation rate of 10%. Accordingly, in April 2007, NTL filed amended tax returns for its 2002 to 2005 taxation years reclassifying the pipeline from Class 1 to Class 6 and filed its 2006 to 2010 returns on the basis that the pipeline was a Class 6 asset. In February 2012, the CRA wrote to NTL, refusing to accept the amended filings for 2002 to 2005 and proposing to reassess 2006 to 2010.
In August 2012, NTL asked the Minister to issue notices of reassessment to enable it to serve notices of objection for 2002 to 2005. The Minister responded by saying that the time to serve notices of objection and applications for orders extending time had expired. Section 166.1 of the Income Tax Act allows the Minister to grant an extension of time to serve an objection only if an application is filed within one year after the expiration of the normal 90 day period.
In arguing that its application for an extension of time should be granted, NTL argued that a letter from the CRA in February 2012 rejecting the amended returns constituted a “reassessment”. In the alternative, NTL claimed that it had relied on CRA policy that an amended return was a de facto waiver.
The Tax Court disagreed. In Armstrong v. The Queen (2006 FCA 119), the Federal Court of Appeal held that a request by a taxpayer to amend its return is “merely a request” and need not result in an assessment. In addition, the Tax Court held that it was not bound by a CRA policy and had no jurisdiction to grant an extension of time as the relevant taxation years were statute-barred by the time the taxpayer attempted to serve the objections.
This decision is a useful reminder that, depending on when it is filed, there may be no recourse when an amended return is rejected by the Minister – all the more reason to get it right the first time!