Easy Way Cattle Oilers Ltd. in Federal Court of Appeal November 2016

Date: 20161128

Docket: A-432-15

Citation: 2016 FCA 301

CORAM: NADON J.A.

RENNIE J.A.

DE MONTIGNY J.A.

BETWEEN:

EASY WAY CATTLE OILERS LTD.

Appellant

and

HER MAJESTY THE QUEEN

Respondent

Heard at Saskatoon, Saskatchewan, on November 14, 2016.

Judgment delivered at Ottawa, Ontario, on November 28, 2016.

REASONS FOR JUDGMENT BY: NADON J.A.

CONCURRED IN BY: RENNIE J.A.

DE MONTIGNY J.A.

Date: 20161128

Docket: A-432-15

Citation: 2016 FCA 301

CORAM: NADON J.A.

RENNIE J.A.

DE MONTIGNY J.A.

BETWEEN:

EASY WAY CATTLE OILERS LTD.

Appellant

and

HER MAJESTY THE QUEEN

Respondent

REASONS FOR JUDGMENT

NADON J.A.

[1] This is an appeal from a decision of D’Arcy J. of the Tax Court of Canada (the Judge)

dated August 21, 2015 (2015 TCC 211) which dismissed the appellant’s appeal of a

reassessment made under the Income Tax Act, R.S.C., 1985, c. 1 (5th Supp.) (the Act) for the

appellant’s 2008 taxation year.

[2] The Judge held that because the appellant had failed to comply with the requirements of

paragraph 127(9)(m) of the Act, it could not claim an investment tax credit for its 2008 taxation

year in respect of certain scientific research and experimental development expenditures (SR and

ED expenditures). More particularly, in the Judge’s view, the appellant had failed to file by June

30, 2010, the form prescribed by the Minister for the purposes of paragraph 127(9) (m), namely

Form T2SCH31 (the prescribed Form).

[3] Subsection 127(9) of the Act, and paragraph (m) in particular, provide as follows:

except that no amount shall be Toutefois aucun montant n’est inclus

included in the total determined under dans le total calculé selon l’un des

any of paragraphs (a) to (e.2) in alinéas a) à e.2) au titre d’une dépense

respect of an outlay, expense or qui, s’il n’était pas tenu compte des

expenditure that would, if this Act paragraphes (26) et 78(4), serait

were read without reference to engagée ou effectuée par le

subsections 127(26) and 78(4), be contribuable en vue de gagner un

made or incurred by the taxpayer in revenu au cours d’une année

the course of earning income in a d’imposition, et aucun montant n’est

particular taxation year, and no ajouté, aux termes de l’alinéa b), dans

amount shall be added under le calcul du crédit d’impôt à

paragraph (b) in computing the l’investissement du contribuable à la

taxpayer’s investment tax credit at the fin d’une année d’imposition au titre

end of a particular taxation year in d’une dépense engagée ou effectuée

respect of an outlay, expense or par une fiducie ou une société de

expenditure made or incurred by a personnes en vue de gagner un revenu,

trust or a partnership in the course of si, selon le cas:

earning income, if…

… […]

m) the taxpayer does not file with the m) le contribuable ne présente pas au

Minister a prescribed form containing ministre un formulaire prescrit

prescribed information in respect of contenant les renseignements prescrits

the amount on or before the day that is relativement au montant au plus tard

one year after the taxpayer’s filing-due le jour qui suit d’une année la date

date for the particular year; (crédit d’échéance de production qui lui est

d’impôt à l’investissement) applicable pour l’année en question.

(investment tax credit)

(emphasis added)

[4] Thus, in order to meet the requirements of paragraph 127(9)(m), a taxpayer who seeks to

claim an investment tax credit in regard to its SR and ED expenditures must file with the

Minister the prescribed Form containing prescribed information within one year of its filing due

date for the relevant taxation year.

[5] There is no dispute that June 30, 2010 was the deadline within which the appellant had to

file the prescribed Form containing the prescribed information and that the appellant did not file

the prescribed Form within that deadline. However, the appellant filed on June 30, 2010 a

completed Form T661 as required to support its claim for SR and ED expenditures. Although the

Minister accepted the appellant’s claim for expenditures in relation to SR and ED, he denied the

appellant’s claim for an investment tax credit because the prescribed Form was not filed by June

30, 2010. It was only filed on August 16, 2010.

[6] The only issue on this appeal is whether the Judge erred in holding that filing the

prescribed Form was the only way to claim an investment tax credit in relation to SR and ED

expenditures pursuant to paragraph 127(9)(m) of the Act. For the reasons that follow, I conclude

that the Judge made no reviewable error.

[7] The only argument put forward by the appellant in this appeal is that its failure to file the

prescribed Form with the Minister by June 30, 2010 is not fatal because, by that time, all of the

prescribed information was available to the Minister. More particularly, the appellant says that

all of the prescribed information required by the Minister to calculate the investment tax credit

sought by it could be found in Form T661 and its T2 corporate income tax return for the 2008

taxation year filed on September 30, 2009.

[8] The appellant says that the information contained in Form T661 and in its T2 income tax

return was “sufficiently clear and complete” so as to allow the Minister to calculate its

investment tax credit. Consequently, according to the appellant, this information put the Minister

in a position to make the necessary calculations to determine the appellant’s investment tax

credit in relation to its SR and ED expenditures.

[9] In support of its position, the appellant referred us to section 32 of the Interpretation Act,

R.S.C., 1985, c. I-21 which provides as follows:

32 Where a form is prescribed, 32 L’emploi de formulaires, modèles

deviations from that form, not ou imprimés se présentant

affecting the substance or calculated to différemment de la présentation

mislead, do not invalidate the form prescrite n’a pas pour effet de les

used. invalider, à condition que les

différences ne portent pas sur le fond

ni ne visent à induire en erreur.

[10] At paragraph 16 of its memorandum of fact and law, the appellant says that:

Canadian courts have consistently held that section 32 of the Interpretation Act

operates to ensure that a deviation from a prescribed form does not invalidate the

document. There is a substantial body of authority to this effect and a review of

some of the more relevant cases will illustrate that the decision of the trial judge

was wrong in law.

[11] In my view, the appellant’s reliance on section 32 of the Interpretation Act, on the facts

of this case, is misguided.

[12] First, the prescribed Form and Form T661 serve different purposes notwithstanding that

some of the information contained therein may overlap. The purpose of Form T661, as stated on

the form itself, is to provide technical information regarding SR and ED projects, to calculate the

SR and ED expenditures, and to calculate those expenditures which would qualify as SR and ED

expenditures for investment tax credits should such credits be claimed. The stated purpose of the

prescribed Form is, inter alia, for a corporation to claim investment tax credits in regard to SR

and ED expenditures.

[13] Second, the clear intent of section 32 of the Interpretation Act is, in my respectful view,

to avoid penalizing a taxpayer who has complied substantively with a statutory provision which

requires the filing of a prescribed form containing prescribed information. In other words,

section 32 applies where the taxpayer has filed the prescribed information, but has not used the

prescribed Form to do so. Nonetheless, the taxpayer has substantially complied with the

requirements of the form by providing the Minister the information which the Minister needs in

regard to the taxpayer’s claim. In this case, there can be no doubt that the appellant did not file

the prescribed information by June 30, 2010. In other words, the appellant had not filed any form

setting out the prescribed information for the purpose of claiming an investment tax credit in

relation to its SR and ED expenditures by the deadline.

[14] What the appellant seeks, in my respectful view, is to transform its Form T661 and its T2

corporate income tax return into a prescribed Form filed by June 30, 2010. The respondent, at

paragraph 40 of its memorandum of fact and law, correctly explains the appellant’s approach as

follows:

The appellant is attempting to convert the information in the T2 and the Form

T661 that the Minister could have used to calculate the appellant’s investment tax

credits into a stand-alone application for ITCs [investment tax credits], equivalent

to Schedule 31 [the prescribed Form] but defective only in form. This is over-

reaching.

[15] In the respondent’s view, should the appellant’s approach herein be approved by this

Court, the Minister would have to second guess a taxpayer’s intention with regard to investment

tax credits when processing that taxpayer’s Form T661 which, as I have already indicated, serves

an entirely different purpose. In other words, the Minister, upon being apprised of the taxpayer’s

intention after the deadline, would then have to look back at the taxpayer’s files and make the

calculations which the taxpayer ought to have made when filing the prescribed form. Clearly,

such an approach cannot be right.

[16] In my respectful opinion, it is the taxpayer’s responsibility to inform the Minister whether

it is claiming an investment tax credit in relation to SR and ED expenditures. The way to

communicate that intention to the Minister is for the taxpayer to file the prescribed Form

containing the prescribed information by the prescribed deadline. In this case, the appellant did

not communicate its intention of claiming an investment tax credit in regard to its SR and ED

expenditures before it filed the prescribed Form on August 16, 2010.

[17] Consequently, section 32 of the Interpretation Act cannot help the appellant. On the facts

of this case, the appellant’s failure to file the prescribed Form by June 30, 2010, or any other

form in compliance with the requirements of paragraph 127(9)(m), is fatal to its appeal of the

Minister’s reassessment of its 2008 taxation year.

[18] Lastly, in support of its position on this appeal, the appellant also referred us to a number

of cases decided by the Tax Court, the Federal Court, and this Court dealing with waivers. In my

view, all of these cases are distinguishable and they provide no support to the appellant’s

position.

[19] As I see no basis for interfering with the Judge’s decision, I would dismiss the appeal

with costs.

“M Nadon”

J.A.

“I agree.

Donald J. Rennie J.A.”

“I agree.

Yves de Montigny J.A.”

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-432-15

(APPEAL FROM A JUDGMENT OF THE HONOURABLE JUSTICE D’ARCY OF THE

TAX COURT OF CANADA DATED AUGUST 21, 2015 (DOCKET NO.: 2012-1217(IT)G)

STYLE OF CAUSE: EASY WAY CATTLE OILERS

LTD. v. THE QUEEN

PLACE OF HEARING: SASKATOON, SASKATCHEWAN

DATE OF HEARING: NOVEMBER 14, 2016

REASONS FOR JUDGMENT BY: NADON J.A.

CONCURRED IN BY: RENNIE J.A.

DE MONTIGNY J.A.

DATED: NOVEMBER 28, 2016

APPEARANCES:

Adam Hnatyshyn FOR THE APPELLANT

John Krowina FOR THE RESPONDENT

SOLICITORS OF RECORD:

Hnatyshyn Gough FOR THE APPELLANT

Saskatoon, SK

William F. Pentney FOR THE RESPONDENT

Deputy Attorney General of Canada