Tax Law

The applicants, charged with tax evasion under the Income Tax Act and Excise Tax Act, brought a Charter motion alleging breaches of their sections 7 and 8 rights.

They argued that a CRA auditor improperly used civil audit powers to gather evidence for a criminal investigation.

The court applied the Jarvis predominant purpose test and found the auditor's focus remained on civil tax liability until the file was referred to criminal investigations.

The court did find a section 8 breach because the search warrant did not explicitly authorize a thorough search of seized electronic data storage units.

However, applying the Grant framework, the court admitted the evidence under section 24(2), concluding the breach was minor, the officers acted in good faith, and there is a strong societal interest in adjudicating the serious allegations on their merits.

The defendants pleaded guilty to possession of unmarked cigarettes under the Tobacco Tax Act.

The Crown argued that the penalty provisions in s. 29(14) established a maximum fine, allowing for judicial discretion in sentencing.

The court rejected this argument, applying the reasoning from R. v. Winlow to find that the phrase 'is liable to' establishes a fixed statutory fine.

The court concluded it had no discretion to impose a penalty other than the exact calculation set out in the statute.

The Minister of Revenue appealed an order dismissing its motion to dismiss the respondent's tax appeal and granting a production order.

The Court of Appeal quashed the appeal, finding that the motion judge's order was interlocutory because it did not finally determine the scope of the appeal under the Retail Sales Tax Act.

As the order was interlocutory, jurisdiction to hear the appeal lay with the Divisional Court, not the Court of Appeal.

The appellants, owners of private cottages on leased land in a provincial park, appealed a decision declaring them obligated to pay a portion of the grant in lieu of taxes paid by the Crown to the municipality under the Municipal Tax Assistance Act.

The appellants argued that prior lease agreements and correspondence constituted an agreement exempting them from this obligation.

The Court of Appeal dismissed the appeal, upholding the application judge's finding that no such agreement existed and affirming the Crown's right to enforce its statutory rights following a change in taxation policy.

On a motion in a retail sales tax appeal, the moving party sought to restrict the responding party to arguing only the issue expressly raised in its Notice of Objection, namely whether premiums paid under a health and welfare plan attracted retail sales tax.

The responding party argued the court could permit amendments and should allow a fuller factual record, including matters such as due diligence and penalty, to properly frame the appeal.

The court held that fairness required a complete factual record so that any necessary determinations could be made in the interests of justice.

The motion to restrict the grounds of appeal was dismissed, with costs reserved to the hearing judge.

On an appeal from an application judgment concerning deregistration of private corporation shares held in an RRSP, the court held that the application judge erred by deciding, on his own motion, that there was no legal basis for withholding tax.

That issue was not before the court below and was for the proper tax forum.

The court further held that the shareholder had not provided adequate documentation to permit the financial institution to determine the value of the shares for deregistration purposes.

The appeal was allowed, the order below was set aside, and the application was dismissed with costs.

The appellant challenged reassessments imposing Ontario corporate income tax and corporate minimum tax on interest received under specialty debt instruments created through an inter-corporate refinancing designed to reduce provincial tax.

The court held the interest was income from property, not income from business, because the appellant's activity was minimal and the debt instruments were not employed or risked in any separate business.

Applying GAAR principles, the court found that even if the transactions generated a tax benefit or constituted avoidance transactions, they were not abusive because the statutory scheme deliberately distinguished between business income and property income for foreign-incorporated corporations with an Ontario permanent establishment.

The court also held the specialty debt instruments were not property situated in Canada because, under the settled common law situs rule, specialty debts are located where the instruments are physically found, here the British Virgin Islands.

The appeal was allowed and the reassessments were to be vacated.

The appellant sought an interim injunction in the Superior Court of Justice to prevent the Canada Revenue Agency (CRA) from collecting unpaid taxes, interest, and penalties pending a breach of contract claim.

The motion judge struck the claim, finding the Federal Court had exclusive jurisdiction under s. 18(1) of the Federal Courts Act.

The Court of Appeal dismissed the appeal, confirming that s. 18(1) applies to all injunctions, including interim ones, and that the CRA is a federal board, commission, or other tribunal when exercising tax collection powers.

The appellant, a federal government employee, successfully appealed her income tax reassessment and subsequently sued the federal government for abuse of power and misfeasance in public office.

The respondent successfully moved for summary judgment, arguing the claim was statute-barred because the appellant knew the material facts underlying her tort claims years earlier.

On appeal, the Court of Appeal held that the appellant was entitled to seek a determination that her tax reassessment was invalid before commencing her tort action, as proving the reassessment's invalidity was a necessary element of her misfeasance claim.

The appeal was allowed and the summary judgment was set aside.

The Canada Revenue Agency (CRA) registered liens against a taxpayer's properties for unpaid taxes.

The taxpayer's wife and sister subsequently claimed prior unregistered equitable interests in the properties (constructive trust and equitable mortgages).

The CRA brought a motion to determine if its registered liens took priority over these unregistered equitable interests.

The motion judge held that the CRA's liens did not constitute a 'charge' under the Land Titles Act and therefore did not take priority.

The Court of Appeal dismissed the CRA's appeal, confirming that the statutory liens do not arise from a voluntary act of the landowner and thus do not gain the priority afforded to a registered charge under the Land Titles Act.

The appellant was acquitted at trial of income tax evasion after claiming her depression prevented her from filing returns.

The Summary Conviction Appeal Court allowed the Crown's appeal and ordered a new trial, finding the trial judge erred in admitting a doctor's letter as hearsay and relying on it.

The Court of Appeal dismissed the appellant's appeal, agreeing with the appeal judge and further finding that the trial judge erred in law by relying on evidence he had previously ruled inadmissible to support the appellant's credibility.

The Minister of Finance appealed a decision finding that the OMERS Board and its wholly-owned subsidiaries were Crown agencies exempt from paying land transfer tax under the Land Transfer Tax Act.

The Court of Appeal dismissed the appeal, endorsing the motion judge's conclusion that the government had de jure control over the OMERS Board, making it a Crown agency.

The Court also agreed that the statutory scheme allowed the OMERS Board to act through wholly-owned subsidiaries, which were therefore also Crown agencies entitled to the tax exemption.

The applicants challenged a City of Toronto by-law imposing an annual tax on third-party signs, arguing it was an ultra vires indirect tax, discriminatory, and that existing signs were grandfathered under the City of Toronto Act.

The application judge upheld the by-law but found existing signs were grandfathered and granted a sealing order over the applicants' financial information.

The Court of Appeal dismissed the applicants' appeals, finding the tax was direct and not discriminatory.

The Court allowed the City's cross-appeal, holding that the grandfathering provision applies only to regulatory by-laws, not taxing by-laws, and that the sealing order was unjustified under the Dagenais/Mentuck test.

The appellants' locked safe was stolen from their restaurant and later recovered by police.

An officer investigating the appellants for suspected tax violations, who was not involved in the theft investigation, photocopied documents from the safe without a warrant and forwarded them to Revenue Canada.

The Supreme Court of Canada held that the appellants retained a residual expectation of privacy in the stolen safe's contents.

The officer's actions constituted an unreasonable search under s. 8 of the Charter.

The Court excluded the evidence under s. 24(2), finding that the officer's disregard for regular police procedures and failure to leave the investigation to taxation authorities rendered the breach sufficiently serious that admitting the evidence would bring the administration of justice into disrepute.

The Supreme Court of Canada considered the valuation of imported goods under the Customs Act.

Mattel Canada imported goods manufactured in Hong Kong through a three-tiered distribution system.

The Court held that the relevant 'sale for export to Canada' under s. 48(4) was the sale between Mattel U.S. and Mattel Canada, as Mattel Canada was the importer who held title when the goods entered Canada.

The Court also held that royalties paid by Mattel Canada to a third-party licensor, and periodic licence fees passed through Mattel U.S. to master licensors, were not dutiable under s. 48(5)(a)(iv) because they were not paid as a 'condition of the sale' of the goods for export.

The appeal by Mattel Canada was allowed in part, and the cross-appeal by the Deputy Minister was dismissed.

The appellant and other Canadians sought to acquire potential losses from a U.S. partnership for use as an income tax deduction in Canada.

They became assignees of the interests of the original American partners and immediately disposed of the partnership's apartment complex back to the original partners, realizing accounting losses.

They also acquired a one percent interest in a Canadian oil and gas property.

The Minister disallowed the claim for partnership losses under s. 96 of the Income Tax Act.

The Supreme Court of Canada dismissed the appeal, holding that the fundamental criteria of a valid partnership—carrying on business in common with a view to profit—were not met.

The Court found no intention to profit from the apartment complex and concluded the oil and gas investment did not establish an ancillary profit-making purpose.

Furthermore, the Court held that an assignee of a partnership interest must satisfy the essential ingredients of a partnership under Canadian law to be considered a partner for tax purposes.

The appellants acquired interests in a foreign partnership that had incurred substantial potential losses from a condominium project.

The original partners withdrew, and the appellants sold the condominium project back to them at fair market value, realizing a large loss which they claimed on their Canadian income tax.

The appellants also continued to profitably manage a low-rent apartment building that was an ancillary asset of the partnership.

The Minister disallowed the losses, and the lower courts upheld this decision.

The Supreme Court of Canada allowed the appeal, finding that the three essential ingredients of a valid partnership—carrying on business, in common, with a view to profit—were met, notwithstanding that the primary motivation was to acquire a tax loss.

The appellant paving company constructed an asphalt plant and claimed an accelerated capital cost allowance and investment tax credit, arguing the plant was used primarily for 'manufacturing or processing goods for sale'.

The Minister denied the claims because 75% of the asphalt was used in the appellant's own paving contracts (contracts for work and materials), not sold to third parties.

The Supreme Court of Canada dismissed the appeal, holding that the term 'sale' in the Income Tax Act imports settled commercial law distinctions, meaning goods supplied through contracts for work and materials do not qualify as goods for sale.