Geneviève Léveillé

The Respondent brought a motion to amend its Reply to advance an alternative argument based on the thin capitalization rules under subsection 18(4) of the Income Tax Act to support the disallowance of interest expense previously reassessed under paragraph 20(1)(c).

The Tax Court allowed the motion, finding that the 2016 amendments to subsection 152(9) of the Act permit the Minister to advance an alternative basis or argument even if it relies on different facts or a different source, provided the total amount of tax assessed does not increase.

The Court found no non-compensable prejudice to the Appellant.

The Respondent brought a motion to amend the Reply to the Notice of Appeal to clarify its secondary assessing position that the Appellant failed to produce sufficient documentation to demonstrate that the expenses allowed as current business expenses also qualified as Canadian exploration expenses.

The Appellant opposed the motion, arguing that the proposed amendments were inconsistent with the position originally taken by the Minister and that the Respondent was attempting to advance an alternative basis or argument that would lead to an injustice as it would be required to adduce new evidence that is no longer available.

The Tax Court of Canada granted the motion, finding that the proposed amendments merely clarified the existing Reply and did not constitute a new or additional basis or argument.

The Court also found that even if it was an alternative basis, the Respondent was entitled to advance it pursuant to subsection 152(9) of the Income Tax Act.