Thang Trieu

The appellant, Stonehouse Group Inc., appealed a motion judge's decision denying enhanced refund interest on an overpayment of provincial tax.

The overpayment resulted from a disallowed loss carry back under the Corporations Tax Act, which was later reversed.

The motion judge interpreted s. 79(7) of the Act as precluding enhanced interest for loss carry back refunds.

The Court of Appeal allowed the appeal, finding the motion judge's interpretation incorrect.

The Court held that such an interpretation would unfairly deny any refund interest, contrary to the legislative intent of the interest payment provisions, which aimed to balance the rights of government and taxpayers and provide enhanced interest for compelled overpayments arising from disputes.

The appellant corporation claimed a tax refund resulting from carrying back non-capital losses to a previous taxation year.

After a successful objection to a reassessment, the appellant received the refund but was denied the enhanced rate of interest under s. 82(5) of the Corporations Tax Act.

The appellant brought a Rule 21 motion to determine whether 'tax payable' under s. 82(5) must take into account a deduction from a loss carried back.

The court answered the question in the negative, finding that the specific deeming provision in s. 79(7) applies to the calculation of interest under s. 82(5), meaning tax payable is calculated without regard to subsequent year tax losses.

The appeal was effectively dismissed in favour of the respondent Crown.