Dow Chemical Canada ULC v. Canada

Dow Chemical Canada ULC v. Canada
Collection
Supreme Court Judgments
Date
2024-06-28
Neutral citation
2024 SCC 23
Case number
40276
Judges
Karakatsanis, Andromache; Côté, Suzanne; Rowe, Malcolm; Martin, Sheilah; Kasirer, Nicholas; Jamal, Mahmud; O’Bonsawin, Michelle
On appeal from
Federal Court of Appeal
Subjects
Courts
Notes
Case in Brief SCC Case Information
Decision Content
SUPREME COURT OF CANADA
Citation: Dow Chemical Canada ULC v. Canada, 2024 SCC 23
Appeal Heard: November 9, 2023 Judgment Rendered: June 28, 2024 Docket: 40276
Between:
Dow Chemical Canada ULC Appellant
and
His Majesty The King Respondent
Coram: Karakatsanis, Côté, Rowe, Martin, Kasirer, Jamal and O’Bonsawin JJ.
Reasons for Judgment: (paras. 1 to 122)
Kasirer J. (Martin, Jamal and O’Bonsawin JJ. concurring)
Dissenting Reasons: (paras. 123 to 224)
Côté J. (Karakatsanis and Rowe JJ. concurring)
Note: This document is subject to editorial revision before its reproduction in final form in the Canada Supreme Court Reports.
Dow Chemical Canada ULC Appellant
v.
His Majesty The King Respondent
Indexed as: Dow Chemical Canada ULC v. Canada
2024 SCC 23
File No.: 40276.
2023: November 9; 2024: June 28.
Present: Karakatsanis, Côté, Rowe, Martin, Kasirer, Jamal and O’Bonsawin JJ.
on appeal from the federal court of appeal
Courts — Jurisdiction — Taxation — Income tax — Downward transfer pricing adjustment — Taxpayer reporting taxable income — Taxpayer including income earned and deducting interest expenses incurred under loan agreement with related foreign company — Minister reassessing and applying transfer pricing rules to income earned resulting in increased amount of taxable income — Minister declining to exercise discretion to make downward transfer pricing adjustment in respect of interest expenses — Taxpayer applying to Federal Court for judicial review of Minister’s decision denying downward adjustment and appealing reassessment to Tax Court of Canada — Whether decision by Minister exercising discretion to deny taxpayer’s request for downward transfer pricing adjustment falls outside exclusive original jurisdiction of Tax Court to determine appeals of assessments — Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), ss. 169, 247(2), 247(10) — Federal Courts Act, R.S.C. 1985, c. F‑7, ss. 18.1, 18.5.
Dow Chemical Canada ULC, a Canadian resident corporation, entered into, as a borrower, a non‑arm’s length revolving loan agreement with a related Swiss company as the lender. As a result of this loan agreement, Dow incurred interest expenses for its 2006 and 2007 taxation years. It also reported income for the 2006 taxation year in respect of toll manufacturing services provided to the Swiss company. Following a review of the transactions between Dow and the Swiss company, the Minister reassessed Dow for its 2006 taxation year, applying transfer pricing rules set out in s. 247(2) of the Income Tax Act (“ITA”). Under s. 247(2), where a taxpayer is dealing with a non-resident person with whom it is not at arm’s length, the amounts in a given transaction will be adjusted to reflect what would have been agreed to had the persons been dealing with one another at arm’s length. The application of s. 247(2) resulted in a significant increase in Dow’s income in the 2006 taxation year.
Dow believed that its income should be decreased to reflect an amount of interest that would have been paid had the parties been at arm’s length. Where an amount is identified that would decrease the taxpayer’s income, s. 247(10) of the ITA provides that a downward adjustment is not to be made unless, in the opinion of the Minister, the circumstances are such that it would be appropriate that the adjustment be made. Dow requested that the Minister exercise her discretion under s. 247(10) and make a downward transfer pricing adjustment, but the Minister refused. Dow sought judicial review in the Federal Court of the Minister’s discretionary decision. It also objected to the reassessment for the 2006 taxation year and eventually appealed the reassessment to the Tax Court.
In the context of the appeal of the reassessment, the parties referred a question of law to the Tax Court, asking it to determine whether, where the Minister has exercised her discretion pursuant to s. 247(10) of the ITA to deny a taxpayer’s request for a downward transfer pricing adjustment, the decision by the Minister falls outside the exclusive original jurisdiction of the Tax Court. The Tax Court held that the Minister’s discretionary decision under s. 247(10) is an essential component of the taxpayer’s assessment and goes to the correctness of that assessment, and may therefore be reviewed by the Tax Court under its exclusive appellate jurisdiction to determine the correctness of the assessment. The Federal Court of Appeal allowed the Minister’s appeal and held that the Federal Court has exclusive jurisdiction to judicially review discretionary decisions by the Minister under s. 247(10).
Held (Karakatsanis, Côté and Rowe JJ. dissenting): The appeal should be dismissed.
Per Martin, Kasirer, Jamal and O’Bonsawin JJ.: When the Minister has exercised her discretion under s. 247(10) of the ITA to deny a taxpayer’s request for a downward pricing adjustment, that decision falls outside of the jurisdiction of the Tax Court in respect of an appeal of the taxpayer’s assessment. The Minister’s discretionary decision is not part of the assessment. The meaning of “assessment” is settled in law, and the Minister’s opinion formed under s. 247(10) is qualitatively distinct from that concept. As there is no express right of appeal to the Tax Court, the proper forum to challenge the Minister’s discretionary decision under s. 247(10) is the Federal Court, pursuant to its exclusive jurisdiction in judicial review under s. 18(1) of the Federal Courts Act. Only the Federal Court has the jurisdiction to apply the appropriate standard of review and access to an appropriate range of administrative law remedies.
Both the Federal Court and the Tax Court are creatures of statute. The Federal Court has exclusive statutory jurisdiction to grant relief in relation to federal ministerial decisions under s. 18(1) of the Federal Courts Act. Section 18.5 of that Act allows for this jurisdiction to be ousted where a federal statute expressly provides for an appeal to another body, including the Tax Court. Pursuant to s. 12 of the Tax Court of Canada Act and s. 169 of the ITA, the Tax Court has exclusive jurisdiction to hear appeals seeking to vary or vacate income tax assessments. This jurisdiction is limited to reviewing the correctness of assessments. As confirmed in the Court’s jurisprudence, a tax assessment is a purely non‑discretionary determination of the taxpayer’s tax liability for a particular taxation year. The amount of tax owing is the product of the process of determining tax liability and it flows from the ITA itself. In preparing an assessment, the Minister’s role is simply to determine what the law requires the taxpayer to pay by applying a fixed statutory formula to taxable income. The Minister does not exercise any discretion.
Unlike the non‑discretionary determinations that make up an assessment, the ITA empowers the Minister to exercise discretion in some matters, including over whether to issue downward transfer pricing adjustments under s. 247(10). These discretionary decisions are not assessments nor are they part of assessments. Section 247(10) empowers the Minister to base her decision on policy considerations rather than the strict application of the law to the facts. When the Minister makes discretionary decisions, she provides her opinion, guided by policy considerations. This is a fundamentally different task than preparing an assessment. Section 247(10) must be understood alongside the non‑discretionary rule in s. 247(2) that the Minister must issue an upward adjustment of income to reflect amounts that would have been determined if the parties to the transaction had been dealing at arm’s length. In contrast, taxpayers have no entitlement to a downward adjustment and it cannot be said that the Minister must exercise her discretion under s. 247(10) in order for tax liability to be calculated correctly. A challenge to a policy‑based decision under s. 247(10) should therefore proceed separately from an appeal of the non‑discretionary assessment.
The definition of “assessment” should not be expanded to include discretionary decisions said to be directly affected by or inextricably linked to assessments. The Minister’s conduct is not at issue in an assessment and taxpayers cannot object to the underlying process or motivations for the issuing of an assessment before the Tax Court. Reviews of conduct by the executive proceed by way of judicial review before the Federal Court. If a discretionary decision made under s. 247(10) is quashed, it does not automatically follow that the tax liability is wrong and the assessment is incorrect, since it is open to the Minister to make the same decision upon reconsideration. By contrast, whenever a non-discretionary determination is found to have been made in error, the Minister has no choice but to make the correct determination. Furthermore, the fact of the Minister’s opinion must not be confused with the basis for it. It is only the outcome of the Minister’s exercise of discretion that may be a fact relevant to the correctness of the assessment, not the appropriateness of that outcome. A discretionary decision under s. 247(10) will not always result in an assessment being issued and decisions under s. 247(10) may be made after an assessment has been issued. It cannot be said in these circumstances that an initial assessment was incorrect. If Parliament had wished that the Minister would issue a new assessment in every circumstance that s. 247(10) discretion were exercised, it would have provided for this in the ITA. Changing the nature of the s. 247(10) decision or otherwise assimilating it to the assessment would require a legislative amendment.
Holding that assessments may include decisions of the Minister pursuant to provisions like s. 247(10) by necessary implication would be inconsistent with distinct routes of appeal to the Tax Court from other decisions that are set out expressly in the ITA. Where Parliament provides for recourse from a ministerial decision to the Tax Court, it has created an express right to appeal; this shows that ministerial decisions are understood as distinct from the tax assessment even where they may directly affect it. To hold that the Tax Court could have implicit jurisdiction over the Minister’s decision under s. 247(10) on an assessment appeal would be inconsistent with this established method. Nor does the jurisdiction of the former Exchequer Court of Canada support the view that decisions under s. 247(10) form part of an assessment. The Exchequer Court had a broader grant of jurisdiction and access to administrative law remedies, unlike the modern Tax Court. The historical jurisdiction of the Exchequer Court is therefore of limited relevance.
To depart from the settled meaning of “assessment” also has potential implications beyond the matter in issue. Moreover, adopting Dow’s theory would unsettle the Court’s jurisprudence on the standard of review set forth in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653. When a taxpayer challenges an assessment, the Tax Court will conduct a de novo review of that assessment. If a discretionary decision under s. 247(10) were part of an assessment, it would thus be reviewed de novo. However, absent legislative direction, this would be inappropriate. Vavilov emphasized that the fact that the legislature has chosen to delegate authority justifies a default position of reasonableness review. The Federal Court is the only court that has jurisdiction to review a discretionary decision under s. 247(10) on a reasonableness standard. Further, applying appellate standards of review to a decision appealed to the Tax Court through s. 169 of the ITA would be inconsistent with the de novo standard of review before the Tax Court and it is not at all clear how the single appellate mechanism under s. 169 can provide at once for de novo review for some parts of the assessment and for appellate review of decisions that are said to be inextricably linked to that same assessment. Importing a new standard of review into an appeal to the Tax Court from an assessment would directly contradict Parliament’s intent on how the Tax Court should decide if an assessment is correct. The statutory de novo review in the Tax Court does not contemplate deference other than placing an evidentiary burden of proof on the taxpayer. Holding that a standard other than reasonableness applies to exercises of the Minister’s discretion under s. 247(10) would undercut the certainty and predictability that Vavilov brought.
Moreover, treating the Minister’s decision under s. 247(10) as part of an assessment for the purposes of an appeal to the Tax Court would result in bifurcated streams of review and give rise to issues regarding the Federal Court’s jurisdiction. A decision under s. 247(10) can be made without an assessment being issued or after the time limit for objections and appeal. This might result in challenges to discretionary decisions being statute‑barred. The argument that, if the Minister does not issue an assessment after she makes a discretionary decision, then the decision can be challenged by way of judicial review in the Federal Court proposes an untenable solution in which the Federal Court would retain its judicial review jurisdiction over discretionary decisions by the Minister as a general rule, but lose its jurisdiction to conduct judicial review of those same discretionary decisions if they are followed by assessments. Moreover, such an approach would enlarge the Tax Court’s jurisdiction beyond the correctness of assessments to other related ministerial decisions. This is also inconsistent with the principles of statutory interpretation. Section 18.5 of the Federal Courts Act states that only an express ouster of the Federal Court’s jurisdiction will have such an effect. Extending the jurisdiction of the Tax Court to the exclusion of the jurisdiction of the Federal Court by necessary implication rather than by express statutory language ought to be rejected.
Only the Federal Court can grant an appropriate remedy for a challenge to the s. 247(10) decision. If the Tax Court determines that an assessment is incorrect, it may vacate the assessment, vary it, or refer it back to the Minister for reconsideration and reassessment. If the Tax Court issues an order for reconsideration and reassessment, the Minister will simply be required to issue a reassessment that correctly reflects the decision that the taxpayer sought to challenge since that decision would not have been quashed. An order for reconsideration and reassessment cannot compel the Minister to reconsider her discretionary decision. If Parliament had sought to confer power to grant relief from a s. 247(10) opinion on the Tax Court, it would have to have done so by statute. The Tax Court does not have the remedial tools necessary to address a s. 247(10) decision. The Federal Court has the power to quash the Minister’s discretionary decision, which would require her to reconsider it. The Tax Court may intervene only after the Federal Court has quashed the Minister’s decision, after the Minister made a new decision, after that new decision results in a change in the taxpayer’s tax liability, and if the Minister fails to issue a reassessment to reflect a change in tax liability.
Parliament intentionally divided jurisdiction over tax matters between the Federal Court and the Tax Court. The Tax Court has never been a single forum for all tax litigation. Parliament has set up a complex structure to deal with a multitude of tax‑related claims. Making a change to that complex structure without a thoughtful, comprehensive reform that can only be achieved by Parliament would be imprudent, particularly if doing so would directly contradict the wording of the applicable statutes and Parliament’s intent. It falls to Parliament to respond to concerns about the jurisdiction of the Tax Court.
Deciding that the Tax Court has jurisdiction to review decisions under s. 247(10) will not enhance access to justice. This provision is relevant mainly to multinational corporate taxpayers carrying out non‑arm’s length transactions with related entities. If the Tax Court were to have jurisdiction to review the Minister’s exercise of discretion pursuant to s. 247(10), the Federal Court’s ability to conduct judicial review of those decisions would be ousted under s. 18.5 of the Federal Courts Act but the Tax Court would have no ability to provide recourse if the Minister conducted herself unreasonably in coming to her decision because it does not have remedial power to quash the Minister’s decision. Expanding the jurisdiction of the Tax Court beyond what is provided for in legislation could have far‑reaching implications in respect of the jurisdiction of the Federal Court to conduct judicial review of ministerial decisions in other settings. Important aspects of tax and administrative law in Canada should not be undermined in order to pursue access to justice benefits that have not been made out.
Per Karakatsanis, Côté and Rowe JJ. (dissenting): The appeal should be allowed and Dow’s challenge regarding the Minister’s discretionary decision to deny downward transfer pricing adjustments under s. 247(10) of the ITA should proceed before the Tax Court. Unlike other discretionary powers in the ITA, the power that the Minister has under s. 247(10) is not permissive. The Minister is obliged to exercise this power in order to determine a taxpayer’s liability. Parliament has ensured that the correctness or validity of a taxpayer’s assessment falls squarely within the jurisdiction of the Tax Court, to the exclusion of the Federal Court’s supervisory jurisdiction. Judicial review should not be used to develop a new form of incidental litigation designed to circumvent the system of tax assessments and appeals established by Parliament. Because it goes directly to the correctness of a taxpayer’s assessment, a decision by the Minister to deny a downward transfer pricing adjustment under s. 247(10) is within the scope of the Tax Court’s appellate jurisdiction. Such a decision is inextricably linked to the assessment because it directly impacts the amount of a taxpayer’s income and taxable income and it necessarily precedes the determination of the ultimate amount of tax owing. This conclusion is consistent with the comprehensive legislative schemes establishing the respective jurisdiction of the Federal Court and the Tax Court and with the important objectives of avoiding a multiplicity of proceedings and of promoting efficiency and access to justice.
Statutory courts such as the Federal Court and the Tax Court derive their existence, jurisdiction, and powers solely from their enabling statutes. Section 18(1) of the Federal Courts Act grants the Federal Court supervisory jurisdiction over decisions of a federal board, commission or other tribunal. However, s. 18.5 of the Federal Courts Act ousts the Federal Court’s jurisdiction to grant such remedies where a federal statute expressly provides for a right of appeal to the Tax Court. Concerns for good tax administration, access to justice and efficiency animate Parliament’s choice to prioritize the Tax Court’s jurisdiction in tax matters where a right of appeal is expressly provided. Pursuant to ss. 165 and 169 of the ITA, the Tax Court has exclusive jurisdiction to review the validity and correctness of assessments.
The Minister’s decision to either allow or deny a downward transfer pricing adjustment under s. 247(10) is based on whether, in her opinion, the circumstances are such that it would be appropriate that the adjustment be made. Section 247(10) does not define those circumstances or provide any guidance as to what they may be. The Minister is given wide discretion to make her decision, based on her own assessment of the circumstances, policy considerations and the applicable legislation. Contrary to other provisions of the ITA that give the Minister a discretion that affects the amount of a taxpayer’s income or taxable income, s. 247(10) is not permissive. Although a taxpayer is not entitled to a downward adjustment in all circumstances, a taxpayer is entitled to the Minister’s opinion as to whether the downward adjustment is appropriate when one is sought and/or established. Section 247(2) provides that upward and downward adjustments shall be made when the conditions prescribed in that provision are met. Section 247(10) is an exception to the general rule in s. 247(2), which mandates adjustments where necessary to reflect the amounts that would have been agreed to had the parties been dealing with each other at arm’s length. It places a limitation on any downward transfer pricing adjustment by subjecting such an adjustment to the Minister’s discretion. Read together, s. 247(2) and 247(10) require the Minister to form an opinion as to whether a downward adjustment is appropriate when the requisite conditions are met.
The settled meaning of an “assessment” for the purposes of s. 169 of the ITA is not in dispute. At issue on appeal from an assessment is the amount of tax owed by the taxpayer. In this case, the question is whether a decision that the Minister must make before the amount of tax liability can be determined is within the scope of an appeal from an assessment provided for in s. 169. The Minister’s exercise of discretion in this context is inextricably linked to the correctness of the assessment and is an essential component of the assessment as a matter of fact and law. The discretion under s. 247(10) is of a different character than a discretion that is entirely permissive and need not be exercised until after tax, interest and penalties have been assessed. A decision to deny a downward transfer pricing adjustment is a fact on which the application of the relevant statutory provisions necessarily rests. If the discretion is not exercised or properly exercised, the resulting assessment cannot be correct. The right of appeal provided for in s. 169 in these circumstances arises from the assessment, not from the exercise of discretion per se; the amount of tax assessed is the direct result of the Minister’s decision under s. 247(10). This finding does not create any legal uncertainty, nor does it expand the settled meaning of an assessment or alter the nature of the right of appeal provided for in s. 169. Indeed, in objecting to an assessment that results from the Minister’s exercise of discretion under s. 247(10), a taxpayer is concerned with the amount of tax owing, not merely with the propriety of the Minister’s exercise of discretion.
The Tax Court’s remedial powers under s. 171 of the ITA allow it to deal with discretionary decisions going to the correctness of an assessment. Section 171(1)(b)(iii) sets out that the Tax Court may refer the assessment back to the Minister for reconsideration and reassessment. These words imply that the Tax Court may, in referring the assessment back for reconsideration and reassessment, remit the matter of the downward pricing adjustment to the Minister as part of a reconsideration. In contrast, on judicial review, the Federal Court cannot deal with the assessment. An assessment remains valid and binding unless and until it is varied or vacated by the Tax Court or the Minister issues a reassessment, even where a decision under s. 247(10) has been quashed by the Federal Court. Section 171(1)(b)(iii) is better suited to the real substance of the issue to be determined, which is the correct amount of tax owing.
A deferential standard of appellate review applies when the Tax Court is dealing with the Minister’s discretionary decisions under s. 247(10). This is because the Tax Court cannot substitute its opinion for that of the Minister or prevent her from arriving at the same decision upon reconsideration, following a proper exercise of her discretion. It is clear from the language in s. 247(10) that Parliament intended to confer upon the Minister a broad discretion in reaching a decision regarding a downward transfer pricing adjustment. In challenging the Minister’s decision under s. 247(10), a taxpayer must establish a factual foundation to support the submission that the decision was wrong in principle, ignored relevant evidence or was based on irrelevant evidence, and the focus is on whether the exercise of discretion remains a valid fact on which to rest the correctness of the assessment. The Tax Court, as a specialized court, is well placed to rule on whether the discretion under s. 247(10) was properly exercised
Cases Cited
By Kasirer J.
Applied: Okalta Oils Ltd. v. Minister of National Revenue, [1955] S.C.R. 824; referred to: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653; Main Rehabilitation Co. v. Canada, 2004 FCA 403, 247 D.L.R. (4th) 597; Canada v. Anchor Pointe Energy Ltd., 2007 FCA 188, [2008] 1 F.C.R. 839; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Walker v. Canada Customs and Revenue Agency, 2005 FCA 393, 344 N.R. 169; Canada (Attorney General) v. Collins Family Trust, 2022 SCC 26; The Queen v. Wesbrook Management Ltd., 96 DTC 6590; Addison & Leyen Ltd. v. Canada, 2006 FCA 107, [2006] 4 F.C.R. 532, rev’d 2007 SCC 33, [2007] 2 S.C.R. 793; Ereiser v. Minister of National Revenue, 2013 FCA 20, 444 N.R. 64; JP Morgan Asset Management (Canada) Inc. v. Canada (National Revenue), 2013 FCA 250, [2014] 2 F.C.R. 557; Ludmer v. Canada, [1995] 2 F.C. 3; Fazal v. R., 2020 TCC 137, [2021] G.S.T.C. 5; Azzopardi v. The King, 2023 TCC 51, [2023] 4 C.T.C. 2049; Callahan v. The King, 2023 TCC 172, [2024] 2 C.T.C. 2001; Iris Technologies Inc. v. Canada (Attorney General), 2024 SCC 24; Canada (Attorney General) v. Iris Technologies Inc., 2022 FCA 101, [2022] 1 F.C.R. 401; Canada v. Consumers’ Gas Co., [1987] 2 F.C. 60; Roitman v. Canada, 2006 FCA 266, 353 N.R. 75; Johnson v. Minister of National Revenue, 2015 FCA 52, 470 N.R. 183; 9162‑4676 Québec Inc. v. Canada, 2016 FCA 112, 2017 DTC 5074; Webster v. Canada (Attorney General), 2003 FCA 388, 312 N.R. 235; Ghazi v. Canada (National Revenue), 2019 FC 860, 70 Admin. L.R. (6th) 216; Newave Consulting Inc. v. Canada (National Revenue), 2021 FC 1203; Chad v. Canada (National Revenue), 2023 FC 1481, [2024] 1 C.T.C. 63; Nicholson Ltd. v. Minister of National Revenue, [1945] Ex. C.R. 191; Canada (National Revenue) v. ConocoPhillips Canada Resources Corp., 2017 FCA 243, 2017 DTC 5135; Interior Savings Credit Union v. R., 2007 FCA 151, [2007] 4 C.T.C. 55; Pure Spring Co. v. Minister of National Revenue, [1946] Ex. C.R. 471; Johnston v. Minister of National Revenue, [1948] S.C.R. 486; Canada (Attorney General) v. Buchanan, 2002 FCA 231, 2002 DTC 7397; Campbell v. Minister of National Revenue, [1953] 1 S.C.R. 3; Yatar v. TD Insurance Meloche Monnex, 2024 SCC 8; Canada (Transportation Safety Board) v. Carroll‑Byrne, 2022 SCC 48; Southwind v. Canada, 2021 SCC 28, [2021] 2 S.C.R. 450; Bozzer v. Canada (National Revenue), 2011 FCA 186, [2013] 1 F.C.R. 242; Jewett v. Canada (Attorney General), 2020 FCA 187, [2021] 4 C.T.C. 1; Shaw Estate v. Canada (Attorney General), 2021 FC 576; Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27; Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559; Mason v. Canada (Citizenship and Immigration), 2023 SCC 21; Canada v. Loblaw Financial Holdings Inc., 2021 SCC 51; Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601; Sifto Canada Corp. v. Minister of National Revenue, 2014 FCA 140, 461 N.R. 184; Maverick Oilfield Services Ltd. v. Canada (Attorney General), 2023 FC 1728, [2024] 2 C.T.C. 67.
By Côté J. (dissenting)
Canada v. Addison & Leyen Ltd., 2007 SCC 33, [2007] 2 S.C.R. 793; Canada (Attorney General) v. Collins Family Trust, 2022 SCC 26; Minister of National Revenue v. General Electric Capital Canada Inc., 2010 FCA 344, 414 N.R. 304; Canada v. Cameco Corporation, 2020 FCA 112, [2020] 4 F.C.R. 104; Canada v. GlaxoSmithKline Inc., 2012 SCC 52, [2012] 3 S.C.R. 3; Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653; Ereiser v. Minister of National Revenue, 2013 FCA 20, 444 N.R. 64; Ontario v. Criminal Lawyers’ Association of Ontario, 2013 SCC 43, [2013] 3 S.C.R. 3; Windsor (City) v. Canadian Transit Co., 2016 SCC 54, [2016] 2 S.C.R. 617; Roberts v. Canada, [1989] 1 S.C.R. 322; Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559; Canada (Attorney General) v. TeleZone Inc., 2010 SCC 62, [2010] 3 S.C.R. 585; Walker v. Canada Customs and Revenue Agency, 2005 FCA 393, 344 N.R. 169; JP Morgan Asset Management (Canada) Inc. v. Canada (National Revenue), 2013 FCA 250, [2014] 2 F.C.R. 557; Campbell v. Minister of National Revenue, [1953] 1 S.C.R. 3; Johnston v. Minister of National Revenue, [1948] S.C.R. 486; Okalta Oils Ltd. v. Minister of National Revenue, [1955] S.C.R. 824; Canada v. Consumers’ Gas Co., [1987] 2 F.C. 60; Main Rehabilitation Co. v. Canada, 2004 FCA 403, 247 D.L.R. (4th) 597; Canada v. Anchor Pointe Energy Ltd., 2007 FCA 188, [2008] 1 F.C.R. 839; Hunt v. The Queen, 2018 TCC 193, 2018 D.T.C. 1139; Nicholson Ltd. v. Minister of National Revenue, [1945] Ex. C.R. 191; Pure Spring Co. v. Minister of National Revenue, [1946] Ex. C.R. 471; Canada (Attorney General) v. British Columbia Investment Management Corp., 2019 SCC 63, [2019] 4 S.C.R. 559; Domtar Inc. v. Canada, 2009 FCA 218, [2009] 6 C.T.C. 61; Sifto Canada Corp. v. Minister of National Revenue, 2014 FCA 140, 461 N.R. 184; Wenham v. Canada (Attorney General), 2018 FCA 199, 429 D.L.R. (4th) 166; International Air Transport Association v. Canadian Transportation Agency, 2022 FCA 211; R. v. Cunningham, 2010 SCC 10, [2010] 1 S.C.R. 331; ATCO Gas and Pipelines Ltd. v. Alberta (Energy and Utilities Board), 2006 SCC 4, [2006] 1 S.C.R. 140; Pioneer Laundry and Dry Cleaners, Ld. v. Minister of National Revenue, [1940] A.C. 127; Minister of National Revenue v. Wrights’ Canadian Ropes, Ld., [1947] A.C. 109; Anger v. M.N.R., 49 DTC 65; MacDonald Estate v. M.N.R., 50 DTC 109; Buehler v. M.N.R., 50 DTC 119; Williamson v. M.N.R., 50 DTC 147; Minister of National Revenue v. Parsons, [1984] 2 F.C. 331; Redeemer Foundation v. Canada (National Revenue), 2008 SCC 46, [2008] 2 S.C.R. 643; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Roncarelli v. Duplessis, [1959] S.C.R. 121; Reza v. Canada, [1994] 2 S.C.R. 394; Canada (Attorney General) v. Fontaine, 2017 SCC 47, [2017] 2 S.C.R. 205; Canada (Transportation Safety Board) v. Carroll‑Byrne, 2022 SCC 48; Canada (Attorney General) v. Jencan Ltd., [1998] 1 F.C. 187; Association of Universities and Colleges of Canada v. Canadian Copyright Licensing Agency, 2012 FCA 22, 428 N.R. 297; Delios v. Canada (Attorney General), 2015 FCA 117, 100 Admin. L.R. (5th) 301; ‘Namgis First Nation v. Canada (Fisheries and Oceans), 2019 FCA 149.
Statutes and Regulations Cited
Constitution Act, 1867, s. 101.
Federal Courts Act, R.S.C. 1985, c. F‑7, ss. 18, 18.1, 18.5.
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), Part I, ss. 67, 91(2), 111(1.1)(c), 118.1(10.2) to (10.5), 125(7), Division I, 152(1), (1.1), (1.2), (1.3), (3), (4.2), (8), 165, 166.2, Division J, 169, 171, 172(3), 204.81(9), 220(3.1), (3.2), 222 to 223, 231, Parts XVI, XVI.1, 247, 248(1).
Income War Tax Act, R.S.C. 1927, c. 97, s. 6(2), 66, Sch. 4, s. 3(4) [ad. 1946, c. 55, s. 22].
Tax Court of Canada Act, R.S.C. 1985, c. T‑2, s. 12.
Tax Court of Canada Rules (General Procedure), SOR/90‑688a, s. 58.
Tax Court of Canada Rules (Informal Procedure), SOR/90‑688b.
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APPEAL from a judgment of the Federal Court of Appeal (Webb, Rennie and Locke JJ.A.), 2022 FCA 70, [2022] 5 C.T.C. 1, 2022 DTC 5050, [2022] F.C.J. No. 565 (Lexis), 2022 CarswellNat 1109 (WL), setting aside a decision of Monaghan J., 2020 TCC 139, [2021] 2 C.T.C. 2063, 2021 DTC 1001, [2020] T.C.J. No. 114 (Lexis), 2020 CarswellNat 5538 (WL). Appeal dismissed, Karakatsanis, Côté and Rowe JJ. dissenting.
Daniel Sandler, Osnat Nemetz and Laura Jochimski, for the appellant.
Daniel Bourgeois, Christa Akey and Justine Malone, for the respondent.
The judgment of Martin, Kasirer, Jamal and O’Bonsawin JJ. was delivered by
Kasirer J. —
I. Overview
[1] This appeal concerns the jurisdiction of the Tax Court of Canada, sitting in appeal of a taxpayer’s assessment, to review the Minister of National Revenue’s decisions under s. 247(10) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (“ITA”). Parliament has conferred on the Minister discretionary authority to decide whether “the circumstances are such that it would be appropriate” to make a downward transfer pricing adjustment. A downward adjustment can only be made in accordance with the ITA where the Minister has come to the opinion that it is appropriate. When the taxpayer seeks to challenge the Minister’s discretionary decision, should that challenge be brought by an appeal to the Tax Court, pursuant to that court’s exclusive statutory jurisdiction to decide on the correctness of the taxpayer’s income tax assessment? Or should the taxpayer’s challenge be brought instead before the Federal Court of Canada, pursuant to that court’s exclusive statutory jurisdiction over judicial review, proceeding on the presumptively applicable standard of reasonableness?
[2] Dow Chemical Canada ULC argues that a review of the Minister’s decision under s. 247(10) of the ITA falls within the exclusive jurisdiction assigned to the Tax Court because that decision directly affects or is inextricably linked to the assessment of tax liability. Dow says its position advances the cause of fairness and convenience for all taxpayers, including multinational corporations like itself, that might benefit from one-stop judicial shopping in the Tax Court. Accordingly, Dow asks this Court to enlarge the statutory jurisdiction of the Tax Court on appeal by providing it with a new power to conduct what amounts to judicial review of the Minister’s decision on a reasonableness standard.
[3] I have had the advantage of reading the reasons prepared by my colleague Côté J. in which she proposes to allow Dow’s appeal. I agree with her that the Federal Court has exclusive statutory jurisdiction to grant relief in relation to federal ministerial decisions under s. 18(1) of the Federal Courts Act, R.S.C. 1985, c. F-7. We share the view that s. 18.5 of that Act allows for this jurisdiction to be ousted where a federal statute, such as the ITA, expressly provides for an appeal to another body, including the Tax Court. I agree as well that the Tax Court has exclusive jurisdiction to hear appeals seeking to vary or vacate income tax assessments pursuant to s. 12 of the Tax Court of Canada Act, R.S.C. 1985, c. T-2, and s. 169 of the ITA. For both of us, the central question before the Court is whether the Minister’s decision under s. 247(10) is part of an assessment, and thus subject to the jurisdiction of the Tax Court, or whether as a separate exercise of ministerial discretion it should be subject to judicial review, on the standard of reasonableness, before the Federal Court.
[4] With the utmost respect, however, I am unable to agree with the view that the Minister’s decision under s. 247(10) can be appealed as part of an assessment to the Tax Court. Allowing this matter to be heard on appeal in the Tax Court as part of an assessment would require this Court to accept Dow’s expansive jurisdictional theory, based not on an express provision of an act of Parliament as s. 18.5 of the Federal Courts Act requires, but on what Dow claims is fair and best for access to justice. In my view, ousting the Federal Court’s jurisdiction in the absence of express direction by statute and enlarging the Tax Court’s review function would prompt new controversy over jurisdictional boundaries, all in service of supposed benefits for access to justice that strike me as largely illusory. Parliament plainly did not intend for the Tax Court to serve as an exclusive forum for taxation matters; it expressly granted by statute some jurisdiction over taxation matters to the Federal Court, some to the Tax Court, and even some original