Dow Chemical Canada ULC v. His Majesty the King
(Federal) (Civil) (By Leave)
Courts - Jurisdiction, Income tax - Courts —Jurisdiction — Income tax — Whether review of exercise of Minister’s power under subsection 247(10) of Income Tax Act is within Tax Court’s exclusive original jurisdiction.
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A corporate taxpayer requested that the Minister of National Revenue exercise her discretionary power under s. 247(10) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (“ITA”) to adjust the value of a non-arm’s length transaction downward, which would, in turn, reduce the amount of the taxpayer’s assessment. The Minister declined to do so. The taxpayer wished to challenge the Minister’s decision, but it was unclear whether the Tax Court or Federal Court had jurisdiction to do so. The parties put a stated question to the Tax Court to determine the jurisdictional issue: Where the Minister of National Revenue has exercised her discretion pursuant to s. 247(10) of the ITA to deny a taxpayer’s request for a downward transfer pricing adjustment, is that a decision falling outside the exclusive original jurisdiction granted to the Tax Court of Canada under s. 12 of the Tax Court of Canada Act, R.S.C. 1985, c. T-2 and s. 171 of the ITA?
The Tax Court judge determined that the Tax Court had exclusive jurisdiction to review the Minister’s decision. She held that the decision directly affected the computation of income, and was therefore part of the assessment. Appeals of assessments are within the Tax Court’s jurisdiction.
The Federal Court of Appeal reached the opposite conclusion and allowed the Crown’s appeal. The decision is part of the process of the assessment, and the Tax Court only has the power to hear appeals of the product of that process. Furthermore, correcting an error in the Minister’s decision requires a power to quash or issue an order of mandamus, and the Tax Court does not have those powers.
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