[2011] 2 F.C.R. D-11
Income Tax
Reassessment
Appeal from Tax Court of Canada (T.C.C.) decision (2010 TCC 104) allowing appeal brought by respondent, referring back assessment issued regarding 1997 taxation year for reassessment on basis that refund of interest of $6 474 459.61 to be included in calculation of respondent’s resource allowance—Resource allowance phased out over period of years ending in 2007—Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 20(1)(v.1) statutory basis for deduction of resource allowance with respect to respondent—Income Tax Regulations, C.R.C., c. 945 providing for calculation of resource allowance—T.C.C. determining whether refund interest having to be included in computation of “gross resource profits” pursuant to Regulations, s. 1204(1)—T.C.C. relying on one of leading cases on interpretation of Regulations, s. 1204(1)—Applying correct legal test as to whether refund interest sufficiently connected to production, processing activities to constitute income from that source—T.C.C. seeking to characterize nature of refund received, then assessing whether refund sufficiently connected to production, processing activities to constitute income from that source—Determining that respondent earned refund in course of managing tax obligations, which in turn arose as a consequence of earning profits from production, processing of coal—T.C.C. also considering nature of dispute giving rise to refund—Finding that refund interest sufficiently connected to respondent’s production, processing activities to constitute income from that source—Finding open to T.C.C. based on evidence before it—Appeal dismissed.
3850625 Canada Inc. v. Canada (A-116-10, 2011 FCA 117, Noël J.A., judgment dated March 24, 2011, 15 pp.)