Case: TD Bank v. British Columbia (Commissioner of Income Tax), 2017 BCCA 159 (CanLII)
Keywords: International Business Activity Act, S.B.C. 2004, c. 49; Income Tax; Tax Return; Tax Refund
TD Bank’s tax return claiming a refund of $2.8 million is filed one day after the B.C. Provincial Commissioner of Income Tax thought it was due. The Commissioner determines the refund is nil. She also refuses an extension of time. The B.C. Minister of Finance confirms the nil determination.
TD appeals the Minister’s decision, seeking judicial review of the Commissioner’s refusal to extend time. The chambers judge finds the return had been filed in time and ordered the Commissioner to assess the claim. The chambers judge does not find it necessary to judicially review the refusal of the extension of time.
The Province then appeals the determination that the return was filed on time. TD cross-appeals the refusal of an extension by the Commissioner. The Court of Appeal allows both the Province’s appeal and TD’s cross appeal. In arriving at these determinations, in his first paragraph, Frankel J.A. references the lyrics to an old song, “recorded by a number of artists, most notably Dinah Washington:
What a diff’rence a day makes / Twenty-four little hours
Having regard to provisions of the Interpretation Act, RSBC 1996, c 238, the Court of Appeal determines TD’s return was one day late. That being said, the Court also found the Commissioner unnecessarily fettered her discretion in refusing TD’s extension and, therefore, her decision is unreasonable.
TD sought the refund pursuant to the “International Business Activity Program”, a tax incentive administered under the International Business Activity Act, S.B.C. 2004, c. 49. Under the IBAA, Canadian corporations with “permanent establishment” in British Columbia may be eligible to claim up to 100% of Provincial income tax from income generated from international financial business. (See para. 3).
Subject to obtaining an extension from the Commissioner, TD was required to file its return “within 18 months after the end of [its 2012] taxation year.” From the Court of Appeal’s description of the relevant factual background, TD’s 2012 taxation year ended on October 31 of that year. (See para. 11). As per s. 25(5) of the Interpretation Act, RSBC 1996, c 238, “the first day must be excluded” in determining the proper date for filing. (See para. 36).
Whereas the Province argued the first day was October 31, 2012 and the last day April 30, 2014, TD contended the first day was November 1, 2012. For TD, the last day for filing should be May 1, 2014.
The Court of Appeal agreed with the Province, and made the following observations before concluding TD was required to file its return within 18 months after October 31, 2012:
- The word “after” does not appear in s. 25(5) of the Interpretation Act and so cannot be used to determine what day should be excluded in determining the 18-month filing period at s. 28(4) of the IBAA (and yet, presumably, it can still be used to determine that a day must, nevertheless, be excluded);
- With reference to Lopez v. Canada (National Parole Board), 2001 BCCA 742 (CanLII), the law does not consider units of time smaller than a day;
- At s. 28(4) of the IBAA, the “triggering event” is the end of the taxation year (in this case, October 31); and
- Although a taxation year ends at the last instant of the last day of that year, it nevertheless “ends on that day”. (See paras. 42-44).
For Frankel J.A., that TD was required to file its return within 18 months after October 31, 2012 meant the time for filing “began to run on November 1, 2012 and expired on April 30, 2014”. (See para. 44). As such, TD filed a day late on May 1, 2014 but that’s not the end of the story…
The Court of Appeal judicially reviewed the Commissioner’s decision refusing the one-day extension of time. Section 24(1) of the IBAA provides: “If a claimant was at any time in the taxation year a registered corporation or an IB specialist, the claimant may file a return for the taxation year with the commissioner within 18 months after the end of the taxation year or within a later period approved by the commissioner.” [emphasis added].
Ultimately, the Court concluded the Commissioner had improperly approached TD’s request “…on the basis she was precluded from granting an extension of time in the absence of extraordinary circumstances”. (See para. 59). Although “Taxpayer Relief Guidelines” contemplated three scenarios in which relief could be granted (and none appeared to apply to TD), for the Court of Appeal, this was an unnecessary fetter on the otherwise “broad discretion” provided by s. 24(1) of the IBAA. After all (as per the decision of Stratas J.A. at para. 60 in Stemijon Investments Ltd. v. Canada (Attorney General), 2011 FCA 299 (CanLII)),
“…an administrative policy is not law. It cannot cut down the discretion that the law gives to a decision-maker. It cannot amend the legislator’s law. A policy can aid or guide the exercise of discretion under a law, but it cannot dictate in a binding way how that discretion is to be exercised”. (See at para. 58).
Sighs of relief all around – well, not all around.
Despite being a day late, the Court of Appeal found the nil determination of the Commissioner could not stand on the basis the refusal to grant TD’s extension was improper.
The difference between November 1, 2012 and April 30, 2014 (including the end date in the calculation) is exactly 546 days or 18 months. To check for yourself, take a look at this helpful website: https://www.timeanddate.com/date/durationresult.html?m1=11&d1=1&y1=2012&m2=4&d2=30&y2=2014&ti=on
Counsel for the Appellant: Sointula Kirkpatrick and Veronica Jackson (Minister of Justice, Revenue & Taxation Dept., Legal Services Branch, Victoria)
Counsel for the Respondent: Thomas Gelbman and Amanda Heale (Osler, Hoskin & Harcourt LLP, Calgary and Toronto)