Subsection 161(1) - General
Cases
The Queen v. Zelinski, 2000 DTC 6001, Docket: A-742-96 (FCA)
The Court rejected the submission of the taxpayer that given that s. 158(8) deemed an assessment to be valid and binding until the time of the reassessment interest under s. 161(1) arising because of the reassessment of a taxpayer accrued only from the time of the reassessment rather than from the time the taxpayer filed his return. Sexton J.A. noted (at p. 6010) that "outstanding" was broadly defined as '''that stands over; that remains undetermined, unsettled or unpaid'" and that "simply put, taxes that a taxpayer underestimates from his or her tax return are unpaid and are therefore outstanding, regardless of the date in which the Minister reassesses ... ."
Wargacki v. The Queen, 92 DTC 6336 (FCTD)
Joyal J. recommended that the Crown remit interest on the tax payable by the taxpayer that accrued between June 17, 1986 and the date his formal judgment was issued, given that on the first date counsel for the taxpayers had made a settlement offer that was essentially identical to the findings in the action by Joyal J.
The Queen v. Union Gas Ltd., 90 DTC 6659 (FCA)
For its 1978 taxation year ending March 31, 1978 the taxpayer remitted $8,916,000 and then in June 1978 directed Revenue Canada to apply $2,168,000 of that amount to its 1979 taxation year, which was done. However, the taxpayer showed tax payable of $7,110,095 when its filed its 1978 return, which later was increased to $7,521,000 by reassessment.
No interest was payable under s. 161(2), as the taxpayer had paid the required instalments for its 1978 taxation year, and the June 1978 agreement with Revenue Canada allocating those instalment payments to the 1979 year could not alter that fact "since a contract cannot have the effect of modifying a past event". However, interest was payable under s. 161(1) because at the time for filing the taxpayer's return for its 1978 taxation year (September 1978), the instalment payments had been applied, in part, to the 1979 taxation year.
Rath v. The Queen, 82 DTC 6175, [1982] CTC 207 (FCA)
The pre-1984 version of s. 161(1) did not require interest to be paid where taxes have been paid, some portion thereof has been refunded and it subsequently is determined that the refund was excessive. "[T]he Crown is entitled only to such exactions as the statute imposes".
Galway v. M.N.R., 74 DTC 6247, [1974] CTC 313 (FCA)
On an application for a consent judgment, the Court of Appeal lacked the jurisdiction to refer an assessment back to the Minister to reassess the taxpayer's tax and interest in a single lump sum. S.54(1) of the pre-1972 Act did not lend itself to the assessment of a fixed amount for interest before the tax had all been paid. In addition, "assuming the assessment of interest can be made at a fixed amount (which the proposed assessment does not expressly do), the result of the proposed lump sum assessment would be that the amount assessed as tax would diminish with a delay in implementing the settlement ...".
See Also
J.K. Read Engineering Ltd. v. The Queen, 2014 DTC 1216 [at 3872], 2014 TCC 309
After finding that GAAR applied to deny capital losses of the taxpayers from the time of the abusive transactions giving rise to them rather than not being denied until the transactions' reassessment under s. 245(2), Hogan J found that it followed that interest respecting such reassessments commenced accruing from the taxpayers' balance-due dates.
Ford v. The Queen, 95 D.T.C 848 (TCC)
The taxpayer did not file a 1991 return on or before April 30, 1992 because she had no income tax payable for that year. When a subsequent court judgment retroactively gave rise to a 1991 tax liability pursuant to s. 56.1(3), she filed her 1991 return within 90 days thereafter.
Bell TCJ. found that no interest was payable because the taxpayer had used due diligence in filing on this basis, and because, if she had filed a 1991 income tax return on April 30, 1992 there would have been no requirement for the filing of a second return by her following the court's judgment.
Administrative Policy
91 C.R. - Q.61
RC will credit a voluntary payment as being on account of the year subject to a waiver effective from the date of payment where RC has identified a contentious deduction which it may disallow on a reassessment to increase taxes payable for the year in question.
10 June 1991 T.I. (Tax Window, No. 4, p. 23, ¶1290)
Where RC agrees to a request to substitute one type of loss for another and there is no Part I tax either on the original assessment or the reassessment, RC will not assess interest under s. 161(1).
87 C.R. - Q.73
RC has established tolerances to provide relief where payments are received within certain time frames and where interest to the date of payment falls below certain limits.
Subsection 161(2) - Interest on instalments
Administrative Policy
93 C.R. - Q. 50
Since the introduction of the instalment reminder system in March 1992, it has been departmental policy to charge neither instalment interest nor instalment penalty in situations where instalment reminders were not sent.
86 C.R. - Q.66-69
Re change from contra method to deficiency method; and maintenance of instalment accounts.
85 C.R. - Q.32
RC will permit a transfer of instalment payments previously made to the account of the same taxpayer for a later or earlier taxation year, and a transfer of instalment payments to a (related) taxpayer.
Subsection 161(2.2) - Contra interest
Administrative Policy
87 C.R. - Q.74
Discussion of interest offset method.
Subsection 161(4.1) - Limitation — corporations
See Also
I.G. (Rockies) Corp. v. The Queen, 2005 DTC 289, 2005 TCC 51
For the purpose of computing interest on late and deficient instalment payments, the taxpayer was entitled to utilize the instalment method in s. 157(1)(a)(iii) (so that its first two monthly instalment payments were relatively small), notwithstanding that this method resulted in larger overall required instalment payments for the year than the method described in s. 157(1)(a)(i). Teskey J. stated (at p. 292) that "if Parliament intended in subsection 157(1) to require a corporation to use only the method that would result in the least total amount of tax being paid, it would have included clear statutory language to that effect in the body of subsection 157(1) itself".
Subsection 161(7) - Effect of carryback of loss, etc.
Cases
Connaught Laboratories Limited v. The Queen, 94 DTC 6697 (FCTD)
When the taxpayer was reassessed for its 1981 taxation year on the basis that it had realized a taxable capital gain, it choose to eliminate the resulting taxable income by carrying back a net capital loss for its 1982 taxation year, rather than utilizing undeclared scientific researched expenditures or investment tax credits for its 1981 taxation year. In finding that this choice by the taxpayer resulted in interest payable because of s. 161(7), Reed J. stated (p. 6699):
"I interpret the term 'tax payable', upon which interest is to be paid, pursuant to that subsection, as referring to the tax payable on the basis of the particular way the taxpayer chooses to compute its taxable income, when there is an option available, in this regard. I do not interpret that subsection as referring to the tax which might have been payable had another option been chosen."
See Also
Zandi v. The Queen, 2012 DTC 1246 [at 3707], 2012 TCC 259
The taxpayer filed his 2007 and 2008 returns on 29 July 2009. He had $289,707,38 of taxable capital gains for 2007, which was reduced to $198,153.78 through the carry-forward of a net capital loss of $73,331.18 from 2000, and $133,637.29 of "net capital losses" in 2008. His 2008 return included a T1A form requesting a carryback of the 2008 net capital losses to 2007. He sent a T1A form by fax to CRA on 14 January 2010 requesting the same carryback. The Minister reduced the taxpayer's tax payable for 2007 on the basis that the the 2008 carry-back amounts were deemed to have been paid on 13 February 2010, 30 days after the faxing of the T1A. (Further carryback requests, apparently of non-capital losses made pursuant to a notice of objection were not in issue.)
Favreau J. found that, pursuant to s. 161(7)(b)(iii), the carry-back amounts should be deemed to have been paid on 28 August 2009, 30 days after the first claiming of the net capital loss carryback in the 2008 return. The taxpayer's appeal was granted to reduce his interest payable accordingly.
Administrative Policy
29 March 2011 T.I. 2009-035172
Where a taxpayer which is a member of an associated group requests a reduction to nil in in the small business limit allocated to it under s. 125(3), and then carries back subsequently-incurred non-capital losses to reduce the resulting tax payable to zero, interest is payable on tax that would have been payable but for the loss carry-back from the date of the original allocati0n until 30 days after the request is made.
93 C.R. - Q. 49
Where three years subsequent to the claiming of a capital gains exemption, it is determined that the capital gain should actually have been characterized as income, no arrears interest will be charged if the taxpayer requests that non-capital losses from previous years be applied against the income, whereas such arrears will arise if the individual instead requests the application of non-capital losses from a subsequent year.
88 C.R. - F.Q.9
Interest may be payable on a reassessment of a taxation year even if the resulting taxable income then is reduced by the carryback of a subsequent year's losses.
86 C.R. - Q.70
Interest on unpaid taxes arises where a taxable capital gain of year 2 originally is offset by a non-capital loss of year 1, then that non-capital loss is regenerated by carrying back an allowable capital loss of year 3.