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FEDERAL INCOME TAX - Notice of Appeal - Striking out a pleading

Wednesday, October 30, 2019 @ 8:26 AM  


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Appeals by 14 members of a partnership from a Tax Court decision striking their notices of appeal. TSI Limited Partnership allocated $941,840 in losses among its partners for the 2000 taxation year, and $2.1 million in losses for the 2001 taxation year. Each appellant claimed portions of the losses in determining their income for the relevant years. In 2006, the Minister determined pursuant to s. 152(1.4) of the Income Tax Act that the business losses of TSI for 2000 and 2001 were nil. In 2007, TSI filed notices of objection. The Minister confirmed the notices in 2012. The appellants were reassessed for the relevant taxation years to deny their claims for TSI's losses. The appellants filed notices of objection that were confirmed by the Minister. TSI and the appellants each filed notices of appeal to the Tax Court. The appeals raised the issues of whether the determination of TSI's losses occurred outside of the prescribed three-year period, and whether the Minister correctly determined the losses were nil. It was determined that TSI's appeal would proceed first. Just prior to the 2016 hearing, the Court was notified that TSI would file a notice of discontinuance. As a result, the appeal was deemed dismissed. The Minister subsequently brought a motion to strike the appellants' notice of appeal. The Tax Court found that it would be an abuse of process to allow the appellants to argue TSI's losses were statute-barred given the discontinuance of its appeal. The appellants appealed.

HELD: Appeals allowed. The Tax Court judge erred in concluding that abuse of process by re-litigation applied in this situation, as there was no prior finding that the Minister's determinations were made within or outside of the three-year statutory time period. Under s. 16.2 of the Tax Court of Canada Act, a discontinued appeal was deemed dismissed. The Tax Court judge erred in finding that the operation of s. 16.2(2) deemed that the issues raised in a discontinued appeal were deemed to have been adjudicated upon and dismissed. Hearing the appellants' appeals would not lead to possible inconsistency or waste judicial resources. It would not be an abuse of process for the appellants to proceed with the issues raised by their appeals. Rendering the decision the Tax Court ought to have made, the Crown's motion to strike the notices of appeal was dismissed.

Stewart v. Canada (appeal by Tedesco), [2019] F.C.J. No. 1082, Federal Court of Appeal, M. Nadon and W.W. Webb J.A. and J.M. Woods A.C.J., September 20, 2019. Digest No. TLD-October282019008