PROVINCIAL AND TERRITORIAL TAXATION - Ontario - Income tax - Corporate income

Appeal by Stonehouse Group from a decision of a motion judge finding that the appellant was not entitled to interest on a refund paid by the respondent after allowing 100 per cent of a loss carry back that the respondent had previously denied such that the appellant had overpaid $560,000 in taxes. The appellant argued that interest ought to be paid calculated at the enhanced rate that was applicable when taxes had been overpaid because of a compelled payment while an objection was outstanding. The appellant argued it was entitled to interest calculated at the enhanced rate under s. 82(5) of the Corporations Tax Act because, after the reassessment in 2013, it had a surplus in its tax account, namely, the amount of tax that it had been required to pay because of the respondent’s refusal to permit the loss carry back when that tax was not, in fact, properly payable. The respondent argued that s. 79(7) of the Corporations Tax Act was a special provision relating to loss carry backs that, according to the respondent, took this situation out of the effect of s. 82(5) for enhanced interest. The respondent argued that the effect of s. 79(7) was that the tax payable was deemed to be the same as it was before the deduction of the loss.

HELD: Appeal allowed. There was a manifest error in the interpretation urged by the respondent, and adopted by the motion judge, that the appellant would be disentitled to any interest payment. That result was not only manifestly unfair, it was directly contrary to the legislative context in which the interest payment provisions were adopted more than 60 years ago.

Stonehouse Group Inc. v. Ontario (Minister of Finance), [2021] O.J. No. 85, Ontario Court of Appeal, P.D. Lauwers, B. Miller and I.V.B. Nordheimer JJ.A., January 11, 2021. Digest No. TLD-March82021010