Collier, J:—The appellant is a Canadian corporation which, in 1965, 1966 and 1967, carried on business both in Canada and the United States with a permanent establishment in both countries.
In 1965 it earned profits in both countries and under section 41 of the Income Tax Act it deducted the Canadian equivalent of tax paid to the United States on the profits made in that country. This deduction was $168,397.75.
In 1966 the appellant had no profits or losses in the United States. In 1967 it suffered a loss in its operations in the United States and, under United States law, a part of the loss was carried back to the 1965 taxation year.
In fact, the appellant suffered an overall loss in all its operations in 1967 but could only carry back part of its loss in Canada to the year 1966. The carry-back under United States law of the 1967 loss to the 1965 taxation year resulted in the appellant being paid a refund which had a Canadian equivalent of $168,397.75. This refund was paid on April 15, 1968.
The respondent, by Notice of Reassessment dated March 16, 1970, reassessed the appellant in respect to its income for the 1965 taxation year and disallowed the foreign tax credit previously granted. In addition, the Minister levied interest on this reassessment; this amounted to $36,129.89.
The appellant contends that it, in 1965, did precisely what it was authorized to do under paragraph 41 (1)(a):* [1] deducted income tax actually paid by it to another country. The appellant further contends that because it suffered a subsequent loss in the United States which allowed some tax relief, the respondent cannot go back to. 1965 and reassess.
Counsel for the Minister relies on subsection 46(4)t of the Income Tax Act and takes the position that the Minister can reassess at any time within four years and as often as the circumstances require. The respondent argues that new facts or new circumstances arose when the United States gave the appellant the tax refund in 1968.
I sympathize with the taxpayer in this case but in my view the meaning of subsection 46(4) is clear and the respondent was entitled to do what he did.
Some inequities may result in cases of this kind. For example, a Canadian taxpayer may carry on business in some country where business losses can be charged back for, say, five years. In that hypothetical case it would be my opinion the Minister could not reassess in respect to an earlier tax credit which was eventually refunded if the four-year period stipulated in subsection 46(4) had expired. Another possible inequity might arise where the foreign country, under its tax statutes, reassessed the taxpayer two or three years later and increased the tax payable for a previous year. There might be some difficulty on the part of the Canadian taxpayer in subsequently claiming the benefit of that reassessment in Canada, in view of the time limitation periods in the Income Tax Act.
Regardless of possible inequities, however, to my mind paragraph 41(1)(a) and subsection 46(4) are unambiguous and in my view the Minister properly reassessed the appellant in this case.
The appeal will therefore be dismissed with costs.
There remains the question of the assessment of interest in the sum of $36,129.89. Mr Walker for the appellant concedes that there is nothing this Court can do in that regard. The respondent, in assessing interest, is merely following the provisions of the Income Tax Act.
In my opinion, in the circumstances of this case, the assessment of interest is unjust. The appellant here paid for 1965 all the Canadian taxes rightfully owing at that time and it is unfair that the appellant, because of a relief provision, in another country, the unexpected effect of which occurred two years later, should pay interest over the period of time involved here. I point out the Minister’s reassessment was not made until March 16, 1970.
As I have said, this Court is powerless to assist. Perhaps relief will be granted elsewhere.
*41. (1) A taxpayer who was resident in Canada at any time in a taxation year may deduct from the tax for the year otherwise payable under this Part an amount equal to the lesser of
(a) any income or profits tax paid by him to the government of a country other than Canada for the year (except any such tax or part thereof that may reasonably be regarded as having been paid by him in respect of dividends received from that country, by reason of which he is entitled to a deduction under subsection (1) of section 28 for the year in which they were received),
146. (4) The Minister may at any time assess tax, interest or penalties under this Part or notify in writing any person by whom a return of income for a taxation year has been filed that no tax is payable for the taxation year and may,
(a) at any time, if the taxpayer or person filing the return
(i) has made any misrepresentation or committed any fraud in filing the return or in supplying any information under this Act, or
(ii) has filed with the Minister a waiver in prescribed form within 4 years from the day of mailing the notice of an original assessment or of a noti fication that no tax is payable for a taxation year, and
(b) within 4 years from the day referred to in subparagraph (ii) of para graph (a), in any other case,
re-assess or make additional assessments, or assess tax, interest or penalties under this Part, as the circumstances require.