The original Crown Reply had stated that the Minister had assessed the 2015 return of the taxpayer (TPine) to disallow a deduction for capital cost allowance (CCA) on the basis that the Class 10 and 16 assets for which CCA had been claimed were included in the same equipment that TPine had sold and for which it had claimed a deduction for the cost of goods sold (CGS). TPine appealed the Tax Court’s allowance of an amendment to the Reply (requested after the expiry of the normal reassessment period, and which the Crown sought to justify under s. 152(9)) to include the alternative basis for the assessment that, if TPine was successful in challenging the CCA denial, the TPine CGS deduction should be reduced by an equivalent amount.
Webb JA indicated that in interpreting the previous version of s. 152(9), the Federal Court of Appeal “has not allowed the Minister to raise a new argument based on a transaction that did not form the basis on which a taxpayer was assessed” (para. 85). Here, that test was not a barrier to the new pleaded basis of assessment. The central allegation of the Minister was that it was “the same equipment that resulted in the CCA claim and in the deduction for the cost of goods sold” (para. 86). Thus the two alternate assessment bases were joined at the hip: if TPine had sold those assets, it followed “that the claim for CCA was a valid claim and no amount should have been claimed for the cost of goods sold” (para. 88); and if it had not sold the assets, it followed that this “would not preclude the Minister from making an argument that no amount should have been allowed as a deduction for cost of goods sold for the same equipment” (para. 88).
Since s. 152(9) permitted the pleading of the new alternative basis even under its more restrictive version as judicially interpreted, the same result should follow under the current version of s. 152(9) that applied to this amendment. However, in commenting on the current version of s. 152(9), Webb JA stated (at para. 90):
The principles that the Minister cannot appeal an assessment and the Minister cannot reassess beyond the expiration of the normal reassessment period are still valid principles that would need to be taken into account in determining what alternative basis or argument the Minister may advance. In interpreting and applying the previous version of subsection 152(9) of the Act, this Court has also limited an alternative argument to the same transaction that is in dispute. It is not clear how the amendments would alter this principle.