The Bank, which had decided to outsource all its Canadian tax department to EY, was told by the last departing tax employee that its relevant tax credit amounts had not been at a level sufficient to be a qualifying institution. After discovering that this was incorrect, it filed late applications pursuant to ETA s. 141.02(19)(b)(ii) to be permitted to use a method for computing its input tax credits (ITCs) for its four most recent fiscal years that would result in ITCs that exceeded the minimum otherwise applicable under s. 141.02(8)(d) of 12% of its GST on its residual inputs.
In denying the applications, the CRA delegate considered that a high degree of care and diligence was to be expected given the sophistication of the Bank and EY, and that this had not been demonstrated in the circumstances. In dismissing the Bank’s appeal from a finding of the Federal Court that this decision was fair and reasonable, Mactavish JA found, regarding the Minister’s finding that the Bank had failed to exercise the requisite degree of care respecting its filing obligations, that “the Bank has not shown any reversible error with respect to this factually suffused finding” (para. 12).
Mactavish JA also rejected the Bank’s submission (summarized at para. 10) that “the Minister should have applied the four-part test applicable to extensions of time under section 18.1(2) of the Federal Courts Act”, i.e., “whether the Bank had a continuing intention to pursue its application, whether the application had some merit, whether there was any prejudice to the respondent as a result of the Bank’s delay and whether the Bank had a reasonable explanation for its delay: Canada v. Hennelly, [1999] F.C.J. No. 846, 244 N.R. 399”. She stated (at para. 11) that “this Court has already determined that it is reasonable for the Minister to have regard to the diligence of a taxpayer in circumstances such as this: Denso Manufacturing … 2021 FCA 236” and that “even if … the Minister applied the wrong test in denying its applications for late filing, [the Bank] was still required to provide a reasonable explanation for its delay under the Hennelly test, which it failed to do.”