Audit Applications Division Small Business and
J. Daman General Division
A/Director J.D. Jones
957-2104R.P. Laramy Scientific Research Audit Applications Section
Subject: Application of Subsections 160.1(1)
and (3) to Investment Tax Credit
("ITC") RefundsThis is in reply to your memorandum of June 14, 1989, wherein you requested our views on the rules in subsections 160.1(1) and (3) of the Income Tax Act (the "Act") as they apply to ITC refunds. Attached to your memorandum was a copy of an opinion (February 25, 1987) issued by the Department of Finance.
21(1)(b)
It is your view that subsection 160.1(1) does not, in and of itself, provide the Minister with the authority to "determine that an amount has been refunded to a taxpayer for a taxation year in excess of the amount to which he was entitled". You feel that subsection 160.1(1) specifies the rules to be applied where such a determination has been made under some other provision of the Act. For the purposes of ITC refunds, it is your opinion that subsection 152(4) provides this authority. In this regard you believe that the rules in subsection 160.1(1) could only apply in the circumstances where subsection 152(4) is applicable.
We have recently received a legal opinion with respect to this issue, with which we are in agreement, that supports your position.
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Based on the above, we are in agreement with your view that the Department may not raise an assessment pursuant to section 160.1 in respect of an overstated ITC refund in a taxation year that is statute-barred under subsection 152(4) unless with respect to the calculation of the subsection 127.1(1) amount, the taxpayer or person filing the return made a misrepresentation attributable to neglect, carelessness or wilful default or committed a fraud in filing the return.
B.W. Dath Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
c.c. Assessing and Enquiries Directorate