CRA reassessed in or about 2017 a Canadian-resident personal discretionary trust to deny the s. 104(6) deduction it claimed for income distributed in 2013 and 2015 to a Barbados-resident beneficiary, on the grounds that there had been an income inclusion to that beneficiary under s. 105(1) rather than s. 104(13). On the basis that there was no Part XIII tax on a s. 105(1) benefit, the beneficiary applied, beyond the two-year period under s. 227(6) for doing so, for a refund of the Part XIII tax that had been withheld on the distributions.
In finding that the refund application should be denied, the Directorate stated:
[W]here the specific conditions of subsection 227(6) have not been met, the implied exception rule … prevents relief from being available under the more general provision of subsection 220(2.1). Such relief would not be harmonious with … the intention of Parliament to limit Part XIII refund applications to two years after the end of the calendar year in which the amount was paid to the non-resident. …
[T]here is no relief available to a taxpayer under the Canada-Barbados Tax Convention to override the two-year limitation period required by subsection 227(6).