The trial judge found that the "taxation year" referred to in s. 220(3.1) is the year of assessment of the related tax debt and not the year in which the interest accrued and, therefore, that the subsection only gives the Minister the discretion to waive interest that accrued within 10 years of the end of the taxation year in which the tax debt arose where the taxpayer applied for relief by the end of that period.
The Court of Appeal accepted the taxpayer's submission (at para. 12) that subsection 220(3.1) "permits the Minister to exercise his discretion to cancel interest accrued in any taxation year ending within ten years before the taxpayer's application for relief, regardless of when the underlying tax debt arose." Stratas J.A. stated (at para. 9) that "nowhere does subsection 220(3.1) mention the year of assessment as a relevant consideration." He noted (at para. 18) that, taken in isolation, "interest... payable... in respect of a taxation year" was ambiguous. Furthermore, the interpretation at trial was (para. 36) "contrary to the purpose of subsection 220(3.1): to allow taxpayers to ask for relief against penalties and interest and to allow the Minister to grant such relief where, in his view of the overall fairness of the situation, it is appropriate to do so."