For income tax planning reasons, the registrant followed a practice of not claiming input tax credits ("ITCs") for a number of successive monthly reporting periods ("Deferral Periods") and then, in its return for the reporting period following that grouping of Deferral Periods (the "ITC claim return"), claimed ITCs for the Deferral Periods equal to the amount of the ITCs to which it otherwise would be entitled minus GST received by it in the Deferral Periods through the receipt of credit notes. In returns for reporting periods subsequent to those for which it filed the ITC claim returns, it then made further ITC claims (for the "Residual ITCs") which effectively represented a reversal of the previous deductions it had made, in its ITC claims in the ITC claim returns, for the GST included in credit notes received by it. The Minister denied the claims for the Residual ITCs in reassessments made outside the four-year limitation period if it were viewed as commencing from the time of filing the ITC claim returns, but which were within that period if it commenced from the claiming by the registrant of the Residual ITCs.
In accepting (at para. 47) that the Minister was not statute-barred from denying the Residual ITC claims, D'Auray J noted that until the registrant made those claims, the Minister did not have a basis to reassess the registrant.