A large corporation ("Devon") objected to assessments, denying the deduction of stock option surrender payments made by two of its predecessors in 2001, on the basis that they were fully deductible, with its objections held in abeyance for a number of years pending the Imperial Tobacco decision. In 2012, Devon specifically raised for the first time arguments, in the alternative, that deductions should be allowed under s. 20(1)(b) (including under s. 111(5.2)) or 20(1)(e). Following confirmation, these alternative arguments were also raised in its Notice of Appeal.
After finding (at para. 25) that "the issue raised by Devon in its original notice of objection that the Surrender Payments were deductible under section 9…(and therefore not on account of capital) cannot be considered to include the alternative and inconsistent arguments related to paragraphs 20(1)(b) and 20(1)(e)," Webb JA stated (at paras. 30, 31, 33):
The interpretation of the reference to "notice of objection" in subsection 169(2.1) of the Act that would be harmonious with the Act, is that this "notice of objection" would include any amendments or additional submissions that are accepted by the Minister. As noted above, the Large Corporation Rules were introduced to allow the Crown to know at the objection stage the nature and quantum of tax litigation.
…
CRA…responded to Devon in relation to the merits of its submissions with respect to paragraphs 20(1)(b) and 20(1)(e)… and…in the notices of confirmation, stated that the basis of the objection included the argument that the predecessors of Devon should be entitled to a deduction under paragraph 20(1)(b)… . Therefore, the Minister explicitly accepted that the issue related to paragraph 20(1)(b)…was part of the objection.
[S]ince the Minister accepted these submissions, it is a moot point whether the Minister could have refused to accept them on the basis that they were made well after the time permitted for filing a notice of objection or for seeking an extension of time to file a notice of objection, had expired.