refund

The taxpayer (“984”) reported a capital gain on its 2003 sale of land on the basis that it had acquired it from its parent (Henro) on a rollover basis, paid the computed capital gains tax and was assessed as filed. In 2010, the Minister assessed the Henro (to include an income account gain) and 984 (to reverse the previously reported capital gain and refund the capital gains tax, plus interest, totalling $1.7M) on the basis that the 2003 drop-down had occurred on a non-rollover basis – but its assessment of 984 was found to be void as being statute-barred.

The taxpayer failed to apply for its dividend refund for a taxation year within the three year time-limit, and its dividend refund that year was therefore denied. Hogan J. found that the taxpayers' RDTOH was not reduced by the amount of the unclaimed dividend refund. The ordinary meaning of "refund" is the repayment of a sum of money (paras. 33-34). The meaning of "dividend refund" likewise refers to an amount actually paid rather than the notional amount the taxpayer is entitled to apply for, because the alternative would be arbitrarily punitive (paras. 49-50).

In finding that a refund of federal sales tax that predecessors of the taxpayer previously had paid in error did not qualify as a reimbursement for purposes of s. 12(1)(x)(iv), Létourneau J.A. noted that Westcoast Energy had found that “in all of the examples of the word reimbursement [provided to the court], there exists a flow of benefits between the respective parties.” He then stated (at p. 6063):