{"id":7304,"date":"2025-05-29T09:09:35","date_gmt":"2025-05-29T16:09:35","guid":{"rendered":"https:\/\/www.thor.ca\/blog\/?p=7304"},"modified":"2025-05-29T09:09:35","modified_gmt":"2025-05-29T16:09:35","slug":"meglobal-canada-ulc-v-hmk-a-follow-up-to-dow-chemical","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2025\/05\/meglobal-canada-ulc-v-hmk-a-follow-up-to-dow-chemical\/","title":{"rendered":"MEGlobal Canada ULC v. HMK: A follow-up to Dow Chemical"},"content":{"rendered":"

Introduction<\/strong><\/p>\n

On March 26, 2025, the Tax Court of Canada (\u201cTCC<\/strong>\u201d) issued its decision in MEGlobal Canada ULC v. HMK<\/em><\/a>. Following the recent decision of the Supreme Court of Canada (\u201cSCC<\/strong>\u201d) in Dow Chemical Canada ULC v. Canada<\/em>.<\/a>, MEGlobal is another case confirming the TCC\u2019s lack of jurisdiction over discretionary decisions of the Minister of National Revenue (the \u201cMinister<\/strong>\u201d) to deny downward transfer pricing adjustment requests.<\/p>\n

This blog post provides an overview of the MEGlobal Canada<\/em> decision, which \u00a0illustrates the importance of selecting the correct judicial remedy to pursue in a timely manner.<\/p>\n

Facts & Issues<\/strong><\/p>\n

The Minister reassessed MEGlobal to impose an upward transfer pricing adjustment under s. 247(2) of the Income Tax Act <\/em>for its 2008, 2010 and 2011 taxation years.<\/p>\n

Following objections filed by MEGlobal, the Minister vacated the upward adjustments but declined the company\u2019s request for downward adjustments pursuant to s. 247(10). MEGlobal appealed the reassessments to the TCC and also brought a parallel application in Federal Court for judicial review of the Minister\u2019s decision denying the downward adjustments.<\/p>\n

In response, the Crown brought a motion for an order quashing the TCC appeal pursuant to Rule 53(3)(a) of the Tax Court of Canada Rules (General Procedure) <\/em>on the basis that the TCC has no jurisdiction over the subject matter of the appeal.<\/p>\n

The parties jointly requested that the TCC appeal be held in abeyance pending the outcome of the taxpayer\u2019s SCC appeal in Dow Chemical<\/em>. If the outcome was that the TCC has jurisdiction to hear appeals of s. 247(10) decisions, then MEGlobal would withdraw its Federal Court application. Alternatively, if it was found that the TCC does not have jurisdiction, MEGlobal would withdraw the TCC appeal.<\/p>\n

In Dow Chemical<\/em>, discussed in more detail in our previous blog post<\/a>, the SCC held that when the Minister has exercised her discretion under s. 247(10) to deny a downward transfer pricing adjustment, that decision falls outside of the jurisdiction of the TCC.<\/p>\n

Despite the decision in Dow Chemical<\/em>, MEGlobal chose not to withdraw its TCC appeal. The issues before the TCC were whether it should quash the appeal for lack of jurisdiction and if so, whether MEGlobal should be allowed to amend its notice of appeal.<\/p>\n

Analysis<\/strong><\/p>\n

The TCC found that, as made clear in Dow Chemical<\/em>, the Minister\u2019s decision to deny a downward adjustment is not an assessment or part of an assessment that can be appealed to the TCC. Rather, it is a discretionary decision for which a taxpayer\u2019s recourse is restricted to judicial review in Federal Court.<\/p>\n

MEGlobal attempted to distinguish its facts from Dow Chemical<\/em>. In that case, the Minister found that s. 247(2) gave rise to a specific amount of a downward adjustment but exercised her discretion to not make the adjustment. In MEGlobal\u2019s case, the Minister found that no downward adjustment was warranted.<\/p>\n

The TCC found that this distinction did not change the conclusion that the TCC lacked jurisdiction over the matter.<\/p>\n

As a result of the TCC\u2019s finding that it lacked jurisdiction over the subject matter of the appeal, MEGlobal sought leave to amend its notice of appeal to ask the TCC to determine the correct transfer pricing methodology to be applied under s. 247(2). If an application of the methodology would, in the absence of s. 247(10), result in a downward adjustment, the matter should be referred back to the Minister for reconsideration on this basis.<\/p>\n

The TCC held that the order sought by MEGlobal is not permitted under s. 171(1)(b)(iii), which allows the TCC to refer a matter back to the Minister for \u201creconsideration and reassessment\u201d where the TCC\u2019s order will necessarily result in a reassessment. The TCC does not have the authority refer a matter back to the Minister only for \u201creconsideration\u201d of a discretionary decision.<\/p>\n

Conclusion and Considerations<\/strong><\/p>\n

The TCC granted the Crown\u2019s motion to quash the TCC appeal, without leave to amend, and also awarded costs to the Crown.<\/p>\n

In the decision, Justice MacPhee expressed his sympathy for MEGlobal, noting its concern that if the appeal was quashed, then the taxation years at issue would be statute-barred from reassessment. If so, any success on MEGlobal\u2019s judicial review application may not afford any practical utility as it could be too late for the Minister to issue reassessments to make a downward adjustment.<\/p>\n

MEGlobal serves to further confirm the TCC\u2019s lack of jurisdiction in regard to the Minister\u2019s discretion to deny downward transfer pricing adjustments. The decision also highlights the importance of timing in selecting the correct remedy to pursue and the challenges which may arise in obtaining relief for taxation years that could be statute-barred from reassessment.<\/p>\n","protected":false},"excerpt":{"rendered":"

Introduction<\/strong><\/p>\n

On March 26, 2025, the Tax Court of Canada (\u201cTCC<\/strong>\u201d) issued its decision in MEGlobal Canada ULC v. HMK<\/em><\/a>. Following the recent decision of the Supreme Court of Canada (\u201cSCC<\/strong>\u201d) in Dow Chemical Canada ULC v. Canada<\/em>.<\/a>,…<\/p>\n","protected":false},"author":81,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30,16],"tags":[],"class_list":["post-7304","post","type-post","status-publish","format-standard","hentry","category-current-tax-cases","category-tax-litigation"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/7304","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/81"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=7304"}],"version-history":[{"count":2,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/7304\/revisions"}],"predecessor-version":[{"id":7306,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/7304\/revisions\/7306"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=7304"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=7304"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=7304"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}