The jurisdictional boundaries between the Tax Court of Canada and Federal Court over taxation matters has often been a trap for taxpayers. In Iris Technologies Inc. v. Canada (National Revenue), 2022 FCA 39 (“Iris Technologies”), the Federal Court of Appeal relied on these jurisdictional boundaries to conclude that the taxpayer’s motion to compel a tax refund from the Minister of National Revenue (the “Minister”) was moot.
In Iris Technologies, the taxpayer sought an order of mandamus to compel the release of $21.85 million in GST/HST refunds which it claimed for the January and February 2020 reporting periods pending the conclusion of an on-going audit and assessment. The Federal Court dismissed the motion on the basis that the taxpayer had failed to demonstrate a clear right to the performance of the Minister’s duty to assess and pay refunds “with all due dispatch.” The taxpayer appealed to the Federal Court of Appeal.
Prior to the appeal being heard, the Minister assessed the taxpayer and concluded that no net tax refund was owing.
Before the Federal Court of Appeal, the Minister moved for an order to dismiss the appeal as moot. The taxpayer, conversely, contended that the question of interim relief remained outstanding and that “the Minister could not usurp the jurisdiction of [the Federal Court of Appeal] simply by issuing an assessment in the course of proceeding before the Court” (at paragraph 8).
The Federal Court of Appeal granted the Minister’s motion to dismiss the appeal. The assessment made by the Minister following the Federal Court decision was determinative of the taxpayer’s net tax liability until such time that a reassessment was issued or the assessment was vacated by the Tax Court. In practical terms, the assessment left the Court without jurisdiction. Further, the true character of what the taxpayer sought amounted to “an attempt to short-circuit the recourse mechanisms established by Parliament” (at paragraph 9). There was simply no basis to assert that the Court could compel the payment of refunds that the legislation provided were not owing.
Selecting the appropriate jurisdiction is an important first step in all tax litigation (for another recent post on this topic, click here). Iris Technologies confirms that jurisdictional matters must be considered throughout the course of the litigation process to ensure a timely and proper resolution.