Appeal court dismisses Iristel application to release $21.85m in tax refunds

The Federal Court of Appeal dismissed an application by Iristel Inc. to appeal a decision by the Federal Court which rejected its motion to release $21.85 million in tax refunds which it claimed for the 2019-2020 reporting period pending the conclusion of an on-going audit and assessment. Justice Donald J. Rennie, writing for the appeal court, issued the decision Wednesday via an online video conference. In March 2020 Iristel sought the refund of $62.3 million, being a portion of monies remitted to the Minister of National Revenue as GST/HST for the periods of Sept. 2019 to Feb. 2020. In July 2020 the Federal Court of Appeal sided with the company by ruling that the Federal Court had jurisdiction to review the conduct from the Canadian Revenue Authority (CRA) which Irisitel said was withholding its money owed. However, the court simultaneously dismissed the company’s claim for interim relief for the full $62.3 million. Both the Federal Court and the Federal Court of Appeal concluded that the $62.3 million relief motion was premature because the CRA must be afforded a reasonable period of time within which to complete its audits and may retain refunds during the audit period. In Dec. 2020 the Federal Court then issued a decision regarding Iristel’s motion for interim relief of approximately $21.85 million of GST/HST refunds for its Jan. and Feb. 2020 reporting periods. “ states that it will not be able to continue in business without the release of the refunds and that, should it cease operations, a significant swath of northern Canada will lose its one telecommunications service provider,” according to the 2020 court documents. Iristel claimed the reasonable time period for completion of the Minister of National Revenue’s audits of the January and February reporting periods had expired and the minister is continuing the audits for an improper purpose. “The minister submits that the CRA’s 10-month estimate was given in respect of the 2019 audit and must, in any event, be treated as an estimate and not an immutable deadline. The minister also submits that the applicant has established no improper purpose and that the CRA continues its audit work diligently,” the court documents read. Ultimately the Federal court justice dismissed the application finding that the CRA was making “reasonable progress” in its audit. According to the Federal Court of Appeal's Wednesday decision, the minister filed a new affidavit from the manager of the Aggressive GST/HST Planning Program in the GST Directorate of the CRA which deposes that the “minister has now assessed Iris’ net tax payable for its January 2020 to March 2021 reporting periods and that there is no net tax refund owing.” “We admit the Smith affidavit as fresh evidence. The affidavit meets the test for admitting fresh evidence on appeal set out by the Supreme Court,” Rennie wrote. “The evidence could not have been adduced at trial, it is relevant in that it bears on a decisive or potentially decisive issue on appeal, is credible, and could reasonably be expected to have affected the result in the Federal Court.” As a result, Rennie wrote that the appeal is now moot. “There is no longer a live controversy. The assessments are determinative of Iris’ net tax liability until the minister makes a reassessment or the assessment is vacated by the Tax Court,” Rennie wrote. However, Iristel argued that the question of interim relief for the $21.85 million in refunds remains outstanding because the minister cannot usurp the jurisdiction of the court “simply by issuing an assessment in the course of proceeding before the court.” Rennie said there was no credible basis for the argument because the court cannot compel the payment of the refunds if it was ultimately found that the refunds are not owing. – Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and editing by Paul Park at ppark@thewirereport.ca

Appeal court dismisses Iristel application to release $21.85m in tax refunds

News | March 3, 2022

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Appeal court dismisses Iristel application to release $21.85m in tax refunds

News | March 3, 2022

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