http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/109098/index.do 
Nanica Holdings Limited v. The Queen (April 10, 2015 – 2015 TCC 85, V. Miller J.).
Précis: The taxpayer claimed dividend refunds in 2011 and 2012 which were partially denied by CRA. The denial was based on the fact that the taxpayer would have been entitled to dividend refunds in 2007 and 2008 had it filed its tax returns on time, but the returns were in fact filed outside the three year limitation period established by subsection 129(1) of the
Income Tax Act. The simple question was whether a “dividend refund” had to be in fact paid or whether dividend refunds that could have been paid had the returns been filed in time eroded the RDTOH. This was precisely the same question that was considered in the Presidential MSH Corporation case which was blogged earlier on this site. The Tax Court reached the same conclusion and allowed the appeal without costs.
Decision: The facts were straightforward:
[7] The Appellant’s fiscal year end is August 31. In its 2007 taxation year, it received dividends of $76,168 from non-connected corporations. In its 2007 and 2008 taxation years, the Appellant paid taxable dividends to its shareholders of $73,800 and $111,000 respectively. It did not file its income tax returns for 2007 and 2008 until December 22, 2011 and January 6, 2012 respectively, which was more than three years after its year end for both 2007 and 2008.
[8] In its 2007 income tax return, the Appellant computed its liability for Part IV tax to be $25,389. It claimed a refund under subsection 129(1) in the amount of $24,600 in 2007 and $789 in 2008. Those refunds were correctly disallowed by the Minister as a result of the Appellant’s late filing of its returns and in accordance with subsection 129(1).
[9] The Appellant received no dividends, paid no taxable dividends and had no investment income in the 2009 year.
[10] In 2010 and 2011, the Appellant had investment income of $5,792 and $9,267, respectively and it paid taxable dividends in the amount of $32,500 and $33,500 respectively. In its 2010 and 2011 returns, the Appellant claimed dividend refunds of $1,545 and $2,471, respectively. The dividend refunds claimed for 2010 and 2011 were allowed by notice of assessment dated February 1, 2012.
[11] The 2007 and 2008 years were initially assessed by the Minister on March 26, 2012 and March 15, 2012, respectively. When the Appellant learned that the dividend refunds for 2007 and 2008 had been denied, it requested that its income tax returns for the 2010 and 2011 years be amended and that it be allowed dividend refunds in the amount of $10,833 and $11,167, respectively. The Appellant based its calculation for the revised dividend refunds on its view that there should be no reduction to its RDTOH account because the dividend refunds for 2007 and 2008 had been denied.
[12] The Appellant’s request to amend its returns for the 2010 and 2011 years was denied. However, the Appellant was granted an extension of time to file a notice of objection to its initial assessment for these years. The assessment was confirmed.
The question was the same as in Presidential MSH Corporation and the Court reached the same result, allowing the appeal, but without costs (which were awarded in the Presidential case):
[40] Counsel for the Respondent argued that the limitation period is rendered ineffective and meaningless if the denial of the dividend refund is not coupled with a reduction in the RDTOH in subsequent years. He stated that if the amount remains available for the calculation of a dividend refund in future years, then the Appellant, in effect, still gets its dividend refund despite filing its income tax returns late.
[41] I disagree. This denies the cost of losing a dividend refund in the current year. The effect of not receiving a dividend refund is felt by both the corporation and the shareholder. The corporation does not get a refund of the Part IV tax and the shareholder who receives the taxable dividend gets a dividend tax credit which is intended to be a credit for the underlying corporate tax only. The shareholder does not get a credit for the Part IV tax. There is double taxation. In addition, the corporation is liable for a late filing penalty and arrears interest. Applying the conclusion reached by Justices Hogan and Graham, the Appellant may be able to recover some of the underlying Part IV tax if it later pays out sufficient taxable dividends or if it is partially reduced by business losses. This will occur only in future years, if at all. In the meantime, the funds have left the corporation and have been taxed twice. The penalty of late filing is clear.
[42] It is my view that Parliament’s intent with respect to the limitation period in subsection 129(1) is achieved without the reduction of the RDTOH account. The purpose of the limitation period is accomplished when the dividend refund is denied.
[43] In conclusion, I agree with both Justices Hogan and Graham that the phrase “dividend refund” in section 129 is the refund of an amount. It is an amount which is actually refunded to the Appellant by the Minister. As a result, the Appellant’s RDTOH account should not have been reduced by the denied dividend refunds. It was entitled to dividend refunds of $10,833 and $11,167 in 2010 and 2011 respectively.
[44] The appeal is allowed.