Large Corporations and the Fine Line between “Issues” and “Reasons” – Canadian Imperial Bank of Commerce v. The Queen

Bill Innes on Current Tax Cases

The decision of the Tax Court in Canadian Imperial Bank of Commerce v. The Queen New Window

dealt with three procedural issues: a motion by CIBC to amend its Notice of Appeal, a motion by the Crown for enhanced discovery of documents under Rule 82, and an argument by the Crown that CIBC’s proposed amended pleadings would offend sections 306.1(1) and 301(1.2) of the Excise Tax Act because they raised a new “issue”:

306.1(1) [Where a specified person] has filed a notice of objection . . ., the person may appeal to the Tax Court . . ., or a reassessment made, only with respect to

(a) an issue in respect of which the person has complied with subsection 301(1.2) or (1.21) in the notice, or

(b) . . .

and . . . the person may so appeal only with respect to the relief sought in respect of the issue as specified by the person in the notice.

301(1.2) Where a person objects to an assessment in respect of which the person is a specified person, the notice of objection shall

(a) reasonably describe each issue to be decided;

(b) specify in respect of each issue the relief sought, expressed as the change in any amount that is relevant for the purposes of the assessment; and

(c) provide the facts and reasons relied on by the person in respect of each issue.

These provisions are the GST equivalent of the “large corporation” notice of objection rules in the Income Tax Act .
The underlying case dealt with whether payments made by CIBC to Aeroplan were consideration for a taxable supply and therefore subject to GST. There was a great deal of money involved: $45 million in the period under appeal and another $80 million in the wings. What appears to have brought this “issue” question to the fore is that CIBC’s original Notice of Appeal alleged (in the alternative) that the payments arose from a joint venture between CIBC and Aeroplan relating to the CIBC/Aeroplan credit card program. CIBC sought to amend the provisions in question to delete the reference to a joint venture and replace them with language of a simple sharing of revenue. This is summarized at note 9 to the Reasons for Judgment:

At page 2 of the statement of facts and reasons attached to and forming part of the notice of objection dated June 22, 2011, one finds as a statement of the issue:
The issue for determination is whether CIBC is entitled to the Rebate because it paid the amounts that are the subject of the Rebate in error as GST. This issue, in turn, requires a determination as to whether GST was exigible on the Subject Payments.

>Whether in the amended or in the proposed second amended notice of appeal, the preamble of paragraph 15, the appellant’s statement of the issues to be decided is consistent with that statement in the notice of objection:

The issue in this Appeal is whether the Aeroplan Payments were consideration for a taxable supply made by Aeroplan to CIBC or, instead, were:

(A) consideration for Aeroplan’s exempt supply of a financial service made to CIBC;

(B) in the alternative, Aeroplan’s share of the revenues from a joint venture, the Aeroplan Program; or

(C) in the further alternative, consideration for Aeroplan’s issuance or sale of a “gift certificate”.

The Crown took the position that the sharing of revenues was an “issue” not mentioned in the Notice of Objection. CIBC argued that it was simply a “reason” why GST was not exigible. [While it is not clear from the reasons for judgment, presumably the Crown would logically have had to have taken the same position with respect to the pre-amendment “join venture” pleading.]  The Court surveyed the meaning of “issue” as a dictionary matter and through the jurisprudence. Ultimately it concluded that the Crown was arguing a far too detailed definition and concluded that the original notice of objection was broad enough to permit raising revenue sharing as a “reason” to exempt the payments in question from GST. In addition the Court permitted both CIBC’s motion to amend and the Crown’s motion for more extensive documentary discovery, but with limitations in both cases.

The Court’s decision holding that revenue sharing was a “reason” and not an “issue” seems fair and balanced. Nevertheless it will be interesting to see whether the Crown seeks to put the issue before the Federal Court of Appeal.