In 2022 the Federal Court of Canada ruled in favour of the Revenue Agency and dismissed Dow Chemicals’ appeal regarding the Tax Court’s jurisdiction to make a downward adjustment. The Federal Court held that the Tax Court could not overturn the Revenue Agency’s (Minister’s) opinion that a requested downward adjustment was inappropriate because the Tax Court’s jurisdiction is only to set aside, vary or remit an assessment to the Minister, whereas an opinion is not an assessment. According to the Federal Court, the jurisdiction to judicially review an opinion lies with the Federal Court. Following the Federal Court’s decision, Dow Chemicals filed an application for leave to appeal to the Supreme Court. In a judgment of 23 February 2023, the application for leave to appeal was granted and the question of the Tax Court’s jurisdiction would therefore be considered by the Supreme Court. Judgment of the Supreme Court The Supreme Court dismissed the appeal of Dow and confirmed that a taxpayer’s challenge to a discretionary decision of the Minister of National Revenue should be brought before the Federal Court, as the Tax Court does not have jurisdiction to review the Minister’s discretionary decision. “when the Minister has exercised her discretion under section 247(10) of the ITA to deny a taxpayer’s request for a downward pricing adjustment, that decision falls outside of the jurisdiction of the Tax Court in respect of an appeal of the taxpayer’s assessment. The Minister’s discretionary decision is not part of the assessment. The meaning of “assessment” is settled in law, and the Minister’s opinion formed under section 247(10) is qualitatively distinct from that concept. As there is no express right of appeal to the Tax Court, the proper forum to challenge the Minister’s discretionary decision under section 247(10) is the Federal Court, pursuant to its exclusive jurisdiction in judicial review under section 18(1) of the Federal Courts Act. Only the Federal Court has the jurisdiction to apply the appropriate standard of review and access to the appropriate range of administrative law remedies.” Click here for translation ...

In 2022 the Federal Court of Canada ruled in favour of the Revenue Agency and dismissed Dow Chemicals’ appeal regarding the Tax Court’s jurisdiction to make a downward adjustment. The Federal Court held that the Tax Court could not overturn the Revenue Agency’s (Minister’s) opinion that a requested downward adjustment was inappropriate because the Tax Court’s jurisdiction is only to set aside, vary or remit an assessment to the Minister, whereas an opinion is not an assessment. According to the Federal Court, the jurisdiction to judicially review an opinion lies with the Federal Court. Following the Federal Court’s decision, Dow Chemicals filed an application for leave to appeal to the Supreme Court. Appellant DCC.pdf Respondent HMTK.pdf Appellant DCC.pdf Judgement of the Supreme Court In a judgment of 23 February 2023, the application for leave to appeal was granted and the question of jurisdiction will now be considered by the Supreme Court ...

This appeal and cross-appeal arise as a result of the response provided by the Tax Court of Canada to a question submitted under Rule 58 of the Tax Court of Canada Rules (General Procedure), SOR/90-688a. The question was: Where the Minister of National Revenue has exercised her discretion pursuant to subsection 247(10) of the Income Tax Act (“ITA”) to deny a taxpayer’s request for a downward transfer pricing adjustment, is that a decision falling outside the exclusive original jurisdiction granted to the Tax Court of Canada under section 12 of the Tax Court of Canada Act and section 171 of the ITA? This question arose in the context of the appeal commenced by Dow Chemical Canada ULC (Dow) in relation to the reassessment of its 2006 taxation year. The Tax Court (2020 TCC 139) provided the following answer to this question: The Court has determined that where the Minister has decided, pursuant to subsection 247(10) of the Income Tax Act (Canada) [the ITA], to deny a taxpayer’s request for a downward transfer pricing adjustment, that decision is not outside the exclusive original jurisdiction granted to the Court under section 12 of the Tax Court of Canada Act and section 171 of the ITA provided that the assessment resulting from that decision has been properly appealed to the Court… The Crown, in its appeal to this Court, is asking that the question as posed by the parties be answered in the affirmative. In its cross-appeal, Dow is seeking an amended response. In Dow’s view, the decision of the Minister of National Revenue (the Minister) under subsection 247(10) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the ITA) is within the exclusive jurisdiction of the Tax Court of Canada, regardless of whether an assessment has been issued. The Revenue Agency, in its appeal to the Federal Court of Appeal, is asking that the question as posed by the parties be answered in the affirmative – that the decision is outside the jurisdiction of the tax court. In its cross-appeal, Dow is seeking an amended response – that such a decision is within the exclusive jurisdiction of the Tax Court of Canada, regardless of whether an assessment has been issued. Judgement of the Federal Court of Appeal The Federal Court ruled in favour of the Revenue Agency and dismissed the cross appeal of Dow Chemicals. The court found  that the Tax Court could not reverse the revenue agency’s (Ministers) opinion that a requested downward adjustment is inappropriate. The jurisdiction accorded to the Tax Court is only to vacate or vary an assessment or refer it back to the Minister, whereas an opinion is not an assessment. The jurisdiction to judicially review an opinion was with the Federal Court ...