Fighting for an extension of time in the Tax Court of Canada


Subsection 169(1) of the Income Tax Act (the “Act”) provides, in part, that a taxpayer may institute an appeal in the Tax Court of Canada to dispute a (re)assessment or notice of confirmation (jointly referred to as the “Reassessment”). In order to institute a valid appeal, a taxpayer must submit a notice of appeal, along with the appropriate filing fee, to the Tax Court within 90 days of the date that the Minister of National Revenue sent the Reassessment (the “90-day Period”).

If the Minister has satisfied its burden of the technical rules associated with the sending of the Reassessment and if the taxpayer has not instituted a valid appeal within the 90-day Period (assuming the discoverability rule does not apply), a taxpayer may apply for an extension of time to appeal under paragraph 167(5)(b) of the Act. The Tax Court will consider an application for an extension of time if the application is filed within one year after the 90-day Period i.e., within one year and 90 days from the date indicated on the Reassessment.

Subsection 167(5) of the Act provides that the Tax Court shall not grant an application for an extension of time to appeal unless the taxpayer can establish all of the following conditions: (1) the taxpayer had a genuine intention to appeal within the 90-day Period or was unable to act, or instruct another to act, within the 90-day Period; (2) it would be just and equitable to grant the application; (3) the application was filed as soon as circumstances permitted; and (4) there are reasonable grounds for the appeal (jointly referred to as the “Four Application Conditions”).

The Tax Court recently considered whether a taxpayer satisfied the above-noted conditions in M.P.N. Holdings Ltd. v. Her Majesty the Queen (“MPN”), 2011 DTC 1150. For the purposes of this article, the salient facts in MPN were as follows. MPN objected to a Part XIII withholding tax assessment related to management fees that MPN paid to a non-resident corporation, Arden Advisors LLC (“Arden”). MPN’s position at the objection stage was that Arden was a limited liability corporation that did not have a permanent establishment in Canada and, therefore, Article VII of the CanadaU.S. Income Tax Convention (the “Convention”) precludes the Minister assessing Part XIII withholding tax on the amounts that MPN paid Arden. The Minister issued a notice of confirmation, dated February 2, 2009, denying MPN’s objection on the basis that limited liability corporations were not liable to tax in the United States and, therefore, not entitled to benefits under the Convention (the “Minister’s Convention Position”). MPN did not institute an appeal within the 90-day Period.

MPN was unaware that the Minister had assessed TD Securities (USA) LLC (“TD”) for Part XIII withholding tax. The Minister purported to justify its assessment against TD using the same Minister’s Convention Position. On October 22, 2008, TD instituted an appeal in the Tax Court to dispute the Minister’s Convention Position. At that time, MPN’s objection was outstanding. On April 8, 2010, the Tax Court allowed TD’s appeal on the basis that the Minister’s Convention Position was wrong in law (2010 DTC 1137). MPN learned of the Tax Court’s TD decision and MPN applied for an extension of time to appeal. MPN’s application was filed within the one year 90-day Period and the Tax Court considered whether MPN satisfied the Four Application Conditions. MPN argued that it satisfied condition (1) a genuine intention to appeal within the 90-day Period because, at all material times, MPN disagreed with the Reassessment and the Minister’s Convention Position. In addition, MPN argued that it was unable to act because of the cost of litigation.

Although Justice Sheridan accepted that MPN never agreed with the Minister’s Convention Position within the 90-day Period, she held that this fact was not sufficient to satisfy the requirement that MPN had a bona fide intention to appeal within the 90-day Period. Justice Sheridan noted that MPN’s directing mind acknowledged that MPN did not appeal the subject reassessment because it believed that an appeal would be cost prohibitive and challenging. In addition, MPN acknowledged that it decided to file its application for an extension of time to appeal only after it learned that TD instituted its appeal. In these circumstances, Justice Sheridan held that MPN simply chose not to appeal within the 90-day Period and, therefore, MPN did not have a genuine intention to appeal within the 90-day Period.

Second, Justice Sheridan addressed MPN’s argument that the costs of litigation, like a mental or physical impairment, rendered it unable to act. Justice Sheridan observed that the Court could accept that an inability to pay litigation costs could constitute an inability to act within the 90-day Period and satisfy the first condition of the Four Application Conditions. However, that was not what prevented MPN from filing a notice of appeal within the 90-day Period. MPN simply chose not to act.

It is unfortunate, to say the least, that MPN was unable to establish all of the Four Application Conditions. If MPN instituted its appeal within the 90-day Period, it could have applied to the Court to hold MPN’s appeal in abeyance pending the resolution of the TD appeal. This way, MPN may have benefited from the Tax Court’s decision in the TD case without incurring significant expense. It appears that MPN’s only recourse may be to seek remission under the Financial Administration Act. In any event, we believe that Justice Sheridan’s reasons for judgment in MPN are valuable to taxpayers and practitioners applying for an extension of time to appeal. Justice Sheridan’s reasons illuminate what constitutes a bona fide intention to appeal and confirm that financial constraints may constitute an inability to act.


Susan Farina wearing a dark blue top and dark rimmed circular glasses brightly smiling while sitting at a desk with a pen and paperwork in front of her

What Accountants Say

Peter Aprile is a very hands on and practical tax lawyer who is very focused and diligent. He is a pleasure to work with.

- Susan Farina, Tax Partner, Price Waterhouse Coopers

David Cuddy in a blue button up shirt standing in a park

What Clients Say

I’m a Senior VP with an accounting and finance background. I’ve worked with lawyers and large law firms. I was referred to Counter to fix a tax dispute. It is very rare to encounter lawyers that combine expertise, dedication, and a businesslike approach to litigation. I have no hesitation in recommending Counter.

- David Cuddy, Senior Vice-President, Finance & Business Operations, CFL

Laura Couvrette smiling in a plaid top standing with arms folded

What Accountants Say

Counter Tax Litigators has worked with Fuller Landau to resolve several of our clients’ tax disputes. Counter delivers superior communication.

- Laura Couvrette, CPA, CA, Fuller Landau LLP

Mark Ram standing in a office hallway wearing a white button up with dark blue jacket and dark rimmed glasses

What Clients Say

I spent a good part of my career dealing with attorneys on innumerable matters, and found Peter to be extremely competent, open-minded and exceptionally honest. I would not hesitate to use Peter again, and highly recommend the team at Counter Tax Litigators.

- Mark Ram, Retired CEO

Klaus W. Reif sitting at a desk, dressed in a blue jacket with a silver wrist watch

What Clients Say

Counter’s representation on our behalf was well informed, professional and efficient, which ultimately resulted in a highly satisfactory decision in all aspects.

- Klaus W. Reif, President, Reif Estate Winery

Brian Grott wearing a white button up with a red tie with white dots, softly smiling and leaning against a desk

What Clients Say

I was amazed with the results. They went above and beyond, and I would recommend Counter to any person or business with a significant tax dispute.

- Brian Grott, Northland Screen Corp

How can we help you?


Our law firm and tax lawyers regularly receive
recognition as leaders in tax controversy and litigation.