The decision, delivered by Justice John Evans on Feb. 5,in Vancouver, upholds a Justice Michael Phelan’s Federal Court ruling from last June.
Twentieth Century Fox Home Entertainment Canada Ltd — which distributes DVDs for the film studio giant — argued it should receive a $1-million rebate for GST overpaid in error between July 2000 and March 2003.
Fox had already obtained a rebate of around $11.5 million for GST it had overpaid due to the same error, caused by a problem with its computer software.
Under s. 261(1) of the Excise Tax Act 1985, Fox would have needed to apply for a rebate within two years of making the overpayment, so was out of time to recover the $1 million. But under s. 23(2) of the Financial Administration Act 1985, the governor in council has discretion, on a minister’s recommendation, to remit any tax.
Discretion can be applied where collecting tax would be “unreasonable or unjust” or where it would be “in the public interest to remit the tax”.
In this case, the Canada Revenue Agency declined to recommend that Minister of National Revenue Gail Shea should transfer the tax back to Fox.
It based its decision on two provisions of the CRA’s remission guidelines.
Firstly, it did not consider the over-remittance to be due to a circumstance “beyond a person’s control.” Second, it did not view the $1 million as likely to cause Fox “a significant financial setback” that would strain its “limited resources”.
The firm had a gross revenue of $163.8 million in the year ending June 30, 2010, and has assets valued at $194.6 million, according to court documents.
Fox applied for a judicial review to set aside the CRA’s decision. After this was dismissed by Phelan, it appealed the ruling.
In his judgment last week, Evans said he was satisfied “the decision not to recommend that Fox’s overpayment be remitted was reasonable, given the breadth of the governor in council’s statutory discretion, the extraordinary nature of the relief not otherwise available to taxpayers, and the guidelines on which he relied in exercising the discretion.”
The CRA had “virtually no discretion to refuse to recommend a remission”, he added.
The appeal was dismissed with costs.