In Bank of Nova Scotia v R, 2024 FCA 192, the Court held that interest on a taxpayer balance owing should be calculated from the balance due date for a year to the date of a loss carry back request. In this case, the CRA had reassessed the taxpayer’s 2006 taxation year in 2015 as a result of an audit. The increase in taxable income, after taking into account the carry back, was only about $1 million, but the Minister added on about $7.9 million on the theory that interest accrued to the date of the carry back request in 2015. The Court upheld the Minister’s position after reviewing “contextual and purposive factors” to resolve uncertainty around the interpretation of subparagraph 161(7)(b)(iv).
For a summary of this case, see Safi and Mobarak “Bank of Nova Scotia v. Canada, 2024 DTC 5169 (Federal Court of Appeal) — FCA upholds ruling that under subsection 161(7) of the ITA interest on tax owed continues from the relevant taxation year until the time of a loss carryback request” Tax Topics 2720 (December 17, 2024)
