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Published: March 18, 2020

Last Updated: April 13, 2020

CRA has a requirement under the Canadian Income Tax Act to issue a tax assessment for income tax returns submitted by Canadian taxpayers with all due dispatch. On Nov 6, 2015 the Federal Court of Appeal dismissed the CRA appeal in MNR v McNally 2015 FCA 248 in a unanimous decision. Mr. McNally was successful in requiring CRA to assess his return. CRA had refused to do soon the basis that he had participated in a tax shelter. The Federal Court of Appeal repeated that the CRA’s policy of delaying tax returns in order to deter taxpayers from participating in tax shelters was not a valid policy under the law. Revenue Canada admitted that the main reason Mr. McNally’s return (like other Canadian taxpayers in the same situation) had not been subject to an income tax assessment was to discourage participation in Canadian income tax shelters. Mr. McNally’s Canadian income tax attorneys brought a mandamus application in the Federal Court of Canada to require the Canadian tax department to assess that return. The Federal Court of Canada at 2015 FC 767 ruled in the taxpayer’s favour in June 2015 that CRA’s duty to provide an income tax assessment with due dispatch under section 152(1) of the Canadian Income Tax Act was violated by CRA.The Canada Revenue Agency is of the view that widely marketed tax shelters are generally invalid. CRA therefore decided not to assess the participants’ tax returns until after the audit of the gifting tax shelter. The tax department stated that the purpose in implementing this change was to deter participation in these income tax shelters. The Federal Court held that the Minister of National Revenue owes Mr. McNally a statutory duty to examine his return “with all due dispatch”.

CRA complied with the judgment but still wished to continue the appeal in order to pursue a jurisprudential point. The taxpayer declined to participate in the appeal. He got what he wanted in the previous hearing since the Federal Court gave judgment in his favour and CRA had complied with it. CRA appealed to the Federal Court of Appeal. The parties agreed that the appeal became moot once the income tax assessment had been issued. The case therefore discussed the 3 tests for reviewing a moot case set out in the Supreme Court’s decision in Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342, 57 D.L.R. (4th) 231. Applying the facts of Mr. McNally’s situation to these 3 factors the court concluded that there were no grounds for continuing the appeal. Mr. McNally was therefore not required to participate in the appeal. If you have an income tax litigation issue contact one of our Toronto tax attorneys for income tax help.


"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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