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JURISDICTION IN TAX DISPUTES TRICKY

INTERPRETATION OF APPEAL PROVISIONS CAN BE A COMPLICATED TASK!

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We have previously written about jurisdictional issues between the Tax Court of Canada (“TCC”) and Provincial Superior Courts here. A recent decision of the TCC – Desjardins v. the King, 2026 CCI 109 [Desjardins] – further illustrates the tricky nature of jurisdiction in tax disputes and that getting the forum correct is not a simple task.

In this update to our Tax Appeal Series on jurisdiction in tax disputes, we review the Desjardins decision with a view to highlighting the complicated task of statutory interpretation and its intersection with jurisdiction in tax disputes.

Case Background

Desjardins Financial Security and Life Insurance Company (the “Appellant”) was assessed by the Minister of National Revenue for tax on large corporations under s. 75 of Nova Scotia’s Income Tax Act (the “Assessments” and “NSITA”), indicating the value of certain redeemable shares it issued and listed as liabilities on its balance sheet should have been included in its taxable capital as long-term liability debts per s. 181.3(3)(b)(i) of the Income Tax Act (the “ITA”).

The Appellant appealed the Assessments to the TCC, taking the position in the Respondent’s motion to dismiss that Nova Scotia conferred jurisdiction on TCC based on an interpretation of the wording of s. 75 of NSITA in contrast to the wording of the appeal provision in s. 64 of NSITA.

TCC Decision

The TCC granted the Respondent’s motion to dismiss, rejecting the Appellant’s position that Nova Scotia conferred jurisdiction on TCC over appeals concerning tax on large corporations in NSITA s. 75.

The TCC based its ruling on the analytical framework provided in prior Supreme Court of Canada (“SCC”) and TCC jurisprudence. That framework establishes that the inherent jurisdiction of a provincial superior court (i.e., the Supreme Court of Nova Scotia, “NSSC”) can only be diminished in favour of a federal tribunal or court like the TCC by a clear legislative provision (i.e., where the loss of jurisdiction is expressly stated in clear terms in the law).

In the case before it, the TCC concluded that s. 2(10)(j) of NSITA was clear that "TCC" was to be interpreted as NSSC, and that the legislature would have been much clearer if it had actually intended to confer jurisdiction on the TCC for appeals of tax assessed under s. 75 of NSITA. In the TCC's view, the alleged difference in wording between s. 64 and 75 of NSITA was artificial, and that the inclusion in the provincial law of a reference to federal law did not constitute an express granting of jurisdiction to the TCC for appeals. Rather, the TCC concluded that reference in s. 75 of NSITA to various parts of the ITA was simply to clarify that large corporations would also have a right of appeal for the new tax without excluding application of the appeal provisions in s. 64 of NSITA.

Takeaways

Determining the correct forum for a tax dispute can be difficult, as it often involves the complicated task of interpreting federal and provincial legislation to determine whether jurisdiction has been conferred on the TCC. To avoid costly mistakes related to jurisdiction, taxpayers should contact Experienced Tax Litigation Counsel for legal advice.

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For an updated Index of our Tax Appeals Series, click here.