In Grenon v. Canada (National Revenue), 2017 FCA 167, the Federal Court of Appeal overturned the Federal Court’s decision and held that the taxpayer was entitled to interest on a $12.75 million payment that was refunded to him pursuant to subsection 164(1.1) of the Income Tax Act.

The taxpayer had been reassessed and his reassessment was under dispute in the Tax Court of Canada, but the CRA obtained a jeopardy order to collect the payment. The jeopardy order was subsequently set aside, entitling the taxpayer to a refund under subsection 164(1.1). The Court of Appeal held that once a jeopardy order is set aside, subsection 164(3) is to be read as if the jeopardy order never existed, with the result that the CRA was required to pay interest to the taxpayer on the amount refunded to him.