R&D Pro-innovation inc. v. Canada (2016)
Key Lessons / Points
- To be eligible for the SR&ED tax credit, work performed must address a scientific or technological uncertainty with the goal of increasing your company’s knowledge base relative to its state prior to the project and above the overall industry’s knowledge base through scientific or technological advancement.
- Please see the Guidelines on the eligibility of work for scientific research and experimental development (SR&ED) tax incentives for more information.
Fiscal Years in Question
Court Heard In
Federal Court of Appeal (Montreal, QC)
May 17, 2016
Length of Process
2016 FCA 152
Amount Under Dispute
Decision The parties having left the adjudication of costs to the Court’s discretion, I would propose that this appeal be dismissed without costs.
In this case, the Appellant, R&D Pro-Innovation Inc., appealed the decision made by the Tax Court of Canada (TCC) in 2015 pertaining to the company’s SR&ED claims for the taxation years of 2009 and 2010, in which The judge ruled that there was no evidence suggesting the required systematic approach was followed and that the initial internal CRA decision to reject the Appellant’s SR&ED investment tax credit policy application was to be upheld.
In this case, the Appellant stated that the TCC judge failed to consider all of the evidence including a letter from the Canada Revenue Agency recognizing that the work did involve technological uncertainty. The judge, in this case, stated that the TCC judge did not err in their analysis and that:
It must be assumed that the Judge considered all the evidence given before him and that he accepted it, including the letter…
The Appellant put forward two separate TCC cases in support of its position that the TCC judge erred in applying the criteria to determine whether there was technological uncertainty. The judge, in this case, dismissed both cases stating they did not apply to the case. The judge dismissed the appeal without costs.
Key Excerpts The appellant argues that the Judge of the Tax Court of Canada (the Judge) erred in finding that it did not carry out scientific research and experimental development activities within the meaning of subsection 248(1) of the Income Tax Act, R.S.C., 1985, c. 1 (5th Supp.) (the Act) because its research project did not satisfy the criterion of technological risk or uncertainty for the taxation years ending on August 31, 2009, and August 31, 2010.  The appellant submits that the Judge was also mistaken in failing to consider, among other things, the July 6, 2011 letter from the Canada Revenue Agency that recognizes, according to the appellant, that its research work involved technological uncertainty.  In my view, an intervention is not warranted. The Judge made no errors of fact or otherwise and examined the evidence in this case. He properly applied the criteria of Northwest Hydraulic Consultants Ltd. v. The Queen, 98 D.T.C. 1839,  T.C.J. No. 340 (QL), confirmed by our Court in C.W. Agencies Inc. v. Canada, 2001 FCA 393,  F.C.J. No 1886, at paragraph 17, and concluded that he was not persuaded that the appellant’s research project to develop a chocolate spread made from cocoa butter and milk protein involved a technological risk or uncertainty.  At the hearing of this appeal, the appellant also referred to us two cases from the Tax Court of Canada: Les Abeilles Service De Conditionnement Inc. v. Her Majesty the Queen, 2014 TCC 313,  T.C.J. No. 241, as well as 6379249 Canada Inc. v. Her Majesty the Queen, 2015 TCC 77,  T.C.J. No. 62, in support of its position that the Judge erred in applying the criteria to determine whether there was technological uncertainty. Having considered these cases, I must find that they do not apply in this case, since the facts and expertise brought up therein are substantially different from the case before us.
Link to Full Ruling
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