Tax Court of Canada SR&ED Cases

1988-2021

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TOPICAL AREAAPPELLANTCITING / DOCKET #YEARPRIMARY ISSUE / INDUSTRY WIN - LOSE - DRAW?RULING & RATIONALE IMPLICATIONS: UNRESOLVED ISSUES AND OPPORTUNITIES LONG-TERM SIGNIFICANCE
SR&ED cases regarding "technological eligibility"
1TECHNOLOGICAL Northwest Hydraulic Consultants 97-531-IT-G1998"system uncertainties" basis for eligibility?Win 4 of 5 projects eligible due to "system uncertainties"Landmark case with "exemplary " project High
ADVANCEMENT Rainbow Pipeline 96-4369-IT-G1999definition of "technological advancement" (TA)Winrejection of an hypothesis is an advanceSignificant precedent definition of "TA"High
(TA)Airmax*2012 TCC 3762012Technological Advancement (TA)Winsystem uncertainties re. heat source, pressure, ductsUse of informal appeal procedureHigh
Les Abeilles (GE)2014 TCC 3132015Process improvements – 4 projects little evidenceWinAdmissability of verbal evidence if “highly credible”Credible witnesses counters weak documentationModerate
6379249 Canada Inc.2015 TCC 772015Printer design - problems after commercial releaseWinStrong evidence of TU and TA + exampleExcellent example of eligible projectHigh
Acsis EHR2016 TCC 502016Work to increase stabilityWinNo existing methodsStill lacks detail on specific hypotheses Moderate
Formadrain2017 TCC 422017Properietary methods chemical & mechanicalWinMethod unique in industry & cross disciplinaryExcellent example of eligible projectHigh
A&D Precision2019 TCC 482019TA in precision machine projectsWinSystem uncertainty but still lacks detailUse of expert testimony favorableModerate
Beton Mobile 2019 CCI 2782019Concrete processes - 5 criteria Win 6 of 14 projects eligible each detailedquestions on why some ineligibleHigh
CRL Engineering2019 TCC 652019Distributed computing Evidence & AdvancementWinPhD researcher project published scholarly journal sequentially, progressively complex options via system snapshots Moderate
Andre Lamy MPC 2020 TCC 612020Whether Directly EngagedWin Work by Dr. deemed on behalf of MPC 4 eligible project examples - 2 with sponsorsHigh
LifeChoice2017 TCC 212017LoseInsufficient testing of hypothesesChange in interpretation of required testing?High
Flavornet*2017 TCC 1792017Defining Standard practiceLose4 of 5 criteria not metDid TCC consider relevant evidence?High
Novalia (Wind turbines)2016 TCC 812017Wind turbine with patent LoseLack of Qualifications? PhD in music.Hypotheses must be based in scienceModerate
Robotx Solutions Inc.2017 TCC 732017Defining Standard practiceLoseProcess methods not benchmarkedUnclear how different that Les Abeilles?Moderate
2SYSTEMATIC Hun-Medipharma*97-2305-IT-I1997eligibility of analysis without "clinical trials"Win SR&ED work can be "experimentation OR analysis""SI" envisions contemplation of technological alternativesModerate
INVESTIGATIONRIS Christie [1996] ETC 537 1996"lack of documentation"Lose - round 1ineligible - lack of any experimentation or analysisSuccessful result &/or patent NOT proof of experimentationModerate
(SI)[1999] ETC 2004 1999death of key witnessWin - round 2 appeal (FCA)engineer died prior to trial - court sympatheticcourts may be sympathetic for CCPC's in extreme circumstancesModerate
Murray Arlin DPC*2012 TCC 1332012"lack of documentation"High
Mac & Mac Hydrodemolition2017 TCC 2562018Documentation of hypothesesLoseLack of detailed measurementsGenerate & retain evidenceModerate
Indusol2020 TCC 1032020Systematic Investigation (SI)Lose + costsNo SI even though TU (Technological Uncertainty)Need to show progressive hypothesesModerate
National R&D2020 TCC 472020Systematic Investigation (SI)Lose + costsNo SI even though TUNeed to show progressive hypothesesModerate
SR&ED cases regarding Financial issues
1WAGESSynchrosat 2000-1378-IT-I1995allocating salary to only SR&ED activitiesLose only SR&ED percentage claimableneed system to document employee experimenation timeLow
Ergorecherche[1998] CTC 20621998time allocation - SR&ED vs. non-SR&ED projectsLose "reasonable" basis for allocation required could structure "non-SR&ED" done during unpaid timeModerate
Alcatel2005 TCC 1492005stock options - whether SR&ED "cost" incurredWin - round 1SR&ED "cost" is dilution of shareholder interestCourts contemplate "costs" not in taxable incomeHigh
Draw - round 2legislation to disallow > Nov. 14, 20052 year window to amend 2004 - 2005 taxation yearsHigh
Jaft2015 MBCA 772016Wages only payable if SR&ED approvedLosecould claim unpaid wages on sch 32 line 315
Oldcastle2016 CCI 1832017SR&ED wages based on salesWinSalary & wages definition 248(1)Payments not considered commissionHigh
AG Shield2017 TCC 682017Allocation of SR&ED wagesWin100% allowed even though 23%Dividends & non T-4 payments included?High
2MATERIALSConsoltex 97 DTC 7241997materials used in SR&ED then soldWin - round 1 eligible if required for SR&EDshort-lived precedent to include "commercial materials"Low
Draw - round 2New legislation repayment of ITC's on saleClarification: labour eligible - materials "sold" excluded High
3ASSISTANCE/Com Dev Ltd.96-4343-IT-G1999government fees - "assistance" or "revenue"Win fixed price contract not purchase of SR&EDStructure SR&ED contracts-"taxpayer" to bear "risks" High
GRANTS/
EXPERIMENTALLes Cultures Laflamme89-2514(IT)1989sale of experimental productionWinsale irrelevant if SR&ED performedclarifies SR&ED labour eligible despite subequent saleHigh
PRODUCT SALE
4UNPAID Chartwell2004 TCC 7282002eligibility of unpaid amounts / bad debtsWin / loseclaim costs during year incurred (then 78(4))opportunity to claim unpaid wages (*unless forgiven)High
AMOUNTS
5FOREIGNLGL 96-4726 (IT)G1999data collection outside Canada SR&ED?Lose ineligible if physically outside Canadacourts took literal interpretation of "in Canada"Moderate
EXPENSESDraw - round 2Subsequent events: eligible if within "EEZ"marine work eligible to 200 nauts - still "unclear" travel abroadLow
6FILING Datacalc Research 2000-1413-IT-G2000extension of 18 month filing deadlineLose qualified expenditures by filing due dateobject under proper sections of ITA - see Alex ParallelLow
DEADLINEAlex Parallel Computers T-1512-971998basis for extension of filing deadlineWin CRA cannot restrict Minister extend deadlinesextension for reasons other than CRA IC (illness/disasters)High
Draw - round 2Legislation Nov. 17, 2005 no SR&ED extensionmust file within 18 months of year end - preferably 15 Moderate
6379249 Canada Inc.2015 TCC 772015Proving project filed with claimWinVerbal evidence if “highly credible”Moderate
Easyway Cattle2015 TCC 2112016Failed to file sch 31 LoseAll prescribed info in prescribed formdangers of filing past 15 month CRA admin deadlineModerate
Westsource2017 TCC 92017Complete claimLoseProjects only filed by related Co.18 month deadline is absoluteModerate
7QUALIFIED All Colour Chemicals[1993] CTC 30501993Can CCPC partners claim 35% refundable ITC'sLose127(8) partnership "over-rides" 127(10.1) refundsQualified CCPC's should avoid using SR&ED partnershipsHigh
CCPC STATUSHSC ResearchCTC 2283 (TCC)1995Factors in evaluating defacto controlWinseparate directors - no control evidenced Landmark case on definition of "defacto control"High
Mimetex Pharmaceutical 1999-4847-IT-G1999if US director with 50% of shares has control?LoseUS director w/o consent Canadian director(s)consent from 1 of 2 Canadian directors to solve problemHigh
Terra Remote2006 TCC 2792006Is shareholder with < 50% ownership arm's length?WinITA 256 (control) & 251 (related persons) Confusing "specified employee" (>10%) with "arm's length"Moderate
Mindready Solutions2015 CCI 172015Was private Co. controlled by Public?LoseSeveral factors determining factual controlModerateModerate
Aeronautic Dev Corp2017 TCC 392017Defacto ControlLoseUndue influenceBe careful even if <50% votesModerate
CO2 Solution Technologies2019 CCI 2862019Control by public co.LoseDefacto control establishedLoss with costsModerate
8ITC USEAinsworth Lumber98-1052-IT-G2001ordering of ITC use - refundable vs. non-refundableWinAct clarifies that taxpayer "may" deduct [credits]taxpayer elects order of refundable vs. non-refundable creditsModerate
9SR&ED FRAUDTemporaSCC2018level of fineLoseEach of 3 charged 100% for false representationsfine is 300% of amount claimedHigh
R v. Elhami 2017 QCCQ 26842017level of fineLoseEach of 3 parties charged 50% false datesfine is 150% of amount claimedHigh
10REASSESSMENTRio Tinto Alcan2017 TCC 672017Can CRA reassess 5 years back?LoseFiled waivers for other reasonsIncreased risk to all claimantsHigh
PERIOD
11SHAREHOLDER Guy Laliberte2018 TCC 1862018Space flight $4 vs. $42 millionLoseFull amount taxableDenied as marketing expenseModerate
BENEFIT

Tax court of Canada SR&ED strategies 

Nov. 24, 2017

SREDStakeholder.ca Interview 

the Honourable Donald Bowman,

Former Chief Justice of the Tax Court of Canada

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