RIS-Christie Ltd. v. Canada
A-710-96
Robertson J.A.
21/12/98
9 pp.
Appeal from T.C.C. decision made under Income Tax Act, s. 37, Income Tax Regulations, s. 2900-Whether taxpayers obligated to adduce documentary evidence of test result in order to claim tax benefits available under legislation-Tax Court Judge imposing evidentiary burden under aegis of "repeatability" criterion-In 1982, Leonid Slonimsky, Daniel Dorcich conceived idea of developing concrete forming medium for cast-in-situ concrete construction in order to decrease costs, increase quality of insulation in formation of concrete panels in construction industry-In December 1982, appellant invested $230,000 in project, through numbered company-Claimed deduction of $160,000 in respect of scientific research under Act, s. 37(1)(a), research allowance of $80,000 under s. 37.1(1), investment tax credit of $40,000 under s. 127(9) in respect of 1982 taxation year-Expenditures disallowed by MNR-What constitutes scientific research for purposes of Act either question of law or mixed question of law and fact to be determined by Tax Court of Canada, not expert witnesses-Research must be directed toward meaningful technological advancement and involve element of creativity rather than mere application of routine engineering principles-Evidence of scientific research must be adduced by taxpayer in order to demonstrate such research undertaken, eligible for favourable tax treatment-Taxpayers must also demonstrate tests conducted in systematic fashion-Only way of establishing scientific research undertaken in systematic fashion to adduce documentary evidence revealing logical progression between each test, preceding or subsequent tests-If taxpayer has plausible explanation for failure to adduce such evidence, still open to court to hold, on balance of probabilities, systematic research undertaken-Also permissible to infer taxpayer had conducted systematic research where such research led to technological advancement-Whole foundation of scientific research provisions of Act, Regulations not resting solely on repeatability criterion-Tax Court Judge made two important findings: (1) testing undertaken, (2) research efforts constituted technological advancement-No need to impose additional evidentiary burden on taxpayer of having to adduce documentary evidence relating to repeatability of testing data-Appeal allowed-Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 37, 37.1, 127(9)-Income Tax Regulations, C.R.C., c. 945, s. 2900 (as am. by SOR/78-749).