Gold Nugget: Logitek Technology Ltd. (Pt. 1 of 2)

While most people don’t often think about what’s happening at the Tax Court of Canada, taking the time to read through their website can yield some gold nuggets of useful information.

Throughout the SR&ED Education and Resources Gold Nugget series, I’ll dig up some of the most informative hearings and judgments from the Tax Court of Canada—especially in terms of how not to apply to the SR&ED program.

Today, I bring you Part 1 of my personal favourite portions from the Logitek Technology Ltd. v. The Queen (2008, T.C.C.). In this appeal, Logitek were claiming additional investment tax credits to the tune of $106,557.

Hire Expert Council

This appeal could have been thrown out due to a procedural point—namely, one of the points being debated was not raised in the original notice of appeal.

[19]         Before discussing whether the evidence supports this, I first wish to comment about a procedural point and that is that this issue was not raised in Logitek’s notice of appeal. In fact to the contrary, the notice of appeal suggests that Logitek accepts the Minister’s determination of what activities qualify for SR&ED. Logitek should not be changing the fundamental nature of its argument at the hearing without giving the Crown notice of this so that the Crown could prepare its case.

In this instance, the Appellant was fortunate as the Respondent allowed them to make their argument:

Nevertheless counsel for the respondent graciously allowed Logitek to make this argument so that there could be a decision on the merits of the case rather than a procedural point.

Something as small as overlooking a procedural point could have led to Logitek losing their day in court. To avoid mistakes such as this, be sure to have expert council on hand to assist and guide the preparation of any court documents, should you choose to represent yourself.

Provide Enough Information

As detailed below, the Court is willing to apply the Income Tax Act in a liberal manner in their judgment —providing that sufficiently detailed evidence is provided. In this instance, the information provided is clearly identified as being insufficient.

[5]  It is important to note that the statute provides a detailed definition of what SR&ED is. Essentially it requires that there be a technological problem where the resolution is not reasonably predictable using standard procedures. What are standard procedures? They have been described by the Chief Justice of this Court as being procedures that are generally accessible to competent professionals in the field.

[6]  In this case, I find that the evidence is not sufficiently detailed for me to conclude that this requirement is satisfied.