Tax - Income tax - Tax credits
Taxpayer worked on two projects to design and build its own lathes to manufacture turbine components. Taxpayer claimed scientific research and experimental (SRED) expenditures and shared-use-equipment (SUE) for three taxation years, which formed basis for investment tax credits (ITCs). Minister reassessed taxpayer to deny ITCs on basis that work did not constitute SRED. Taxpayer appealed. Appeal allowed in part. Taxpayer was denied SRED claimed in 2006 for T lathes it had purchased and then sold in order to make their own M lathes. Taxpayer was allowed SRED ITCs for 80-ton M lathe in 2007 and 2008 as five criteria were met. Taxpayer faced technological uncertainty of system uncertainty. Process of creating new lathe that could handle large work pieces while achieving demanding tolerances represented step forward in technical knowledge. Taxpayer was denied claim for two-thirds of ITCs for 2008 because 60-ton and 40-ton M lathes did not have much originality factored into their designs, as they were mostly small versions of 80-ton M lathe. Taxpayer was allowed SRED ITCs for double wheel roll grinding machine for all three years because five criteria were met. Although project was concluded before any successful outcome due to cost, there was technological advancement.
A & D Precision Limited v. The Queen (2019), 2019 CarswellNat 541, 2019 TCC 48, B. Russell J. (T.C.C. [General Procedure]).
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