Westsource Group Holdings v. R. – FCA: Failure to provide prescribed information fatal to SRED claims

Westsource Group Holdings v. R. – FCA:  Failure to provide prescribed information fatal to SRED claims


Westcource Group Holdings Inc. v. Canada (March 21, 2018 – 2018 FCA 57, Rennie, Woods (author), Laskin JJ. A.).

Précis:    CRA denied the taxpayer certain SRED expenditures claimed on the basis that it had not properly completed all of the information required on a prescribed form.  The taxpayer appealed unsuccessfully to the Tax Court.  The taxpayer appealed further to the Federal Court of Appeal and its appeal was dismissed from the bench, with costs.

Decision:    At issue was the taxpayer’s failure to provide information required in three boxes of the prescribed SRED form.  The Federal Court of Appeal found that failure to be fatal to the taxpayer’s appeal:

[3]  In reasons by Justice V. Miller (2017 TCC 9), the Tax Court concluded that the prescribed form filed by Westsource did not contain all the prescribed information that was required because no information was provided in boxes 240, 242 and 244 of the form. The Tax Court determined that the missing information was important to verify the claim because it addressed key legislative requirements for SR&ED - technological advancement, technological uncertainty and systematic investigation.

[4]  In this Court, Westsource submits that it did comply with the requirements of the legislation even though the three boxes were left blank.

[5]  This issue raises a question of law for which the standard of review is correctness.

[6]  Westsource submits that what is encompassed by prescribed information that is required to be included on the form is not clear either in the legislation or in administrative policy statements. As a result, it suggests that the Minister’s restrictive approach to interpreting prescribed information is not appropriate given that the purpose of the SR&ED legislation is to encourage research and development activity.

[7]  We do not agree with this submission. In our view, the legislation is clear that prescribed information includes information necessary to determine whether the activity qualifies as SR&ED, such as the information elicited in the boxes that Westsource did not fill in. Neither a textual, contextual nor purposive interpretation leads to a different interpretation. In addition, this interpretation is consistent with the administrative policy statements that we have been referred to.

[8]  In support of a more liberal interpretation of subsection 37(11), Westsource urges the Court to consider the legislative objective of encouraging research and development activities. Although this is undoubtedly one of the purposes of the SR&ED regime, another objective is to facilitate tax administration by denying the tax incentives if the filing requirement has not been satisfied.

Thus the appeal was dismissed from the bench, with costs.