Précis: In its taxation year ended December 31, 2012 the taxpayer claimed the amount of $453,323 as a scientific research and experimental development (“SRED”) capital expenditure. The expenditure represented the purchase price of “automated Pure Pulse Waterjet System equipment” from Pratt and Whiney Military Aftermarket Services Inc. (“Pratt”). As part of the purchase agreement the taxpayer agreed to provide $450,000 of research and engineering services to Pratt using the equipment.
CRA denied the SRED claim on the basis that the property was not purchased to be used for all or substantially all of its operating time for the prosecution of SRED in Canada. CRA’s position was that the property was acquired to provide services to Pratt and others as an R&D subcontract provider. On the evidence the Court accepted CRA’s position and dismissed the appeal with costs.
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