http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/108839/index.do 
6379249 Canada Inc. v. The Queen (March 31, 2015 – 2015 TCC 77, D’Auray J.).
Précis: The appellant developed the world’s smallest wireless printer and was entitled to SRED credits in 2006 and 2007. When it launched the product on the market in 2008 it was discovered to be essentially non-functional. In 2009 and 2010 it claimed SRED credits for additional work on the printer. CRA denied the credits on the basis that there was no technological uncertainty, i.e., that it was routine engineering work. In the 2010 taxation CRA also denied the credits on the basis that the taxpayer had failed to file prescribed information. The Court allowed the appeal on the basis that the taxpayer’s expert evidence established that there was system uncertainty in the printer in 2009 and 2010 therefore the expenses qualified for SRED credits. It also accepted the appellant’s evidence that it had in fact filed the necessary scientific report with its 2010 tax filing.
Decision: The case turned on whether expenses incurred in 2009 and 2010 qualifed for SRED credits:
[1] In 2006, the appellant undertook the development of a miniature self‑contained wireless portable printer (“the printer”). The printer’s dimensions were to be 1.5” x 1.5” x 10”. It would have been the smallest such printer in the world.
[2] Following an audit by the Canada Revenue Agency (“CRA”), for the 2006 and 2007 taxation years, the Minister of National Revenue (the “Minister”) accepted that the work performed by the appellant with respect to the printer constituted scientific research and experimental development (“SR&ED”). Accordingly, the appellant was granted the SR&ED investment tax credit (“ITC”) for those years. The appellant was also granted the SR&ED ITC for its 2008 taxation year, although the 2008 taxation year was not audited by CRA.
[3] At the end of 2008, Mr. Raja Tuli, the Chief Executive Officer (“CEO”) of the appellant, was of the view that the technological objectives of the printer had been met; namely the printer could print 20 pages without having to recharge the battery.
[4] Accordingly, 200 printers were released onto the market for sale.
[5] After its commercial release, the manufacturer of the printer informed the appellant that it was receiving complaints from customers who had purchased the printers.
[6] The appellant investigated the customers’ complaints by testing approximately 50 printers and determined that the complaints were well-founded. The appellant noticed that the paper was coming out of the printer curled and the battery stopped after five to ten pages had been printed. Although this did not occur on a regular basis, the occurrence was high enough that the appellant decided to stop manufacturing the printers and removed them from the market.
[7] In 2009, the appellant undertook a new SR&ED project with respect to the printer and claimed a SR&ED ITC in the amount of $103,628 for its 2009 taxation year and $49,688 for its 2010 taxation year.
[8] The position of the appellant is that the work performed on the printer in the 2009 and 2010 taxation years constituted SR&ED. The appellant argued that technological uncertainties still remained with respect to the printer in 2009 and 2010.
[9] By notices of assessment dated December 24, 2010 and November 25, 2011, the Minister denied the appellant’s claim for a SR&ED ITC for the 2009 and 2010 taxation years. The basis for the assessments was that, at the time of commercial production, there were no longer technological uncertainties with respect to the printer. In addition, the Minister took the position that the work performed on the printer during the 2009 and 2010 taxation years was routine engineering.
[10] For the appellant’s 2010 taxation year, the Minister also took the position that the appellant did not file the prescribed information with his Form T661 within the time limits provided for by subsection 37(11) of the Income Tax Act (“ITA”). The appellant was therefore not entitled to claim a SR&ED ITC for its 2010 taxation year. The appellant argued that it had filed the prescribed information with the Form T661 within the time limits.
The Court accepted the taxpayer’s evidence that in 2009 and 2010 there remained system uncertainty about the function of the printer:
[67] Mr. Tuli stated that existing standard engineering procedures were not available to competent professionals in the field to solve the technological problems with the printer. If they had been available, the printer would be functioning by now.
[68] In my view, Mr. Wierzbica [CRA’s witness] put too much emphasis on the commercial release of the printer. In doing so, he ignored an essential element, namely, that, concretely, the printer did not function and had to be removed from the market. During cross-examination, Mr. Wierzbica stated that if the printer had not been commercially released, the project would most probably have been accepted for 2009 and 2010. He stated as follows:
In term of SR&ED evaluation, if they have still claimed it prior to sending it to manufacturing, most probably this project would be accepted. It would be just continuation of unresolved—there would be no, clearly there would be no indication for me to assume that they solved technological uncertainty. Which is in place when they release it to manufacturing. That’s the difference.
[69] In light of the evidence, I am of the view that the appellant has demonstrated that there was a system uncertainty at the system/printer level for the 2009 and 2010 taxation years.
As to whether the prescribed information had been filed by the taxpayer in a timely manner for 2010 the Court again accepted the taxpayer’s evidence:
[126] In summary, Mr. Tuli is asking me to believe his version of the facts, namely that the appellant would never file his T2 return and the Form T661 without the scientific report. He had the documents hand delivered to CRA to ensure that the time limits were met, since it was the last day for filing the Form T661 with the scientific report. On the other hand, the respondent relied on the two letters from Mr. Tuli Senior to show that the appellant was late in filing its scientific report. The tenor of the two letters does not support this finding. The respondent also relied on Ms. Grant’s testimony; I find her testimony not determinative. She did not take into account the possibility that the scientific report could have been separated by the time the documents were forwarded to her. In addition, the letter of Mr. Tuli Senior to QRA was not relevant in her determination. As I stated earlier, Mr. Tuli Senior was not called as a witness. In addition, Mr. Tuli stated that in the past they did not file a scientific report with QRA since it do not audit SR&ED.
[127] As stated by the parties, in this appeal, the question as to whether the scientific report was filed within the time limits must be decided according to the balance of probabilities. This is not an easy call, since most of the evidence submitted by both parties was hearsay evidence. In light of the facts that Mr. Tuli was a credible witness and I do not have any reasons to doubt his testimony, I decided to give the benefit of the doubt to the appellant and accept that the scientific report was filed with the T661 on September 30, 2011.
As a result the appeal was allowed, with costs.