http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/109839/index.do
Inflection Analytics Ltd. v. The Queen (May 22, 2015 – 2015 TCC 129, Boyle J.).
Précis: The appellant was endeavouring to develop investment management software.
[1] In the assumptions set out in the reply, the Appellant is described as a software company dedicated to leveraging research and market microstructure and computing technologies toward the development of end-to-end fund management and trading solutions that allows asset managers to focus on their global portfolio strategies.
To that end it paid to access various databases on the internet. It treated those expenses as expenditures of a current nature for the lease of equipment for the prosecution of SRED. The Court held that the data supply agreements did not entitle the appellant to any rights to the underlying equipment used by the suppliers to post the data. Accordingly no equipment was leased and the appeal was dismissed.
Decision: The case turned on whether any equipment was leased by the appellant. The Court held that there was no leasing of equipment:
[7] These two representative agreements appear to clearly be subscription service agreements to access websites to obtain information. The e-service agreement defines the term vendor's service relevant to the addendum as including certain equipment, software and communications. However, that is to be related to the transmission of the information to or by the subscriber Appellant.
[8] The parties agreed that no device had been provided by the vendor to the Appellant. Further, to the extent the Appellant argues that that extends to the vendor's own equipment used to get the data posted promptly to the site, I respectfully disagree that any rights are transferred in that from the vendor to the Appellant/subscriber under the terms of these agreements.
[9] The Appellant relied heavily on the decision of Justice Lamarre (as she was then) in Datakinetics where the issue was whether an appellant who was acquiring a right to access and use a mainframe computer for what it wished and who acquired a dedicated telecommunications line was leasing those two pieces of equipment. She was satisfied they did.
[10] In this case, however, as I have already concluded, these agreements are to provide information via a website to be used by the Appellant. They do not grant to the Appellant any rights in equipment of the vendor that can be used by the Appellant as it wishes, as was the case in Datakinetics.
Accordingly the appeal was dismissed from the bench.
TAGS: Income Tax Act, Tax Litigation, SRED Expenditures