Allegro Wireless Canada Inc v. The Queen in Tax Court of Canada

Allegro Wireless Canada Inc. filed for SR&ED tax credits for the 2010 and 2011 tax years, with qualifying expenditures in the amount of $798,342 and $615,906 respectively. After reviewing the claim, the Minister of National Revenue disallowed $697,723 and $615,906 of the amount claimed as SR&ED for each year. Allegro Wireless appealed this decision, intending to prove the legitimacy of their claim.

Allegro Wireless had spent these years developing software for clients, and believed these projects to be qualifying SR&ED. Their projects largely revolved around developing software that allowed workers to communicate with their headquarters while working remotely – for instance service technicians performing work at a client’s house could communicate with their boss if needed or track the work being done. Throughout the appeal, Allegro Wireless used expert and fact witnesses to explain the technical uncertainty that came with these software developments – including the various third party software they had to integrate with, which varied from client to client. While the fact witnesses explained the purpose and technical uncertainty of each project, the expert witness asked questions, analyzed the research and methods undertaken and provided an opinion to the court. In this case, the expert witness sided with Allegro Wireless for most, but not all of the projects.

Following this, the court analyzed the financials that were being claimed. In one instance, Allegro Wireless had claimed a $25, 000 contractor payment but was unable to provide support for the correlation of that claim to SR&ED. However, in the case of salaries and wages, Allegro Wireless was able to provide evidence that showed the hours were accurate and the allocation of time spent on SR&ED was substantiated.

Relevant Law

Section 248(1) defines SR&ED as a systematic investigation in the science or technology field. They further define it to include experimental development with the purpose of achieving technological advancement to create or improve existing innovations. The definition also excludes certain work including work on quality control or routine testing of materials, devices, products or processes

The courts use a five part test to assess if a project qualifies as SR&ED:

  1. Was there a technological risk or uncertainty which could not be removed by routine engineering or standard procedures?
  2. Did the person claiming to be doing SR&ED formulate hypotheses specifically aimed at reducing or eliminating that technological uncertainty?
  3. Did the procedure adopted accord with the total discipline of the scientific method including the formulation testing and modification of hypotheses?
  4. Did the process result in a technological advancement?
  5. Was a detailed record of the hypotheses tested, and results kept as the work progressed?

Court’s Decision

After listening to the expert witness’ evaluation of each project in detail and viewing the detailed breakdown of the costs and calculations used to determine qualifying expenditures and the associated credits, the Court issued a partial overturn of their prior assessment. While not all of the projects were determined to be SR&ED, a large portion of them were accepted. The Court accepted that Allegro Wireless had qualifying expenditures of $449,878 and $508,351 in the 2010 and 2011 taxation years, respectively, and is entitled to corresponding investment tax credits of $157,457 and $177,923 for the 2010 and 2011 taxation years, respectively. This court ruling approved the majority of the claims, denying only a portion after the appeal.


From this case, we can see the importance of tracking the details you are basing your claims on. From having detailed financial breakdowns and an in-depth report on the projects undertaken, you can help to substantiate your claims. Through the use of an expert witness, your projects can be supported and defended in court. The Court is happy to be proven wrong, and adjust as necessary, as long as your evidence is clear and verifiable.

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