Kam-press Metal Products Ltd v Her Majesty the Queen
Kam-Press Metal Products Ltd. Docket No. A-442-19. 2021 FCA 88
The 2009 and 2020 SR&ED credits claimed by Kam-Press Metal Products Ltd. had been denied on the basis that the company did not use a scientific method in line with the law. The company appealed these to the Tax Court of Canada, the appeal was dismissed, and Kam-Press appealed this to the Federal Court of Appeals.
The Tax Court had concluded that Kam-Press did not demonstrate that the procedures adopted for their projects did not align with the scientific method, further citing the case of Northwest Hydraulics to support their statement. Northwest Hydraulic Consultants Limited v. Her Majesty the Queen ( 3 C.T.C. 2520, 52 D.T.C. 1839) has outlined the approach to be followed when working to determine if a particular project qualified as SR&ED. The Tax Court had applied the third criteria as outlined by the Northwest Hydraulic case.
- Did the procedures adopted accord with established and objective principles of scientific method, characterized by trained and systematic observation, measurement and experiment, and the formulation, testing and modification of hypotheses?
Kam-Press explained that they had followed the text of the definition of SR&ED rather than this amended definition outlined by the Northwest Hydraulic case. Kam-Press specifically focuses on the fact that there is no reference to “scientific method” in the text of the definition, which means that the third criteria outlined in that prior case should not be applied to any future cases.
The Court referenced numerous other cases where the definitions outlined in Northwest Hydraulics were used to determine whether the scientific method was performed and influenced decisions regarding if a project qualified as SR&ED. They further stated that Kam-Press did not address these prior decisions or provide any basis that shows these cases should not be followed. Finally, they state the Tax Court Judge did not err in applying the criteria as set out in Northwest Hydraulics and dismissed the appeal.
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