http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/111531/index.do
Easy Way Cattle Oilers Ltd. v. The Queen (August 21, 2015 – 2015 TCC 211, D'Arcy J.).
Précis: Easy Way was denied SR&ED credits in respect of its 2008 taxation year. Put quite simply it filed a Form T2SCH31 (“Schedule 31”) on August 16, 2010 when CRA took the position that the deadline for filing was 46 days earlier, i.e., June 30, 2010.
Easy Way argued that Schedule 31 was not a “prescribed form” that it was required to file on or before June 30, 2010 under the terms of the definition of “investment tax credit” contained in subparagraph 127(9)(m) of the Income Tax Act (the “Act”). The Tax Court disagreed finding that Schedule 31 was indeed a prescribed form. As a result the appeal was dismissed with costs.
Decision: The facts of this case were not complex, the Schedule 31 had not been filed on or before June 30 , 2010:
[2] Most of the relevant facts are contained in the Partial Agreed Statement of Facts, which states the following:
a) The Appellant’s corporate tax year end date is December 31st;
b) The Appellant’s corporate taxation year end for 2008 was December 31, 2008;
c) The filing due date for the Appellant’s T2 Corporate Income Tax Return for the 2008 taxation year was June 30, 2009;
d) The Appellant filed its T2 Corporate Income Tax Return for the 2008 taxation year on September 30, 2009;
e) The Appellant’s T2 Corporate Income Tax Return for the 2008 taxation year was initially assessed on October 5, 2009;
f) The deadline for the Appellant to file a completed Form T661 relative to the Appellant’s 2008 SR & ED claim was June 30, 2010;
g) The deadline for the Appellant to claim Investment Tax Credits in relation to its claim for SR & ED was June 30, 2010;
h) The Appellant, by its accountants, BDO Canada LLP, filed a completed Form T661 with the Canada Revenue Agency (CRA) in support of its 2008 SR & ED claim on June 30, 2010;
i) The Appellant, by its accountants, BDO Canada LLP, filed a completed Form T2SCH31 with the CRA in support of its claim for Investment Tax Credits on August 16, 2010;
j) The CRA denied the Appellant’s claim for an SR & ED Investment Tax Credit by Corporation Notice of Reassessment issued to the Appellant on March 7, 2011.
The relevant provision was the definition of “investment tax credit” contained in paragraph 127(9)(m) of the Act:
[9] Investment tax credit is defined in subsection 127(9). The relevant portion of the definition for the purposes of this appeal is contained in paragraph (m) of the definition, which reads as follows:
except that no amount shall be included in the total determined under any of paragraphs 9(a) to (e.2) in respect of an outlay, expense or expenditure that would . . . be made or incurred by the taxpayer in the course of earning income in a particular taxation year . . . if . . .
(m) the taxpayer does not file with the Minister a prescribed form containing prescribed information in respect of the amount on or before the day that is one year after the taxpayer’s filing due date for the particular year.
Easy Way argued that Schedule 31 was not a “prescribed form” and all of the information contained in the Schedule 31 that it filed could have been gleaned from the other material it filed with CRA in a timely manner.
The Court disagreed:
[18] Schedule 31 is referred to in numerous CRA publications as either a prescribed form or a form used to provide the CRA with prescribed information in respect of the amount of the investment tax credit. For example, CRA Application Policy 2004-02R, 2004-02R2, 2004-02R4 entitled Filing Requirements for Claiming SR & ED states:
For the purpose of paragraph (m) of the definition of an ITC in subsection 127(9) of the Act,
*Schedule T2SCH31, Investment Tax Credit–Corporations, is the prescribed form for corporations and
. . . [19] In my view, the result of the application of paragraph (m) of the definition of investment tax credit in subsection 127(9) is that no amount can be included in the determination of the amount of the Appellant’s investment tax credit for its 2008 taxation year in respect of its SR & ED qualifying expenditure pool unless the Appellant filed, on or before June 30, 2010, a prescribed form authorized by the Minister for the purposes of paragraph (m) of the definition.
[20] For a corporation that form is Schedule 31.
[21] I agree with Mr. Figley that the Minister could have calculated the Appellant’s investment tax credits for its 2008 taxation year using the information the Appellant included in its T2 and Form 661. The Appellant filed these forms, which are prescribed forms, with the CRA on or before the June 30 deadline.
[22] However, there is no evidence before me that the T2 and Form 661 are forms authorized by the Minister as prescribed forms for the purposes of paragraph (m) of the definition of investment tax credit.
[23] In summary, the Appellant has not satisfied the requirement of filing on or before June 30, 2010 a prescribed form (in this instance Schedule 31) in respect of the amount sought as an investment tax credit. As a result, it is not entitled to claim an investment tax credit in respect of its allowable SR & ED expenditures for its 2008 taxation year.
[24] I appreciate that this is a harsh result; however, Parliament has clearly directed that the Appellant had to file the Schedule 31 on or before June 30, 2010.
[Footnote omitted]
As a result the appeal was dismissed, with costs.