Simon's Legal Resources

Federal Tax - Scientific Research and Experimental Development (SRED)

. Tuna Temple Inc. v. Canada

In Tuna Temple Inc. v. Canada (Fed CA, 2026) the Federal Court of Appeal considered the income tax test for qualifying as a 'scientific research and experimental development' (SRED) deduction:

[7] The Tax Court properly identified the five criteria necessary to establish SRED, first articulated in Northwest Hydraulic Consultants Ltd. v. The Queen, [1998] 3 C.T.C. 2520, 1998 CanLII 553 (TCC) at paragraph 16, and approved by this Court in R I S - Christie Ltd. v. Her Majesty the Queen, [1999] 1 C.T.C. 132, 1998 CanLII 8876 (FCTAD), at paragraph 10: CW Agencies Inc. v. Canada, 2001 FCA 393 at para. 17.

[8] For each of the thirteen projects, the Tax Court found that the appellant failed to meet more than one of those criteria: none had a hypothesis, and for each, the appellant employed existing technology and processes, used trial-and-error rather than a systematic approach, kept inadequate records, and failed to establish there was a gap in knowledge in the industry. These are findings that we cannot overturn absent a palpable and overriding error—a very difficult standard to meet: Benhaim v. St-Germain, 2016 SCC 48 at para. 38; H.L. v. Canada (Attorney General), 2005 SCC 25.