Christopher R. Mostovac

The appellant appealed assessments for the 2002 to 2009 taxation years involving shareholder benefits, unreported income, and gross negligence penalties.

The Tax Court dismissed the appeals for 2002 and 2009, quashed the appeal for 2007, and allowed the appeals for 2003, 2004, 2005, 2006, and 2008, referring them back for reassessment.

The Court adjusted the shareholder loan account balance, reduced the unreported income and shareholder benefit amounts for 2006, and quashed the gross negligence penalties for 2006.

The Respondent brought motions for leave to file Amended Replies to the Notices of Appeal in two appeals concerning whether certain projects qualified as scientific research and experimental development under the Income Tax Act.

The Appellant opposed the amendments, arguing they would deprive it of the right to rely on the specific approach taken by the auditors.

The Tax Court of Canada granted the motions, finding that the proposed amendments added factual allegations in support of the existing basis of assessment and did not constitute a new basis of assessment.

The Court held that the amendments would assist in determining the real questions in controversy without causing non-compensable prejudice to the Appellant.