The Minister assessed the appellant for foreign accrual property income (FAPI) relating to research and development services provided by its US affiliates.
The appellant appealed, arguing the services did not constitute FAPI or fell within statutory exceptions.
The Tax Court of Canada allowed the appeal, finding that the services provided by the foreign affiliates were not FAPI because they did not erode the Canadian tax base and were inextricably linked to the manufacturing and sale of goods outside Canada.
The Court held that the statutory exceptions for services performed in connection with the sale of goods and manufacturing applied.
