The appellant appealed assessments for its 2012 and 2013 taxation years, arguing that amounts received under a Strategic Aerospace and Defence Initiative (SADI) Agreement were loans, not 'government assistance' under subsection 127(9) of the Income Tax Act.
The Tax Court of Canada dismissed the appeal, finding that the SADI Agreement was not an ordinary business agreement because its implied rate of return was substantially below the market rate.
Consequently, the amounts received constituted government assistance and had to reduce the appellant's deductible SR&ED expenditures and eligible expenditures for investment tax credit purposes.
