Noémie Vespignani

The corporate appellant appealed reassessments denying investment tax credits for scientific research and experimental development (SR&ED) for its 2006 to 2009 taxation years.

The Minister reassessed beyond the normal reassessment period and imposed gross negligence penalties, alleging the appellant submitted plagiarized documentation with its claims.

The Tax Court found the appellant made misrepresentations attributable to neglect by submitting plagiarized technical reports, justifying the statute-barred reassessments and penalties.

However, the Court allowed the appeals in part, finding that two projects in 2007 and 2008 did qualify as SR&ED because they involved technological uncertainties and advancements.

The appeals of the individual appellants regarding section 160 assessments were dismissed as the corporate appellant's underlying tax debt was confirmed for the 2006 and 2009 taxation years.

The appellant appealed reassessments for the 2007, 2008, 2009, and 2012 taxation years regarding the characterization of profits from the sale of shares and losses from the expiration of stock options, as well as the deductibility of interest expenses.

The Tax Court of Canada found that the appellant was engaged in an adventure or concern in the nature of trade, meaning the profit from the sale of shares and the losses from the stock options were on income account.

The Court also disallowed the interest deduction as the appellant failed to prove the borrowed funds were used to earn income from a business or property.

The Minister reassessed the appellant's 2010 taxation year beyond the normal reassessment period, adding $92,522 to his income and imposing gross negligence penalties.

The reassessment was based on an entry in the corporation's Schedule 100 showing a shareholder advance.

The appellant argued the entry was an accounting error and he did not earn the undeclared income.

The Tax Court of Canada allowed the appeal, finding the Minister failed to prove on a balance of probabilities that the appellant made a misrepresentation attributable to neglect, carelessness, or wilful default.

The evidence supported the appellant's position that the entry was an error, and the Minister's assumptions based on later years were insufficient to justify reopening the statute-barred year.

The respondent brought a motion to strike certain parts of the appellant's Notice of Appeal without leave to amend.

The impugned parts related to the appellant's request for a reduction in interest and allegations that the reassessments violated sections 7 and 8 of the Charter and sections 231.1 and 231.2 of the Income Tax Act because evidence was obtained during a criminal investigation.

The Tax Court of Canada granted the motion, finding that it lacked jurisdiction to reduce interest under subsection 220(3.1) of the Act.

The Court also held that the Minister was entitled to use investigative powers and information requests to determine tax liability even while a criminal investigation was underway, and that no prior judicial authorization was required in these circumstances.