Jaft Corporation v. Canada (AG), 2014 DTC 5080 [at at 7056], 2014 MBQB 59

CRA had found that the applicant's research into solutions for Sick Building Syndrome based on air treatment qualified for scientific research and experimental development credits. In proceeding to develop related products, the applicant employed several individuals on terms that their compensation be based "solely on the work done that meets the requirements of SR&ED." The applicant applied the presumed SR&ED credits towards payroll remittances. CRA found that the work did not qualify, and the taxpayer applied to have the employment contracts rescinded or declared void ab initio.

After finding that allowing the application would needlessly interfere with the Tax Court's jurisdiction on this matter (see summary under s. 171(1)), McKelvey J decided in the alternative to disallow rescission. While the applicant relied on Stone's Jewellery and Juliar, the facts were closer to Bramco. She stated (at para. 44):

This case smacks of attempts to adopt a retroactive/no-risk tax planning scenario or, in essence, rewriting history. The payroll tax remittances are lawfully owed ... and should not be rectified, rescinded, or declared void ab initio.

CRA had found that the applicant's research into solutions for Sick Building Syndrome based on air treatment qualified for scientific research and experimental development credits. In proceeding to develop related products, the applicant employed several individuals on terms that their compensation be based "solely on the work done that meets the requirements of SR&ED." The applicant applied the presumed SR&ED credits towards payroll remittances. CRA found that the work did not qualify, and the taxpayer applied to have the employment contracts rescinded or declared void ab initio.

McKelvey J dismissed the application on jurisdictional grounds. "[R]escission, if granted, would serve to alter the essence of the litigation before the TCC" (para. 26). She did not address the applicant's argument that the application was essentially for equitable relief (the equitable doctrine of rescission being broader than the common law doctrine of void ab initio), which the Tax Court has no jurisdiction to grant - although she went on to find, in the alternative, that such relief should not be granted in any event (see summary under General Concepts - Rescission).