AFD Petroleum – Federal Court finds that a corporation which filed an SR&ED claim on the 1-year extended deadline had no recourse when CRA rejected the claim

A claim for an SR&ED deduction must be made on a properly completed T661 form. Although s. 37(11) provides that the form can be filed up to 12 months after the taxpayer’s filing-due date, it is dangerous for a corporation to rely on this accommodation: if CRA rejects the form as being incomplete, the corporation has no recourse (unless it can persuade CRA to reassess the related return, which CRA is not obligated to do.)

This is what happened to AFD, which filed a T661 right on the extended due date, with only 2 of the 7 pages in the form completed. Bowell J noted that if AFD had filed the T661 with its T2 return, it would have been able to deal with any CRA concerns with the manner of completion of the form by filing a notice of objection, so that the absence of recourse based on what AFD actually had done did not represent procedural unfairness.

It seems odd to effectively impute a Parliamentary intention to provide what looks like a gift but, in fact, is a trap. What if the taxpayer clearly had made a bona fide effort to make a good T661 filing?

Neal Armstrong. Summary of AFD Petroleum Ltd. v. A.G., 2016 FC 547 under s. 37(11).