Buhler Versatile – Tax Court of Canada finds that increasing the horsepower of a tractor by 20% was SR&ED

Wong J allowed the claim of the taxpayer, which was the only Canadian manufacturer of agricultural tractors, respecting a project to build a four-wheel drive tractor with 85 horsepower (or about 20%) above the current industry maximum.

She found in particular that here “the integration of non-trivial combinations of established (well-known) technologies and principles carried a major element of technological uncertainty” and that “with a horsepower increase of this magnitude, the obvious problems might not have had obvious solutions.” She also found that the scientific method had been followed – and documented well enough, although only marginally so.

The costs for this qualifying project were pooled with two others involving developing models with horsepower close to that of competitors’ models, which did not qualify as SR&ED. Since the cost allocation amongst the three projects was not established, Wong J allowed one-third of the pooled costs of $2.9 million, even though the qualifying project entailed the most work.

Neal Armstrong. Summary of Buhler Versatile Inc. v. The King, 2023 TCC 18 under s. 248(1) – SR&ED.