Canafric – Tax Court of Canada finds that developing new pie recipes was SR&ED

Canafric specialized in developing frozen pies for grocery chains and restaurants. Customers would request specific targets, such as content (e.g., low fat and salt, or halal), shelf life (e.g., without preservatives), taste acceptability and texture. Canafric averaged around six projects a year in which it would elaborate a recipe designed to meet such requirements, test the recipe and send the sample product to a “taste panel” – and evaluate the reasons for any failure.

The chief beef of the CRA technical advisor was that each breakthrough made was transferrable from one product to the other so that most of the projects lacked technological uncertainty. In rejecting this view and before finding that all of the SR&ED claims at issue were to be allowed, Rossiter C.J. stated that the CEO “clearly demonstrated that this was not the case because the ingredients will react differently when used in different products.” Regarding two of the projects where the CRA technical advisor considered there to be insufficient documentation, any such gaps were filled by the testimony, with Rossiter C.J stating:

Documentary evidence is not mandatory.

More generally, all five criteria established in Northwest Hydraulics were met.

Neal Armstrong. Summary of Canafric Inc. v. The King, 2023 TCC 108 under s. 248(1) - SR&ED.