Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
921648
24(1) A.Y. Ho
(613) 957-4796
Attention: 19(1)
August 7, 1992
Dear Sirs:
This is in reply to your letter of May 27, 1992 wherein you requested our confirmation as to whether a Canadain corporation can claim investment tax credits ("ITC") when the scientific research and experimental development ("SR&ED") expenditures are reimbursed by the U.S. parent corporation and the Canadian corporation does not have any rights to exploit the results.
As stated in paragraph 21 of Information Circular IC70-6R2 [Information Circular 70-6R2] , we do not confirm income tax consequences unless in a ruling context. However, we can provide you with the following comments.
Our Comments
The phrase "entitled to exploit the results" appears in subparagraph 37(1)(a)(ii) of the Income Tax Act (the "Act"), but not in subparagraph 37(1)(a)(i).
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
This phrase is not used in conjunction with SR&ED "directly undertaken by or on behalf of the taxpayer" perhaps because it is implicit that a person doing research has the right to use the results of the SR&ED unless the person is performing the research on behalf of another person. Where a taxpayer performs SR&ED on behalf of its U.S. parent and is not entitled to exploit the result of such SR&ED, it can be reasonably concluded that the taxpayer is acting as an agent for the U.S. parent. If this is the case, the expenditures made by the taxpayer are not considered as expenditures made under subparagraph 37(1)(a)(i) of the Act and the taxpayer cannot claim ITC for these expenditures.
We trust the above comments are of assistance.
Yours truly,
for Director
Manufacturing Industries, Partnerships
and Trusts Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
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© Her Majesty the Queen in Right of Canada, 1992
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© Sa Majesté la Reine du Chef du Canada, 1992
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