Docket: 2010-320(IT)I
BETWEEN:
AMIRIX SYSTEMS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal
heard on September 14, 2010, at Toronto, Ontario
Before: The Honourable Justice
L.M. Little
Appearances:
|
Counsel for the Appellant:
|
David
J. Rotfleisch
Yonathan Moussadji
|
|
Counsel for the Respondent:
|
Toks C. Omisade
|
____________________________________________________________________
JUDGMENT
The
appeal from the assessment made under the Income Tax Act for the 1997
taxation year is dismissed, with costs.
Signed at Victoria, British Columbia, this 1st day of February 2011.
“L.M. Little”
Citation: 2011 TCC 60
Date: February 1st, 2011
Docket: 2010-320(IT)I
BETWEEN:
AMIRIX SYSTEMS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Little J.
A. FACTS
[1]
The Appellant maintains
that it was carrying on scientific research and experimental developments in
the year under appeal.
[2]
The Appellant
originally filed an incorrect income tax return for the 1997 taxation year.
[3]
In the tax return that
was filed, the Appellant did not claim all of the Scientific Research and
Experimental Development credits (“SR&ED”) to which it was entitled. As a
result of this mistake, the Appellant incorrectly reduced federal income tax
credits (“ITCs”) to which it was entitled.
[4]
The records of the Canada
Revenue Agency (“CRA”) indicate that the Minister of National Revenue (the
“Minister”) reassessed the Appellant’s 1997 tax return on five separate
occasions, i.e.:
November 1, 1999;
January 4, 2000;
March 26, 2001;
May 7, 2002; and
May 15, 2002.
[5]
The Appellant filed a
Notice of Objection to the Notice of Reassessment issued on May 15, 2002.
[6]
On August 30, 2007, the
parties executed Minutes of Settlement.
[7]
Pursuant to the Minutes
of Settlement, the Appellant’s taxable income was increased from $650,696 to
$1,937,610. Federal ITCs of $205,844 were allowed for the 1997 taxation year.
[8]
Following the
settlement, the Appellant submitted a plan to the Minister requesting that the
Minister apply ITCs from the 1997, 1998, 1999 and 2000 taxation years plus
a Nova Scotia Manufacturing and Processing Investment Tax credit (“M&P credit”)
from the year 2000 to its income in the 1997 taxation year.
[9]
On April 4, 2008, the
Minister issued a Notice of Reassessment in accordance with the plan submitted
by the Appellant. In the Notice of Reassessment, the Minister charged the
Appellant interest on the carryback from 1998 to 2000.
[10]
The Appellant objected
to the interest calculation.
[11]
On November 10, 2009,
the Minister varied the Reassessment by changing the effective interest date
on all credits carried back to 1997 to November 28, 2000.
[12]
The Appellant filed an
appeal to the Tax Court.
B. ISSUES TO BE DECIDED
[13]
The issues to be
decided are:
a)
whether the Minister
reassessed the Appellant for the 1997 taxation year in accordance with the
Minutes of Settlement; and
b)
whether the Minister
correctly identified the effective date for calculation of interest when
applying the tax credit to the 1997 taxation year.
C. ANALYSIS AND DECISION
[14]
The parties filed an
Agreed Statement of Facts in which they agreed that the Appellant had an
SR&ED expenditure pool of $1,413,822.
[15]
The Appellant’s main
argument is that when it submitted the settlement proposal to the Minister, it
requested a substitution of provincial credits for federal credits, i.e., Nova Scotia M&P credits for federal SR&ED credits.
[16]
Counsel for the
Appellant claims that the treatment that was proposed is in accordance with CRA
assessing policy.
[17]
Counsel for the
Appellant attempted to distinguish the case of Connaught Laboratories
Limited v The Queen, 94 D.T.C. 6697 [Connaught], on the grounds that in Connaught
the carryback of a capital loss was requested as a result of a CRA audit, while
in this situation there was no audit involved.
[18]
Counsel for the
Respondent’s main argument is that the Appellant’s balance due date for the
1997 taxation year was August 31, 1997. However, Counsel for the Respondent
noted that the Appellant is claiming a combination of provincial and federal
carrybacks from 1998 to 2000 that were not available at that time.
[19]
Counsel for the
Respondent said that the Appellant chose to carry forward the SR&ED
expenditure pool instead of using it to reduce its tax liability when it
submitted its plan following the settlement. Counsel for the Respondent noted
that the Appellant chose to rely on federal ITC credits and Nova Scotia M&P credits to reduce its tax liability in 1997. Counsel
for the Respondent noted that it is because of these carrybacks that the
Appellant is in a refund position. Counsel for the Respondent said that the
Appellant cannot rely on the SR&ED expenditure pool and ask for a
substitution since it did not claim the expenditure pool in the first place.
[20]
In my opinion the
position adopted by the Minister is correct. The appeal is dismissed, with
costs.
Signed at Victoria, British Columbia, this 1st day of February 2011.
“L.M. Little”
CITATION: 2011 TCC 60
COURT FILE NO.: 2010-320(IT)I
STYLE OF CAUSE: AMIRIX SYSTEMS INC. AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Toronto,
Ontario
DATE OF HEARING: September 14, 2010
REASONS FOR JUDGMENT BY: The
Honourable Justice L.M. Little
DATE OF JUDGMENT: February 1, 2011
APPEARANCES:
|
Counsel for the
Appellant:
|
David J. Rotfleisch
Yonathan Moussadji
|
|
Counsel for the
Respondent:
|
Toks C. Omisade
|
COUNSEL OF RECORD:
For the Appellant:
Name: David J. Rotfleisch
Firm: Rotfleisch
& Samulovitch
For the
Respondent: Myles J. Kirvan
Deputy
Attorney General of Canada
Ottawa,
Canada
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