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.
DATE: March 12, 1981,
FROM: HEAD OFFICE Corporate Rulings Directorate F.L. Workman 593-6201
ATTENTION: D. Spencer, Business Audit
RE: Scientific Research
This is in reply to your memorandum dated December 9, 1980.
The facts as we understand them are as follows:
XXXX
Section 2900 of the Income Tax Regulations defines "scientific research" as the "systematic investigation or search carried out in a field of science or technology by means of experiment or analysis" and goes on to make certain specific references to basic research, applied research, and development. The words quoted above are critical to the definition and unless that method is followed, development of a product using engineering or other professional skills will not qualify as scientific research. A determination can be made only after an examination of the complete and detailed description of the program(s) and its specifications which should include the location and nature of the research facilities, the academic qualifications of persons involved in the program(s) together with the portion of their time devoted to it and whether patents have been or are expected to be taken out for any new product or process developed or to be developed.
Inherent in the definition of scientific research is the principle that the probability of obtaining a given technical objective cannot be known or determined in advance on the basis of current knowledge or experience, that is, the outcome of the project work cannot be predicted. The technological or scientific uncertainty can only be removed through a program of systematic investigation, experimentation, and analysis by the use of a scientific method.
Based on the information provided to us, we are unable to conclude that XXXX engaged in scientific research within the meaning of subparagraph 37(7)(b) of the Income Tax Act.
We trust the above comments will be helpful. Should you require further assistance after discussing the matter further with XXXX please forward the additional information requested in this memo.
Chief Mines, Oil & Forest Industries Section Specialty Corporations Rulings Division Corporate Rulings Directorate Legislation Branch
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