Regulation 2902

See Also

Armada Equipment Corporation v. The Queen, 2007 DTC 879, 2007 TCC 260 (Informal Procedure)

In finding that fees paid to an accounting firm to prepare investment tax credit claims in respect of scientific research undertaken by the taxpayer did not qualify on the basis that they were "a legal or accounting fee", Mogan D.J. stated (at para. 882):

"Those services are within the scope of what an accountant ordinarily does for a fee. Filing a claim for an investment tax credit is part of filing an income tax return if the taxpayer is engaged in SR&ED."

Words and Phrases
accounting fee

Spectron Computer Corp. v. MNR, 93 DTC 1473 (TCC)

The taxpayer unsuccessfully argued that interest expenses incurred by it to finance the payroll cost of its R & D personnel were not made for the purpose of generating expenses, not income, and therefore were not described in Regulation 2902(a)(c). Kempo, TCJ. stated (p. 1478):

"that no income was or could have been gained or produced at that time from the property being researched and developed is not determinative because the purpose and direct use of the borrowed funds were focused to that end and no issues were raised concerning the efficacy of the projects under research."

However, registration and travel costs arising from the attendance of R & D staff at computer software conferences were not denied by Regulation 2902(a)(F). Kempo, TCJ. stated (p. 1480):

"If any assembly or gathering portrays a commonality of purpose (which is what we have here) and a commonality of participants (which does not exist here except peripherally through their general interest in computer technology) it will, prima facia be a convention."

Words and Phrases

Minicom Data Corp. v. The Queen, 92 DTC 1876 (TCC)

In finding that interest on a mortgage secured by a building which was used as the taxpayer's head office and principal place of business was a prescribed expenditure, Mogan J. stated (p. 1878):

"The word 'including' directly following that phrase [in Regulation 2902(a)(i)] is expansive in and of itself. In my opinion, it was the draftman's intention that each item in clauses (A) to (H) would be a prescribed expenditure if it was of a current nature without regard to whether it was in respect of the general administration or management of a business."

In addition, the taxpayer failed to establish the use of the borrowed money giving rise to the interest expense.

Administrative Policy

31 May 1994 T.I. 941365 (C.T.O. "Investment Tax Credit (SR&ED)")

IT-331R, para. 24, does not explain when renovations will be so "significant" to result in the renovated equipment not being prescribed properly. However, in the context of a mainframe or computer system, renovations that are merely performance related enhancements that do not change the essential nature of the equipment would not qualify.

8 June 1993 T.I. (Tax Window, No. 32, p. 18, ΒΆ2615)

After the confirmation of Finance that it was not intended that an election under s. 16.1 should cause equipment not to qualify for an investment tax credit, RC on an administrative basis has adopted the position that Regulation 2902(b)(ii) will not apply to the leased equipment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) 46

85 C.R. - Q.48

A partnership which intends to exploit technology developed by it will not ne considered to derive "all or substantially all" of its revenue from the prosecution of scientific research or the sale of rights in or arising out of scientific research.

84 C.R. - Q.41

Notwithstanding the "wholly attributable" requirement, where a specific area within a building is set aside exclusively for R&D for the foreseeable future, RC will allow a reasonable proportion of the cost of the building.

Generally, "all or substantially all" means at least 90%.


Katiya, "Proposed Changes to the SR&ED Program under the Income Tax Act", 1994 Canadian Tax Journal, No. 42, No. 2, p. 309.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 37 - Subsection 37(8) 0