The taxpayer engaged in an upgrading of a Supervisory Control and Data Acquisition (SCADA) system for the remote control of pipeline systems. In finding that the work did not qualify as SR&ED on the basis of not satisfying the test of there being sufficient technological risk or uncertainty, Wong J. stated:

The appellant’s efforts to develop a browser‑based system and move away from using a proprietary brand of hardware was more in the nature of catching up with a browser‑based external world and bringing an outdated system into the 21st century, i.e. product research and development. …

[T]here is no evidence that the appellant used more than routine engineering or standard procedures.

The taxpayer also worked on building a system for driverless trains that would run through a central box system, which the client wanted to operate at a Safety Integrity Level (SIL) of 4. In finding that this qualified as SR&ED, Wong J. stated:

Here, the cumulative uncertainties in creating a central train control box capable of operating at the SIL 4 level combined to form a system uncertainty … . The appellant had no guidance for building a control box capable of detecting zero speed and managing train‑line functions while also operating at the highest safety level.

In applying the proxy method under s. 37(8)(a)(ii)(B) in respect of the qualifying project, which references the payroll of employees engaged “directly” in SR&ED, the taxpayer included 100% of an employee’s remuneration where the employee's work contributed directly to SR&ED; whereas, if the employee's work was considered to be supporting in nature—for example, during a weekly project manager's meeting in which the project would be discussed along with other unrelated projects—the taxpayer applied a 60% factor to the remuneration.

Wong J. found that she could not agree with the Crown's contention that applying a mathematical factor of 0.6 was unreasonable in the circumstances.

Neal Armstrong. Summaries of Willowglen Systems Inc. v. The King, 2026 TCC 7 under s. 248(1) – SR&ED and s. 37(8)(a)(ii)(B).

We have translated a further 5 CRA interpretations released in September of 1999. Their descriptors and links appear below.

These are additions to our set of 3,496 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 26 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5^th of each month).

CRA has published a revised version of its Circular on the third-party penalties imposed under s. 163.2, which represents a substantial rewriting of the previous version.

Points made include:

• Indicating the basic distinction between the penalty imposed under s. 163.2(2) and that under s. 163.2(4):

The planner penalty is directed primarily at any person who generally prepares, participates in preparing, selling, or promoting, either directly or in-directly, a planning activity or valuation activity.

…. The preparer penalty is generally directed at any person providing tax-related services to a taxpayer.

• Providing examples of misrepresentations in tax planning arrangements, including “a lawyer giving a favourable legal opinion about an abusive tax scheme knowing that it contains false statements” and “an accountant creating offshore structures to obtain a tax benefit relying on false statements”.
• However, stating that “CRA does not require more of reputable practitioners than compliance with the professional standards of their governing bodies.”
• Stating factors that may be relevant to determining whether penalties will be assessed:

• whether the position taken is obviously wrong, unreasonable, and/or contrary to well-established case law
• the person’s experience with the relevant subject matter and knowledge of the other person’s specific circumstances, or lack thereof
• the extent of knowing or deliberate participation in false statements
• the degree to which the culpable conduct represents the most aggressive and blatantly abusive behaviour
• the extent to which there is a pattern of repeated abuse
• the significance of the tax benefit

• Indicating that if “a practitioner discovers that another person made a false statement for tax purposes, the CRA expects practitioners to take the necessary steps to rectify the situation.”
• However, when the Circular then provides the example of a practitioner who discovers that the previous accountant of a new client had made a false statement by not reporting income of the client from the underground economy, CRA indicates that the practitioner should advise the client to make a voluntary disclosure (and, of course, that the practitioner not make the same omission in fresh returns) but does not suggest any further action including where a voluntary disclosure is declined.

Neal Armstrong. Summaries under IC 01-1R2 Third-Party Penalties 17 February 2026 under s. 163.2(1) – culpable conduct, excluded activity, subordinate, s. 163.2(2), s. 163.2(4), s. 163.2(5), s. 163.2(8), and s. 163.2(12).

The taxpayers' appeal was allowed, and the matter was referred back to the Court of Quebec for a fresh adjudication, given that, in the appealed decision, the judge had not addressed the issue before her in her reasons for judgment (namely, whether the ARQ was justified in using the indirect cash flow method to arrive at its assessments of the taxpayer) otherwise than to quote the ARQ pleadings at length.

Neal Armstrong. Summary of Ngoy v. Agence du revenu du Québec, 2026 QCCA 193 under Federal Courts Act, s. 27(1.3).