Government assistance can reduce tax credits or deductions and it can be included in income (see ITA s. 12(1)(x).) Here, the FCA agreed with the TCC that a loan “from the Atlantic Canada Opportunities Agency (ACOA) for the tax years 2005, 2006, 2007, and 2008 were “government assistance” pursuant to subsection 127(9) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the Act). As government assistance, these sums reduce the amount of scientific research and experimental development expenses that the appellant can claim for the tax years in question.” (Para. 2.)
“[6] The Judge found that ACOA, in entering into the Agreement with the appellant, was carrying out its object and exercising its powers under theAtlantic Canada Opportunities Agency Act (R.S.C., 1985, c. 41 (4th Suppl.)). Hence, based on the evidence and the context, the contribution by ACOA constituted “government assistance” within the meaning of subsection 127(9) of the Act and was not a regular loan advanced on reasonable terms for business purposes.
“[10] In Canada v. CCLC Technologies Inc., reflex, 139 D.L.R. (4th) 765, 96 D.T.C. 6527 [CCLC Technologies], this Court adopted a test which determines whether payments made by a public authority, akin to ACOA and pursuant to an agreement, have the attributes of a commercial venture. In other words, the key question becomes: is the public authority in question acting in a business rather than a governance capacity?”
Applying those principles, the FCA agreed with TCC Justice Lamarre and dismissed the taxpayer’s appeal.
See Immunovaccine Technologies Inc. v. Canada, 2014 FCA (Boivin JA)