The appellant is a professional corporation that operates the dental practice which specializes in implants.

Fifteen years ago, Dr. Arlin purchased a computer software program called the Tritan Dental Implant Management System, which is designed to track the success rate of various types of dental implants.

Dr. Arlin uses the software to compare the success rate of implants in different circumstances. Some of the variables relate to the patients’ circumstances (e.g. smokers versus non-smokers) and other variables to the characteristics of the implant device.

The program contains approximately 200 potential inputs for every implant. According to the testimony, Dr. Arlin uses about 50 of these. Currently he has records for approximately 12,000 implants.

Dr. Arlin believes that by studying this data he can provide a useful addition to scientific knowledge.

Dr. Arlin estimated that he spent 350 hours per year on SR&ED since Fridays were spent on research when he does not see patients.

Evidence of experimentation or analysis:

Dr. Arlin testified that he updated his research for all of his lectures.

The judge also noted that;
this testimony was very brief
should have provided greater detail and documentary support &
many of the lectures were not given to implant specialists & had a marketing component.

whether there was systematic investigation &
whether the allocation of Dr. Arlin’s time was reasonable.
Relevant legislation and analysis:

A significant focus at the hearing was on the requirement of “systematic investigation” in the definition of SR&ED in Income Tax Act.

The CRA argued the research is not sufficiently documented to qualify as “systematic investigation” since;
Dr. Arlin “failed to develop specific hypotheses prior to the data collection &
there is insufficient evidence of time spent by Dr. Arlin on research in the relevant years.
Ruling & rationale: loss due to lack of documentation:

The judge;
was “reluctant to agree with” the requirement for “hypotheses [to be] determined prior to the data collection” however,
“the main problem … very little detailed evidence regarding the analysis done in the years at issue and the time spent.”
She stated that,

“the Tritan program is designed to present comparative tables at the press of a button. The actual time spent on applied research potentially might be very small….

In order to support the appellant’s claims, the evidence as to actual research done, and the amount of time spent, would have to be much more detailed.”

Implications and author’s commentary:

Though the judge did not require pre-stated hypotheses these might have helped the situation as far as relevant evidence.

The biggest disappointment in this case was the claimant’s inability to provide any real evidence of experimentation or analysis. We are told they provided a single research article which was published in 2007 in order to support claims for the 2007 and 2008 taxation years. Clearly the 2007 article could NOT have dealt with the 2008 work and perhaps not even 2007 work.

Results vs. Conclusions:

Basically Dr. Arlin’s system was able to illustrate “what” happened however he did not appear to have any written evidence attempting to document;

Why these results occurred &
How any conclusions were formulated.
Evidence examples:

The following list illustrates the types of evidence which are typically used to substantiate these types of claims. If Dr. Arlin had provided any of these they would have been excellent supporting documentation.

Notebooks – dated daily with brief, point form notes of hypotheses, related analysis & time spent
Emails – correspondence with the suppliers & colleagues regarding any hypotheses & analysis.
Test Reports – any queries from the Tritan system which were used to analyze hypotheses.

Murray Arlin Dentistry Professional Corporation v. The Queen 2012 TCC