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Federal Tax - Evidence. Tuna Temple Inc. v. Canada [burden of proof]
In Tuna Temple Inc. v. Canada (Fed CA, 2026) the Federal Court of Appeal considered the income tax test for qualifying as a 'scientific research and experimental development' (SRED) deduction.
Here the court cites the unique evidentiary burden of proof in income tax assessments:[9] In assessing a taxpayer, the Minister relies on assumptions concerning the facts; the taxpayer has the initial onus of "“demolishing”" or refuting those factual assumptions: Hickman Motors Ltd. v. Canada, [1997] 2 S.C.R. 336, 1997 CanLII 357 (SCC) at para. 92, citing Johnston v. Minister of National Revenue, [1948] S.C.R. 486, 1948 CanLII 1 (SCC) and Kennedy v. M.N.R., [1973] F.C. 839 (F.C.A.), 1973 CanLII 2268 (FCTAD) at p. 843; Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54 at para. 63. The appellant can do that by adducing evidence that raises a prima facie case the assumptions are wrong: Hickman Motors at para. 93.
[10] The Minister’s reply to the appellant’s notice of appeal in the Tax Court describes the Minister’s factual assumptions. While we need not address them all, they include assumptions that the appellant did no work to overcome technological uncertainties or to dispel scientific knowledge gaps through systematic investigation. The reply includes additional details regarding these and other assumptions for each of the projects at issue.
[11] Contrary to the appellant’s submission, the Tax Court did not treat the Minister’s assumptions as evidence. Rather, it considered whether the appellant led sufficient evidence to contradict those assumptions and concluded it had not. In these circumstances, it does not matter that the witness was credible: Bykov v. Canada, 2025 FCA 103 at para. 9.
[12] Nor is the Minister required to adduce evidence: Jefferson v. Canada, 2022 FCA 81 at para. 27; Laliberté v. Canada, 2020 FCA 97 at para. 56. The Minister may rely on the taxpayer’s evidence—its documents and the testimony of its witnesses, including on cross-examination: Jefferson at para. 29; Grenon v. Canada, 2025 FCA 129 at para. 262. The Tax Court considers all the evidence to determine whether the assessment is correct, as it did here. . Bykov v. Canada
In Bykov v. Canada (Fed CA, 2025) the Federal Court of Appeal dismissed a Tax Court appeal, here from an order which disallowed "additional deductions for motor vehicle expenses incurred by the appellant in connection with employment".
The court considered the evidentiary issue that judges "must presume the assumptions [SS: 'made by the Minister'] are true unless they are demolished by the appellant", here versus viva voce evidence from the appellant that he had "kept records and logbooks that were provided to the Canada Revenue Agency" which substantiated travel expenses which could be deducted from employment income:[8] The Tax Court determined that this evidence was insufficient because it does not challenge the assumptions made by the Minister. It is well established that the judge must presume the assumptions are true unless they are demolished by the appellant. The Tax Court concluded that the evidence "“fail[s] to satisfy the burden of proof placed on the Appellant to establish to a balance of probabilities the facts that show the Reassessments to be wrong”" (Tax Court reasons at para. 74).
[9] The appellant submits that this conclusion is inconsistent with the Tax Court judge’s finding at the beginning of the reasons that the appellant was a credible witness. I do not agree with this submission. It appears from the Tax Court’s reasons that the judge had some sympathy for the appellant. However, it was not a matter of disbelieving him; it was a matter of the appellant failing to present sufficient evidence to demonstrate that the amounts claimed were in fact deductible.
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