Executive Summary: Key Legal and Evidentiary Issues

• The Minister was justified in reassessing Tempora beyond the normal reassessment period under subparagraph 152(4)(a)(i) due to misrepresentation attributable to neglect in supplying information under the Income Tax Act.

• Plagiarized documentation from suppliers' and manufacturers' websites attached to SR&ED claims constituted false statements in prescribed information filed with the CRA.

• Three SR&ED projects qualified for investment tax credits (ITCs) totalling $415,868, while five projects failed to demonstrate technological uncertainty or advancement.

• Penalties under subsection 163(2) were upheld as Tempora's conduct in using plagiarized documentation fell markedly below reasonable person standards, constituting gross negligence.

• Section 160 assessments against Maged and Shady Elhami for personal tax debts paid by Tempora were confirmed due to Tempora's underlying tax liability.

• Each party bears their own costs, reflecting the mixed outcome where some appeals succeeded while others were dismissed.

Background and parties involved

Les Éléments Chauffants Tempora Inc. ("Tempora") is a company in the business of manufacturing products, including the manufacturing of various types of heating elements. The company was incorporated in 2004 and from 2004 to December 2006 was owned and managed by Mr. Atef Elhami. When their father passed away while travelling in Egypt during the Christmas holidays in December 2006, his sons Maged and Shady Elhami had to put an end to their university studies and started working for Tempora on a full-time basis. They decided to continue carrying on Tempora's business. Some time after their father passed away, around February 2007, Maged and Shady were appointed directors of Tempora, and Ms. Claire-William Ibrahim, Maged and Shady's mother, became Tempora's sole shareholder and president.

The SR&ED claims at issue

For the 2006 to 2009 taxation years, Tempora claimed deductions for scientific research and experimental development expenditures and corresponding investment tax credits. Mr. Serge Lavoie, Tempora's accountant, prepared all income tax returns (T2s) for Tempora, as well as the T661 forms. For his services, Mr. Lavoie took a fee equal to 25% of the amount refunded to Tempora. The CRA initially allowed the SR&ED claims and refunded ITCs in the following amounts: $170,649, $173,540, $242,328 and $151,954 for the 2006, 2007, 2008 and 2009 taxation years respectively.

The CRA investigation and reassessments

For the 2010 taxation year, Tempora filed an SR&ED claim for a new project. The scientific examination was performed in February 2011 mainly by Mr. Clément Leclerc, a CRA research and technology advisor. Mr. Benoît Lussier assisted him. They concluded that the invoice submitted by Tempora in support of its SR&ED claim was false and denied the SR&ED claim. Because of their findings regarding the 2010 SR&ED claim, Mr. Leclerc and Mr. Lussier proceeded to examine the previous taxation years' SR&ED claims and found out that the technical reports filed by Tempora in support of its claims had been plagiarized and came mostly from documents available from other suppliers or manufacturers' websites. Tempora's files for the 2006 to 2010 taxation years were then sent to another CRA division, which carried out a criminal investigation into the affairs of Tempora. The CRA executed the warrants on July 4, 2012. Searches were carried out at Tempora's place of business, as well as at Ms. Ibrahim's home and Tempora's accountant's place of business. The CRA seized 32 boxes of documents and many computers.

Criminal proceedings and their outcome

In September 2013, the CRA laid criminal charges against Tempora, Ms. Ibrahim, Maged and Shady under paragraphs 239(1.1)(a) and (c) because of alleged false or deceptive statements made to the CRA in respect of the SR&ED claim for the 2010 taxation year. No criminal charges were laid in respect of the SR&ED claims for the 2006 to 2009 taxation years. On October 17, 2016, the provincial Court of Québec, by summary conviction, found Tempora, Maged and Shady guilty of an offence under paragraphs 239(1.1)(a) and (c) for the 2010 taxation year; they were found liable to pay a fine of $1,000,000 each (as revised by the Superior Court of Québec).

The reassessments under appeal

On November 9, 2016, the Minister reassessed Tempora for the 2006 to 2009 taxation years, disallowing ITCs claimed for SR&ED expenditures and assessing penalties under subsection 163(2). In the Reassessments, the Minister took the view that it was not possible to determine whether various expenses made or incurred by Tempora during the 2006, 2007, 2008 and 2009 taxation years with respect to eight projects were SR&ED expenditures under the Act, and whether the Appellant had carried on any SR&ED activities as defined in subsection 248(1) of the Act. Maged and Shady were also assessed under section 160 of the Act; Maged was assessed for an amount of $44,166.95, and Shady was assessed for an amount of $27,860. According to the Minister, Tempora paid personal tax debts owed by each of Maged and Shady, at a time when Tempora was a tax debtor.

The plagiarism issue

The Court found extensive plagiarism in the documentation attached to Tempora's T661 forms. For the 2006 taxation year, the technical report was a three-page document to which were attached 133 pages of information relating to thermocouples. More than half of the documents attached to the technical report submitted with Form T661 had been copied from documents found on the Internet from suppliers and manufacturers of heating elements, such as Watlow, Omega, Thermo Electric, Rosemount, Lumrix, and Instrument Service & Equipment. Furthermore, more than half of the documents from suppliers and manufacturers' websites had been modified, either by removing the supplier or manufacturer's name or the reference to a product, or by adding Tempora's logo. Similar patterns appeared across all taxation years.

The Court's analysis on statute-barred reassessments

Justice Lafleur found that the technical reports, including documentation attached thereto, submitted in support of Tempora's SR&ED claims are prescribed information and therefore are information supplied "under the Act" within the meaning of subparagraph 152(4)(a)(i). The Court found that Tempora showed a lack of reasonable care because it used various documents from other suppliers and manufacturers' websites and submitted these documents (sometimes with changes such as the addition of Tempora's logo or name) in support of its SR&ED claims without mentioning their sources, as if the documents were Tempora's own. Further, both Maged and Shady showed a lack of reasonable care because they admitted that they had never read Form T661, nor the guide issued by the CRA dealing with SR&ED (T4088), even though Tempora had been claiming SR&ED expenditures starting in 2005.

Projects that qualified as SR&ED

The Court found that three projects met the SR&ED requirements. The "Tubular Element Manufacturing Line" project for the 2007 taxation year (with ITCs totalling $173,540) demonstrated technological uncertainties that could not be removed by applying routine engineering, and technological advancement. The evidence showed that Tempora was eventually able to manufacture a "heating element" able to withstand temperatures of -70?. For the 2008 taxation year, the "Flexible Silicone Rubber and Kapton Heating Elements" and "Straight and Bent Annealed Tubular & Finned Heating Elements" projects (with ITCs totalling $242,328) also qualified. The objective of the silicone rubber project was to create a silicone-based heater that would operate outdoors in various adverse conditions, to adequately heat exterior structures, such as train tracks and stations, during cold weather. If successful, the silicone rubber could then replace salt, which is corrosive to structures.

Projects that did not qualify as SR&ED

Five projects failed to meet SR&ED requirements. The 2006 "Thermocouple and Temperature Moderator" project lacked sufficient evidence to show the existence of any technological uncertainty and any technological advancement, and the Court found that the procedure Tempora used was consistent with a trial-and-error method and was not consistent with the scientific method. The "Hi-Density Cartridge Heaters" projects for both 2008 and 2009 taxation years did not qualify; the Court found that cores are readily available on the market, that Tempora used routine engineering to solve their problems, and that the project was commercial in nature. The "Tubular Process Heaters" project for 2009 did not qualify; the description of the technological advancement found in Form T661 came mostly from documentation issued by Watlow, a supplier or manufacturer of heating elements. The "Coil & Cable Heaters" project for 2009 similarly did not qualify; the technological advancement description in Form T661 was almost a carbon copy of an excerpt of Watlow's documents found on the Internet.

Penalties and section 160 assessments

The Court upheld penalties under subsection 163(2) for the 2006 to 2009 taxation years. The Court found that Tempora made false statements in Form T661 under circumstances amounting to gross negligence, as Tempora's conduct fell markedly below what would be expected of a reasonable person. The extent of plagiarism found in the documentation attached to the technical reports submitted with the T661 forms justified the assessment of the penalties. The section 160 assessments against Maged (notice of assessment number 4083671) and Shady (notice of assessment number 4083655) were dismissed because Tempora has a resulting tax debt in respect of the taxation years ending July 31, 2006, and July 31, 2009.

The ruling and outcome

The Tax Court of Canada delivered judgment signed on November 20, 2025, by the Honourable Justice Dominique Lafleur. The appeals from the reassessments made under the Act for Tempora's taxation years ending July 31, 2006, and July 31, 2009, were dismissed. The appeals from the reassessments made under the Act for Tempora's taxation years ending July 31, 2007, and July 31, 2008, were allowed, and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that Tempora's projects qualified as SR&ED projects, that Tempora incurred SR&ED expenditures and that Tempora was entitled to corresponding ITCs: for the 2007 taxation year, the "Tubular Element Manufacturing Line" project, with ITCs totalling $173,540; and for the 2008 taxation year, the "Flexible Silicone Rubber and Kapton Heating Elements" and "Straight and Bent Annealed Tubular & Finned Heating Elements" projects, with ITCs totalling $242,328. The appeals from the assessments under section 160 to both Maged and Shady were dismissed. Each party shall bear their own costs.