BlackBerry had acquired four US companies (the “US Affiliates”) so that it could benefit from the tech expertise and services of their employees, who mostly remained in the US. The US Affiliates charged fees to BlackBerry for R&D services on a cost plus 8% basis, and BlackBerry provided service of greater value to the US Affiliates.
After finding that that s. 95(2)(b)(i) did not apply to include the fees of the US Affiliates in computing the foreign accrual property income (FAPI) given the reciprocal nature of the services, and that the exclusions under ss. 95(3)(b) and (d) were also available, in obiter, Bocock J accepted the Crown’s submission that, if the fees for the R&D services were FAPI, there was no FAT deduction because the CIRA (US tax credit for increasing research activities) should be wholly allocated to the US Affiliates whose R&D activities generated the credit rather than to the consolidated US group as a whole.