Before going on to find that s. 256(6) did not apply, the Directorate indicated that s. 256(3) did not apply, stating:
Subsections 256(3) and 256(6) are similar. However, subsection 256(3) never appears to apply where subsection 256(6) applies. Subsection 256(6) provides a deeming rule that there is no de jure or de facto control at a particular time where the required conditions are satisfied. If there is no de jure or de facto control at a particular time, a corporation cannot be associated at the particular time by virtue of being “controlled, directly or indirectly...” for the purposes of subsection 256(3), and subsection 256(3) then does not apply. On the other hand, the deeming rule created by subsection 256(3) (i.e., that the corporations are deemed not to be associated) does not affect the application of subsection 256(6). Subsection 256(6) is relevant where a corporation would, but for subsection 256(6), be controlled, directly or indirectly in any manner whatever by a person (see preamble). In addition, given that the conditions set out in paragraphs 256(6)(a) and (b) are almost identical to the conditions set out in paragraphs 256(3)(a) and (b), subsection 256(3) does not apply where subsection 256(6) does not apply.