A corporation ("NSPC"), which was described in s. 4 of the Power Corporation Act (Nova Scotia) "as agent of Her Majesty in right of the province", transferred its assets to the taxpayer in its 1993 fiscal period. NSPC (which previously had not filed any income tax returns as it was exempt on its taxable income) filed T2 corporate income tax returns for 1980 to 1993 in which it purported to elect under subsections 21(1) and (3) of the Act to capitalize interest as part of the capital cost of the depreciable assets it had transferred to the taxpayer. The capital cost of the transferred depreciable assets to the taxpayer was deemed under s. 85(5.1) to be its capital cost to NSPC.
The Minister assessed on the basis that NSPC carried on its income-earning activities as an agent of the Queen in right of Nova Scotia, with the result that the Act did not apply to it by reason of s. 17 of the Interpretation Act and, therefore, NSPC was not capable of filing income tax returns and making the election under s. 21; and that the exemption that NSPC enjoyed was derived from section 17 and not s. 149(1)(d) of the Act.
In responding to questions posed under s. 173 of the Act as to whether NSPC conducted its income-earning activities, and owned its assets, as agent for the Nova Scotia Crown, Bowman A.C.J. first found that, in the absence of s. 4 of the Power Corporation Act, NSPC did not conduct its activities or own its property as a Crown agent given that the Power Corporation Act treated NSPC as carrying on its own business and owning its own property separate from the province, and as being capable of borrowing money from the province. Respecting s. 4, the jurisprudence established that the words "agent of Her Majesty the Queen" did not go so far as to make NSPC an agent for all purposes and that the courts had been reluctant to confer Crown privileges and immunities on entities merely because they happened to be called agents of Her Majesty. The Power Corporation Act contrasted with other statutes which specifically stated that the property of a corporation or board and all profits earned in the administration of the same were property of Her Majesty. Accordingly, the answer to the questions was "no".