The taxpayer, which had offices and maintenance and service facilities in Manitoba and whose aircraft landed and took off from Manitoba, was assessed under The Retail Sales Tax Act (Manitoba) in respect of depreciation on its aircraft, the use of parts and in respect of liquor service to passengers on through-flights in the air space over Manitoba, and also in respect of flights that landed in Manitoba.
Merely going through the air space over Manitoba did not give the aircraft a situs that would support a tax which constitutionally must be "within the Province", nor did temporarily landing in Manitoba. Laskin CJ stated (at pp. 316-317):
Merely going through the air space over Manitoba does not give the aircraft a situs there to support a tax which constitutionally must be "within the Province". In the case of aircraft operations, there must be a substantial, at least more than a nominal, presence in the Province to provide a basis for imposing a tax in respect of the entry of aircraft into the Province. …
Does the act of landing within a state, even regularly and on schedule, confer jurisdiction to tax? … [W]hen a plane lands to receive and discharge passengers, to undergo servicing or repairs, or to await a convenient departing schedule, it does not in my opinion lose its character as a plane in transit.
Respecting an argument that a tax on Air Canada in respect of its airplanes, parts and services on over flights was validated by regarding these facilities as merely the means of measuring a tax in personam, Laskin C.J. first noted that this was not the way the tax was imposed (it was exacted upon the bringing of tangible personal property to the Province, and this had not been shown to occur), and second, the principle expressed in Bank of Toronto v. Lamb could not be extended to make inter provincial and trans national aircraft operations as measuring standards to determine the amount of tax imposed upon an air carrier which had a business office in the taxing province.