Digests

Canada v. Nova Scotia Power Inc.

A-108-02

2003 FCA 33, Pelletier J.A.

23/1/03

25 pp.

Appeal by Crown from Tax Court of Canada decision with respect to two questions stated pursuant to Income Tax Act, s. 173--First, did Nova Scotia Power Corporation (NSPC) conduct principal income-earning activities as agent of Her Majesty the Queen such that ITA, s. 2 did not apply to NSPC--If no, whether NSPC agent of Her Majesty with respect to ownership of assets used in business such that ITA, s. 21, did not apply to depreciable assets acquired by NSPC--Taxation issue raised by present case whether NSPC can file election under ITA to have interest costs associated with purchase of assets added to capital cost of assets, for purpose of increasing amount of deduction which purchaser of assets, Nova Scotia Power Inc. (Power Inc.), can claim in respect of capital cost allowance--Both questions ask whether NSPC undertook certain activities as agent for Crown such that ITA did not apply to NSPC--Finding of Crown agency not automatically leading to conclusion that NSPC enjoys Crown immunity--Power Corporation Act (PCA), s. 4 specifically making NSPC agent of Crown--Once corporation found to be agent of Crown, question of Crown immunity turning on scope of corporation's mandate and whether corporation acted within mandate--In R. v. Eldorado Nuclear Ltd., [1983] 2 S.C.R. 551, leading case on Crown immunity and public corporations, Court stated that statutory bodies created for limited purposes--When Crown agent acting within scope of public purposes statutorily empowered to pursue, Crown agent entitled to Crown immunity from operation of statutes, because acting on behalf of Crown--When agent steps outside ambit of Crown purposes, however, agent acting personally and not on behalf of state, and cannot claim immunity as agent of Crown-- Consequently, question of Crown immunity whether, in respect of transaction in question, Crown agent acted within purposes for which corporation created--Immunity available when corporation acting within scope of public purposes statutorily empowered to pursue or when acting within corporate purposes or when acting within respective authorized purposes--Availability of immunity decided by reference to corporation's authorized purposes--As to NSPC's mandate under PCA, s. 4(1), Nova Scotia Power Commission continued as body corporate and as agent of Crown under name of Nova Scotia Power Corporation--PCA goes on to define object of corporation: to develop for Nova Scotia maximum use of power on economic, efficient basis and for this purpose, to engage, in Nova Scotia and elsewhere, in development, generation, production, transmission, distribution, supply, sale of electricity, water, steam, gas, oil or other products or things used or useful in production of power--Court found corporate objects clause outlining purposes for which NSPC constituted agent of Crown-- Where Act creating or continuing corporation, making corporation agent of Crown, setting out objects and conferring on corporation powers necessary to enable corporation to meet objects, not unreasonable to conclude corporation acting as Crown agent in giving effect to objects--Clear from agreed statement of facts NSPC did in fact produce and deliver electricity to Nova Scotia--Also clear NSPC borrowed money for purpose of acquiring depreciable property used in production of electricity--In operating electrical system, and in borrowing money for purposes of developing and maintaining system, NSPC acted within authorized purposes so as to benefit from Crown immunity--Appeal allowed-- Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 2, 21 (as am. by S.C. 1994, c. 7, Sch. II, s. 16), 173--Power Corporation Act, S.N.S. 1973, c. 47, s. 4(1).