Non-resident business income is taxable only to the extent fairly attributable to in-Province operations and sources.

A non-resident corporation carrying on business in Saskatchewan is taxable only on net profit fairly attributable to business and sources within the Province. Profit earned by manufacturing operations outside Saskatchewan must be excluded from the taxable base, even if the resulting sales are received in the Province. Allocation regulations may use rough apportionment methods, but the Commissioner's assessment must still conform to the statutory scheme and cannot treat out-of-Province manufacturing profit as provincially taxable income. The proper assessment method is one that assigns to Saskatchewan only the income reasonably attributable to operations within the Province.

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Issues: (i) Whether the taxable income of a non-resident corporation carrying on business in Saskatchewan included manufacturing profit earned outside the Province; (ii) Whether the allocation regulations and the Commissioner's method of assessment could be applied without regard to such excluded profit.

Issue (i): Whether the taxable income of a non-resident corporation carrying on business in Saskatchewan included manufacturing profit earned outside the Province.

Analysis: The taxing scheme confined liability, in the case of a non-resident, to the net profit or gain arising from business in Saskatchewan. Read with the surrounding provisions dealing with non-resident services, manufacture, sales, and apportionment, the statute contemplated that profit fairly attributable to operations outside Saskatchewan was not part of the taxable base merely because it was ultimately received on sales within the Province. The structure of the Act showed that the Legislature intended an apportionment which distinguished between income arising in the Province and profit earned elsewhere.

Conclusion: Manufacturing profit earned outside Saskatchewan was not taxable as income arising from business in Saskatchewan and had to be excluded in computing liability.

Issue (ii): Whether the allocation regulations and the Commissioner's method of assessment could be applied without regard to such excluded profit.

Analysis: The regulations made under the assessment power were not invalid merely because they provided a rough method of allocation. However, the Commissioner's use of a sales-percentage formula, without considering manufacturing profit, did not correctly apply the statutory scheme. The proper course was to reassess under the regulation that allowed income to be determined by a method best calculated to assign to the Province only the portion reasonably attributable to business and sources within the Province.

Conclusion: The assessments could not stand in their existing form and required reconsideration in light of the exclusion of manufacturing profit.

Final Conclusion: The appeal succeeded, the adverse assessments were not finally upheld, and the matter remained to be reassessed on the correct statutory basis.

Ratio Decidendi: In taxing a non-resident's business income, only the profit fairly attributable to operations within the taxing Province is chargeable, and income earned by separate out-of-Province manufacturing operations must be excluded from the taxable base.

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