Taxable income must exclude manufacturing profit earned outside the Province, and appellate courts may fix the assessable amount on statutory appeal.

Taxable income under the Manitoba Income Taxation Act had to reflect only the net profit arising from business in Manitoba, so sales profit from goods manufactured outside the Province could not be treated as wholly Manitoba profit without an allowance for the external manufacturing element. The appellate judge was also entitled, on the statutory appeal, to determine both the legal entitlement to that allowance and the resulting net assessable profit figure, because the appeal required decision of the amount of the assessment on the evidence. The broader assessment challenge therefore failed, and the restored assessments stood.

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Issues: (i) Whether, in computing the taxable income of a corporation carrying on business in Manitoba and manufacturing outside the Province, an allowance had to be made for manufacturing profit attributable to the external manufacturing activity. (ii) Whether the Judge hearing the statutory appeal had jurisdiction to determine the net assessable profit figure and direct assessment on that basis.

Issue (i): Whether, in computing the taxable income of a corporation carrying on business in Manitoba and manufacturing outside the Province, an allowance had to be made for manufacturing profit attributable to the external manufacturing activity.

Analysis: The taxable income under Section 24 of the Manitoba Income Taxation Act was the net profit or gain arising from business in Manitoba. Where a taxpayer sold in Manitoba goods manufactured outside Manitoba, the net profit arising in Manitoba could not be treated as wholly generated by Manitoba sales alone. The earlier decision governing the same principle required an allowance for profit attributable to the out-of-Province manufacturing activity, and the statutory scheme did not justify taxing the whole sale profit as Manitoba profit.

Conclusion: The allowance for manufacturing profit was required, and the issue was decided in favour of the respondent.

Issue (ii): Whether the Judge hearing the statutory appeal had jurisdiction to determine the net assessable profit figure and direct assessment on that basis.

Analysis: Under Sections 53, 59, and 60 of the Manitoba Income Taxation Act, the appeal concerned the amount of the assessment and required the Judge to decide the matter of the appeal on the evidence. That matter included both the legal entitlement to an allowance and the factual figure resulting from its application. The Judge was therefore not confined to setting aside the assessment and remitting the matter, and the special discretionary provisions in other sections of the Act could not be imported into Section 24.

Conclusion: The Judge had jurisdiction to determine the net profit figure and direct assessment accordingly, and the challenge failed.

Final Conclusion: The appeal failed in its entirety, and the assessments as restored below stood undisturbed.

Ratio Decidendi: On a statutory appeal against income-tax assessment, the appellate court may determine both the legal basis of taxable profit and the resulting assessable amount where the statute directs it to decide the matter of the appeal, and the whole profit from sales in the Province cannot be taxed without allowance for profit attributable to manufacturing outside the Province.

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