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Taxation - Assessment - Statutes - Interpretation - Constitutional law - Division of powers - Jurisdiction - Can a province constitutionally tax the income of a non-resident who has no connexion whatsoever with that province, solely because the income of the non-resident was paid from or with the income of a third party attributable to that party's establishment in that province - Is part of the retirement allowance or pension paid to a retired partner resident in Ontario out of the revenues of a partnership carrying on business in jurisdictions including Québec, taxable under the Taxation Act, L.R.Q. c. I-3.

The Appellant lives in Ontario and is a retired partner of the firm of accountants, Ernst & Young. The partnership carries on business in all provinces of Canada except P.E.I., and in 1997 earned approximately 19.87 % of its total revenues in Québec. In accordance with the terms of his partnership agreement, since retiring the Appellant has received the annual amount of $31, 244, paid out of the annual revenues of the partnership and treated as a partnership expense. For the 1997 taxation year the Appellant was assessed by the Respondent Deputy Minister on the basis that part of his retirement allowance or pension constituted revenue earned in Québec and was therefore taxable by virtue of fictions and statutory presumptions found in sections 25, 87, 600, 608, 609, 612.1 and 1088 of the Taxation Act, R.S.Q. c. I-3. The Appellant brought a motion appealing his 1997 assessment and challenged the constitutionality of the legislative provisions. The Court of Québec allowed Mr. Dunne`s motion to appeal, finding that his retirement allowance was not taxable under the Act. The Court of Appeal of Québec allowed the Respondents' appeal.