International Harvester Co. of Canada, Ltd. v. Provincial Tax Commission, [1949] A.C. 36 (PC)

The taxpayer, which was an Ontario corporation engaged in the business of manufacturing and selling agricultural implements, carried on its manufacturing operations exclusively outside Saskatchewan while selling operations occurred partly in that province and partly in other provinces and countries. Any part of the taxpayer's net profit which might fairly be attributed to its manufacturing operations outside Saskatchewan, was found not to be profit arising from the business of the appellant inside Saskatchewan within the meaning of the Income Tax Act, 1932 (Saskatchewan).

The taxpayer manufactured agricultural implements outside Saskatchewan and had sales branches in Saskatchewan. The Saskatchewan Provincial Tax Commissioner determined the income of the taxpayer that was its "net profit ... arising from the business of such person in Saskatchewan" for purposes of the Saskatchewan Income Tax Act by applying the percentage of sales made in Saskatchewan to the taxpayer's world-wide income.

The Court found this method to be unreasonable because it effectively subjected a portion of the taxpayer's manufacturing profits to Saskatchewan tax and went on to state in obiter dicta (at p. 53) that it would have been "not unreasonable" to ascertain the manufacturing profits that were exempt from Saskatchewan tax by reference to the wholesale price of the goods.