The appellant, a bank subsidiary, transferred its leasing assets to a partnership to utilize a tax rollover provision under s. 97(2) of the Income Tax Act.
The Minister reassessed the appellant, arguing the partnership was invalid because the Bank Act prohibits banks from participating in partnerships, and the Partnerships Act dissolves partnerships engaged in unlawful business.
The Supreme Court of Canada held that the partnership was valid.
The Bank Act prohibition applied to the parent bank, not the subsidiary, and did not render the partnership's business unlawful.
Furthermore, the Bank Act's saving provision prevents transactions from being invalidated solely due to a contravention of the Act.
The appeal was allowed.