The appellant, a status Indian, earned interest income on term deposits at a caisse populaire located on a reserve.
The Minister of National Revenue assessed the income as taxable, and the lower courts upheld the assessment on the basis that the caisse generated its revenues in the 'commercial mainstream' off the reserve.
The Supreme Court of Canada allowed the appeal, applying the connecting factors approach from Williams.
The Court held that the location of the debtor, the place of payment, the residence of the payee, and the source of the invested capital all pointed to the reserve.
The fact that the financial institution generated its revenues in the commercial mainstream was legally irrelevant to the location of the appellant's interest income.
The income was therefore exempt from taxation under section 87 of the Indian Act.
