Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Taxability of allowances paid by band council to full-time status Indian student living off reserve.
Position:
Exempt if paid under a treaty or agreement between band council and Her Majesty, however, not enough information provided.
Reasons:
Paragraph 81(1)(a) of the Act exempts property of an Indian situated on reserve. If the amounts are paid under a treaty or agreement between a band and Her Majesty they would be considered personal property of an Indian situated on a reserve within the meaning of section 87 of the Indian Act. Accordingly, any scholarship paid to a Status Indian under an agreement between a band and Her Majesty would be exempt from taxation.
February 27, 1997
Ottawa Tax Services HEADQUARTERS
Client Services Division A.M. Brake
(613) 957-8953
Gabor Obert
960579
Scholarships and Bursaries to Status Indians
This is in reply to your memorandum of February 13, 1996 requesting our opinion on the taxability of a "scholarship allowance" paid by the tribal council of an Indian reserve to a status Indian living off reserve. The purpose of these payments, which are made monthly, is to provide financial assistance for the student, while in full-time attendance at a university, to help pay for the basic living expenses of the student while the student is engaged in full-time studies. You have not provided any details on the source of the tribal council's funds. We apologize for the delay in replying.
It would seem that the funding received by the student under these circumstances would be considered to be "a scholarship or bursary" as discussed in Interpretation Bulletin IT-75R3. However, based on the reasoning in the case of Deanna Greyeyes v. Her Majesty the Queen, (78 DTC 6043) (F.C.T.D.), the scholarship allowance may be exempt from taxation by virtue of paragraph 81(1)(a) of the Act, if it was paid under a treaty or agreement between a band and Her Majesty so that it may be considered personal property of an Indian situated on a reserve within the meaning of section 87 of the Indian Act. Deanna Greyeyes was a status Indian enrolled as a student at the University of Calgary, who while attending the University of Calgary received from the Department of Indian Affairs and Northern Development the sum of $2,339.50 to assist her in her post-secondary education. At all relevant times she was neither living on nor attending classes on a reserve. However, the scholarship was received by Deanna Greyeyes pursuant to an agreement between her Band and Her Majesty specifically pursuant to an agreement to assist band members in their education in compliance with the obligations of the Federal Government under treaty No. 6. The court held that the scholarship, by virtue of subsection 90(1) of the Indian Act, was personal property of an Indian situated on a reserve within the meaning of section 87 of the Indian Act, and since section 87 of the Indian Act, by its own terms, prevailed over any contrary intention expressed in the Income Tax Act, the scholarship was exempt from taxation. The judge concluded that taxing the scholarship, resulted in her being subject to taxation in respect of the scholarship and therefore in violation of section 87 of the Indian Act. Specifically, Mahoney, J. had this to say at page 6045:
"I will, for convenience, hereafter refer to the $2,339.50 payment as "the scholarship". In light of the agreed fact, the scholarship was the personal property of an Indian situated on a reserve within the meaning of section 87 of the Indian Act; it is deemed to be such by virtue of subsection 90(1). Nothing turns on the fact that the plaintiff did not reside on a reserve or apply the scholarship to classes conducted thereon. It is the property, not the Indian that is required to be situated on a reserve."
In your particular case, it is a question of fact whether the scholarship allowance was received by the status Indian under a treaty or agreement between a band and Her Majesty and is exempt or is received under some other program and is taxable. A review of the documentation including agreements relating to both the receipt by the tribal council of the funding and the payment by the tribal council to the status Indian would be required to resolve this issue.
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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