Dixon v. MNR, 96 DTC 1330, [1995] 2 CTC 2095 (TCC)

Lamarre Proulx J.T.C.C:-These appeals were heard on common evidence. The taxation year under appeal in both appeals is the year 1976.

The question at issue in these appeals is whether the employment income received by the appellants in that year was situated on a reserve and therefore exempt from taxation in accordance with section 87 of the Indian Act.

Section 87 of the Indian Act reads as follows:

87. Notwithstanding any other Act of the Parliament of Canada or any Act of the legislature of a province, but subject to section 83, the following property is exempt from taxation, namely:

(a) the interest of an Indian or a band in reserve or surrendered lands; and

(b) the personal property of an Indian or band situated on a reserve;

...and no Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (a) or (b) or is otherwise subject to taxation in respect of any such property; and no succession duty, inheritance tax or estate duty is payable on the death of any Indian in respect of any such property or the succession thereto if the property passes to an Indian, nor shall any such property be taken into account in determining the duty payable under the Dominion Succession Duty Act, being chapter 89 of the Revised Statutes of Canada, 1952, or the tax payable under the Estate Tax Act, or in respect of other property passing to an Indian.

There is no dispute as to whether employment income is personal property. The dispute concerns the site of this personal property as to whether it is situated on a reserve.

Reserve is defined as follows at section 2 of the Indian Act:

’’reserve” means a tract of land, the legal title to which is vested in Her Majesty, that has been set apart by Her Majesty for the use and benefit of a band;

The facts of these appeals are described in page 8 of the replies to the notices of appeal. The section is identical for the two appellants except for the amounts. That section 8 reads as follows:

8. In assessing the appellant for his 1976 taxation year, the respondent relied inter alia, on the following assumptions of facts:

(a) During the relevant period, the appellant was a registered Indian within the meaning of the Indian Act;

(b) During the relevant period, the appellant was an employee of the Grand Council of the Crees as a coordinator;

(c) During the relevant period, the appellant performed the functions of his employment outside a reserve;

(d) During the relevant period, the appellant had neither his principal establishment, domicile or residence on a reserve;

(e) In filing his return for his 1976 taxation year, the appellant failed to include an amount of $12,519.25 (Mr. Georgekish), $3,696.88 (Mr. Dixon) received by him during the said year as salary.

Messrs. Georgekish, Dixon and Kitchen testified for the appellants.

Mr. Georgekish was born on February 20, 1947 at a location then known as the Old Factory River. He is an Indian registered with the Wemindji band. Originally the name of the band was the Old Factory River band. In 1959, the name became Paint Hills. It was changed to Wemindji in 1984 when the Cree-Naskapi (of Québec) Act, S.C. 1984, c. 18 came into force. In 1959, the band moved to the present site known as Wemindji.

Mr. Georgekish studied in Ontario, but in the summer returned to his family’s home in Old Factory. From 1968 to 1972, Mr. Georgekish worked for "La Direction générale du Nouveau-Québec". After 1972, until 1975, he attended Queen’s University in Kingston, Ontario, to study cultural psychology. In the summer of 1975, he began to work for the Department of Indian Affairs in Ottawa and worked there until early 1976, when he took a position with The Grand Council of the Crees (of Québec) to work in Val D’Or. He was hired as a senior officer for health services and his responsibility was to implement section 14 of the James Bay and Northern Québec Agreement, (the "agreement"), entitled "Cree Health and Social Services".

There was a new regional board to be established to administer health and social services in the "Territory" as defined in the Agreement at section 1. Mr. Georgekish had to meet with the various departments at the provincial and federal level. For that purpose, there were meetings in Québec City, Montréal and some in Ottawa, respecting the creation of the board, concerning budgetary and operational transfers. The travels were on a weekly basis, to Montréal, Québec or Ottawa and to the Cree communities. For this latter destination it meant 15 to 20 trips of three days for explanation and exploration of modes of implementation. Among his trips to the Cree communities were trips to two reserves, Mistassini and Eastmain. The only other reserve in the Territory at that time was Waswanipi, but it was an abandoned site. He went two or three times to Mistassini and to Eastmain.

For his work, Mr. Georgekish resided in Val d’Or with his family, his wife and two daughters. He went back to Paint Hills, his home community to participate in communal events such as the goose hunt and others. He did not possess a home there but he owned a canoe and snowmobile, which he used for hunting. They were kept at his parents’ home.

He worked as an employee of The Grand Council of the Crees (of Québec) until the Cree Regional Board of Health and Social Services was established in 1978, (Exhibit A-l, Arrêté en conseil no. 1213-78, dated April 20, 1978, creating the Cree Board of Health and Social Services of James Bay). The appellant, Mr. Georgekish, became a member of the board of directors and was appointed Director General, Fort George. At that time he commenced an employment with the board. Now Mr. Georgekish is the head of facilities, operations and maintenance for the Cree Regional Board of Health and Social Services of James Bay and he lives in Chisasibi previously known as Fort George.

Mr. Dixon is an Indian registered with the Waswanipi band. He was born April 6, 1954 at Chapais as the band was no longer living on its reserve, Waswanipi. That reserve was located on an island and nobody lived there. He went to elementary school in Chapais, and to high school in Chibougamau. After grade nine, he went to Phoenix, Arizona at the American Indian Bible Institute, for three years. In 1974 he married a Navajo woman from Arizona. He came back to Chapais to work at the Falconbridge Copper Mine for a year and a half up to the early part of 1976. He then was interviewed for a position with The Grand Council of the Crees (of Québec) at Val d’Or for a program in alcohol and drug abuse. He was offered the position. He began as an assistant-coordinator to soon become coordinator. The program had to be designed to answer the situation specific to each community. In 1976 he must have gone once in every community including the two reserves. He worked from 1976 to 1978 when he came under the Cree Health Board. For his work with The Grand Council of the Crees (of Québec) he resided in Val D’Or with his family. Mr. Johnny Dixon is now a community education administrator of the Cree School Board.

In 1976, Mr. Abel Kitchen was administrative chief of The Grand Council of the Crees (of Québec), one of three executives. He was also a director of its board. Mr. Kitchen was one of the signatories of the agreement and his title appears as Administrative Chief of The Grand Council (of Québec). Mr. Kitchen testified to the effect that Val d’Or was chosen as the place of work of the corporation because it was centrally located and because there was no place in the Territory with the adequate facilities. The Letters Patent of The Grand Council of the Crees (of Quebec), were produced as Exhibit A-6. The date of incorporation is August 16, 1974. They were produced to show that the objects of the corporation, a nonprofit corporation, were all related to the Cree communities living in the Territory.

In 1990, this Court rendered a decision in a matter similar to the one presently in dispute in Pachanos v. M.N.R., [1990] 2 C.T.C. 2273, 90 D.T.C. 1668. When that decision was rendered, the Williams v. Canada decision ([1992] 1 S.C.R. 877, [1992] 1 C.T.C. 225, 92 D.T.C. 6320, at S.C.R. page 891) had not yet been rendered by the Supreme Court. The leading decision at that time was the Nowegijick v. The Queen decision ([1983] 1 S.C.R. 20, [1983] C.T.C. 20, 83 D.T.C. 5041) also a decision of the Supreme Court of Canada. That decision was to the effect that the personal property was situated at the domicile of the payor. This is why all the argumentation centered on whether Fort George, now Chisasibi, which was the head office of The Grand Council of the Crees (of Québec), the employer of Violet Pachanos, whether Fort George was a reserve or not.

The Williams decision found that this criterion of the domicile of the debtor, as to the situs of personal property, was one that had been developed for the purpose of the conflict of laws and was not by itself the only criterion adequate to answer the purposes of the exemption from tax in the Indian Act. The purposes of the tax exemption provided for in the Indian Act has to be understood in order to find the proper criteria for the application of the tax exemption. The purposes are explained as follows by Mr. Justice Gonthier in Williams, supra, at page 885:

The question of the purpose of sections 87, 89 and 90 has been thoroughly addressed by La Forest J. in the case of Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85. La Forest J. expressed the view that the purpose of these sections was to preserve the entitlements of Indians to their reserve lands and to ensure that the use of their property on their reserve lands was not eroded by the ability of governments to tax, or creditors to seize. The corollary of this conclusion was that the purpose of the sections was not to confer a general economic benefit upon the Indians.

The purpose of the tax exemption is thus to ensure the Indians of the use of their property on their reserves and not to confer them a benefit applicable everywhere. The manner of determining whether the personal property of an Indian is situated on a reserve is explained as follows by Mr. Justice Gonthier (at page 893):

The first step is to identify the various connecting factors which are potentially relevant. These factors should then be analyzed to determine what weight they should be given in identifying the location of the property, in light of three considerations: (1) the purpose of the exemption under the Indian Act;

(2) the type of property in question; and (3) the nature of the taxation of that property. The question with regard to each connecting factor is therefore what weight should be given that factor in answering the question whether to tax that form of property in that manner would amount to the erosion of the entitlement of the Indian qua Indian on a reserve.

This approach preserves the flexibility of the case by case approach, but within a framework which properly identifies the weight which is to be placed on various connecting factors. Of course, the weight to be given various connecting factors cannot be determined precisely. However, this approach has the advantage that it preserves the ability to deal appropriately with future cases which present considerations not previously apparent.

In the matter of income from unemployment insurance benefits examined by the Supreme Court in the Williams case, two factors were considered (at page 894) to be of importance, that is: the residence of the recipient of the benefits and the location of the employment. The residence of the debtor, in that case the Crown, was not considered to be of importance in the context of unemployment insurance benefits because the Crown being everywhere it is not possible to ascertain its residence. For the same reasons the place where the benefits were paid was also considered of limited importance (page 894). These factors may however have some weight when the debtor is not the Crown.

This brings us to first examine whether the Category IA lands described in section 5 of the agreement entitled "Land Regime” were reserves in 1976 and if not, when they became reserves. Section 5 of the agreement describes the lands of Categories I, II and III. The lands that are of concern here are the Category IA lands. They are defined as follows in the agreement:

5.1.2 Category IA Lands

Category IA lands are lands set aside for the exclusive use and benefit of the respective James Bay Cree bands, including the Great Whale River Band, under the administration, management and control of Canada, subject to the terms and conditions of the agreement.

Subject to the provisions of the agreement and notwithstanding the surrender provisions of the Indian Act, it is recognized by Canada, Québec and the James Bay Crees that the lands presently set aside for the Native people of the Waswanipi, Mistassini and Eastmain Bands under the Québec Lands and Forests Act (S.R.Q. 1964, c. 92 as amended) shall no longer be reserves within the meaning of the said Act as of the coming into force of the agreement.

Category IA lands will comprise an area of approximately 1,274 square miles as shown on the attached maps and as described in section 4 of the agreement and shall include the areas of all the present Cree villages, except Waswanipi and Nemaska, and including part of the Great Whale River settlement. Such lands shall be excluded from the James Bay Municipality. The land selection for the village of Nemaska is subject to the provisions concerning the relocation of such village contained in the agreement.

Québec shall, by the legislation giving effect to the agreement, transfer, subject to the terms and conditions of the agreement, the administration, management and control of the Category IA lands to Canada and Canada shall accept such transfer. Québec shall retain bare ownership of the land and, subject to the provisions herein, ownership of the mineral and subsurface rights over such lands.

Counsel for the appellants refers to the Williams decision, supra, and to the passage cited herein to submit that the approach that the courts must take in determining the location of the personal property is a case-by-case approach and, therefore, I have to take into account the particular circumstances of the conditions of employment of the Indians working at Val d’Or for The Grand Council of the Crees (of Québec).

Counsel for the appellants also submitted that, by the agreement, the Category IA lands that are described therein had been set apart for the use and benefit of the Indians and had become reserves at the time of signature of the agreement, since both governments had signed the agreement. If these lands had not become reserves at the time of signature of the agreement, he submits that they became reserves on July 14, 1977, when Canada enacted its own legislation to implement the agreement. In effect he says that an Order in Council from Quebec was not essential in view of the wording of section 36 of the Indian Act. This section reads as follows:

36. Where lands have been set apart for the use and benefit of a band and legal title thereto is not vested in Her Majesty, this Act applies as though the lands were a reserve within the meaning of this Act. R.S.C. c. 149, section 36.

Counsel for the appellants pointed out also that if the employer was located in Val d’Or and if by consequence the employees were residing in Val d’Or it is because there was no other alternative. It is admitted that there existed prior to the signature of the James Bay and Northern Québec Agreement three reserves: Mistassini, Eastmain and Waswanipi. On these reserves there was no infrastructure to accommodate offices, the employees, the travels, the equipment necessary to negotiate and implement an agreement of the magnitude of the agreement. However all the work was related to Indians qua Indian on a reserve. Counsel for the appellants referred the Court to chapter 4 of Le Rapport de la Commission d'étude sur l'intégrité du territoire du Québec, dated March 1970. This chapter 4, entitled Le domaine indien, confirms the existence of the three reserves. Respecting Waswanipi it says that it was a reserve but that no one lived there. Waswanipi was the reserve of the band of which Mr. Dixon is a member. Respecting the origin and status of the establishment of Old Factory where Mr. Georgekish was born and grew up, the report says:

This territory is one simply occupied by Indians having acquired no official legal title thereto.

Il s’agit d’un territoire simplement occupé par les Indiens qui n’y ont obtenu aucun titre juridique officiel.

[Translation.]

There were eight bands which were signatories to the agreement. It may appear strange that the Territory would not comprise eight reserves and that a band would not have a reserve set aside for its use and benefit. However, if we read the definition of the word "band" in the Indian Act we note that a band may exist without a reserve. This definition reads as follows:

’’band" means a body of Indians

(a) for whose use and benefit in common, lands, the legal title to which is vested in Her Majesty, have been set apart before, on or after the 4th day of September 1951,

(b) for whose use and benefit in common, moneys are held by Her Majesty, or

(c) declared by the Governor in Council to be a band for the purposes of this Act;

In the loose leaf book on Native Law, by J. Woodward it is said that the most common indicator that a body of Indians is a "band" within the meaning of the Indian Act is that it has a reserve. However, as it can be seen by the definition, bands may exist without reserves. As told by Woodward, there are two kinds of Indian lands in Canada: reserve lands (within the meaning of the Indian Act) and aboriginal title lands. This explains why bands do not live necessarily on a reserve and why a reserve may become uninhabited.

Counsel for the respondent refers to the definition of reserve in the Indian Act that 1s: a tract of land, the legal title to which is vested in Her Majesty, that has been set apart by Her Majesty for the use and benefit of a band. He submits that section 36 of the Indian Act has effect only where lands have been set apart by Her Majesty and the legal title thereto is not vested in Her Majesty. However, the legal requirement that this land must have been set apart by Her Majesty for the use and benefit of a band remains.

Her Majesty refers to Her Majesty in right of Canada. In Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85, it was found that a reading of the Indian Act, as a whole, leads to the conclusion that the term "Her Majesty", unless specifically qualified, is meant to refer solely to the "Federal Crown" (page 123).

For very long now, the legal way of setting apart lands for the use and benefit of a band is by an Order in Council. In Woodward, supra, it is said that "the instrument by which reserve lands are formally set apart from other Crown lands is usually an Order in Council".

On November 15, 1974 there was an agreement in principle between The Grand Council of the Crees (of Québec), The Northern Inuit Association, the Government of Quebec, The James Bay Energy Corporation, The Quebec Hydro-Electric Commission (Hydro-Québec) and the Government of Canada. This agreement was very elaborate but it is also clear that it will be of no force if a final agreement was not signed on November 1, 1975. On November 11, 1975 the James Bay and Northern Quebec Agreement was signed.

The Government of Canada signed the agreement but legislation was needed for the implementation of the agreement. It is clear when reading the transitional provisions of the agreement, as well as in reading the sections concerning the land regime, including the afore-cited subsection 5.1.2, that legislative action from both federal and provincial governments was required to give effect to the agreement.

For this purpose, there were various pieces of legislation enacted by the Government of Quebec and there was one by the federal government. The James Bay and Northern Quebec Native Claims Settlement Act was assented to by the Parliament of Canada on July 14, 1977. It came into force by proclamation on October 31, 1977. Subsection 3(1) of this Act reads as follows:

3(1) The agreement is hereby approved, given effect and declared valid.

Finally, on October 19, 1978, an Order in Council was passed. It reads as follows:

WHEREAS the James Bay and Northern Quebec Agreement signed November 11, 1975 and approved by section 3 of the James Bay and Northern Quebec Native Claims Settlement Act contemplates the constitution of Category IA lands, the administration, management and control of which is to be transferred to the Government of Canada for the use of the Cree bands in accordance with the terms and conditions of the agreement;

WHEREAS section 2 of the Act approving the James Bay and Northern Quebec Agreement (L.Q. 1976, c. 46) provides that pursuant to the agreement the Category I lands will be granted in accordance with the Province of Quebec legislation to be adopted to that effect;

WHEREAS, pursuant to section 4 of the Loi concernant les autochtones Cris et Inuit of the Province of Quebec, Category IA lands were provisionally described in Province of Quebec Order in Council 2084-78 of June 28, 1978;

WHEREAS section 4 of the Loi concernant les autochtones Cris et Inuit contemplates that the Government of Quebec may provisionally transfer the administration and management of Category IA lands to Her Majesty in right of Canada for the exclusive benefit of the Cree beneficiaries;

AND WHEREAS Province of Quebec Order in Council 3046-78 of October 4, 1978 provides for the provisional transfer of the administration and management of provisionally described in Category IA lands to Her Majesty in right of Canada for the exclusive use and benefit of the Cree bands identified in the James Bay and Northern Quebec Agreement and of all Cree beneficiaries of that Agreement and requires that the provisional transfer of the administration and management of the provisionally described Category IA lands be accepted by an Order of the Governor General in Council and that such Order be transmitted to the Ministre des Terres et Forêts du Québec.

THEREFORE, HIS EXCELLENCY THE GOVERNOR GENERAL IN COUNCIL, on the recommendation of the Minister of Indian Affairs and Northern Development, is pleased hereby to accept, on behalf of Her Majesty in right of Canada, the provisional transfer of the administration and management of Category IA lands, more particularly described in Province of Quebec Order in Council 2084-78 of June 28, 1978, in accordance with the terms and conditions set out in Province of Quebec Order in Council 3046-78 of October 4, 1978, from Her Majesty in right of the Province of Quebec for the exclusive use and benefit of the Cree bands identified in the James Bay and Northern Quebec Agreement and of all Cree beneficiaries of the agreement.

As can be read by this Order in Council, the description of the lands was still a provisional description. Nonetheless, the lands therein described were considered therefrom as reserves by the Government of Canada. The Minister of National Revenue considered that date of October 19, 1978 as being the date to which the Category IA lands may be considered reserves for income tax purposes. This is stated in a letter of the minister dated September 28, 1979, being Exhibit R-7.

Thank you for your letter of August 22 concerning the status of lands designated as Category IA lands under the James Bay and Northern Quebec Agreement.

On April 17 my predecessor Hon. A.C. Abbott advised you that upon transfer in 1979 of the administration, management and control by Quebec to Canada of those lands, Revenue Canada would recognize them as having qualified within section 5.1.2 of the agreement since October 19, 1978. The effect would be to accord the lands the status of reserves for the purpose of determining the taxability of incomes earned thereon by Indians.

Province of Quebec Order in Council No. 1851-79 of June 27 has transferred the administration, management and control of the lands to Canada and by Order in Council P.C. 1979-2178 of August 16, Canada has accepted the transfer with effect from June 1, 1979. Accordingly, I am pleased to confirm that Category IA lands will be regarded as reserves since October 19, 1978 for the purposes of Interpretation Bulletin IT-62. Thus an Indian will not include in his income for income tax purposes the income he earns on those lands after that date.

I see no legal reason to find otherwise. In my view the Order in Council taken on the recommendation of the Minister administering the Indian Act, was essential for the said lands to become reserves within the meaning of the Indian Act. Although this finding would be sufficient to determine the issue of these appeals since the year at issue is 1976 and the year of the Order in Council was 1978, I feel that I should nevertheless analyze the various connecting factors relative to the employment income of the appellants.

Respecting a first connecting factor, that is: the location of the debtor, I will find as I found in the matter of Violet Pachanos that the residence of the debtor was not situated on a reserve. The debtor had its head office in Fort George (not a reserve) and its principal establishment, in Val d’Or. A second factor: the place where the salaries are paid: it was in Val d’Or. A third one: the place where the work is performed: it was Val d’Or, Québec, Montréal, Ottawa and the Category IA lands which were not reserves in the year under appeal. A fourth factor: the residence of the employees: the appellants did not reside on a reserve. They resided in Val d’Or and before their employment they were not residing on a reserve and according to the evidence, they never resided on a reserve. Of these factors it would appear that, in the matter of employment income, the residence of the employee and the place of work would be the most important factors.

The conclusion that has to be reached respecting the connecting factors is that there are no connecting factors pointing towards a reserve.

The reason given for the place of work being Val d’Or is one that appears to be of importance and to which I would have given much weight in balancing the connecting factors if it were not for the fact that the Category IA lands were not reserves within the meaning of the Indian Act in 1976, the year at issue, Her Majesty in right of Canada having not accepted the transfer of the said lands and set them apart for the use and benefit of the bands before October 19, 1978, and also if it were not for the fact that the appellants had not resided on these lands before their employment with the Grand Council of the Crees (of Québec).

Counsel for the respondent was ready to concede as being tax exempt the employment income that may have related to the trips made to the two reserves being inhabited that is: Mistassini and Eastmain. In my view the number of days passed on these reserves is too minimal to be given any weight.

The appeals are dismissed.

Appeals dismissed.