The Grand Council of the Crees (Of Quebec) v. Minister of National Revenue, [1990] 2 CTC 2376, 90 DTC 1652

Lamarre Proulx, T.C.J.:—The appellant is appealing the assessments of the respondent, the Minister of National Revenue, for taxation years 1974 to 1978 inclusive.

At issue is the applicability of section 153 of the Income Tax Act (the “Act”).

The appellant is a corporation comprised of a number of Cree Indian bands which was initially formed to negotiate the James Bay and Northern Quebec Agreement. During the years in question, the appellant had its head office at Fort George, Quebec. The appellant states that Fort George has been a reserve from the time that is at least since the agreement in principle reached November 15, 1974 by the appellant, the Northern Quebec Inuit Association, the governments of Quebec and of Canada, the James Bay Energy Corporation, the James Bay Development Corporation and Hydro-Quebec, if not before, since, according to the evidence, there existed at Fort George a hospital, a school and dwellings, all maintained by the federal government.

The appellant submits that wages paid to its Indian employees were tax exempt under section 87 and possibly section 90 of the Indian Act, R.S.C., 1985, c. 1-5, and therefore the appellant did not have to deduct the taxes on these wages as required by section 153 of the Act. In fact, the appellant deducted these amounts of tax but did not remit them to the Receiver General of Canada. The appellant deposited them in a trust account pending the settlement of the question as to whether the wages of the appellant's Indian employees were tax exempt. The respondent argues that Fort George was not a reserve prior to October 19, 1978, therefore the said sections of the Indian Act have no application and that in any event, the appellant had to comply with the requirements of section 153 of the Act.

The relevant part of this section reads as follows:

153.(1) Withholding. Every person paying

(a) salary or wages or other remuneration to an officer or employee,

shall deduct or withhold therefrom such amount as may be prescribed and shall, at such time as may be prescribed, remit that amount to the Receiver General of Canada on account of the payee's tax for the year under this Part.

Under section 153, every person paying wages shall deduct the amount determined pursuant to the Regulations and remit such amount to the Receiver General on account of the payee's tax.

Counsel for the appellant as well as for the respondent made learned submissions on the nature and the creation of reserve and as to whether, during the relevant years, the lands on which Fort George was located were a reserve. I deal in greater detail with the characterization of Fort George as a reserve in Violet Pachanos v. M.N.R., [1990] 2 C.T.C. 2273; 90 D.T.C. 1668, heard at the same time as the present appeal. All of this leads me to conclude that the question as to whether Fort George was situated on a reserve was far from clear-cut in the years in question.

Section 220 of the Act provides that the Minister of National Revenue is responsible for the administration of the Act:

220.(1) Minister's duty. The Minister shall administer and enforce this Act and control and supervise all persons employed to carry out or enforce this Act and the Deputy Minister of National Revenue for Taxation may exercise all the powers and perform the duties of the Minister under this Act.

I am of the opinion that in circumstances of divergent views, section 220 of the Act states that it is the Minister and not the payor who determines the amount of tax payable by the payee for the application of section 153 of the Act. That the payee's tax for the year is a question to be resolved between the Minister and the payee rather than by the person paying follows also from the various relevant provisions of the Act. Under subsection 153(1.1), it is the Minister who is empowered to reduce the amount to be deducted and remitted. In addition, Regulation 104(1) of the Income Tax Regulations sets forth the procedure to be followed by the payee with regard to exemptions.

Moreover, the appellant, by deducting the required amount without remitting them to the Receiver General, goes against the general schedule of the Act since subsection 153(3) of the Act states the following presumption:

153.(3) Effect of deduction. When an amount has been deducted or withheld under subsection (1), it shall, for all the purposes of this Act, be deemed to have been received at that time by the person to whom the remuneration, benefit, payment,fees, commissions or other amounts were paid.

Tax refunds are in effect made by the Minister and not by the person paying.

Counsel for the appellant refers me to Union of Nova Scotia Indians et al. v. A.-G. Nova Scotia et al. (1988), 54 D.L.R. (4th) 639; 89 N.S.R. (2d) 121, where the Supreme Court of Nova Scotia held that a scheme of subsequent remittance of tax on tobacco products to Indians living on a reserve violated section 87 of the Indian Act.

In the present appeal, the appellant is the person paying and not the person who may invoke paragraph 81 (1)(a) of the Act, which provides that an amount declared exempt from tax is not to be included in the taxpayer's income.

In The Queen v. National Indian Brotherhood, [1979] 1 F.C. 103; 92 D.L.R. (3d) 333, the Court, having first answered in the negative to the question of whether Indians could benefit from the exemption claimed, did not consider it necessary to address the issue of whether the defendant was in any event required under the Act to make deductions and to remit them to the Receiver General, National Indian Brotherhood, supra, page 111 (D.L.R. 340). That was a case in which both parties had requested a decision regarding the exemption, unlike the present appeal where only the appellant, through her solicitors, makes such request. The decision applied for is rendered in the related appeal of Violet Pachanos.

In the case at bar, it is section 153 and its various modes of application which apply to the appellant and it is to the effect that the person paying must deduct from the payee's wages the tax payable by the payee, unless the said payee files the prescribed forms allowing him to do otherwise. In the event of doubt as to the amount of tax payable, it belongs to the Minister to determine this amount by virtue of his power of administration of the Act conferred upon by the Act itself.

Appellant's counsel argues that the respondent's assessments should be quashed on grounds of estoppel since the respondent assented to the appellant's depositing the amounts deducted in a trust account about which the signature of an agent of the respondent was required in order to effect withdrawals from this account.

The assessments were all issued on or before September 1978. The letter filed in evidence as Exhibit A-4 referring to a resolution of the appellant requiring that all withdrawals be signed by the Minister's agent is dated November 10, 1978. It contains moreover no suggestion of any commitment by the Minister or his agents not to assess the appellant. The purpose of the letter of June 2, 1982 from the Director of Taxation in Rouyn to the bank where the trust accounts are held was to authorize the investment of the amounts on deposit and cannot constitute evidence of a formal agreement allowing the appellant not to comply with section 153 of the Act. There is absence of evidence as to the nature and terms of the agreement with the agents of the respondent assuming that the agreement could have influenced the application of the Act. Because, in any event, there are no grounds for the application of the doctrine of estoppel with respect to any administrative decision that would not have been made in accordance with the provisions of the Act. (See Ernest G. Stickel v. M.N.R., [1972] C.T.C. 210; 72 D.T.C. 6178 (F.C.T.D.); revd [1973] C.T.C. 202; 73 D.T.C. 5178 (F.C.A.); affd [1974] C.T.C. 416; 74 D.T.C. 6268 (S.C.C.) at 219 (D.T.C. 6185.))

The appeal is dismissed.

Appeal dismissed.