Daniel N. Paul v. Minister of National Revenue, [1990] 1 CTC 2413, 90 DTC 1298

Teskey, T.CJ.:—The appellant appeals his 1985 reassessment wherein the Minister assessed tax on $29,687.34 of income.

Issue

The single issue involved is whether that portion namely the sum of $29,687.34 of the appellant's income is exempt from taxation by reason of sections 87 and 90 of the Indian Act.

Facts

The facts were mostly agreed upon. The relevant facts of this case are:

The appellant is a member of the Millbrook Band of Indians, being Band No. 181 and an Indian as defined by subsection 2(1) of the Indian Act.

During the 1985 taxation year, the appellant was employed by Her Majesty as represented by the Minister of Indian Affairs and Northern Development. The appellant resides in the City of Halifax which is not an Indian reserve.

The appellant in 1985 worked 51 days on an Indian reserve and the rest of the working year, he worked in an office in Halifax. His salary was paid by Government of Canada cheques issued in Halifax by Supply and Services which he also received in Halifax.

His T4 form was issued by Supply and Services. His total employment income for the 1985 year was $36,868.65. He was not assessed and did not report $7,181.31 of this income as it represented income earned on an Indian reservation. He reported and was assessed on $29,687.34 of income being the income earned for work performed not on an Indian reservation.

The appellant, an accountant, was asked in 1971 to join the Department of Indian Affairs and Northern Development in Halifax. He claims he was asked for two reasons, namely his skills and training and because he is a status Indian.

In 1981, he became and still is, a district superintendent of Indian lands, revenues and trusts. His evidence is that annually a budget is submitted to Ottawa for all funds to be spent in the forthcoming year which includes all wages and that the budget approved by Parliament for the Department of Indian Affairs and Northern Development is for the use and benefit of Indians.

In the Halifax office, approximately 20 per cent of the employees are status Indians.

Respondent's Position

The Minister’s position is that on the facts of this case all of the appellant's income is taxable under the provisions of the Income Tax Act and that the provisions of sections 87 and 90 of the Indian Act are of no avail. However, because of the Indian remission order respecting the remission of certain income taxes payable by an Indian made August 21, 1985 pursuant to the Financial Administration Act, the $7,181.31 being that portion of the appellant's income earned on Indian reservations is not taxable. The purpose of the order being that for 1985, the income of an Indian in respect of income earned on an Indian reservation is not to be included in computing income tax. Thus, the balance of the appellant's income namely $29,687.34 is taxable income subject to the normal deductions.

Appellant's Position

He argues that:

1. he is an Indian;

2. his services are all directed or targeted to Indian lands, revenues and trusts;

3. he sells his time to the government, not his skills and knowledge;

4. his services to the government are personal property;

5. his service was purchased by Her Majesty with money appropriated by Parliament for the use and benefit of Indians.

Therefore, pursuant to sections 87 and 90 of the Indian Act, his income is not taxable.

Analysis

Section 87 of the Indian Act provides that personal property of an Indian situated on a reserve is exempt from taxation. The pertinent words of this section are:

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

(a) . . .

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

Section 90 of the same Act is a section that deems in some circumstances, personal property to be situated on a reserve. The pertinent words of this section are:

90.(1) For the purposes of sections 87 and 89, personal property that was

(a) purchased by Her Majesty with Indian moneys or moneys appropriated by Parliament for the use and benefit of Indians or bands, or

(b) . . .

shall be deemed always to be situated on a reserve.

The leading authority on section 87 is a decision of Dickson, J. as he then was in Nowegijick v. The Queen, [1983] 1 S.C.R. 29; [1983] C.T.C. 20; 83 D.T.C. 5041. The fundamental difference between Nowegijick and the appellant is that Nowegijick lived on a reserve and worked for a company that was situated on the reserve. He was paid on the reserve. His work was performed off the reserve.

The Court at page 24 (D.T.C. 5044 and 5045) adopted the following language:

. . . what is personal property and in substance hold that money or any other thing of value acquired as gain or profit from capital or labour is property, and that, in the aggregate, these acquisitions constitute income, and, in accordance with the axiom that the whole includes all of its parts, income includes property and nothing but property, and therefore is itself property.

Mr. Justice Dickson concluded that a tax on income is, in reality, a tax on property itself. At page 26 (D.T.C. 5046) he goes on to say:

As I read it, section 87 creates an exemption for both persons and property. It does not matter then that the taxation of employment income may be characterized as a tax on persons, as opposed to a tax on property.

We are concerned here with personal property situated on a reserve and only with property situated on a reserve.

From the facts in this case for the appellant to gain the exemption in section 87, he must fall within the deeming provisions of section 90. On the authority of Nowegijick, the appellant's income is personal property.

The appellant argues that he sold his time. The respondent claims this has been rejected in three decisions, namely:

The Queen v. The National Indian Brotherhood, [1979] 1 F.C. 103; [1978] C.T.C. 680; 78 D.T.C. 6488.

Kahn-Tineta Horn v. M.N.R., [1989] 1 C.T.C. 2208; 89 D.T.C. 147.

Bank of Nova Scotia v. Blood, (to date an unreported decision of the Alberta Court of Appeal delivered July 7, 1989.)

The decision of Thurlow, A.C.J. in the National Indian Brotherhood case, supra, was upheld on appeal by the Federal Court of Appeal and leave to appeal to the Supreme Court of Canada was denied. The acting Chief Justice said at page 683 (D.T.C. 6490):

. . . it is not possible to regard the salaries as . . . personal property that was purchased by Her Majesty within the meaning of paragraph 90(1)(a) . . . the word[s] “purchased by Her Majesty with" govern the whole of the remainder of the paragraph.

At page 684 (D.T.C. 6491), he goes on to say:

A chose in action such as the right to a salary in fact has no situs. But where for some purpose the law has found it necessary to attribute a situs, in the absence of anything in the contract or elsewhere to indicate the contrary, the situs of a simple contract debt has been held to be the residence or place where the debtor is found.

And again at page 685 (D.T.C. 6492):

As the salaries in question of the individual Indians until paid were simple contract debts owed by a corporation not resident on a reserve, it is my view that they were not “situated on a reserve" within the meaning of subsection 87(1).

The facts of this case differ from the facts in Horn, supra, in that the appellant did some work on an Indian reservation and the income arising therefrom has been exempted by the Minister pursuant to the 1985 Indian remission order.

My sister Judge Lamarre Proulx in Horn, supra, follows the National Indian Brotherhood decision as a rejection of the proposition that employment income can fall within paragraph 90(1)(a). She says at page 2211 (D.T.C. 149): ", . . wages are not purchased but paid” and she confirms that since the situs of the income being off the reserve, the income was taxable.

Concerning this aspect of the argument, the Alberta Court of Appeal in the Bank of Nova Scotia v. Blood, supra, said

. . . the first argument is based on section 90. The Appellant said that the debt is personal property purchased with Indian monies. The short answer to that contention is that Her Majesty did not purchase the debt, IT PURCHASED SERVICES WHICH GAVE RISE to the debt (Kahn-Tineta Horn v. M.N.R., 89 DTC 147) more significantly, the evidence does not establish that the debt represents a payment with Indian monies or monies appropriate^] for the use and benefit of Indians.

[Emphasis added.]

The Appellant says his employment arises from a special program funded by the Department of Indian Affairs and Northern Development. The bank challenges the assertion and produces correspondence confirming that the Appellant “is a member of the RCMP and as such is paid by the RCMP”. The judge has not found, and we cannot find that the conditions of section 90 are met. "We were referred to Nowegijick v. The Queen, 83 144 DLR 193 (SCC) where section 87 was discussed.” The case decides that where an Indian is paid salary for work were ever done by a company resident on the reserve, it is exempt from tax. The case is also authority for the proposition that statutes relating to Indians should be liberally construed.

This Court has serious reservations that the Bank of Nova Scotia v. Blood, supra, stands for or is authority for the proposition that "services in the form of employment can be purchased"; particularly in light of the National Indian Brotherhood decision, supra.

However, even if that decision is authority for the proposition that "services in the form of employment can be purchased" the appellant's position is not advanced. Services are not personal property. It is the wages or money received for services that is personal property.

Having decided that the appellant's employment or service with the Department of Indian Affairs and Northern Development is not personal property, this Court makes no comment or finding as to the allegation that the moneys spent by the Department of Indian Affairs and Northern Development are "moneys appropriated" by Parliament for the use and benefit of Indians.

The appeal is dismissed.

Appeal dismissed.