Russell Snow v. Minister of National Revenue, [1974] CTC 2327

Roland St-Onge:—This is an appeal from an income tax reassessment dated February 21, 1972 with respect to the 1969 taxation year.

The admitted facts show that for the year under appeal the appellant Russell Snow was an unenfranchised Indian and a member of the Caughnawaga Indian Band within the meaning of the Indian Act, RSC 1952, c 149; that he was a resident of Canada within the meaning of the Income Tax Act and also a resident of Caughnawaga; that Caughnawaga is an Indian Reserve within the meaning of the Indian Act: that in assessing the appellant for the above-mentioned taxation year the Minister of National Revenue, in the computation of his income, added the amount of $9,150.07 received by the taxpayer for services performed by him outside the Caughnawaga Indian Reserve for the following employers whose construction sites were located in the United States:

In addition to the above admissions, Russell Snow testified that he was raised in Caughnawaga, has lived there most of his life, and that is where he supports his wife and his two children and where most of his recreational activities take place. During his 1969 taxation year he worked in his capacity as a steelworker in Boston and in Springfield, Massachusetts, and elsewhere in the New England States, at a net salary of $250 per week due to the fact that income taxes were deducted at the source in the United States. There was no written agreement between him and any of his five employers and the average length of his working contract was about 30 to 40 days at a time. He came back to Caughnawaga every week and that is where he spent most of his money. The only expenditures made outside the Reserve were $80 a week for his room and board in the United States and his weekly travelling expenses back and forth between his job locations and Caughnawaga.

Counsel for the appellant contended that, even if Russell Snow is a Canadian resident, his income earned outside the Caughnawaga Reserve should not be taxed for the following reasons mentioned in his notice of appeal:

(a) The amounts received by the appellant from employers became the property of the appellant upon receipt by him of the said amounts.

(b) Upon receipt of these amounts, these amounts acquired a fixed situs in accordance with the provisions of the Indian Act.

(c) This fixed situs was at the Caughnawaga Indian Reserve where the appellant had his principal establishment domicile and residence.

(d) Section 86 of the Indian Act (now section 87 of the Indian Act RSC 1970) provides that the property of an Indian situated on a reserve is exempt from tax.

(e) The tax claimed by the Department of National Revenue is moreover tax in respect of the ownership, occupation, possession or use of property or taxation in respect of properties situated on the reserve within the meaning of the said section 86.

(f) Consequently the amounts received by the taxpayer from employers became immediately exempt from tax.

(g) The Indian Act contains specific situs rules in respect to all property of an Indian whenever, however and wheresoever acquired and these specific situs rules override any inconsistent provisions in regard thereto in the Income Tax Act.

(h) The Indian Act is a more particular statute and governs all aspects of Indian property, including its fiscal aspects, with the consequence that the taxability of salary or other property received by the taxpayer is subject to its deemed or real location, which in the present case is the appellant’s reserve.

(i) Moreover, the said receipts by the taxpayer are situated at the domicile of the appellant in accordance with the maxim ‘'mobilia sequuntur personam”.

(j) In respect to appellant and all registered Indians, the physical location of property outside the reserve constitutes an accidental situs which is subject to the general situs rule for Indians mentioned above.

(k) It was not the intention of the Parliament of Canada to make Indians subject to Income tax and there is no specific provision in the Income Tax Act imposing tax on Indians whereas the Indian Act specifically exempts Indians.

(l) The said specific exemption in favour of Indians has existed since prior to the introduction of income tax and section 86 (now section 87) of the Indian Act was meant to cover exemptions from all taxes and has never been significantly changed in its text.

(m) The place where salary or income is earned is irrelevant in respect to Indians domiciled on reserves for income tax purposes.

(n) There is no legal basis for considering that salary is considered to be earned where services are performed.

(o) To give property of Indians domiciled on reserves a different situs according to whether they are physically on or off the reserve, as respondent attempts to do, would render sections 86 and 88 (now sections 87 and 89) of the Indian Act meaningless.

(p) Without prejudice to the foregoing, section 86 (now section 87) makes no reference to when property is received such that, if it at any time becomes property situated on a reserve, Indians enjoy the full benefit of the exemption in what is now section 87 dating from the time the property belonged to the said Indian.

(q) Constitutionally the Federal Crown is the trustee of the Indian and cannot impose a tax upon the persons for whom it acts in trust.

The relevant sections of the Indian Act, RSC 1952, c 149, read as follows:

86. Notwithstanding any other Act of the Parliament of Canada or any Act of the legislature of a province, but subject to subsection (2) and to section 82, 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 on or in respect of other property passing to an Indian.

87. Subject to the terms of any treaty and any other Act of the Parliament of Canada, all laws of general application from time to time in force in any province are applicable to and in respect of Indians in the province, except to the extent that such laws are inconsistent with this Act or any order, rule, regulation or by-law made thereunder, and except to the extent that such laws make provision for any matter for which provision is made by or under this Act.

88. (1) Subject to this Act, the real and personal property of an Indian or a band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian.

108. (1) On the report of the Minister that an Indian has applied for enfranchisement and that in his opinion the Indian

(a) is of the full age of twenty-one years,

(b) is capable of assuming the duties and responsibilities of citizenship,

and

(c) when enfranchised, will be capable of supporting himself and his dependants,

the Governor in Council may by order declare that the Indian and his wife and minor unmarried children are enfranchised.

Besides these allegations in his notice of appeal, the appellant through his counsel submitted verbal and written arguments and referred the Board to substantial jurisprudence. In his verbal submissions counsel for the appellant referred the Board to Attorney General of Canada v Lavell, 38 DLR (3d) 481, in which case it was provided that Indian women who married non-Indian men lost their status as Indian women. On the other hand, Indian men who married non-Indian women not only kept their status as Indians but the nonIndian women actually acquired the status of Indians upon marriage. The Court was faced with the argument that the section of the Indian Act which breached the concept of equality before the law enunciated in the Bill of Rights constituted discrimination by reason of sex.

lt was decided that Parliament in statutorily proclaiming certain fundamental rights in general terms in the Canadian Bill of Rights cannot have intended to override the provisions of the Indian Act.

Counsel for appellant commented on an extract of the above- mentioned judgment of Ritchie, J at page 490 which I would like to reproduce hereunder:

In my opinion the exclusive legislative authority vested in Parliament under s. 91(24) (of the British North America Act, 1867) could not have been effectively exercised without enacting laws establishing the qualifications required to entitle persons to status as Indians and to the use and benefit of Crown ‘lands reserved for Indians’. The legislation enacted to this end was, in my view, necessary for the implementation of the authority so vested in Parliament under the Constitution.

To suggest that the provisions of the Bill of Rights have the effect of making the whole Indian Act inoperative as discriminatory is to assert that the Bill has rendered Parliament powerless to exercise the authority entrusted to it under the Constitution of enacting legislation which treats Indians living on reserves differently from other Canadians in relation to their property and civil rights. The proposition that such a wide effect is to be given to the Bill of Rights was expressly reserved by the majority of this Court in the case of R v Drybones (1969), 9 DLR (3d) 473 at pp 485-6, (1970) 3 CCC 355, [1970] SCR 282, to which reference will hereafter be made, and I do not think that it can be sustained.

What is at issue here is whether the Bill of Rights is to be construed as rendering inoperative one of the conditions imposed by Parliament for the use and occupation of Crown lands reserved for Indians. These conditions were imposed as a necessary part of the structure created by Parliament for the internal administration of the life of Indians on reserves and their entitlement to the use and benefit of Crown lands situate thereon, they were thus imposed in discharge of Parliament’s constitutional function under s. 91(24) and in my view can only be changed by plain statutory language expressly enacted for the purpose. It does not appear to me that Parliament can be taken to have made or intended to make such a change by the use of broad general language directed at the statutory proclamation of the fundamental rights and freedoms enjoyed by all Canadians, and I am therefore of opinion that the Bill of Rights had no such effect.

The responsibility of the Parliament of Canada in relation to the international administration of the life of Indians on reserves is succinctly stated by Rand, J, in St Ann's Island Shooting & Fishing Club Ltd v The King, [1950] 2 DLR 225 at p 232, [1950] SCR 211, where he was dealing with the effect of s 51 of the Indian Act, RSC 1906, c 81, in relation to the “surrender” of lands on Indian reserves and said:

“The language of the statute embodies the accepted view that these aborigines are, in effect, wards of the state, whose care and welfare are a political trust or the highest obligation.”

In the case of Barker v Edger, [1898] AC 748, the Privy Council was considering the effect of a New Zealand statute . . .

In the course of his reasons for judgment, Lord Hobhouse had occasion to say, at p 754:

“When the Legislature has given its attention to a separate subject, and made provision for it, the presumption is that a subsequent general enactment is not intended to interfere with the special provision unless it manifests that intention very clearly. Each enactment must be construed in that respect according to its own subject-matter and its own terms.”

In the light of the principle enunciated in the above case, counsel for the appellant. concluded that because the Indians are the only people mentioned in the British North America Act, they belong to a special legal régime and are not taxed like other citizens and if the Indian Act can override the Bill of Rights enacted in 1960, a fortiori it must override income tax legislation which has been in force since 1917.

Counsel for the appellant also argued that, because the Indian Act was a very special law, a code in itself, enacted by Parliament in accordance with powers granted thereto by the British North America Act, the expression “notwithstanding any other Act” mentioned in section 86 (now section 87) of the Indian Act as well as the burden of proof imposed on the taxpayer by the Income Tax Act do not apply to Indians. He also stated that, when income tax was introduced in 1917, it was not intended to tax the Indian, who had already a special body of rules meant to cover all kinds of taxation.

In his written submissions, counsel for the appellant dealt with section 86 of the Indian Act, RSC 1952, by breaking down his arguments into five points: the scope of the exemption; specific types of taxes; the meaning of personal property; the situs of the property; and the meaning of “situated on a reserve”, which was further broken down under three headings: the meaning in general usage; the classification of property; and the situs rules.

According to him, the jurisprudence reveals that, where there is a broad exemption from taxation, such exemption includes income taxes. On that matter, he refers the Board to the following cases: Stewart v Conservators of the River Thames, [1908] 1 KB 893; 5 TC 297; Pole-Carew et al v Craddock, [1920] 3 KB 109; 8 TC 488; Sinclair v Cadbury Bros, Ltd (1933), 18 TC 157; and Ancholme Drainage Commissioners v Weldhen, [1936] 1 All ER 759; 20 TC 241.

He also submitted that the use of the phrase “notwithstanding any other Act of the Parliament of Canada” prima facie excludes the application of the Income Tax Act to Indians. With respect to section 86 and paragraph 80(f) of the Indian Act, RSC 1952, he stated that the latter were wide enough to authorize the imposition of an income tax by the Indian Act because of the mention of personal and property taxes. He made the distinction between the two above-mentioned taxes by saying that the property tax is directed at a particular property and not at a particular person whereas personal tax is imposed directly upon the person. Referring to section 86 of the Indian Act (supra) he stated that the general exemption is followed by specific taxes, mainly estate duty, succession duty and inheritance tax, but does not cite an income tax. However, the absence of a specific reference to income tax does not exclude the application of section 86 to such taxes. All the taxes specifically mentioned therein deal with the transmission of property or the right to succeed to property and do not allude to income tax or any other personal tax such as sales tax or taxes on meals, hotels, amusements, gasoline, mining, logging, alcoholic beverages, etc. He also stated that because an Indian was considered a ward of the State (see Lavell, supra) and, by virtue of section 108 of the Indian Act, RSC 1952, could be enfranchised and assume the duties and responsibilities of citizenship only upon proclamation by the Governor in Council, this shows that the Indian people have been considered as a special class.

As to the meaning of personal property, section 86 allows an exemption in favour of an Indian for any personal tax levied upon him with respect to his personal property situated on the Reserve. He referred to many English dictionaries as well as to civil treaties and even to the Income Tax Act in an effort to define “personal property” and he stated that, according to those definitions, there is no reason for not treating the reference to property in section 86 of the Indian Act as a very general concept, comprising within its purview assets of any kind, including real and personal property and interest in land.

He also submitted that section 88 of the 1952 Indian Act clearly shows that the term “property” as used therein includes moneys received, salaries, goods, cheques and, generally, assets of all kinds (see for example Beaulieu Petits Pas, [1959] RP 86, where it was held that salary was property within the meaning of the above-mentioned section). Thus, money earned as salary can also be considered an asset of a person so that, if that person died immediately after receiving his wages, the money would be taxable as income but would also be treated as an asset of that person’s estate.

Counsel for the appellant argued that, because of the above- mentioned principles, salary earned outside the Reserve but received by an Indian residing in the Reserve becomes “personal property situated on the Reserve” and section 86 of the Indian Act allows an exemption to such personal property.

To reinforce this argument, counsel for the appellant referred to the general scheme of the Income Tax Act to maintain that income tax is a tax in respect of receipts aggregated over a period of time, less certain deductions and the tax is only imposed on the individual in regard to an entire taxation year. Consequently, when the taxable income for the year is ascertained, that property becomes physically located on the Reserve and is also personal property to the Indian.

Because that property is governed by the law of domicile of a province, which in the instant case is the law of the Province of Quebec, and because Article 6 of the Civil Code applies the doctrine of mobilia sequuntur personam, that property has assumed artificial characteristics (the concept of taxable income) and, alternatively, has become physically located on the Reserve or is deemed to be located on the Reserve.

He also referred the Board to the dictionary “Le Robert” to show that the verb “situer” has two meanings:

(1) “placer effectivement en un certain lieu” and

(2) “placer par la pensée dans un lieu déterminé de l’espace”,

and he therefore concludes that the temporary physical presence of an asset outside the Reserve does not preclude it from being deemed to be situated on the Reserve.

As to the classification of property, he referred to Articles 374, 378, 384 and 387 of the Civil Code as authority for saying that moveable property consists of:

(1) “all bodies which can be moved from one place to another”;

(2) “certain things which might be classed as immoveable by nature are regarded as moveable for legal purposes and vice versa”; and

(3) “crops uncut and fruit unplucked are also immoveable.

According as grain is cut and as fruit is plucked, they become moveable in so far as regards the portion cut or plucked. The same rule applies to trees: they are immoveable so long as they are attached to the ground by their roots and they become moveable as soon as they are felled.”

The amounts received by the appellant would still be located at his domicile by virtue of the doctrine of mobilia sequuntur personam and taxable income, which corresponds to net income, comes to rest at the domicile of its owner in the same way as industrial equipment in a plant.

He finally submitted that the appellant has proved as a matter of fact that he brought his taxable income to the Reserve so that his taxable income was situated on the Reserve for the purposes of the Indian Act even though he may have received income from sources off the Reserve and even though he may have spent some of that income off the Reserve during the year.

The situs rules show that, by definition, moveable property may move or, in the case of inanimate things such as taxable income, be moved from place to place, and the authority to exercise power is invariably linked to a particular place. The civil and common law have worked out rules to determine the situs of moveable property for legal purposes.

Since the appellant is an Indian in the Province of Quebec ,the law of Quebec governs his status, and article 6 of the Civil Code thereof states in part that “moveable property is governed by the law of the domicile of its owner”.

After putting forward all the above arguments, appellant’s counsel submitted that the appeal should be allowed.

The appellant’s submissions with respect to personal property situated on the Indian Reserve seem somewhat far-fetched. Even though all the principles enunciated on the subject may be true if taken separately, one cannot link such principles together in an effort to override a law made in the public interest and affecting all the residents of a country.

In general, these principles do not apply to the case at bar because the income tax Act enacted in 1917 as the Income War Tax Act applies to all persons resident in Canada.

Indeed, section 2 of the present Act states:

2. (1) An income tax shall be paid as hereinafter required upon the taxable income for each taxation year of every person resident in Canada at any time in the year.

When the federal government has given its special attention to a Subject as important as the taxation of “every person resident in Canada at any time in the year” and has formulated a code, the presumption is that a prior or subsequent enactment is not to interfere with the special provision unless such intention is manifested in a clear and unequivocal way. Each enactment must be construed “according to its own subject matter and its own terms”, to use the words of Lord Hobhouse in Barker v Edgar, [1898] AC 748.

It is also to be noted that the enactment of the Indian Act was for the purpose of delineating the Indian’s status and his rights. Consequently, the Supreme Court in the Lavell case (supra) decided that the Bill of Rights could not be used to override the Indian Act on the Status of Indians because it would render the said law inoperative.

The fact of deciding that an Indian must pay tax on his income earned outside the Reserve would not render the Indian Act inoperative because the latter is absolutely silent on the important question of income tax.

Because the Income Tax Act taxes all the residents of Canada and does not exclude the Indian as an actual taxpayer, and as the Indian Act is completely silent on this important matter of income tax, it is self-evident that an Indian falls under the Income Tax Act, especially when his income is earned outside the Reserve.

Furthermore, it was mentioned by Viscount Haldane in the case of Minister of Finance v Cecil R Smith, [1927] AC 193; [1917-27] CTC 251; 1 DTC 92, that the same principle should apply to the whole of Canada and I quote the following extract from page 197 [254, 93]:

. . . Moreover, it is natural that the intention was to tax on the same principle throughout the whole of Canada, rather than to make the incidence of taxation depend on the varying and divergent laws of the particular provinces.

For the above reasons the appeal is dismissed.

Appeal dismissed.