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.
SASKATOON DISTRICT TAXATION OFFICE Business and General DivisionL.H. Delorme, Chief of Audit
Attention: R. Reiter, Non-compliance - Audit
XXXXXXXXXX
This is in reply to your memorandum concerning XXXXXXXXXX addressed to the Audit Programs Division that was forwarded to us for reply.
XXXXXXXXXX has asked for an adjustment to his tax returns on the assumption that his on-reserve income is exempt under section 87 of the Indian Act and under section 81(1)(a) of the Income Tax Act. It is not completely clear from the information sent in on what basis the taxpayer is claiming exemption. Reference is made to the "situs of the sales" and "situs of the payment" (see Nowegijick v. R., 1983 DTC 5041) and although no mention is made of it in your memorandum, XXXXXXXXXX claims exemption under the Indian Remission Order in his 1990 and 1992 tax returns. He has also requested a refund of CPP deductions for certain years.
Our Comments:
XXXXXXXXXX would not qualify under the Indian Remission order as it relates to income from employment and other employment related income. (It basically applied in those situations where a status Indian performed employment services on a reserve but the employer was situated off the reserve). XXXXXXXXXX is a self-employed business person and as such is subject to the comments in paragraph 6(h)(ii) of Interpretation Bulletin IT-62. It states there that business income is normally allocable to the permanent establishment of the business. In the taxpayer's case it would probably be his office in his home in Saskatoon.
In this regard, we bring to your attention, the November 23, 1990 case of Jacob Pete v. Minister of National Revenue in which it was held that Mr. Pete's consulting income from clients situated on a reserve constituted the personal property of an Indian situated on a reserve and thus was exempt from taxation. However, this Tax Court of Canada decision is under appeal to a higher court. Until a higher court considers the decision in the Pete case, the comments in IT-62 with respect to self-employment income of a status Indian continue to reflect the Department's position.
XXXXXXXXXX
Your file is being returned under separate cover.
R. Albert for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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