Valerie Henry v. Minister of National Revenue, [1987] 2 CTC 2013, 87 DTC 338

Christie, A.C.J.T.C.:—These undisputed facts were submitted to the Court. By assessment made May 21, 1986, the respondent included in computing the appellant’s income for her 1985 taxation year $14,576.19 under paragraph 56(1)(a) of the Income Tax Act, R.S.C. 1952, c. 148. What is relevant therein provides that there shall be included in computing the income of a taxpayer for a taxation year any amount received by the taxpayer in the year as a superannuation or pension benefit or a retiring allowance. Included in the definition of “superannuation or pension benefit” under subsection 248(1) of the Act is "any amount received out of or under a superannuation or pension fund or plan”. “Retiring allowance" is also defined under this subsection. Inter alia, it “means an amount received in respect of a loss of employment of a taxpayer by the taxpayer."

At all relevant times the appellant was an Indian as defined under subsection 2(1)* [1] of the Indian Act, R.S.C. 1970, c. 1-6, who resided on and was employed in the Public Service of Canada as a teacher at the Islington Reserve, Whitedog, Ontario. It is a reserve as defined under subsection 2(1) of the Indian Actt. [2] The periods of employment as a teacher were from September 1974 to September 1976 and from September 1978 to September 1985.

While in the Public Service the appellant was required under subsection 4(1) of the Public Service Superannuation Act, R.S.C. 1970, c. P-36, to contribute by way of reservation from salary to the Superannuation Account in the Consolidated Revenue Fund. She was similarly required under section 53 of this Act to contribute to the Supplementary Retirement Benefits Account established pursuant to subsection 8(1) of the Supplementary Retirement Benefits Act, R.S.C. 1970, c. 43 (1st supp.). In addition the appellant was a member of a bargaining unit in respect of which a collective agreement had been entered into under the Public Service Staff Relations Act, R.S.C. 1970,

c. P-35.

When the appellant ceased to be employed on September 1, 1985, she became entitled to a return of contributions under clause 12(1 )(c)(ii)(E) of the Public Service Staff Relations Act and under section 6 of the Supplementary Retirement Benefits Act. The total amount paid to the appellant in 1985 under these statutes was $8,857.43+. [3] Further, she received $5,718.76 in that year as severance pay under Article 17 of the collective agreement. These two figures compose the previously mentioned $14,576.19.

The cheques for $8,857.43 and $5,718.76 were issued in favour of the appellant by the Department of Supply and Services in Toronto and subsequently delivered to the personnel section of the Department of Indian and Northern Affairs in Ottawa. It in turn mailed the cheques to the appellant at the Islington Reserve.

By notice dated June 14, 1986, the appellant objected to the assessment and on August 25, 1986, the respondent confirmed the assessment. This appeal followed.

What is pertinent in subsections 17(1), (2) and (10) of the Financial Administration Act, R.S.C. 1970, c. F-10, provides that:

The Governor in Council, on the recommendation of Treasury Board, whenever he considers it in the public interest, may remit any tax. A remission pursuant to this section may be conditional and may be granted in the case of a tax, in any particular case, or class of case and before the liability therefor arises. In this section "tax" includes any tax payable to Her Majesty, imposed or authorized to be imposed by any Act of Parliament.

Section 222 of the Income Tax Act states that all taxes payable thereunder are debts due to Her Majesty.

Pursuant to section 17 Her Excellency-In-Council made an Order on August 21, 1985, entitled the Indian Remission Order, (Canada Gazette, Part II, vol. 119, p. 3610). Subsection 2(1) and sections 3 and 4 thereof provide:

2(1) In this Order,

"Act" means the Income Tax Act;

“Indian” has the meaning assigned by subsection 2(1) of the Indian Act;

"reserve" has the meaning assigned by subsection 2(1) of the Indian Act.

3. This Order applies to the 1983, 1984 and 1985 taxation years.

4. Remission is hereby granted to a taxpayer who is an Indian in respect of income tax payable under Part I of the Act by the taxpayer for a taxation year in an amount equal to the amount, if any, by which

(a) the income tax payable under Part I of the Act by the taxpayer for the taxation year

exceeds

(b) the income tax that would be payable under Part I of the Act by the taxpayer for the year if the aggregate of all amounts each of which is that portion of the amount of his income for the year from an office or employment (determined in accordance with subdivision a of Division B of Part I of the Act) that is reasonably attributable to the duties of that office or employment performed by him on a reserve were not included in computing his income for the year.

Paragraph 81(1)(a) of the Income Tax Act was cited in the course of argument. It provides:

81(1) There shall not be included in computing the income of a taxpayer for a taxation year,

(a) an amount that is declared to be exempt from income tax by any other enactment of the Parliament of Canada, other than an amount received or receivable by an individual that is exempt by virtue of a provision contained ina tax convention or agreement with another country that has the force of law in Canada.

I do not think that the Indian Remission Order can be equated to a declaration by an enactment of the Parliament of Canada. The Order is the operative instrument and is subordinate legislation in relation to enactments by Parliament. Still I have no doubt that an order made under section 17 of the Financial Administration Act can exempt a person from liability to tax under the provisions of the Income Tax Act.

I also refer to section 87 of the Indian Act. It reads:

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, on or in respect of other property passing to an Indian.

In attacking the assessment the appellant relies first on the Indian Remission Order. While the provisions cited from section 17 of the Financial Administration Act vest sweeping authority in the Executive to order exemptions from enactments by Parliament relating to taxation, if orders made thereunder are clearly intra vires it is beyond the power of the courts to interfere in the absence of some valid constitutional reason and, understandably, no such justification has been suggested in these proceedings: Reference Re Proclamation of Section 16 of the Criminal Law Amendment Act, 1968-69, [1970] S.C.R. 777. I am fully satisfied that the Indian Remission Order is within the scope of section 17. Section 4 thereof raises this question; is all or part of the $14,576.19 received by the appellant in 1985 income from her employment as a teacher that is reasonably attributable to the duties of that employment performed by her on a reserve? If the answer is no it is said, in the alternative, that the $14,576.19 is "the personal property of an Indian situated on a reserve" within the meaning of section 87 of the Indian Act. In Nowegijick v. The Queen, [1983] C.T.C. 20; 83 D.T.C. 5041, Mr. Justice Dickson (prior to his being appointed Chief Justice) speaking for the Court said at page 23 (D.T.C. 5044):

It is legal lore that, to be valid, exemptions to tax laws should be clearly expressed. It seems to me, however, that treaties and statutes relating to Indians should be liberally construed and doubtful expressions resolved in favour of the Indian. If the statute contains language which can reasonably be construed to confer tax exemption that construction, in my view, is to be favoured over a more technical construction which might be available to deny exemption.

Although Dickson, J. refers to statutes which in legal parlance means Acts of Parliament or of a Legislature and does not include delegated legislation, I see no reason why on principle what he said should not be regarded as relevant to the Indian Remission Order. But if I err in this regard it mades no difference because the conclusion that follows is based on the generally applicable rules of legislative interpretation. Moreover, I do not consider that a detailed analysis is called for in order to ascertain the meaning of the phrase “reasonably attributable” in the context of section 4 of the Indian Remission Order as occurred when the words “reasonably be attributed" in subsection 805(1) of the Income Tax Regulations* [4] were under consideration by the Federal Court of Appeal in The Queen v. The Canada Southern Railway, [1986] 1 C.T.C. 284; 86 D.T.C. 6097, per Ryan, J. at page 289 (D.T.C. 6101) et seq. The words in section 4 are to be interpreted in their grammatical and ordinary sense.

My answer to the question posed is yes. Objectively regarded there is a clearly discernible and attributable relationship between all of the money in issue and the performance by the appellant of her duties qua teacher on the reserve. The source of what she contributed to the Superannuation Account and the Supplementary Retirement Benefits Account was remuneration for the discharge by her of those duties. This was also the source of her entitlement to severance pay under the collective agreement. The fact that the contributions to the accounts mentioned stood as a credit in the accounts for some time and were first received by the appellant under the circumstances described after termination of her employment cannot, in my view, remove these sums from the ambit of section 4 of the Indian Remission Order. The same is true of the severance pay even though entitlement thereto arose on termination of her employment. This entitlement is directly ascribable to the appellant's employment as a teacher on a reserve. This is sufficient to dispose of this appeal in favour of the appellant and obviates the necessity of dealing with the alternative argument.

The appeal is allowed and the matter is referred back to the respondent for reconsideration and reassessment on the basis that the $14,576.19 received by the appellant in 1985 as returns of contributions to the Superannuation Account and the Supplementary Retirement Benefits Account and as severance pay under the collective agreement is subject to section 4 of the Indian Remission Order. The appellant is entitled to party and party costs.

Appeal allowed.