T-4770-76
Deanna J. Greyeyes (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Mahoney J.—Calgary, January 11;
Ottawa, January 19, 1978.
Income tax — Income calculation — Scholarships — Full
status Indian in receipt of government scholarship — Amount
of scholarship in excess of $500 included in taxable income —
Whether or not inclusion wrong by virtue of sections 87 and
90(1) of the Indian Act and paragraph 81(1)(a) of the Income
Tax Act — Income Tax Act, S.C. 1970-71-72, c. 63, ss. 2,
56(1)(n), 81(1)(a) — Indian Act, R.S.C. 1970, c. I-6, ss. 87,
90(1).
Plaintiff, a full status Indian attending university full time
received a scholarship from the Department of Indian Affairs
and Northern Development pursuant to an agreement and
treaty between plaintiff's Band and Ottawa dealing with educa
tional assistance to band members. Plaintiff bases her appeal
from the defendant's inclusion of the amount of that assistance
in excess of the $500 allowed by subparagraph 56(1)(n)(ii) of
the Income Tax Act in plaintiff's taxable income on sections 87
and 90(1) of the Indian Act, and paragraph 81(1)(a) of the
Income Tax Act.
Held, the appeal is allowed. The inclusion of the amount of
the scholarship (less $500) in the calculation of plaintiff's
taxable income upon which an income tax is assessed and levied
results in her being subject to taxation in respect of the
scholarship. Section 87 of the Indian Act, by its own terms,
prevails over any contrary intention expressed in the Income
Tax Act; it is not necessary to rely on paragraph 81(1)(a) of
the Income Tax Act.
Minister of National Revenue v. Iroquois of Caugh-
nawaga [1977] 2 F.C. 269, distinguished. Sura v. Minister
of National Revenue [1962] S.C.R. 65, 62 DTC 1005,
considered.
INCOME tax appeal.
COUNSEL:
Gerald F. Scott for plaintiff.
W. A. Ruskin and J. A. Williamson for
defendant.
SOLICITORS:
Fenerty, Robertson, Prowse, Fraser, Bell &
Hatch, Calgary, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
MAHONEY J.: The plaintiff appeals against the
inclusion in her taxable income for 1974 of the
sum of $1,839.50 which she says is exempt from
taxation by virtue of certain provisions of the
Indian Act'. The material facts were agreed:
STATEMENT OF AGREED FACTS
1. The Plaintiff is a full status Indian as defined by the Indian
Act, R.S.C. 1970 C I-6 and was at all material times a resident
of Canada.
2. During the school term of 1974 the Plaintiff attended the
University of Calgary in Calgary, Alberta as a student enrolled
in a fulltime course of post-secondary education.
3. While attending the University of Calgary the Plaintiff
received from the Department of Indian Affairs and Northern
Development in Ottawa the sum of $2,339.50 to assist her in
her post-secondary education pursuant to a programme of the
Department of Indian Affairs and Northern Development.
4. The Plaintiff, at all relevant times, was neither living on nor
attending classes on a reserve as that word is defined in the said
Indian Act.
5. The said funds received by the Plaintiff were given to her
pursuant to an agreement and treaty between the Plaintiff's
Band and Ottawa and specifically pursuant to an agreement to
assist band members in their education in compliance with the
obligations of the Federal Government under Treaty No. 6.
The defendant contends that the $1,839.50 was
properly included in the, plaintiff's 1974 taxable
income by virtue of the following provisions of the
Income Tax Act, S.C. 1970-71-72, c. 63:
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.
(2) The taxable income of a taxpayer for a taxation year is
his income for the year minus the deductions permitted by
Division C.
56. (1) ... there shall be included in computing the income
of a taxpayer for a taxation year,
(n) the amount, if any, by which
(i) the aggregate of all amounts received by the taxpayer
in the year, each of which is an amount received by him as
or on account of a scholarship, fellowship or bursary, or a
prize for achievement in a field of endeavour ordinarily
carried on by the taxpayer,
' R.S.C. 1970, e. I-6.
exceeds
(ii) $500; ...
The plaintiff contends that the $1,839.50 was
wrongly included by virtue of paragraph 81(1)(a)
of the Income Tax Act and sections 87 and 90(1)
of the Indian Act.
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;
87. 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 83, the following property is
exempt from taxation, namely:
(a) the interest of an Indian or a band in reserve or surren
dered 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 men
tioned 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.
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) given to Indians or to a band under a treaty or agree
ment between a band and Her Majesty,
shall be deemed always to be situated on a reserve.
It is, of course, paragraph (b) of each of section 87
and subsection 90(1) that is pertinent and, further,
it is the plaintiff's position that those provisions
exclude the $1,839.50 from her taxable income
entirely independent of subsection 81(1) of the
Income Tax Act which is pleaded only as supple
mentary and alternative support for her position.
I will, for convenience, hereafter refer to the
$2,339.50 payment as "the scholarship". In light
of the agreed facts, the scholarship was the person
al property of an Indian situated on a reserve
within the meaning of section 87 of the Indian Act;
it is deemed to be such by virtue of subsection
90(1). Nothing turns on the fact that the plaintiff
did not reside on a reserve or apply the scholarship
to classes conducted thereon. It is the property, not
the Indian, that is required to be situated on a
reserve.
Aside from the particular references to succes
sion duties and estate tax, which have no bearing
on this case, section 87 appears, on a plain reading,
to make three independent provisions vis-Ã -vis the
personal property of an Indian situated on a
reserve, that is, in this case, the scholarship. First
ly, "the following property is exempt from taxa
tion, namely": the scholarship. Secondly, "no
Indian ... is subject to taxation in respect of the
ownership, occupation, possession or use of' the
scholarship. Thirdly, "no Indian . .. is otherwise
subject to taxation in respect of' the scholarship.
Counsel appear from their argument to have
discarded the second provision as having any
application in this case. I agree. To the extent that
the terms "ownership, occupation, possession or
use" can have any application to a scholarship, the
inclusion of the amount of a scholarship, or part of
such amount, in an Indian's taxable income under
the Income Tax Act does not result in a tax in
respect of its ownership, occupation, possession or
use.
Extensive argument was directed to the first
provision with the defendant taking the position
that is well settled that the Income Tax Act levies
a tax on persons, not on property and the plaintiff
urging that decisions to that effect made in cases
involving very different facts ought not bind the
Court in an entirely novel factual situation. The
general question of the nature of the incidence of
income tax has been considered on numerous occa
sions by the highest authorities. It is not necessary
for me to go beyond the decision of the Supreme
Court of Canada in Sura v. M.N.R. 2 where Mr.
Justice Taschereau dealt with the charging provi-
2 62 DTC 1005 at p. 1006. This decision was rendered in
French [1962] S.C.R. 65. I have accepted the English transla
tion in the report cited.
sion enacted in 1948 3 which was identical to the
present subsection 2(1).
Nothing in subsequent amendments of the Act changes the
rule that it is not ownership of property which is taxable, but
that the tax is imposed on a taxpayer, and the tax is determined
by the income received by the person who is the legal benefici
ary from employment, businesses, property or ownership. As
Mr. Justice Mignault stated in the case of McLeod v. Minister
of Customs and Excise, (1917-27) C.T.C. 290, at page 296 [1
DTC 85 at page 87]:
All of this is in accord with the general policy of the Act
which imposes the Income Tax on the person and not on the
property.
The defendant's position in this respect is well
taken. That the Income Tax Act imposes a tax on
the person and not on his property is too firmly
established to now be questioned in this Court
notwithstanding that the determination may not
have been specifically made with the provisions of
section 87 of the Indian Act in mind.
Before leaving this subject, I should refer to the
decision of the Federal Court of Appeal in M.N.R.
v. Iroquois of Caughnawaga 4 . With respect, I do
not think it applies in this case. It did not deal with
income tax. While the Court divided on the ques
tion of its jurisdiction, it appears to have been
unanimous in its decision that employers' premi
ums imposed under the Unemployment Insurance
Act, 1971 5 were not taxation of property within
the contemplation of section 87 of the Indian Act.
I do not infer from that conclusion a decision that
such premiums were necessarily some other form
of taxation which, in the result, section 87 did not
preclude. Rather, it seems open to construe the
majority decision as holding that such premiums
are not a form of taxation at all, a question
expressly left open by the Chief Justice in his
dissent.
The remaining provision of section 87 is that the
plaintiff is not "otherwise subject to taxation in
respect of" the scholarship. Does the inclusion of
the amount of the scholarship (less $500) in the
calculation of her taxable income upon which an
income tax is assessed and levied result in her
3 S.C. 1948, c. 52.
4 [1977] 2 F.C. 269.
5 S.C. 1970-71-72, c. 48.
being subject to taxation in respect of the scholar
ship? In my opinion, it does.
The tax payable by the plaintiff under the
Income Tax Act is determined by the application
of a prescribed rate to her taxable income. The
higher her taxable income, the greater her income
tax. The amount by which the plaintiff's scholar
ship exceeded $500 was added to her taxable
income. As a result her taxable income was
$1,839.50 more than it would otherwise have been
and, it follows, she was assessed more income tax
than if it had not been so added. I do not see how,
having regard to ordinary English usage, I can
come to any conclusion but that she was thereby
made subject to taxation in respect of the
scholarship.
I do not consider it necessary in the circum
stances to rely on paragraph 81(1)(a) of the
Income Tax Act. Section 87 of the Indian Act, by
its own terms, prevails over any contrary intention
expressed in the Income Tax Act.
The plaintiff succeeds. Her 1974 income tax
return will be referred back to the Minister of
National Revenue for reassessment on the basis
that the scholarship was not taxable from income
in her hands. The plaintiff is entitled to her costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.