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T-1598-86
Glenn Williams (Plaintiff)
v.
The Queen (Defendant)
INDEXED AS: WILLIAMS V. CANADA
Trial Division, Cullen J.—Vancouver, October 6; Ottawa, December 15, 1988.
Native peoples — Taxation — Unemployment insurance benefits and enhanced benefits paid to Indian residing and having worked on reserve exempt from taxation pursuant to Indian Act ss.. 87 and 90(1)(b) — Determination of situs of benefits.
Income tax — Exemptions — Unemployment insurance benefits and enhanced benefits paid to Indian residing and having worked on reserve exempt from taxation pursuant to Indian Act ss. 87 and 90(1)(b) as benefits personal property belonging to Indian and situated on reserve — Enhanced benefits paid pursuant to "agreement" between Band and Crown within s. 90(1)(b) — "Agreement" construed liberally and in Indian's favour — Determination of situs of benefits within Act s. 87 according to connecting factors.
Unemployment insurance — Benefits and enhanced benefits paid to Indian residing and having worked on reserve exempt from taxation pursuant to Indian Act ss. 87 and 90(1)(b).
The plaintiff is an Indian living on the Penticton Indian Reserve No. 1 in British Columbia. After having worked on the reserve, first for a company situated there, then for the Pentic- ton Indian Band on a "NEED" project, the plaintiff qualified for and received $3,241 in regular unemployment insurance benefits. He then worked for twenty-five weeks, again on the reserve, on a job creation project set up pursuant to an agree ment between the Band and the Canada Employment and Immigration Commission. In lieu of wages, the plaintiff received enhanced unemployment insurance benefits worth $7,875. The plaintiffs income tax assessment for 1984 included all the benefits in his income pursuant to subparagraph 56(1)(a)(iv) of the Income Tax Act. The Minister dismissed the plaintiffs objection and confirmed the assessment. This is an appeal from that assessment.
The plaintiff invokes section 87 of the Indian Act pursuant to which the personal property of an Indian situated on a reserve is exempt from taxation and, with respect to the enhanced benefits, paragraph 90(1)(b) of the same Act, pursuant to which personal property given to Indians under an agreement between a band and Her Majesty is deemed to be situated on a reserve.
The main issue is whether the benefits received by the plaintiff were "situated" on a reserve. The other issue is
whether the job creation project was an agreement within the meaning of paragraph 90(1)(b).
Held, the appeal should be allowed.
The Nowegijick (S.C.C.) and National Indian Brotherhood (F.C.T.D.) cases lend support to the proposition that residence of the debtor should not be the only factor considered in determining the situs of the benefits. In other words, the residence of debtor criterion should be determinative of situs only in absence of evidence that the situs should be elsewhere. In this case, there is evidence that the situs of the benefits should be the reserve. The place where the benefits were paid to the plaintiff should be considered, along with the place of employment, where the employer was situated, residence, and place of payment of salary. The plaintiffs interpretation of the situs test is consistent with the view that courts should deal with native rights in a liberal and progressive manner. It would also avoid the possible inconsistent result of an Indian taxpay er's income earned from employment on a reserve being exempt from tax, but the unemployment insurance benefits earned as a result of that employment being taxable. Moreover, that inter pretation is consistent with the intent of the Indian Act not to tax Indians on income earned on a reserve.
The enhanced benefits are tax exempt not only by virtue of paragraph 87(b) of the Indian Act but also by virtue of paragraph 90(1)(b) of that Act since they were paid in accord ance with an agreement between the Band and the Crown. The word "agreement" in paragraph 90(1)(b) should be given a liberal construction and any doubt resolved in favour of the Indian.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 56(1)(a)(iv) (as am. by S.C. 1980-81-82-83, c. 140, s. 26), (n), 81 (as am. idem, s. 46).
Indian Act, R.S.C. 1970, c. 1-6, ss. 2(1), 87 (as am. by S.C. 1980-81-82-83, c. 47, s. 25), 90(1).
Indian Remission Order, S1/85-144.
Unemployment Insurance Act, 1971, S.C. 1970-71-72, c. 48, s. 38 (as am. by S.C. 1976-77, c. 54, s. 41; 1978-79, c. 7, s. 6; 1980-81-82-83, c. 47, s. 53).
CASES JUDICIALLY CONSIDERED
APPLIED:
Nowegijick v. The Queen, [1983] 1 S.C.R. 29; 83 DTC 5041; R. v. National Indian Brotherhood, [1979] 1 F.C. 103; (1978), 78 DTC 6488 (T.D.); Greyeyes v. R., [1978] 2 F.C. 385; 78 DTC 6043 (T.D.).
DISTINGUISHED:
Launière v. M.N.R., [1987] 1 C.N.L.R. 55 (T.C.C.); Mitchell v. Sandy Bay Indian Band, [1983] 5 W.W.R. 117 (Man. Q.B.).
REFERRED TO:
Metlakatla Ferry Service Ltd. v. B.C. (Govt.) (1987), 12 B.C.L.R. (2d) 308 (C.A.).
AUTHORS CITED
Punch, Don. Indians and Income Tax: A Case Comment on Nowegijick v. The Queen, (1983-84), 48 Sask. Law Rev. 122.
COUNSEL:
Gary S. Snarch for plaintiff.
Ian S. MacGregor and Sandra E. Phillips for
defendant.
SOLICITORS:
Snarch & Allen, Vancouver, for plaintiff.
Deputy Attorney General of Canada for defendant.
The following are the reasons for judgment rendered in English by
CULLEN J.: The parties agreed to the following facts:
1. The plaintiff is an Indian pursuant to the Indian Act [R.S.C. 1970, c. I-6] and, at all ma terial times, was a member of the Penticton Indian Band (hereinafter referred to as the "Band"). He resides at R.R. #2, Site 80, Comp. 10, Penticton, British Columbia on the Penticton Indian Reserve No. 1 (hereinafter referred to as the "reserve"), which is a reserve within the meaning of the Indian Act.
2. In the 1984 taxation year, the plaintiff received regular unemployment insurance benefits from the Canada Employment & Immigration Commission (hereinafter referred to as the "Commission") at a rate of $225 per week for a period commencing January 1 and continuing for 13 weeks. The plain tiff received a total of $2,925 during this period.
3. The plaintiff qualified to receive the regular unemployment insurance benefits referred to in paragraph 2 hereof on the basis of his having been employed in insurable employment with Green- wood Forest Products Ltd., a company situated on the reserve, during 1982 and 1983.
4. The plaintiff was employed by the Band on a "NEED" project on the reserve for the period from March 23, 1984 to June 1, 1984. During this period he received wages in the amount of $2,995 from the Band.
5. The plaintiff applied for unemployment insur ance benefits on June 7, 1984 and on June 17, 1984 began to receive regular unemployment in surance benefits at a rate of $158 per week for two weeks for a total of $316.
6. The Band entered into an agreement dated March 28, 1984 with the Commission whereby it was agreed that a job creation project (No. 7320BX8) within the meaning of section 38 of the Unemployment Insurance Act, 1971 [S.C. 1970- 71-72, c. 48 (as am. by S.C. 1976-77, c. 54, s. 41)], would be carried out on the reserve.
7. The said job creation project was a Forest Improvement Project and ran from on or about March 30, 1984 to on or about December 21, 1984.
8. The agreement referred to in paragraph 6 hereof provided that the Commission contribute $95,000 to the cost of the project which amount was payable directly to the Band. Subsequently, an amount of $94,500 was paid to the Band, as follows:
5 April 1984 advance payment $29,250
8 August 1984 interim payment 24,750
10 September 1984 interim payment 5,500
22 November 1984 interim payment 26,000
28 February 1985 final payment 9,000
TOTAL $94,500
9. As he was an unemployment insurance claim ant the plaintiff was eligible to work on the job creation project referred to in paragraphs 6, 7 and 8 hereof.
10. The plaintiff worked on the said job creation project for 25 weeks between July 2, 1984 and December 21, 1984 and, as a result thereof, his unemployment insurance benefits were enhanced by the Commission from $158 to $315 pursuant to section 38 of the Unemployment Insurance Act, 1971. The total amount received by the plaintiff was $7,875.
11. The plaintiff and all other participants in the project were required to sign a Model Undertaking by Benefit Recipient—Participant form which states, inter alia, the following:
2. That during my participation in this project, I accept instead of wages the benefits payable to me as determined under the Unemployment Insurance Act, 1971 and the Unemployment Insurance Regulations.
The plaintiff signed the Model Undertaking on July 4, 1984.
12. All of the unemployment insurance benefits referred to in paragraphs 2, 5 and 10 hereof were paid by federal government cheques made payable to the plaintiff and mailed from the Commission's regional computer centre in Vancouver, British Columbia to the plaintiff, c/o Penticton Indian Band, R.R. #2, Site 50, Comp. 8, Penticton, B.C., V2A 6J7.
13. In addition to receiving unemployment insur ance benefits for his work on the job creation project the Band paid to the plaintiff an additional $60 per week as top-up wages for a total of $1,560 including 4% holiday pay.
14. The said top-up wages were paid directly to the plaintiff by the Band out of the $94,500 con tributed to the Band by the Commission in respect of the cost of the project.
15. The plaintiff received a T4-U, Statement of Unemployment Insurance Benefits Paid, from the Commission in the amount of $11,116 computed as follows:
$ 2,925 — see paragraph 2
316 — see paragraph 5
7,875 — see paragraph 10
$11,116 — TOTAL
16. By Notice of Assessment dated May 31, 1985, the plaintiff was assessed by the Minister of Na tional Revenue so as to include in his income for the 1984 taxation year the amount of $11,116 pursuant to the provisions of subparagraph 56(1)(a)(iv) [as am. by S.C. 1980-81-82-83, c. 140, s. 26] of the Income Tax Act, R.S.C. 1952, c. 148, as amended by S.C. 1970-71-72, c. 63, s. 1 (hereinafter referred to as the "Act").
17. By Notice of Objection dated August 29, 1985, the plaintiff objected to the said assessment of his 1984 taxation year.
18. By Notification of Confirmation by the Minis ter of National Revenue dated April 16, 1986, the assessment referred to in paragraph 16 herein was confirmed.
This is an appeal from the assessment referred to in paragraph 16 herein.
Subparagraph 56(1)(a)(iv) of the Act specifi cally provides for the inclusion of unemployment insurance benefits in computing a taxpayer's income for a taxation year:
56. (1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,
(a) any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,
(iv) a benefit under the Unemployment Insurance Act, 1971,
However, section 81 [as am. by S.C. 1980-81-82- 83, c. 140, s. 46] of the Act clearly states that:
81. (1) There shall not be included in computing the income of a taxpayer for a taxation year,
(a) an anount 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 in a tax conven tion or agreement with another country that has the force of law in Canada;
The exemption referred to above must be statutory.
The exemption to which an Indian, within the meaning of subsection 2(1) of the Indian Act, is entitled arises from section 87 of this Act. In essence, section 87 [as am. by S.C. 1980-81-82-83, c. 47, s. 25] provides that personal property of an Indian situated on a reserve is exempt from taxa tion and that no Indian is subject to taxation "in `respect of' 'any"' such property: Nowegijick v. The Queen, [1983] 1 S.C.R. 29, at page 33; 83 DTC 5041, at page 5043. Section 87 and subsec tion 90(1) of the Act are set out below:
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 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.
The relevant portion of subsection 90(1) for this appeal is paragraph 90(1)(b).
The other piece of legislation which has some bearing on the issue before me is section 38 of the Unemployment Insurance Act, 1971. Section 38 provides in part:
38. (1) For the purposes of this section, a job creation project means a project that is approved by the Commission for the purposes of this section under a program designed primarily to create employment and conducted by the Government of Canada pursuant to any Act of Parliament.
(2) Benefit otherwise payable under this Part to a claimant who takes employment on a job creation project may, at the discretion of the Commission and subject to subsection (10), be paid in the manner prescribed.
(3) For the purposes of this Part, a week during which the claimant is employed on a job creation project and is paid benefit under subsection (2) shall be deemed to be a week of unemployment and for the purposes of this Part, Part IV, the Income Tax Act and the Canada Pension Plan, any benefit paid to a claimant under subsection (2) shall be deemed not to be remuneration from employment.
(4) Notwithstanding section 24, the rate of weekly benefit payable to a claimant employed on a job creation project shall be an amount not exceeding the greater of the rate payable
under section 24 and the wage rate applicable to employment on that project, as determined by the Commission.
(10) No amount may be paid in any year as benefit under this section in excess of an amount authorized by order of the Governor in Council to be so paid in that year.
(1 I) No decision of the Commission approving or disapprov ing any job creation project for the purposes of this section is subject to appeal under section 94 or 95. [Emphasis added.]
The issue to be determined is whether the unem ployment insurance benefits (the benefits) the plaintiff received during the first, second and third periods are exempt from taxation, pursuant to section 87 of the Indian Act. As I indicated earlier, in order to qualify for the exemption in section 87 of the Indian Act, the benefits must be personal property, must belong to the Indian or band and must be situated on a reserve. In the case at hand, there is no dispute that the benefits are personal property and that the benefits belong to an Indian, within the meaning of the Indian Act. The only question that must be dealt with is whether the benefits received by the plaintiff during all three periods were "situated" on a reserve.
Counsel for the plaintiff maintains that the plaintiff, at all material times resided on the reserve, worked on the reserve for an employer situated on the reserve (Greenwood Forest Prod ucts Ltd. and the Band) and was paid on the reserve. Moreover, the plaintiff was paid benefits on the reserve during the first, second and third periods as a result of the above employment. During the third period, in addition to receiving regular unemployment benefits, the plaintiffs ben efits were enhanced as he continued to work on the reserve during the receipt of these benefits. Agree ments were entered into between the Commission, the Band and the plaintiff identifying the Band as the plaintiff's employer.
The plaintiff submits that to properly apply the situs test in Nowegijick v. The Queen (supra), one does not merely determine the residence of the debtor. Instead, all the connecting factors should be used to determine situs. As I understood the plaintiff's argument, he maintains that the test to be used in attributing a situs to salary, according to Nowegijick (supra) and R. v. National Indian
Brotherhood, [1979] 1 F.C. 103; (1978), 78 DTC 6488 (T.D.), requires more than the determination of the residence of the debtor (employer) and the place where the wages are payable. The residence of the debtor criterion is determinative of situs only where there is no evidence to indicate that the situs should be elsewhere. In this case, there are a number of factors which can be used to determine situs, and taken collectively, these factors indicate that the situs of the benefits is on the reserve.
In this regard, the plaintiff alleges that the benefits are delayed remuneration and were earned as a direct result of the employment per formed on the reserve. The plaintiff at all material times resided on the reserve, and was paid salary and benefits on the reserve. With respect to the benefits earned during the third period, the plain tiff argues that these benefits are deemed to be situated on a reserve, by virtue of paragraph 90(1)(b) of the Indian Act as these moneys were provided through the Band to the plaintiff pursu ant to an agreement with the Commission: Greyeyes v. R., [1978] 2 F.C. 385; 78 DTC 6043 (T.D.).
The defendant's position is that the combined effect of paragraph 81(1)(a) of the Income Tax Act and of paragraphs 87(b) and 90(1)(b) of the Indian Act does not exempt the plaintiff from taxation in respect of the regular unemployment insurance benefits and enhanced unemployment insurance benefits. The defendant argues that paragraph 87(b) of the Indian Act only exempts from taxation the personal property of an Indian situated on a reserve and that based in the situs test in Nowegijick and National Indian Brother hood, the situs of the benefits is at the residence of the payer, namely in Ottawa. Therefore, the ben efits do not fall within the section 87 exemption.
The defendant also submits that the location at which the benefits are received is irrelevant to the determination of their situs and that a determina tion of where the personal property is situated does not direct one to look at where the services were performed. The case law indicates that the fact that services were performed on a reserve is not determinative of situs.
It is the defendant's further contention that paragraph 90(1)(b) of the Indian Act does not deem the enhanced benefits received by the plain tiff for his work on the job creation project to be "situated on a reserve" as those benefits were paid, to the plaintiff in accordance with and pursuant to, the provisions of the Unemployment Insurance Act, 1971 and were not "given to the plaintiff under an agreement between a band and Her Majesty".
The leading case dealing with the interpretation of section 87 of the Indian Act is the Nowegijick case (supra). Dickson J., as he then was, writing for the Court concluded that section 87 created an exemption from tax for both persons and property. Accordingly, it did not matter that the taxation of employment income may be characterized as a tax on a person as opposed to a tax on property. In Nowegijick the taxpayer was a status Indian living on a reserve. He worked off the reserve as a logger for a corporation which had its head office and administrative offices on the reserve. The taxpayer was paid his wages at the head office on the reserve. Therefore the only factor which indicated an off reserve presence was where the taxpayer actually performed his work.
As pointed out by counsel for the plantiff, the question of situs was not directly at issue in Nowegijick as the parties agreed that the income was situated on the reserve. Nevertheless, the Supreme Court of Canada did comment on the question of situs and approved Thurlow A.C.J.'s criterion for situs as enunciated in National Indian Brotherhood, at pages 109 F.C.; 6491 DTC:
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 neces sary 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. See Cheshire, Private International Law, seventh edition, pp. 420 et seg.
The plaintiff has argued that this test has limited application and what Thurlow A.C.J. was really
saying was that since a right to a salary has no situs, the law will attribute situs to the residence of the employer (debtor) only as a last resort and where no other evidence is present to indicate that the situs should be attributed elsewhere. With respect, I do not agree with this interpretation. The rationale for choosing the residence of the debtor as the test for choosing the situs of the debt was, as Thurlow A.C.J. pointed out, based on the fact that this was where the debt could be enforced or collected.
The plaintiff has also argued that the test to be used in attributing situs to salary, according to Nowegijick and National Indian Brotherhood requires more than the determination of the resi dence of the debtor (employer) and the place where the wages are payable. The plaintiff's posi tion is that the residence of the debtor criterion is determinative of situs only where there is no evi dence to indicate that the situs should be else where. (I must admit I tend to accept this modi fied interpretation more.) To support this position reference was made to Thurlow A.C.J.'s words at pages 109 F.C.; 6491 DTC: "in the absence of anything in the contract or elsewhere to indicate the contrary." In this case, there are a number of connecting factors, that when considered in total, indicate that the situs of the benefits is the reserve. The plaintiff has referred to the following as rele vant factors: 1) benefits are delayed remuneration and were earned as a direct result of the employ ment performed by the plaintiff on the reserve for an employer situated on the reserve; 2) the plain tiff at all material times resided on the reserve and was paid salary and benefits on the reserve. (I will deal with these factors later in my reasons.)
Moreover, the facts of the Nowegijick case and the National Indian Brotherhood; case lend sup port to the plaintiff's interpretation of the situs test. In National Indian Brotherhood all the con necting factors pointed to the situs of the income as being off the reserve. In that case, the employees were living off the reserve, they worked off and on the reserve and were paid off the reserve. However, in Nowegijick the majority of the connecting factors pointed to the reserve as the situs of the income. In that case, the employee was
living on the reserve, he was paid on the reserve and worked off the reserve. His employer was also on the reserve.
There is also an argument to be made that the residence of the employer is not the only factor to be considered in determining situs of income. The Supreme Court of Canada found in Nowegijick [at pages 34 S.C.R.; 5043 DTC] that the taxpay er's income was situated on the reserve because "it was there that the residence or place of the debtor, the Gull Bay Development Corporation, was to be found and it was there the wages were payable." Therefore, the place of payment of wages may also be a factor to be considered when dealing with the question of situs. On the other hand, there is also the Court's approval of Thurlow A.C.J.'s judg ment in National Indian Brotherhood where only the residence of the employer was looked at when determining situs. However, as I indicated earlier, all the factors also pointed to the situs of the income being off the reserve, so there was no choice but to find the situs of the income to be off the reserve.
I lean towards the plaintiff's interpretation of the situs test. To me, it is consistent with the view that courts should deal with native rights cases in a liberal and progressive manner and in this regard, I quote Dickson J. in Nowegijick, at pages 36 S.C.R.; 5044 DTC:
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 Indians. 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. In Jones v. Meehan, 175 U.S. 1, (1896) it was held that Indian treaties "must ... be construed, not according to the technical meaning of [their] words ... but in the sense in which they would naturally be understood by the Indians".
(See also Metlakatla Ferry Service Ltd. v. B.C. (Govt.) (1987), 12 B.C.L.R. (2d) 308 (C.A.) at page 312.)
The defendant has made a strong argument that the benefits are not situated on the reserve based on the test contained in National Indian Brother hood and approved by the Supreme Court of Canada in Nowegijick. The test used to attribute situs to a salary is to determine the residence or place of the debtor and the place where the wages are payable. In this case, although there is no contractual debt, there is what can be considered or characterized as a statutory debt, with the debtor being the Commission, as the Commission is charged with the administration of the Unem ployment Insurance Act, 1971. As such, the resi dence of the debtor is either Ottawa, the head office of the Commission, or Vancouver, the regional office from which the cheques were issued, but not the reserve.
In this regard, counsel for the defendant cited the decision of the Tax Court of Canada Launière v. M.N.R., [1987] 1 C.N.L.R. 55. The issue to be determined in that case was also whether unem ployment insurance benefits received by Mr. Lau- nière were taxable. Mr. Launière is an Indian within the meaning of the Indian Act and worked on the reserve. The Tax Court of Canada found [at page 55]:
There was no doubt about the fact that the unemployment insurance benefits came from the Commission whose head office was in Ottawa nor that it was the payer of the benefits received by the appellant. In such circumstances, the Court cannot resort to a more liberal interpretation and must apply the clear and precise provisions of s. 87(b) of the Indian Act.
With respect, I do not think that the Tax Court's conclusion can be applied out of hand to the case before me. The same arguments were not before the Tax Court. Essentially, what was argued before the Tax Court was that the nature of the unemployment insurance program is related to the appellant's employment and income, to the unem ployment insurance benefits that the appellant received as well as to the unemployment insurance premiums that he paid. The conclusion from this was that the benefits related to a contract of employment in this manner must, like his salary, be considered personal property and exempt from
tax under paragraph 87(b) of the Indian Act. This was not the type of argument that was before me. The plaintiff merely used the characterization of the benefits (relative to employment) as only one of the factors to be considered but it was not determinative nor was it the sole basis of his argument. Further, in Launière, there was never any question that the benefits were paid pursuant to an agreement or treaty between the band and Her Majesty. The plaintiff has also indicated that the Tax Court in Launière was wrong in not considering factors such as the fact that the plain tiff (taxpayer) at all material times resided on the reserve and was paid salary and benefits on the reserve.
Counsel for the defendant also cited the case of Mitchell v. Sandy Bay Indian Band, [1983] 5 W.W.R. 117 (Man. Q.B.) In that case, the Court's main concern was the effect of section 90 of the Indian Act and its observations on the situs test were at best obiter. As such I do not have to apply them.
My one concern about the plaintiffs argument is his characterization of the unemployment insur ance benefits. The plaintiff has indicated that at all material times he resided on the reserve, worked on the reserve for an employer situated on a reserve (Greenwood Forest Products Ltd. and the Band) and was paid on the reserve. In addi tion, the plaintiff was paid benefits on the reserve during the first, second and third periods as a result of the above-mentioned employment. I agree with the plaintiff's contention to the extent that in order to be eligible for benefits a person is required to have a certain number of weeks of insurable employment. However, a contract of unemploy ment insurance is not analogous to any insurance contract. The plaintiff, as an employee, paid pre miums to the unemployment insurance fund, as did his employer, but it does not follow that the unemployment insurance benefits are delayed remuneration from the plaintiffs previous employ ment. The unemployment insurance scheme is a social insurance program designed to insure an employee against the contingency of involuntary unemployment. The scheme is financed from three
sources: the employee, the employer and the feder al general revenue. However, I do think that the place where the benefits are paid to the plaintiff should be a consideration when assessing situs of the benefits, based on Dickson J.'s comment in Nowegijick, at pages 34 S.C.R.; 5043 DTC and Don Purich's article, "Indians and Income Tax: A Case Comment on Nowegijick v. The Queen" (1983-84), 48 Sask. Law Rev. 122. In the case before me the plaintiff received his benefits on the reserve. The benefits were payable and paid direct ly to the taxpayer. I do not think that this neces sarily means that virtually any type of payment, if directed to the reserve, would avoid the payment of tax. This is only a factor to be considered and it is not necessarily determinative.
As I indicated earlier, I tend to favour the interpretation of the situs test espoused by the plaintiff. The issue before the Supreme Court of Canada in Nowegijick dealt with the characteriza tion of personal property. The situs of income was not at issue, as the parties agreed on the situs and merely commented on by the Court. Further, such an interpretation would avoid the possible incon sistent result of a taxpayer's (who is a status Indian) income earned from employment on the reserve being exempt from tax, but the unemploy ment insurance benefits earned as a result of that employment being taxable.
Moreover, the plaintiffs interpretation is con sistent with the intent of the Indian Act not to tax Indians on income earned on a reserve. Although this statement of intent is based on a statement contained in Interpretation Tax Bulletin 62, dated August 18, 1972 and is not binding, it should be given weight and considered to be a factor in cases of doubt arising out of the meaning of legislation. (Dickson J. in Nowegijick, at pages 37 S.C.R.; 5044 DTC, quoting de Grandpré J.) Also, the interpretation does not necessarily mean that no
Indian shall ever pay tax of any kind, per Dickson J., at pages 41 S.C.R.; 5046 DTC.
The enhanced benefits are exempt from tax by virtue of paragraphs 87(b) and 90(1)(b) of the Indian Act. I agree with the plaintiff's argument that paragraph 90(1)(b) is applicable to the case at hand because the enhanced benefits received by the plaintiff were paid not only in accordance with the provisions of the Unemployment Insurance Act, 1971, but were paid in accordance with an agreement between the Band and Her Majesty.
Section 38 of the Unemployment Insurance Act, 1971 provides that benefits may be paid to a claimant who takes employment on a job creation project approved by the Commission. This section does not in itself create the job creation project, the Act presupposes the existence of such projects pursuant to an agreement. Therefore, the project which enabled the plaintiff to qualify for benefits was created by an agreement. As the agreement is between a band and Her Majesty, I conclude that this is an agreement within the meaning of para graph 90(1)(b) of the Indian Act and therefore the benefits are exempt.
A similar argument was made and accepted by Mahoney J. in Greyeyes v. R. (supra). In that case the issue was whether scholarship funds ordinarily taxable under paragraph 56(1)(n) of the Income Tax Act were exempt from tax under the Indian Act. The Court found that monies received by an Indian, pursuant to a Department of Indian Affairs and Northern Development program designed to assist the taxpayer in question with her post-secondary education, were not taxable by virtue of sections 87 and 90(1)(b) of the Indian Act. Mahoney J. noted at pages 388 F.C.; 6045 DTC that on a plain meaning, section 87 made three provisions vis-à-vis the personal property of an Indian situated on a reserve:
Firstly, "the following property is exempt from taxation, name ly"; 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.
He found that the third provision, namely that no Indian is otherwise subject to taxation in respect of the scholarship, applied. Mahoney J. continued with his analysis, at pages 389-390 F.C.; 6046 DTC:
The remaining provision of section 87 is that the plaintiff is not "otherwise subject to taxation in respect of the scholar ship. 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 being subject to taxation in respect of the scholarship? 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 plaintiffs scholarship 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.
He concluded by saying that, "Section 87 of the Indian Act, by its own terms, prevails over any contrary intention expressed in the Income Tax Act." I adopt Mahoney J.'s reasoning to further support the conclusion that the enhanced benefits were exempt from tax by virtue of sections 87 and 90(1) (b) of the Indian Act. Moreover, it is clear that the word agreement in paragraph 90(1)(b) of the Indian Act should also be given a liberal construction and any doubt resolved in favour of the Indian, per Morse J. in Mitchell v. Sandy Bay Indian Band, (supra), at page 127.
Based on the above reasoning, I would allow the plaintiff's appeal, with costs to the plaintiff.
Since I have found for the plaintiff, I do not feel it is necessary to deal with alternative argument on Indian Remission Order, SI/85-144 dated August 21, 1985.
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