Date: 20031208
Docket: A-163-03
Citation: 2003 FCA 469
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Applicant
and
ALEXANDER AKIWENZIE
Respondent
Heard at Ottawa, Ontario, on December 3, 2003.
Judgment delivered at Ottawa, Ontario, on December 8, 2003.
REASONS FOR JUDGMENT BY: NOËL J.A.
CONCURRED IN BY: STRAYER J.A.
LÉTOURNEAU J.A.
Date: 20031208
Docket: A-163-03
Citation: 2003 FCA 469
CORAM: STRAYER J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Applicant
and
ALEXANDER AKIWENZIE
Respondent
REASONS FOR JUDGMENT
[1] The applicant seeks the judicial review of a decision of Miller J. of the Tax Court of Canada (informal procedure) (2003 DTC 235; [2003] 3 C.T.C. 2001) which referred back to the Minister the income tax assessments issued against the respondent for reassessment on the basis that the totality of the income which he derived from his employment with the Department of Indian Affairs and Northern Development (DIAND) during his 1997 and 1998 taxation years is exempt from taxation pursuant to subsection 87(1) of the Indian Act and paragraph 81(1)(a) of the Income Tax Act.
[2] The applicant conceded before the Tax Court Judge that 15% of the respondent's income came within the exemption on the basis that the respondent was physically present on reserves in the course of his employment 15% of the time. The applicant now takes the position that this figure, based on the evidence adduced before the Tax Court Judge, should be revised to 20% and therefore takes the position that the Tax Court Judge arrived at the correct conclusion insofar as 20% of the respondent's income is concerned.
[3] To the extent that this concession is based on the premise that the place where the respondent rendered his services is determinative of the situs of his income, it does not conform with the law (see Canada v. Monias, [2001] 1 F.C. 51 at paragraph 37). We are, however, bound to give effect to it as this proceeding was initiated as a judicial review and the attack is directed against the decision of the Tax Court Judge insofar as it holds that the balance of the respondent's income is exempt from taxation.
[4] As a result, we are only concerned with the employment income earned by the respondent in respect of work performed off reserve, that is from his office at DIAND in Hull, Quebec. The Tax Court Judge found that this income, or more precisely the right thereto, was sufficiently connected to the various reserves which the respondent was called upon to deal within the course of his employment to justify a conclusion that it was personal property situated on these reserves for purposes of subsection 87(1) of the Indian Act.
[5] In reaching this conclusion, the Tax Court Judge relied on the respondent's "unique position" stemming from the fact that his employment duties were "integral to the future of reserves" and that "everything he did, he did as an Indian qua Indian" in the sense that he was a genuine Indian and that his life was totally driven by his quest for the survival and betterment of Indians qua Indians on reserves (Reasons of the Tax Court Judge, paragraphs 56 and 57).
[6] Having regard to the nature of these connecting factors (which the Tax Court Judge identifies as one), the Tax Court Judge had to confront the decision of this court in Canada v. Monias, supra, and determine whether the required economic link between the respondent's income and these reserves was present. In Monias, it was held that:
[67] By enacting paragraph 87(1)(b) Parliament made an important exception to the principle that those similarly situated should be treated in the same way for tax purposes. However, the paragraph cannot be read as exempting from income tax Indians' employment income that was not clearly earned in circumstances that link its acquisition to a reserve as an economic base (see also paragraph 46 of this decision which refers to the link to a reserve as a "physical location").
[7] The gist of the reasoning of the Tax Court Judge in this regard is set out in the following three paragraphs which appear at the conclusion of his reasons:
[58] Returning now to the principles gleaned from the Monias case, I must address whether this connecting factor does establish a necessary link with the reserve as an economic base. This is possible if I can justify an interpretation of section 87 of the Indian Act, and of the recent Federal Court of Appeal cases, as encompassing a nexus between employment income and the reserve system generally, for although Mr. Akiwenzie resided on a reserve, his employment income is only connected to that reserve by his personal expenditures. His true connection as far as determining the situs of his employment income is to each and every reserve in Canada.
[59] From a policy perspective, I believe it would not be contrary to the purpose of section 87, as defined by Justice La Forest, to allow Mr. Akiwenzie, given his exceptional circumstances, to receive this exemption. This does require a reading in section 87 of the use of the term 'properties situated on a reserve' to mean situated on more than one reserve. I can easily imagine a situation where an Indian physically works on three or four reserves and perhaps resides on a fifth. Is his exemption precluded because his connection is to more than one reserve? I think not. He has no less of a connection with a reserve simply because he had contact with 480 reserves. The connection must be established with each and every reserve, but need not be limited to just one. Certainly, Mr. Akiwenzie might have a slightly stronger connection to the reserve on which he resides, as presumably more of his personal property, his employment income, would be spent there, but that does not deny his connection to all the other reserves. For only as a whole did they constitute the economic base required by the Federal Court of Appeal decision in Monias. Mr. Akiwenzie is funded by the Government of Canada to gain access to the Indian community to obtain their knowledge, their input and ultimately their consensus on what the reserve system is now and should be in the future. In this respect, the reserve system generally does indeed serve as an economic base for Mr. Akiwenzie's employment income. It is not so different from the hospital employee paid from government funds directed towards the care of Indians.
[60] While Mr. Akiwenzie's residence and the residence of the Lands and Trusts Department of the Indian Northern Affairs are relevant, it is the nature and special circumstances of Mr. Akiwenzie's employment that sway me to find that he derived his employment income as an Indian qua Indian. It is personal property situated on a reserve. He is, therefore, entitled to the protection of that employment income in the very hands of the entity providing it -- the Government of Canada.
[8] With respect, I believe that the Tax Court Judge erred in law when he held that the personal property in issue could be situated on "each and every reserve in Canada" with which the respondent came into contact in the course of his employment with DIAND on the basis of the factors which he identified.
[9] The issue which the Tax Court Judge had to decide was whether the intangible property constituted by the respondent's entitlement to income for services rendered in the course of his employment could be said to be situated on a reserve. As a pure legal matter, this property was situated at the office of DIAND where the respondent could legally claim the payment of his salary.
[10] However, Courts have developed a purposive approach in construing the personal property exemption under the Indian Act whereby this situs can nevertheless be considered to be on a reserve where it can be shown through relevant connecting factors that the income earned by an Indian is so linked to a reserve that its taxation would result in "the erosion of the entitlement of the Indian qua Indian on a reserve" (Williams v. the Queen, [1992] 1 S.C.R. 877 at paragraph 37). It is the purpose of the exemption i.e. the preservation of the property available to the Indian qua Indian on a reserve, which led this Court to hold in Monias that in order for an Indian's employment income to come within the exemption, there must be a link between its acquisition and a reserve as a physical location or economic base. This same basic requirement was alluded to in different words by Laforest J. in Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85 at page 133 where he said that section 87 offers no protection "... in the absence of a discernible nexus between the property concerned and the occupancy of reserve lands by the owner of that property, ...".
[11] Keeping this in mind, the fact that the respondent's duties were beneficial and indeed "integral to the future of reserves" as the Tax Court Judge found cannot result in his income being situated on these reserves. As was stated by this Court in Monias, supra:
[66] That the work from which employment income is earned benefits Indians on reserves, and indeed may be integral to maintaining the reserves as viable social units, is not in itself sufficient to situate the employment income there. It is not the policy of paragraph 87(1)(b) to provide a tax subsidy for services provided to and for the benefit of reserves. Rather, it is to protect from erosion by taxation the property of individual Indians that they acquire, hold and use on a reserve, although in the case of an intangible, such as employment income, it is the situs of its acquisition that is particularly important (The same basic point is made forcefully in Desnomie v. Canada, 186 D.L.R. (4th) 718 (F.C.A.) at the close of paragraph 21).
The genuineness of the respondent qua Indian, or his "indianness" if I may say so, can be given no more importance for exactly the same reason.
[12] On the facts before him, the Tax Court Judge found, correctly in my view, that the respondent's income was not sufficiently connected with the reserve on which he lived by virtue of his occupancy of the reserve and the amounts which he would have spent on it to support himself and his family (see Bell v. Canada, 2000 DTC 6365 at paragraph 41). However, the "true connection" which he did find is a virtual connection with "each and every reserve in Canada" based on the exceptionally beneficial nature of the services rendered by the respondent through his employment and his genuineness qua Indian (see paragraph 5, supra).
[13] With respect, these factors have nothing to do with the preservation of the respondent's personal property qua Indian on these reserves. Specifically, it cannot be said that the taxation of the respondent's income would result in the erosion of his entitlement qua Indian on any or all of these reserves as there is no connection whatsoever between this income as such and these reserves as economic bases or physical locations (Monias, supra, paragraphs 46 and 67).
[14] I would therefore allow the application for judicial review, set aside the decision of the Tax Court Judge and return the matter to the Chief Justice of the Tax Court or his designate with instructions that the respondent's appeal be allowed in part, and that the assessments be referred
to the Minister on the basis that 20% of the respondent's income was exempt from taxation, each party assuming their own costs. Despite the result, the respondent is entitled to the reasonable and proper costs incurred in respect of this judicial review application pursuant to section 18.25 of the Tax Court of Canada Act.
"Marc Noël"
J.A.
"I agree.
B.L. Strayer J.A."
"I agree.
Gilles Létourneau J.A."
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-163-03
APPLICATION FOR JUDICIAL REVIEW FROM A DECISION OF THE HONOURABLE JUSTICE MILLER OF THE TAX COURT OF CANADA DATED FEBRUARY 25, 2003
STYLE OF CAUSE: HER MAJESTY THE QUEEN v. ALEXANDER AKIWENZIE
PLACE OF HEARING: OTTAWA
DATE OF HEARING: DECEMBER 3, 2003
REASONS FOR JUDGMENT: NOËL J.A.
CONCURRED IN BY: STRAYER J.A.
LÉTOURNEAU J.A.
APPEARANCES:
|
|
FOR THE APPLICANT |
|
|
FOR THE RESPONDENT |
SOLICITORS OF RECORD:
|
Morris Rosenberg Deputy Attorney General of Canada |
FOR THE APPLICANT |
|
Ottawa, Ontario |
FOR THE RESPONDENT |