Bastien Estate v. Minister of National Revenue, [2011] N.R. TBEd. JL.029

• Judge: McLachlin, C.J.C., Binnie, Deschamps, Fish, Charron, Rothstein and Cromwell, JJ.
• Court: Supreme Court (Canada)
• Case Date: July 22, 2011
• Jurisdiction: Canada (Federal)
• Citations: [2011] N.R. TBEd. JL.029;2011 SCC 38;418 NR 220;[2011] 2 SCR 710

Bastien Estate v. MNR (SCC) - Income tax - Interest income - Status indian - Term deposits in caisse populaire on reserve

MLB being edited

Currently being edited for N.R. - judgment temporarily in rough form.

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

Temp. Cite: [2011] N.R. TBEd. JL.029

Estate of Rolland Bastien (appellant) v. Her Majesty The Queen (respondent) and Huron-Wendat Nation, Assembly of Manitoba Chiefs, Grand Council of the Crees (Eeyou Istchee)/Cree Regional Authority, Assembly of First Nations, Chiefs of Ontario and Union of Nova Scotia Indians (intervenors)

(33196; 2011 SCC 38; 2011 CSC 38)

Indexed As: Bastien Estate v. Minister of National Revenue

Supreme Court of Canada

McLachlin, C.J.C., Binnie, Deschamps, Fish, Charron, Rothstein and Cromwell, JJ.

July 22, 2011.

Summary:

Bastien, an Indian, appealed his 2001 income tax assessment. The issue was whether his investment income was situated on a reserve and therefore exempt from taxation pursuant to s. 81(1)(a) of the Income Tax Act and s. 87 of the Indian Act.

The Tax Court of Canada, in a decision reported at 2007 TCC 625, dismissed the appeal. Bastien's estate appealed.

The Federal Court of Appeal, in a decision reported at 400 N.R. 349, dismissed the appeal. Bastien's estate appealed.

The Supreme Court of Canada allowed the appeal. Bastien's investment income should benefit from the s. 87 exemption.

Editor's Note: this appeal was heard together with Dubé v. Minister of National Revenue, [2011] N.R. TBEd. JL.030; 2011 SCC 39.

Indians, Inuit and Métis - Topic 6510

Taxation - Exemption - Personalty on reserve - Bastien, an Indian, appealed his 2001 income tax assessment - The issue was whether his investment income was situated on a reserve and therefore exempt from taxation pursuant to s. 81(1)(a) of the Income Tax Act and s. 87 of the Indian Act - The investment income came from interest on term deposits at a caisse populaire located on the reserve where Bastien lived - The Tax Court judge dismissed the appeal - He found there were several connections between the investment income and the reserve but placed the most emphasis on how the income was earned - The judge found that the income-generating activities were derived from an economic mainstream activity (caisse was investing its funds in the economic mainstream off-reserve) - Therefore, the investment income was not exempt from taxation - The Federal Court of Appeal dismissed an appeal - The judge did not err in giving considerable weight to the fact that the caisse was investing its funds in the economic mainstream - The Supreme Court of Canada allowed Bastien's estate's appeal - All potentially relevant factors connected the investment income to the reserve - The fact that the Caisse produced its revenue in the "commercial mainstream" off the reserve was legally irrelevant to the nature of the income it was obliged to pay to Bastien - This was true as to both form and substance - See paragraph 64.

Indians, Inuit and Métis - Topic 6510

Taxation - Exemption - Personalty on reserve - The Supreme Court of Canada stated that s. 87 of the Indian Act protected the personal property of Indians which was situated on a reserve from taxation - In determining the location of personal property for the purpose of s. 87, there was no requirement that the personal property be integral to the life of the reserve, or that it, in order to be exempted from taxation, had to benefit what the court took to be the traditional Indian way of life - See paragraph 30.

Indians, Inuit and Métis - Topic 6510

Taxation - Exemption - Personalty on reserve - The Supreme Court of Canada stated that s. 87 of the Indian Act protected the personal property of Indians which was situated on a reserve from taxation - Investment income derived from term deposits was personal property within the meaning of the s. 87 exemption - See paragraphs 31 to 34.

Indians, Inuit and Métis - Topic 6510

Taxation - Exemption - Personalty on reserve - Bastien, an Indian, appealed his 2001 income tax assessment - The issue was whether his investment income was situated on a reserve and therefore exempt from taxation pursuant to s. 81(1)(a) of the Income Tax Act and s. 87 of the Indian Act - The investment income came from interest on term deposits at a caisse populaire located on the reserve where Bastien lived - The Supreme Court of Canada stated that one determined the location of intangible personal property such as the interest income in issue in this case by conducting a two-step analysis - First, one identified potentially relevant factors tending to connect the property to a location and then determined what weight they should be given in identifying the location of the property in light of three considerations: the purpose of the exemption from taxation, the type of property and the nature of the taxation of that property - See paragraph 2.

Indians, Inuit and Métis - Topic 6510

Taxation - Exemption - Personalty on reserve - Bastien, an Indian, appealed his 2001 income tax assessment - The issue was whether his investment income was situated on a reserve and therefore exempt from taxation pursuant to s. 81(1)(a) of the Income Tax Act and s. 87 of the Indian Act - The investment income came from interest on term deposits at a caisse populaire located on the reserve where Bastien lived - The Tax Court judge dismissed the appeal - He found, inter alia, that the income-generating activities were derived from an economic mainstream activity (caisse was investing its funds in the economic mainstream off-reserve) - Therefore, the investment income was not exempt from taxation - The Federal Court of Appeal held that the judge did not err in giving considerable weight to the fact that the caisse was investing its funds in the economic mainstream - The Supreme Court of Canada allowed Bastien's estate's appeal - Where the investment vehicle was, as in this case, a contractual debt obligation, the focus should be on the investment activity of the Indian investor and not on that of the debtor financial institution - The other commercial activities of the Caisse should have been given no weight - Bastien's investment was in the nature of a debt owed to him by the Caisse and did not make him a participant in those wider commercial markets in which the Caisse itself was active - Cases of improper manipulation by Indian taxpayers to avoid income tax could be addressed as they were in the case of non-Indian taxpayers - Applying the exemption of interest income in this case was broadly consistent with the purpose of preserving Indian property situated on the reserve - It provided an investment option protected from taxation for Bastien's property while preserving it against possible seizure - See paragraphs 60 to 63.

Cases Noticed:

Nowegijick v. Minister of National Revenue et al., [1983] 1 S.C.R. 29; 46 N.R. 41, refd to. [paras. 3, 76].

Union of New Brunswick Indians and Tomah v. New Brunswick (Minister of Finance) et al., [1998] 1 S.C.R. 1161; 227 N.R. 92; 200 N.B.R.(2d) 201; 512 A.P.R. 201, refd to. [paras. 4, 71].

R. v. Lewis (A.J.) et al., [1996] 1 S.C.R. 921; 196 N.R. 165; 75 B.C.A.C. 1; 123 W.A.C. 1, refd to. [para. 4].

Recalma v. Minister of National Revenue (1998), 232 N.R. 7; 158 D.L.R.(4th) 59 (F.C.A.), refd to. [para. 7].

Lewin v. Ministre du Revenu national, [2002] N.R. Uned. 288; 2003 D.T.C. 5476; 2002 FCA 461, refd to. [para. 8].

Sero v. Minister of National Revenue, [2004] 2 F.C.R. 613; 315 N.R. 162; 2004 FCA 6, refd to. [para. 8].

McDiarmid Lumber Ltd. v. God's Lake First Nation et al., [2006] 2 S.C.R. 846; 356 N.R. 1; 212 Man.R.(2d) 7; 389 W.A.C. 7; 2006 SCC 58, refd to. [paras. 14, 83].

Williams v. Minister of National Revenue, [1992] 1 S.C.R. 877; 136 N.R. 161, refd to. [paras. 16, 71].

Mitchell and Milton Management Ltd. v. Peguis Indian Band et al., [1990] 2 S.C.R. 85; 110 N.R. 241; 67 Man.R.(2d) 81, refd to. [paras. 21, 70].

University of British Columbia v. Berg, [1993] 2 S.C.R. 353; 152 N.R. 99; 26 B.C.A.C. 241; 44 W.A.C. 241, refd to. [para. 25].

Minister of National Revenue v. Poker et al., [1997] 3 F.C. 269; 212 N.R. 342 (F.C.A.), refd to. [para. 26].

Canada v. Folster - see Minister of National Revenue v. Poker et al.

Lewin v. Canada, 2001 D.T.C. 479, refd to. [para. 26].

Will-Kare Paving & Contracting Ltd. v. Minister of National Revenue, [2000] 1 S.C.R. 915; 255 N.R. 208; 2000 SCC 36, refd to. [para. 49].

Southwind v. Minister of National Revenue (1998), 222 N.R. 222; 156 D.L.R.(4th) 87 (F.C.A.), refd to. [paras. 56, 103].

Dubé v. Minister of National Revenue, [2011] N.R. TBEd. JL.030; 2011 SCC 39, refd to. [para. 66].

National Ìndian Brotherhood v. Canada, [1979] 1 F.C. 103 (T.D.), refd to. [para. 76].

Dubé v. Minister of National Revenue, 2008 D.T.C. 4022; 2007 TCC 393, refd to. [para. 97].

Robinson v. R., [2011] 2 C.T.C. 2286; 2010 TCC 649, refd to. [para. 103].

Horn v. Minister of National Revenue, [2008] 1 C.T.C. 140; 319 F.T.R. 94; 2007 FC 1052, affd. (2008), 382 N.R. 95; 302 D.L.R.(4th) 472; 2008 FCA 352, refd to. [para. 103].

Shilling v. Minister of National Revenue, [2001] 4 F.C. 364; 273 N.R. 39; 2001 FCA 178, refd to. [para. 103].

Monias v. Minister of National Revenue, [2002] 1 F.C. 51; 273 N.R. 316; 2001 FCA 239, refd to. [para. 103].

Large v. Minister of National Revenue, 2006 D.T.C. 3558; 2006 TCC 509, refd to. para. 103].

Statutes Noticed:

Income Tax Act, Interprtation Bulletins, Interpretation Bulletin IT-62, generally [para. 75].

Indian Act, R.S.C. 1985, c. I-5, sect. 87(1)(b), sect. 87(2) [para. 3].

Interpretation Bulletins - see Income Tax Act, Interpretation Bulletins.

Authors and Works Noticed:

Bartlett, Richard H., The Indian Act of Canada (1977-1978), 27 Buff. L. Rev. 581, pp. 612 [para. 28]; 613 [paras. 28, 70].

Biberdorf, Donald K., Aboriginal Income and the Economic Mainstream, in Canadian Tax Foundation, Report of Proceedings of the Forty-Ninth Tax Conference (1998), pp. 25:8, 25:9 [para. 53].

Dockstator, Mark, The Nowegijick Case: Implications for Indian Tax Planning Strategies, [1985] 4 C.N.L.R. 1, p. 14 [para. 75].

L'Heureux, Nicole, Fortin, Edith, and Lacoursiere, Marc, Droit bancaire (4th Ed. 2004), p. 408 [para. 32].

Lord, Guy, et al., Les principes de l'imposition au Canada (13th Ed. 2002), p. 154 [para. 36].

MacIntosh, Constance, From Judging Culture to Taxing Indians: Tracing the Legal Disclosure of the Indian Mode of Life (2009), 47 Osgoode Hall L.J. 399, p. 425 [para. 27].

Maclagan, Bill, Section 87 of the Indian Act: Recent Developments in the Taxation of Investment Income (2000), 48 Can. Tax J. 1503, pp. 1507, 1508 [para. 53]; 1515 [para. 28]; 1516, 1517 [para. 48]; 1522 [para. 60].

Marshall, Murray, Business and Investment Income under Section 87 of the Indian Act: Recalma v. Canada (1998), 77 Can. Bar Rev. 528, pp. 536 to 539 [para. 28].

McDonnell, Thomas E., Taxation of an Indian's Investment Income (2001), 49 Can. Tax J. 954, pp. 957 [paras. 28, 60]; 958 [para. 28].

O'Brien, Martha, Income Tax, Investment Income and the Indian Act: Getting Back on Track (2002), 50 Can. Tax J. 1570, pp. 1576 [paras. 28, 53, 60]; 1580 [para. 60]; 1588 [para. 28]; 1589 to 1591 [para. 42].

Slattery, Brian, Understanding Aboriginal Rights (1987), 66 Can. Bar Rev. 727, p. 753 [para. 70].

Sullivan, Ruth, Sullivan on the Construction of Statutes (5th Ed. 2008), p. 297 [para. 25].

Counsel:

Michel Beaupré and Michel Jolin, for the appellant;

Pierre Cossette and Bernard Letarte, for the respondent;

Peter W. Hutchins and Lysane Cree, for the intervenor, the Huron-Wendat Nation;

Jeff D. Pniowsky and Sacha R. Paul, for the intervenor, the Assembly of Manitoba Chiefs;

John Hurley and François Dandonneau, for the intervenor, the Grand Council of the Crees (Eeyou Istchee)/Cree Regional Authority;

Maxime Faille and Graham Ragan, for the intervenor, the Assembly of First Nations;

David C. Nahwegahbow and James Hopkins, for the intervenor, Chiefs of Ontario;

Brian A. Crane, Q.C., and Guy Régimbald, for the intervenor, the Union of Nova Scotia Indians.

Solicitors of Record:

Langlois Kronström Desjardins, Québec, Quebec, for the appellant;

Attorney General of Canada, Montreal, Quebec, for the respondent;

Hutchins Légal inc., Montreal, Quebec, for the intervenor, the Huron-Wendat Nation;

Thompson Dorfman Sweatman, Winnipeg, Manitoba, for the intervenor, the Assembly of Manitoba Chiefs;

Gowling Lafleur Henderson, Montreal, Quebec, for the intervenor, the Grand Council of the Crees (Eeyou Istchee)/Cree Regional Authority;

Gowling Lafleur Henderson, Ottawa, Ontario, for the intervenors, the Assembly of First Nations and the Union of Nova Scotia Indians;

Nahwegahbow, Corbiere Genoodmagejig, Rama, Ontario, for the intervenor, the Chiefs of Ontario.

This appeal was heard on May 20, 2011, before McLachlin, C.J.C., Binnie, Deschamps, Fish, Charron, Rothstein and Cromwell, JJ., of the Supreme Court of Canada.

The judgment of the Supreme Court of Canada was delivered in both official languages on July 22, 2011, and the following opinions were filed:

Cromwell, J. (McLachlin, C.J.C., Binnie, Fish and Charron, JJ., concurring) - see paragraphs 1 to 65;

Deschamps, J. (Rothstein, J., concurring in the result) - see paragraphs 66 to 111.