Date: 20020702
Docket:
2001-304-IT-I
BETWEEN:
HUGH
MERRINS,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasonsfor
Judgment
Rip, J.
[1]
Mr. Hugh Merrins has appealed an income tax assessment for 1998
for the following reasons, among others:
1.
This Appeal results from the deliberate calculated decision of
Canada Customs and Revenue Agency (CCRA) to set at naught the Law
of Canada as set out in The Canada-Ireland Income Tax Agreement
Act, 1967, Part II, c.75, Statutes of Canada 1966-67 and
the provision of The Canada Income Tax Act in relation to pension
income of the Appellant, which pension income is declared by The
Canada-Ireland Income Tax Agreement Act to be non-taxable
in Canada by Treaty.
2.
The Appellant filed Return of Income form T1 General 1998 with
Revenue Canada on 23rd April 1999. (This form (copy) was filed
with the Tax Court as EXHIBIT A in accordance with the Interim
Order of the Court dated 15th March 2002). In this T1 General
form the Appellant claimed deductions for Canada Pension Plan and
Superannuation payments, totalling $15,031.56 as tax free by
Treaty. The Appellant also claimed non-refundable tax
credits totalling $2,179.04 (including $170.00 for pension income
amount which was refused by CCRA). On foot of these allowable
deductions from income and non-refundable tax credits the
Appellant claimed that no Canadian income tax was payable for tax
year 1998.
[2]
During 1998 and later years, Mr. Merrins, a solicitor, was, and
is, a resident of Ireland. Earlier, he had been a resident of
Canada and had been employed in Canada. He filed the required
Notice of Objection to the 1998 assessment and, on confirmation
of the assessment, filed the Notice of Appeal after the time
period for filing a Notice of Appeal had expired. He applied for,
and received, an extension of time within which to file the
Notice of Appeal before me.
[3]
The appeal was scheduled to be heard in Ottawa on August
9, 2001. By letter dated July 24, 2001, Mr. Merrins applied
for his appeal to "be processed on the basis of submitted
documentation, being the Notice of Appeal, the respondent's
Reply to the Notice of Appeal, the appellant's Response to
the respondent's Reply to the Notice of Appeal and any
further submissions and reply thereto which the honourable Court
may require from either party". As a result of this request,
several conference calls took place between Mr. Merrins,
Mr. Ezri, counsel for the respondent, and myself to consider
Mr. Merrins' request. I finally concluded that the Court
could acquiesce to Mr. Merrins' request if the parties
could agree to execute an Agreed Statement of Facts, including
copies of all documents to be filed as exhibits; this would
constitute all of the evidence before me. The appellant would
then file written submissions in support of his position in this
appeal, the respondent would then file written submissions and
finally the appellant would file submissions in writing rebutting
the respondent's submissions. If the parties could not agree
on a Statement of Facts and documents to be produced for my
consideration, the appeal would be heard in the normal manner in
Canada. Eventually, in March, 2002, Mr. Merrins and
Mr. Ezri arrived at the necessary agreements and I issued an
order accordingly. Mr. Merrins' rebuttal submissions
were received June 24, 2002.
[4]
The following is the parties' Agreed Statement of
Facts:
For the purposes of this
proceeding only the following facts are agreed to by the
Appellant and the Respondent:
1.
Throughout the 1998 taxation year, the Appellant, was a resident
of Ireland;
2.
The Appellant was over 65 years of age
throughout the 1998 taxation year;
3.
All of the Appellant's income for
the 1998 taxation year was of Canadian origin;
4.
The Appellant filed a Return of Income,
form T1 General 1998, for the tax year 1998;
5.
The appellant listed at line 113 of the
Section "Total Income"
of form T1
General, the amount of $4901.70 for Old Age Security
pension;
6.
The Appellant listed at line 114 of the
Section "Total Income" of form T1 General, the amount
of $6008.28 for CPP benefit;
7.
The Appellant listed at line 115 of the
Section "Total Income" of form T1 General, the amount
of $9023.28 for Superannuation benefit;
8.
The Appellant listed at line 150 of the
Section "Total Income" of form T1 General the amount of
$19 933.26 for total income;
9.
The Appellant claimed, on form T1
General, deduction from total income of $15 031.56 under the
terms of The
Canada-Ireland Income Tax Agreement Act, 1967, Part II.
c. 75 S.C. 1996-1967 giving a taxable income of $4901.70.
(The Appellant waives for the purpose of this proceeding the
claim for an interest free loan to separated spouse);
10. The
Appellant claimed at line 300 of the Section
"Non-refundable tax credits" of form T1 General
the amount of $6467.00 for basic personal
amount";
11. The
Appellant claimed at line 301 of the Section
"Non-Refundable tax credits" of form T1 General
the amount of $3482.00 for age amount;
12. The
Appellant claimed at line 314 of the Section
"Non-refundable tax credits" of form T1 General
the amount of $1000.00 for pension income amount;
13. The
Appellant claimed in Schedule 9 of form T1 General for charitable
donations of $1302.00;
14. The
Appellant claimed at line 350 of the Section
"Non-refundable tax credits" of form T1 General
the amount of $2179.04 for non-refundable tax credits;
15. The
Appellant claimed on form T1 General for nil tax due;
16. The
Appellant did not elect under section 217 of the Act, but the
CCRA assessed the Appellant on the basis that such an election
had been filed;
17. The
Appellant and Respondent agree to file the following documents or
copies thereof as follows:
(a) The Appellant's
form T-1 General Income Tax Return for tax year 1998 & tax
and benefit guide;
(b) Notice of Assessment by
Canada Customs and Revenue Agency (CCRA) dated September 27,
1999;
(c) Letter from CCRA to
Appellant dated May 25, 2000 with attachments;
(d) Notice of Confirmation
dated June 29, 2000.
[5]
I understand the following to be the issues before me:
a)
If the appellant's
income is assessed under Part XIII of the Income Tax Act
("Act") can he claim the non-refundable
tax credits under section 118 of the
Act?
b)
Is Old Age Security
("OAS") a "pension" pursuant to
Article XI of what is generally referred to as the
Canada-Ireland Income Tax Agreement
such that it is exempt from tax?
c)
If the appellant's
income is assessed pursuant to an election under
subsection 217(2) of the Act is he also able to claim
that the terms of the Canada-Ireland Treaty
apply?
d)
Is the appellant entitled
to the pension credit under subsection 118(3) of the
Act?
A
If the appellant's income is assessed under Part XIII
of the Act can he claim the non-refundable tax credits
under section 118 of the Act?
[6]
The appellant claims that the non-refundable tax credits
provided under section 118 of the Act are available to
reduce his taxable income calculated under section 212 of
the Act and the Canada-Ireland Treaty. He
asserts that pursuant to the Canada-Ireland Treaty
his Canada Pension Plan ("CPP") and superannuation
payments are exempt from tax, thus reducing his taxable income to
$4,901. Pursuant to the Canada-Ireland Treaty the
rate of tax on this amount is 15 per cent, which yields
a gross tax of $735.26. The appellant states that the
non-refundable tax credits for basic personal amount, age
amount and donations yield at $2,042.06 tax credit which, when
subtracted from the gross tax of $735.26, results in no income
tax being payable.
[7]
In the view of the Minister of National Revenue
("Minister"), the non-refundable tax credits
available under section 118 are only available as a deduction
from Part I tax. These credits are not available to reduce tax
payable under section 212, a provision under Part XIII of the
Act. The Minister states that subsection 214(1) of
the Act prohibits the deduction of any amount against tax
payable under section 212. The Minister contends that, absent a
section 217 election, the appellant is subject to a 25 per
cent withholding tax pursuant to paragraph 212(1)(h) of
the Act. By virtue of the Canada-Ireland
Treaty the appellant's CPP and superannuation are exempt
from tax and that the 25 per cent rate on his OAS
income of $4,901.70 in 1998 is reduced to 15 per cent, which
yields tax of $735.26. The Minister notes that the appellant was
only assessed tax of $509.
[8]
Subsection 214(1) of the Act reads as follows:
The tax payable under section 212 is payable on the amounts
described therein without any deduction from those amounts
whatever.
[9]
The interpretation of subsection 214(1) of the Act has
been debated by the parties in some detail. I need not repeat
their positions. The issue may be resolved by examining section
118 of the Act. It is clear from section 118 that the
non-refundable tax credits apply in computing tax under
Part I of the Act. The opening words to subsections
118(1), (2) and (3) with respect to the non-refundable
personal credit, age credit, and pension credit respectfully,
read:
For the purpose of
computing the tax payable under this Part, [that is, Part I] by
an individual . . . there may be deducted. . ..
[10]
Clearly these non-refundable tax credits are intended to apply in
computing tax under Part I and not Part XIII.
B
Is OAS a "pension" pursuant to Article XI of the
Canada-Ireland Treaty such that it is exempt from
tax?
[11]
The appellant claims that his OAS is granted in consideration of
20 years of residence in Canada where he rendered a contribution
to the Canadian economy. That OAS is therefore a periodic payment
made in consideration of past services and qualifies as a
"pension" under Article XI (3) of the
Canada-Ireland Treaty, and that it is tax
exempt.
[12]
According to the respondent, the appellant's entitlement to
OAS, is based only on the age and Canadian residency criteria in
section 3 of the Old Age Security Act.
[13]
Under Article XI of the Canada-Ireland Treaty a pension is
exempt from Canadian tax. A pension is defined as a
"periodic payment made in consideration for past
services". The relevant portions of Article XI of the
Canada-Ireland Treaty reads:
1.
Any pension or annuity derived from sources within Canada by an
individual who is a resident of Ireland shall be exempt from
Canadian tax.
3.
The term "pension" means periodic payments made in
consideration of past services.
[14]
However, the Minister
correctly points out that the eligibility for OAS is not related
to the performance of past services, but rather that it is
related to age and residency requirements.
[15]
Sections 3 and 9 of the Old Age Security Act outline the
requirements for the payment of an OAS pension applicable in the
present case. The relevant portion of these sections of the
Old Age Security Act read as follows:
3.(1) Subject to this Act and the regulations, a full monthly
pension may be paid to
.
. .
(b) every person
who
.
. .
(ii) has attained
sixty-five years of age, and
.
. .
9.(1) Where a pensioner, having left Canada either before or
after becoming a pensioner, has remained outside Canada after
becoming a pensioner for six consecutive months, exclusive of the
month in which the pensioner left Canada, payment of the pension
for any period the pensioner continues to be absent from Canada
after those six months shall be suspended, but payment may be
resumed with the month in which the pensioner returns to
Canada.
(2) In the circumstances described in subsection (1), payment of
the pension may be continued without suspension for any period
the pensioner remains outside Canada if the pensioner establishes
that at the time the pensioner left Canada the pensioner had
resided in Canada for at least twenty years after attaining the
age of eighteen years.
[16]
In the appeal at bar the appellant's eligibility for OAS is based on the fact
that he is over 65 years old and that prior to becoming a
non-resident he had resided in Canada for at least 20 years after
the year in which he turned 18. Therefore the appellant's OAS
payments are not made in consideration for past services such
that it would qualify as a pension pursuant to Article XI of
the Canada-Ireland Treaty
and be tax exempt.
C
If the Appellant's income is
assessed pursuant to an election under subsection 217(2) of
the Act is he also able to claim that the terms of the
Canada-Ireland Treaty apply?
[17]
The Appellant submits that the
Canada-Ireland Treaty prevails over the terms of the
Act and as such that the pension income declared tax free
by the Canada-Ireland Treaty is not to be included in
amounts to which section 212 of the Act applies. He notes
that subsection 217(1) of the Act defines a
non-resident's "Canadian benefits" as the total of
all amounts which would be payable under paragraphs
212(1)(h), (j) to (m) and (q). He
declares that paragraph 212(h), which refers to pension
income, must therefore be modified by the Canada-Ireland
Treaty, to make his pension income non-taxable. The appellant
notes further that subsection 217(3) applies to non-resident
person's "Canadian benefits" within the meaning of
subsection 217(1) and therefore does not include pension benefits
declared tax-free by the Canada-Ireland Treaty.
[18]
As a result of the prevailing terms of the
Canada-Ireland Treaty and their effect the appellant
asserts that even if an election pursuant to subsection 217(2) of
the Act is made he is still entitled to a deduction of
$15,031.56 (treaty exempt pension income) on line 15 of schedule
A of his T1 General tax return, which would yield a net income of
$4,901.72.
[19]
Further, he adds that pursuant to the terms of
the Canada-Ireland Treaty the maximum tax rate that can be
applied in calculating his tax is 15 per cent, which yields a
gross tax of $735.26. The gross tax of $735.26, he insists, is
reduced to nil when the non-refundable tax credits of $2,042 are
applied.
[20]
Subsection 217(2) of the Act read as follows:
No tax is payable under this Part in respect of a non-resident
person's Canadian benefits for a taxation year if the
person
(a) files
with the Minister, within 6 months after the end of the
year, a return of income
under Part I for the year;
[21]
As a general overlay the Minister's
position is that the purpose of subsection 217(2) of the
Act is to permit a non-resident to file a tax return as
though he or she were a resident where such filing is beneficial
to the non-resident, having regard to the fact that the
election under subsection 217(2) gives the taxpayer access to
non-refundable tax credits under subsection 217(4) as well
as an additional credit under subsection 217(6) of the
Act.
[22]
In the appeal at bar, the Minister
states, the appellant is attempting to "pick and
choose" which elements of the section 217 election should
apply to him. Noting that where paragraph 217(3)(b)
includes CPP and superannuation
payments in calculating the appellant's
income, the appellant argues that the provision violates the
Canada-Ireland Treaty, but where subsection 217(4) makes
non-refundable tax credits available, he claims entitlement to
those credits. The Minister asserts that this "pick and
choose" approach to treaty interpretation is inapplicable in
Canada and elsewhere.
[23]
In Swanje v. Canada, the Supreme Court of Canada
upheld the decision of the Federal Court of Appeal
(Swantje). The Federal Court of Appeal concluded that
including pension benefits that were exempt from tax under a tax
treaty in calculating the claw-back of certain social benefits,
including OAS, was not a violation of the applicable tax treaty
and was in keeping with the scheme as a whole. Marceau J.A.
stated at page 6635:
The
approach adopted by the learned judge was a purely mechanical
one, focussed on the method, the means devised to achieve the
goal. The proper approach must be a functional one, and the
scheme must be considered as a whole, taking into account the
intent of the legislation, its object and spirit and what it
actually accomplishes (cf. Stubart Investments Limited v. The
Queen, [1984] 1 S.C.R. 536, [1984] C.T.C. 294, 84 D.T.C.
6305). What Part I.2 of the Act, completed by paragraph 60(w),
realizes is the repayment of social benefits by taxpayers who,
because of their higher incomes, have a lesser need of
them.
[24]
In Peter v. Canada [Peter], the Court
considered whether foreign income could be included in
calculating a taxpayer's entitlement to an age credit. Bowie
T.C.J. distinguished Swantje, supra. He noted that
Swantje, supra, involved the recovery of social benefits
paid under other statutes and did not effect tax paid. He held
that the inclusion of foreign income in calculating the age
credit indirectly taxed treaty exempt income.
[25]
However, in Eric
John v. The Queen [John], the principles in Swantje, supra were cited
in support of a decision that foreign pension income could be
included in calculating a taxpayer's entitlement to an age
credit. Sarchuck, T.C.J. stated at page 1327:
In my
view, although the effect of the calculation might appear as
though the foreign pension were being taxed, the Act does
not impose tax by virtue of the provisions in subsection 118(2).
It does no more than realize the reduction of a social benefit,
i.e., the age tax credit, for those taxpayers "who, because
of their higher incomes, have a lesser need of
them".
[26]
In the appeal at bar the inclusion of treaty
exempt income in the calculation of tax under a subsection 217(2)
election does not increase the tax payable by the appellant
because of the tax exemption provided in subsection 217(6).
Therefore the present appeal is distinguishable from both
Peter, supra and John, supra.
[27]
Following
Swantje, supra the proper approach must be a
functional one, where the scheme must be considered as a whole,
taking into account the intent of the legislation, its object and
spirit and what it actually accomplishes. The intent of
subsection 217(2) of the Act is to allow a non-resident to
elect to be taxed under Part I rather than Part XIII of the
Act. This allows the non-resident access to
non-refundable tax credits in section 118 which may reduce
their tax payable. In calculating the tax payable under section
217 the taxpayers "net world income" is the starting
point. This would include income that is normally not taxable
under Part XIII or a tax treaty. However, subsection 217(6)
provides a special tax exemption, which in the present appeal
would exclude from tax payable, tax calculated under section 217
on the appellant's treaty exempt income. What a section 217
election accomplishes is in keeping with the intent of the
Canada-Ireland Treaty, as in effect it does not tax
treaty exempt income.
[28]
Many of Canada's tax treaties contain
specific provisions, which provide that the tax treaty does not
restrict the taxpayer's entitlement to deductions, credits,
exemptions, exclusions or allowances available under domestic
law. Although, there is no so-called "domestic tax
benefit" provisions in the Canada-Ireland Treaty the
principle may nonetheless apply. Brian J. Arnold, in his article,
"The Relationship Between Tax Treaties and the Income Tax
Act: Cherry Picking," [Cherry Picking Article]
explains:
. . . Canadian tax treaties prevail over the
provisions of the Income Tax Act to the extent of any
inconsistency, subject to the provisions of the Income Tax
Conventions Interpretation Act. This general principle concerning
the relationship between tax treaties and the Income Tax Act is
well established and well known. Less well known is the principle
underlying the domestic tax benefit rule that a tax treaty shall
not be applied to deprive a taxpayer of any benefit otherwise
available under domestic tax law. These two general principles
are not inconsistent, nor is there any obvious hierarchy between
them. According to the second principle, if the treaty is less
favourable to the taxpayer than the Act, the Act applies;
therefore, there can be no conflict between the Act and the
treaty. According to the first principle, on the other hand, the
treaty prevails over any inconsistent provision of the Act, but
only to reduce, not to increase, the tax burden on the taxpayer.
(At page 873.)
As explained earlier, the basic principle of
the domestic tax benefit rule is that tax treaties do not impose
tax; they are exclusively relieving in nature. Since it is widely
accepted that this principle is inherent in tax treaties, it has
been suggested that the inclusion of an express provision in
Canadian tax treaties is simply "for greater
certainty." (At page 877.)
[29]
However the application of this so called
"domestic tax benefit" does not appear to allow a
taxpayer to duplicate benefits by "picking and
choosing" between the application of a tax treaty and
domestic tax laws. Mr. Arnold goes on to examine several
examples of the application of the "domestic tax
benefit" provision under the tax treaty between the U.S. and
Canada. One of the examples involves a situation where a taxpayer
is attempting to duplicate benefits by claiming a deduction under
the Act and a credit under a tax treaty for the same
income. Mr. Arnold concludes that taxpayers should not be
allowed to take inconsistent positions with respect to the
application of tax treaties and domestic tax laws in order to
duplicate a benefit. The example involves a U.S. citizen resident
in Canada who receives a dividend from a U.S. corporation, which
is subject to withholding tax. The issue is whether the taxpayer
can claim a deduction in computing his income for the withholding
tax under the Act and a credit against his Canadian tax
payable for the U.S. withholding tax pursuant to the treaty. Mr.
Arnold states:
. . . [I]t is clearly inappropriate for the
taxpayer to have the benefit of both the statutory deduction and
the credit under the treaty; they are alternative methods of
relieving double taxation. In other words, the taxpayer should be
entitled only to choose between the statutory deduction and the
credit. Another way of looking at the issue, which has sometimes
been used in the United States, is that the domestic tax benefit
rule does not permit taxpayers to take inconsistent positions
with respect to the treaty and the domestic tax legislation. In
this case, the credit provided under the treaty is based on the
assumptions that the US income is taxable in Canada and that no
other relief is available for the US taxes on that income. These
assumptions are consistent with the fundamental purpose of tax
treaties, namely, to eliminate double taxation.
Therefore, in general, the domestic tax
benefit rule should not be interpreted and applied to allow
taxpayers to duplicate benefits accorded under the Act and a
treaty where such benefits are alternatives. This position has
been taken by the Internal Revenue Service (IRS) in the United
States. [At pages 884-885.]
[30]
In the appeal before me a subsection 217(2)
election provided Mr. Merrins with a tax adjustment pursuant
to subsection 217(6) of the Act. This tax adjustment,
respondent's counsel states, "roughly" credits the
tax calculated under section 217 on treaty exempt income. If he
is also able to exempt income under the Canada-Ireland
Treaty he is duplicating benefits. I realize that when Mr.
Merrins originally filed his 1998 tax return, he did not claim a
section 217 election; officials of the Minister adjusted his
return to make his claim since a section 217 election would be to
his benefit. If Mr. Merrins' tax liability were not
reduced as a result of the election, I would not, of course,
sanction the officials' action.
[31]
Also, the subsection 217(2) election does not deny
Mr. Merrins an exemption or a
preferential rate of tax pursuant to the Canada-Ireland
Treaty. The election in effect takes the taxpayer outside of
the treaty and he or she loses the benefit afforded by the
treaty. This reasoning was expressed by
Stephen R. Richardson in considering the same example
discussed by Brian Arnold in the Cherry Picking
Article. Mr. Richardson wrote:
...[I]t must be determined whether the
entitlement is inconsistent with the provisions of the ITA
(because, if there is an inconsistency, the US treaty provisions
would prevail). However, it should be concluded that there is no
inconsistency because the taxpayer was "allowed" a tax
credit by Canada, which the taxpayer chose, under the applicable
provisions of the ITA, not to take. Thus, there is no reason to
consider that any provision of the US treaty has caused the
taxpayer to lose the tax credit; rather, his own choice under
domestic Canadian tax law resulted in that loss. (At page
4:21.)
[32]
In U.S. Rev. Rule. 84-17, published January
30, 1984 the United States Internal Revenue Service determined
that a taxpayer must choose between the application of the
Internal Revenue Code 26 U.S.C. (hereinafter
"Code") or a tax treaty, but not the most
favourable mix of both. The taxpayer in question wanted to
elect provisions of the tax treaty between the U.S. and Poland
with respect to the taxability of a business gain that was only
in part attributable to a permanent establishment in the United
States. In the same tax year the taxpayer also wanted to elect
the provisions of the Code with respect to a
non-attributable business loss.
[33]
Mr. Merrins argues that the application
of a 17 per cent tax rate under section 217 is in violation of
the maximum rate of tax (15 per cent) that is permitted under the
Canada-Ireland Treaty. Article VI of the Canada-Ireland
Treaty reads:
1. The rate of Canadian tax on income (other
than income from carrying on business in Canada or from
performing duties in Canada) derived from sources within Canada
by a resident of Ireland shall not exceed 15 percent.
[34]
The relevant words in Article VI of the
Canada-Ireland Treaty are "shall not exceed 15
percent", that is, the rate of tax of a resident of Ireland
from sources derived in Canada cannot exceed
15 per cent. Mr. Merrins, in fact, was taxed at a
rate of less than 15 per cent. He received $4,901.70 in Canadian
source income that was not exempt under the treaty, which at a
rate of 15 per cent would yield tax payable of $735.26. Under the
subsection 217(2) election the tax payable is $509, which results
in a tax rate of approximately 10 per cent, well below the 15 per
cent limit in the Canada-Ireland Treaty.
[35]
Based on the forgoing, it is clear that the appellant is not
entitled to "pick
and choose" the most favorable mix of the provisions of a
treaty and domestic law. As such, treaty exempt income and a
higher rate of tax may be used in the calculation of tax payable
under section 217 of the Act; at the end of the day an
election under section 217 of the Act reduces the
appellant's tax liability and is therefore not inconsistent
with the tax treaty.
D.
Is the Appellant entitled to the pension credit under
subsection 118(3) of the Act?
[36]
The appellant simply disputes the denial of
the pension credit in subsection 118(3), but he does not
make any specific arguments. The Minister, on the other hand,
asserts that the pension credit available under subsection 118(3)
of the Act is not available in respect of OAS or CPP. The
Minister admits that it is available in respect of superannuation
amounts, but states that subsection 118(8) precludes a taxpayer
from claiming the pension credit where the pension income does
not have to be included in income. As
the appellant's superannuation income is exempt under the
Canada-Ireland Treaty, he cannot claim the pension
credit.
[37]
Subsection 118(8) defines for the purpose of
subsection 118(3) "pension income" which is eligible
for the pension credit. Subsection 118(8) excludes from the
definition "pension income" OAS, CPP and amounts
included in income that would otherwise be "pension
income" but which the taxpayer has taken a deduction for
under another provision of the Act. The relevant portion
of subsection 118(8) reads:
For the purposes of subsection (3),
"pension income" and "qualified pension
income" received by an individual do not include any amount
that is
(a) the amount of a pension or
supplement under the Old Age Security Act or of any
similar payment under a law of a province;
(b) the amount of a benefit under the
Canada Pension Plan or under a provincial pension plan as
defined in section 3 of that Act;
. . .
(d) the amount, if any, by
which
(i) an amount required to be included in computing the
individual's income for the year
exceeds
(ii) the amount, if any, by which the amount referred to
in subparagraph (i) exceeds the total of all amounts deducted by
the individual for the year in respect of that amount;
or
. . .
[38]
Subsection 118(8) clearly states that OAS and
CPP are not "pension income". Therefore the appellant
is not entitled to the credit with respect to these two
items.
[39]
When electing to be taxed under section 217 of
the Act a taxpayer may still claim the "additional
deductions" on line 256 of T1-General for treaty exempt
income. In the present appeal the figure claimed at line 256 is
$15,031.56, which includes a deduction of $9,023.28 for
superannuation income.
[40]
In the appeal at bar the appellant has taken a
deduction, on line 256 of his T1-General, pursuant to paragraph
110(1)(f) for his superannuation income that is exempt by virtue
of the Canada-Ireland Treaty. As such his superannuation
income which would normally be eligible for a pension credit is
not eligible and the credit is accordingly denied.
[41]
At first blush it appears as though the
appellant is being improperly denied the pension credit with
respect to his superannuation income because the deduction of his
superannuation income (claimed on line 256 of his tax return)
does not figure into the calculation of the appellant's tax
payable in schedule 1 of his tax return. However, pursuant to
subsection 217(6) of the Act the appellant received a tax
adjustment of $1,015.00. The tax adjustment effectively credits
tax calculated under section 217 of the Act on treaty
exempt income.
[42]
The appeal is dismissed.
Signed at Ottawa, Canada,
this 2nd day of July 2002.
"Gerald J. Rip"
J.T.C.C.
COURT FILE
NO.:
2001-304(IT)I
STYLE OF
CAUSE:
Hugh Merrins v. The Queen
PLACE OF
HEARING:
Ottawa, Ontario
REASONS FOR JUDGMENT
BY: The Honourable Judge Gerald J.
Rip
DATE OF
JUDGMENT:
July 2, 2002
APPEARANCES:
For the
Appellant:
The appellant himself
Counsel for the
Respondent:
Michael Ezri
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-304(IT)I
BETWEEN:
HUGH MERRINS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal considered by written submissions at
Ottawa, Ontario, by
the Honourable Judge Gerald J. Rip
Appearances
For the
Appellant:
The Appellant himself
Counsel for the Respondent:
Michael Ezri
JUDGMENT
The appeal from the assessment made under the Income Tax
Act for the 1998 taxation year is dismissed.
Signed at Ottawa, Canada,
this 2nd day of July 2002.
J.T.C.C.
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