Bowman,
T.C.C.J.:—In
this
appeal,
from
an
assessment
for
the
appellant's
1990
taxation
year,
Mr.
Merritt
challenges
the
right
of
the
Minister
of
National
Revenue
to
include
in
his
income
the
sum
of
£20,611.76
(Cdn
$42,888.95)
received
by
him
in
1990
as
a
lump
sum
out
of
the
United
Kingdom
Civil
Service
Pension
Scheme.
The
appellant
in
his
claim
for
exemption
relies
primarily
upon
the
provisions
of
articles
17
and
18
of
the
Canada-United
Kingdom
Income
Tax
Convention.
Mr.
Merritt
is
a
civil
engineer
who
worked
for
20
years
for
the
United
Kingdom
Ministry
of
Agriculture,
Fisheries
and
Food
until
he
left
that
employment
in
1980
at
the
age
of
50
and
emigrated
to
Canada,
where
he
has
since
resided.
He
testified
that
in
joining
the
U.K.
civil
service
he
automatically
became
a
member
of
the
Civil
Service
Pension
Scheme.
According
to
a
guide
to
the
scheme
a
member
contributes
1.5
1.5
per
cent
of
his
or
her
pay
mainly
toward
the
cost
of
providing
benefits
for
the
members'
widow
or
widower.
These
contributions
qualify
for
full
tax
relief.
The
pension
consists
of
two
parts:
(a)
periodic
payments
equal
to
1/80
of
the
member's
pensionable
pay
on
retirement
times
the
number
of
years
of
reckonable
service;
and
(b)
a
lump
sum
payment
equal
to
three
times
the
annual
pension.
If
the
member
dies
before
receiving
the
lump
sum
payment
the
amount
thereof
is
paid
to
his
or
her
surviving
widow
or
other
dependants.
Under
United
Kingdom
law
the
periodic
pension
payments
are
treated
as
earned
income.
The
lump
sum
is
free
of
U.K.
tax.
In
1990,
at
the
age
of
60,
Mr.
Merritt
became
entitled
to
and
received
the
lump
sum
payment
of
£20,611.76
as
well
as
the
monthly
payments
out
of
the
scheme.
He
included
both
the
periodic
payments
and
the
lump
sum
in
income
in
filing
his
1990
Canadian
income
tax
return,
but
took
the
position
that
he
was
entitled
to
deduct
the
amount
of
the
lump
sum
under
subparagraph
110(1)(f)(i)
which
permits
a
deduction
of
.
.
.any
amount
that
is
(i)
an
amount
exempt
from
income
tax
in
Canada
by
reason
of
a
provision
contained
in
a
tax
convention
or
agreement
with
another
country
that
has
the
force
of
law
in
Canada.
.
.
.
The
Minister,
on
assessing,
denied
the
deduction
and
included
the
amount
in
his
income
under
paragraph
56(1)(a)
as
an
amount
.
.
.
.
received
by
the
taxpayer
in
the
year
as,
on
account
or
in
lieu
of
payment
of,
or
in
satisfaction
of,
(i)
a
superannuation
or
pension
benefit.
.
.
Superannuation
or
pension
benefit”
under
section
248
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
includes
any
amount
received
out
of
or
under
a
superannuation
or
pension
fund
or
plan
and
.
.
.
includes
.
.
.
any
payment
made
to
a
beneficiary
under
the
fund
or
plan.
.
.
.
(a)
in
accordance
with
the
terms
of
the
fund
or
plan.
.
.
.
There
is
no
question
that
the
lump
sum
payment
is
a
superannuation
or
pension
benefit
within
the
meaning
of
the
Act.
Paragraphs
1
and
3
of
article
17
of
the
Canada-United
Kingdom
Income
Tax
Convention
read
as
follows:
1.
Pensions
arising
in
a
contracting
state
and
paid
to
a
resident
of
the
other
contracting
state
who
is
the
beneficial
owner
thereof
shall
be
taxable
only
in
that
other
state.
3.
For
the
purposes
of
this
Convention,
the
term
pension”
includes
any
payment
under
a
superannuation,
pension
or
retirement
plan,
Armed
Forces
retirement
pay,
war
veterans
pensions
and
allowances,
and
any
payment
under
a
sickness,
accident
or
disability
plan,
as
well
as
any
payment
made
under
the
social
security
legislation
in
a
contracting
state,
but
does
not
include
any
payment
under
a
superannuation,
pension
or
retirement
plan
in
settlement
of
all
future
entitlements
under
such
a
plan
or
any
payment
under
an
income-averaging
annuity
contract.
This
wording,
which
came
into
effect
in
1985,
was
the
result
of
an
amendment
contained
in
the
second
protocol
to
the
1978
convention.
The
predecessor
to
paragraphs
1
and
2
of
article
17,
which
was
itself
an
amendment
under
the
first
protocol,
reads
as
follows:
1.
Pensions
and
annuities
arising
in
a
contracting
state
and
paid
to
a
resident
of
the
other
contracting
state
may
be
taxed
in
that
other
state.
However,
such
pension
and
annuities
may
also
be
taxed
in
the
first-mentioned
contracting
state,
but
of
the
total
amount
thereof
paid
in
any
year
of
assessment
or
taxation
year
to
a
resident
of
the
other
contracting
state
that
first-mentioned
contracting
state
shall
exempt
from
tax
$10,000
or
£5,000,
whichever
is
the
greater.
For
the
purposes
of
this
paragraph
the
term
"pensions"
does
not
include
lump
sum
payments
out
of
a
pension
plan.
2.
Notwithstanding
the
provisions
of
paragraph
1
of
this
article,
pensions
paid
out
of
public
funds
of
the
United
Kingdom
or
Northern
Ireland
or
of
the
funds
of
any
local
authority
in
the
United
Kingdom
to
any
individual
in
respect
of
services
rendered
to
the
government
of
the
United
Kingdom
or
Northern
Ireland
or
a
local
authority
in
the
United
Kingdom
in
the
discharge
of
functions
of
a
governmental
nature
may
be
taxed
in
the
United
Kingdom.
Mr.
Merritt
argued
that
the
second
protocol
was
not
intended
to
qualify
or
amend
the
wording
of
the
last
sentence
in
former
article
17,
"for
the
purposes
of
this
paragraph
the
term
"pensions"
does
not
include
lump
sum
payments
out
of
a
pension
plan".
With
respect
I
do
not
believe
that
it
was
intended
by
the
second
protocol
to
maintain
the
definition
of
pensions
that
prevailed
under
the
first
protocol.
Under
the
first
protocol
there
was
excluded
from
the
meaning
of
pension
any
lump
sum
payment.
I
need
not
consider
how
such
payments
were
to
be
treated
prior
to
the
second
protocol.
The
lump
sum
payment
received
by
Mr.
Merritt
in
1990
was
not
a
payment”.
.
.
in
settlement
of
all
future
entitlements
under
such
a
plan”.
The
lump
sum
payment
was
only
one
part
of
his
entitlement.
He
continues
to
be
entitled
to
a
periodic
monthly
payment.
I
cannot,
without
distorting
the
meaning
of
section
3
of
the
present
article
17,
attribute
to
it
a
meaning
derived
from
the
predecessor
section.
The
second
protocol
was
obviously
the
result
of
protracted
negotiations
between
the
two
contracting
states
in
an
attempt
to
carve
up
the
jurisdiction
to
tax
pensions
and
annuities
in
a
manner
that
was,
to
the
extent
possible,
consistent
with
the
respective
domestic
laws
of
the
two
countries
and
with
the
overall
objectives
of
the
tax
convention.
Mr.
Merritt
contended
as
well
that
the
effect
of
Canada's
taxing
the
lump
sum
payment
is,
in
effect,
to
cause
the
United
Kingdom
to
break
its
contract
with
him
whereby
such
lump
sum
payments
would
be
free
of
tax.
The
short
answer
to
this
contention
is
that,
if
his
understanding
of
the
tax
consequences
under
United
Kingdom
law
can
be
characterized
as
the
term
of
a
contract,
Canada
was
not
a
party
to
that
contract.
When
one
moves
from
one
jurisdiction
to
another
one
cannot
reasonably
expect
the
new
jurisdiction
to
honour
all
of
the
fiscal
rules
of
the
old
one.
The
U.K.
did
not
break
its
so-called
contract
with
him.
It
imposed
no
tax
on
the
lump
sum
payment.
Since
I
have
concluded
that
the
lump
sum
payment
is
not
excluded
from
the
definition
of
pension
in
section
3
of
article
17
of
the
treaty
I
need
not
consider
Mr.
Merritt's
further
argument
that
the
payment
falls
within
article
18
as
"remuneration"
that
is
taxable
only
by
the
United
Kingdom.
Reference
was
also
made
in
argument
to
subclause
56(1)(a)(i)(C.1)
and
paragraph
110(1)(f)
but
I
do
not
think
that
the
lump
sum
payment
falls
within
either
of
those
provisions.
Mr.
Merritt
presented
his
case
with
great
skill
and
thoroughness
but
I
am
respectfully
unable
to
agree
that
the
lump
sum
payment
is
exempt
from
Canadian
tax.
The
appeal
is
therefore
dismissed.
Appeal
dismissed.
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