Tax Court of Canada Judgments

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.[1]

[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[2] 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.[3]

[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:[4]

         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, [5] 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 [6] [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 [7] [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," [8] [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 [9] 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. [10] 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. [11]

[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.

"Gerald J. Rip"

J.T.C.C.