https://decisia.lexum.com/tcc-cci/decisions/en/item/307966/index.do
Smith v. The Queen (March 26, 2018 – 2018 TCC 61, Campbell J.).
Précis: The taxpayer was a registered Indian and his income as a tribe councillor and head of economic development for the Tlowitsis-Mumtagila First Nation was exempt from tax pursuant to section 81 of the ITA. He sought to deduct contributions of $3,210.00 to a registered pension plan (“RPP”) registered by his employer. The Court held that since his employment income was exempt from tax he could not deduct his RPP contributions against his other sources of income, which did not arise from employment. Thus the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.
Decision: The basis statutory provisions at issue were not complex:
[8] No deductions may be made by a taxpayer in computing income in any taxation year from an office or employment unless the deduction is expressly permitted in subsection 8(1) of the ITA. The deductions permitted in subsection 8(1) enable taxpayers to reduce their taxable income in any given taxation year. The preamble in 8(1) states:
Deductions allowed
8(1) In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto
[Emphasis added]
[9] The exception relevant to this appeal is found at paragraph 8(1)(m):
8(1)
…
Employee’s registered pension plan contributions
(m) the amount in respect of contributions to registered pension plans that, by reason of subsection 147.2(4), is deductible in computing the taxpayer’s income for the year;
Justice Campbell found that since Mr. Smith’s employment income was exempt pursuant to section 81 of the ITA he could not use his RPP deduction and apply it against other sources of income:
[20] I agree with the analysis of Justice Paris and his conclusions are equally applicable to the language contained in the relevant provisions in this appeal, even though subsection 20(12) deals with income from a business or property. The comments contained in Hickman Motors are also applicable. The taxing scheme set out in the ITA requires that a taxpayer must calculate income in any taxation year from all sources but it is calculated with reference to each source, which in this appeal, means each office or each employment. The deduction for RPP contributions cannot be treated as a deduction in the general sense so that it could be separated from its income source. The Appellant cannot take the deduction, which is connected to his employment with Tlowitsis-Mumtagila First Nation and apply it generally against his other income of dividends and capital gains interest.
[21] The unfortunate result for the Appellant is that his deduction must be taken against employment income which is exempt producing a nil result for him. He would not have been in a position of making those contributions except through his employment with Tlowitsis-Mumtagila First Nation, which, as the employer, established the pension plan. The language contained in these provisions, together with the general intent and spirit of the ITA, preclude the Appellant from taking the deduction for his RPP contributions against his other income.
[22] For these reasons, the appeal in respect to the 2015 taxation year is dismissed.
These was no order as to costs since this was an informal procedure appeal.