Kenny v. The Queen (January 2, 2018 – 2018 TCC 2, C. Miller J.).
Précis: Mr. Kenny was a resident and national of Ireland. In 2014 he worked in Canada for a few weeks and earned roughly $33,000. In computing his Canadian tax payable he claimed $28,717.00 in tax credits. He did not however report Irish Social Assistance payments of $23,002.37. CRA limited Mr. Kenny’s tax credits to $2,559 on the basis of section 118.94 of the Income Tax Act (the “Act”). The rationale for this was that he did not meet the provision’s test that “substantially all the individual’s income for the year [was] included in computing the individual’s taxable income earned in Canada for the year” since he had not included (nor was he required to include) the Irish Social Assistance payments which, although not taxable in Canada, nevertheless formed part of his “income” for Canadian purposes.
The Tax Court found that the Irish Social Assistance payments were part of his income for Canadian purposes (although not subject to tax in his hands as a non-resident) and therefore section 118.94 denied him the additional Canadian tax credits he had claimed. The Court also found that there was no relief available to Mr. Kenny under the Canada-Ireland Tax Treaty (the “Treaty”).
As a result the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.
Decision: The Court made short work of the claim for Treaty protection:
 To be clear at the outset, I am satisfied the Canada-Ireland Tax Treaty (the “Treaty”) does not preclude the Minister from denying these credits as subsection 24(3) of the Treaty reads:
Nothing contained in this Article shall be construed as obliging a Contracting State to grant to a resident of the other Contracting State any exemptions, allowances, reliefs and reductions for tax purposes which it grants to its own residents.
 Mr. Kenny’s counsel suggested subsection 24(1) of the Treaty precluded such treatment, as well as precluded the application of a surplus tax (though this latter item was not raised in Mr. Kenny’s Notice of Appeal). Subsection 24(1) of the Treaty reads:
1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected.
Similarly, the Court accepted the interpretation of section 118.94 advanced by the Minister, i.e., that the Irish Social Assistance payments constituted “income” for Canadian purposes:
 In determining whether or not the social assistance payments constitute income for the purposes of the application of section 118.94 of the Act, a starting point is section 3 of the Act which details the rules for determining the income of a taxpayer (the definition of taxpayer under subsection 248(1) of the Act includes any person whether or not liable to pay tax). Subsection 3(a) of the Act reads:
determine the total of all amounts each of which is the taxpayer’s income for the year (other than a taxable capital gain from the disposition of a property) from a source inside or outside Canada, including, without restricting the generality of the foregoing, the taxpayer’s income for the year from each office, employment, business and property,
 I then turn to paragraph 56(1)(u) which includes in income:
a social assistance payment made on the basis of a means, needs or income test and received in the year by
(i) the taxpayer, other than a married taxpayer or a taxpayer who is in a common-law partnership who resided with the taxpayer’s spouse or common-law partner at the time the payment was received and whose income for the year is less than the spouse’s or common-law partner’s income for the year, or
(ii) the taxpayer’s spouse or common-law partner, if the taxpayer resided with the spouse or common-law partner at the time the payment was received and if the spouse’s or common-law partners income for the year is less than the taxpayer’s income for the year,
except to the extent that the payment is otherwise required to be included in computing the income for a taxation year of the taxpayer or the taxpayer’s spouse or common-law partner;
 I conclude that the payments received by the taxpayer, Mr. Kenny, from the Irish government, other than the child benefit, fall squarely into this category as social assistance payments. Had Mr. Kenny reported the social assistance payments on his Canadian return, he could have relied on paragraph 110(1)(f) of the Act to deduct them out in computing taxable income. That provision goes to the determination of taxable income but does not in any way remove these payments from “income”. I am unable to find anything in the legislation that provides that these foreign social assistance payments do not constitute income.
Further, the Court concluded that Mr. Kenny had failed to meet the “substantially all” test of the statute because of the size of the Irish payments:
 Clearly, Mr. Kenny’s taxable income earned in Canada is $32,728, yet his overall income is that amount plus the social assistance payments (less the amount of the child benefit). A rough calculation suggests the taxable income earned in Canada represents approximately 60% of Mr. Kenny’s total income. Administratively, the Canada Revenue Agency has used an arbitrary 90% ratio to determine what is meant by substantially all. In the case of Watts v R, Bowman J indicated:
33. There are many cases in this Court that have considered the meaning of "all or substantially all". They consistently comment on the elasticity and ambiguity of the expression and on the inadvisability of using an arbitrary percentage, such as 90%. For example, Rip J. in McDonald v. The Queen, 98 DTC 2151 stated at p. 2154.
 Indeed, cases have relied on percentages as low as 76% to be considered substantially all. In Mr. Kenny’s case, I would be stretching “substantially all” beyond any measure of elasticity if I concluded that 60% represented “substantially all”. It certainly reflects a majority but that is not the same as substantially all.
In the result Mr. Kenny’s appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.