You are also allowed to deduct legal fees in connection with obtaining this settlement, for the amount of the legal fees or the amount of the settlement, whichever is less. 

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/232/lgl-eng.html

It will depend on what the settlement is for.  Per CRA:

"(a) if the compensation is received for the failure to receive a sum of money that would have been an income item if it had been received, the compensation will likely be an income receipt"

Leanne provided a very helpful link for these situations, if you scroll down to "damages, settlements and similar receipts"

http://www.cra-arc.gc.ca/E/pub/tp/it365r2/it365r2-e.html