Date: 19980428
Docket: 96-2862-GST-I
BETWEEN:
JOSEPH V. THOMPSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
(Delivered orally from the Bench at Calgary, Alberta, on April 9, 1997)
Mogan, J.T.C.C.
[1] This is an appeal under the provisions of the Excise Tax Act (with respect to goods and services tax) and the Appellant has elected the informal procedure. The only issue is whether the Appellant is entitled to a “new housing rebate" under section 256 of the Act
[2] The Appellant and his wife have owned and lived at 1106 - 22nd Avenue, N.W., in Calgary for a number of years and, in 1993, they decided to have significant renovations done to their home. At that time, it was a two-bedroom bungalow approximately 28’ by 30’ in size. They decided to add a 12’ addition to the west side of the house which included an excavation for a basement because there was a complete basement under the original bungalow. They also added a second storey which was built over the 12’ addition to the west and covered a significant portion, but not all, of the original bungalow. The projected cost of this renovation was in the range of $120,000. According to the Notice of Appeal, the contractor cost was $120,176; and the self-project costs which I assume were completed by the Appellant, his wife and whatever subcontractors they may have used, were $15,194, making a total cost of approximately $135,000 for renovations.
[3] The construction commenced on April 28, 1993 when the excavation began for the basement. The contractors worked through the spring, summer and fall and the work was substantially completed by November 18, 1993 when the hardwood flooring was in place and the finishing had been applied to the floors. It took about three weeks for the finish to cure before the floors could accept traffic. Therefore, the newly-renovated part of the house was not available for occupancy until December 18, 1993. After hearing evidence from the Appellant’s wife, I am satisfied that for the purposes of the legislation, the renovations were substantially complete on December 18, 1993 and all of the contracting work was performed from April to December, 1993.
[4] On or about September 30, 1995, the Appellant filed an application for rebate of the goods and services tax expended in connection with this renovation. The Minister of National Revenue refused to grant the rebate on the basis that the application had been filed too late. The Minister claims that there is a two-year time limit within which a taxpayer may apply for the rebate and, therefore, the issue in this appeal is when the two-year period commenced.
[5] The Minister argues that the two-year period commenced on April 28, 1993 when the renovations began with the excavation and the Appellant argues that the two-year period did not commence until December 18, 1993 when the renovations were substantially completed. The difference is significant because the application was filed in September 1995 and, two years before the application was filed (September 1993) falls between the two commencement dates which are in dispute.
[6] To resolve this appeal, I must interpret and apply the provisions of section 256 of the legislation. The relevant provisions are as follows:
256(1) In this section,
...
“single unit residential complex” includes a multiple unit residential complex that does not contain more than two residential units.
256(2) Where
(a) a particular individual ... engages another person to construct or substantially renovate ... a single unit residential complex ...
(b) ...
(c) the particular individual has paid tax under Division II in respect of ... the supply to the individual of any improvement thereto (the total of which tax is referred to in this subsection as the “total tax paid by the particular individual”),
(d) either
(i) the first individual to occupy the complex after the construction or substantial renovation is begun is the particular individual or a relation of the particular individual, or
...
the Minister shall, subject to subsection (3), pay a rebate to the particular individual equal to
(e) ...
256(3) A rebate shall not be paid under subsection (2) in respect of a residential complex to an individual unless the individual files an application for the rebate within two years after the earlier of
(a) the day the complex is first occupied as described in subparagraph 2(d)(i) or ...
(b) the day construction or substantial renovations of the complex is substantially completed.
With respect to subsection 256(1) which sets out the definition of “single unit residential complex”, there is no question that the home owned by the Appellant falls within that category because it was what the town planners refer to as a single-family dwelling. Therefore, the Appellant qualifies under that subsection.
[7] Subsection 256(2) sets out the conditions that must be satisfied for a rebate and, assuming that subsections (a), (b), (c) and (d) are satisfied, the subsection continues with a formula which determines the amount of the rebate. That formula is not in dispute in this appeal and, therefore, I can ignore it. Basically, subsection 256(2) authorizes and requires the Minister to pay a rebate subject to subsection 256(3) which creates the time limit for the application which is critical in this appeal.
[8] Paragraphs 256(3)(a) and (b) define two time limits one of which is the commencement of the two-year period. The time limit set out in paragraph 256(3)(a) is cross-referenced to subparagraph 256(2)(d)(i). That subparagraph states: “the first individual to occupy the complex after the construction or substantial renovations is begun is the particular individual or a relation of the particular individual ...”. Therefore, in order to interpret subsection 256(3), one must have regard to the terms of subparagraph 256(2)(d)(i).
[9] As I understand the argument of the agent for the Appellant, the Appellant was not relying on the legislation but was relying on a Guide published by Revenue Canada entitled "Completion Guide and Form for GST New Housing Rebate". This Guide is dated May 1995 and, on page 11, there is the following statement under the heading "Application Type 4, Owner Built Homes and Homes Substantially Renovated by the Owner":
11. If you qualify for owner-built home rebate, you may apply from whichever date comes earlier,
(1) the date you or a relation first occupy the home after construction or substantial renovation has begun,
(2) the date you transfer ownership to another person if you sell the home before it is occupied, or
(3) the date construction or substantial renovation is substantially completed.
In this booklet, it appears that Revenue Canada has attempted to translate into layman’s language the two time limits contained in the Act. Therefore, I assume that paragraphs 11(1) and 11(2) are an interpretation for paragraph 256(3)(a) of the Act and paragraph 11(3) is an interpretation for paragraph 256(3)(b).
[10] The Appellant looked at paragraph 11(1) being “the date you or a relation first occupied the home after the construction or substantial renovation has begun” and assumed that would apply to a dwelling in which the individual had not resided before the renovation commenced. The Appellant therefore concluded: “That does not apply to me because we occupied the home throughout, so it must be the third one which applies; the date construction or substantial renovation is substantially completed”. As a result of his interpretation, he thought that he had two years after December 18, 1993, and he thought he was within the two-year period when he filed his application for rebate in September 1995.
[11] I can understand the Appellant and his wife drawing that conclusion from the Guide and drawing the same conclusion if they were reading the legislation itself. I think, however, that they misread both the legislation and the Guide. I conclude that they do not come within paragraph 256(3)(b) of the Act because they occupied the house throughout the renovation period. At no time did they move away from the dwelling while the renovations were in progress. They consolidated their furniture into those portions of the home where the contractor was not going to work; and they continued to reside in the home throughout the construction period.
[12] The evidence and the Notice of Appeal confirmed that the kitchen had been renovated at a prior time and was not being renovated in 1993. Therefore, the Appellant and his wife were able to use the kitchen and also, they were storing some china cabinets and other furniture in the kitchen. Their living quarters were cramped because they had to pull the furniture from those areas of the house where the contractor was working and consolidate it in other rooms. They had a room finished in the basement under the old part of the bungalow and they had a davenport there where they were able to sleep. Therefore, they were sleeping in the basement and using the kitchen on the main floor and actually residing in the dwelling throughout the renovation period.
[13] Because they were residing throughout, they interpreted the date when a person might first occupy the home after the renovation had begun as not applying to them. In the circumstances of this appeal, I construe subparagraph 256(3)(a) to mean that the date when they first occupied the home after the renovation began was April 29, 1993. I come to that conclusion by my interpretation of both the booklet published by Revenue Canada, which was the Appellant’s guide, and by the legislation itself. Under sub-paragraph 256(2)(d)(i), the words are very clear: “the first individual to occupy the complex after the construction or substantial renovation is begun.”
[14] I look at the day when the renovation was begun which was April 28, 1993, and then ask: “Was the dwelling occupied at all on that date?”. If the dwelling is occupied when the renovation begins and throughout the renovation period, then pursuant to subparagraph 256(2)(d)(i), the first individual to occupy the dwelling after substantial renovation has begun is the individual who lives there on April 28, 1993. The Appellant was occupying the dwelling on the first day after the renovation began.
[15] I realize that the legislation is new and people are not used to dealing with it, but the Appellant had the good sense to get the Guide and follow it. The Guide is a reasonably accurate representation of the legislation but I believe the Appellant drew the wrong inference when he assumed that the words “the date you ... first occupy the home after ... substantial renovation has begun” did not apply to him because he was already residing in the dwelling.
[16] The person who continues to reside in a residential complex throughout a period of substantial renovation must make the application for the new housing rebate within two years after the “substantial renovation is begun”. In this appeal, that two-year period commenced on April 28, 1993, and would have expired on April 28, 1995. Because the application was not filed until September 1995, it was out of time and beyond the two-year limitation period. For these reasons, I dismiss the appeal and hold that the Minister was correct in refusing a rebate of goods and services tax.
Signed at Ottawa, Canada, this 28th day of April, 1998.
"M.A. Mogan"
J.T.C.C.