[OFFICIAL ENGLISH TRANSLATION]
2001-1538(GST)I
BETWEEN:
DANIEL TESSIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on November 23, 2001, at Ottawa, Ontario, by
the Honourable Judge Louise Lamarre Proulx
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Benoit Denis
JUDGMENT
The appeal from the goods and services tax assessment made under the Excise Tax Act, notice of which is dated July 4, 2000, and bears number 001380007229G0001, is allowed and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
The appellant is entitled to a rebate of $2,051.26.
Signed at Ottawa, Canada, this 7th day of December 2001.
|
"Louise Lamarre Proulx" |
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Date: 20011207
Docket: 2001-1538(GST)I
BETWEEN:
DANIEL TESSIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre Proulx, J.T.C.C.
[1] This is an appeal under the informal procedure concerning the assessment notice of which is dated July 4, 2000, and bears number 001380007229G0001.
[2] The issue concerns the rebate provided for in section 256 of the Excise Tax Act (the "Act") in respect of a single unit residential complex built by an individual. The point for determination is which of the day that is two years after the day the complex is first occupied or the day construction of the complex is substantially completed is the earlier within the meaning of subsection 256(3) of the Act.
[3] Subsection 256(3) of the Act reads as follows:
256(3) Application for rebate - A rebate under this section in respect of a residential complex shall not be paid to an individual unless the individual files an application for the rebate within two years after the earliest of
(a) the day that is two years after the day the complex is first occupied as described in subparagraph (2)(d)(i),
(a.1) the day ownership is transferred as described in subparagraph (2)(d)(ii),
(b) the day construction or substantial renovation of the complex is substantially completed.
[4] The facts admitted by the parties are as follows:
[TRANSLATION]
(a) the appellant is an individual who built a residential complex to serve as his ordinary place of residence. The said residential complex is a duplex, thus a "single unit residential complex" as defined in subsection 256(1) of the Act;
(b) on May 3, 2000, the appellant filed an application for rebate of goods and services tax for a new residential complex;
(c) the application was filed within two years of the day that is two years after the day he began to occupy the complex with his family after the start of the work;
(d) the complex began to be occupied in May 1996;
(e) the dwelling located on the upper floor has been rented since May 1, 1996, and was occupied in the first days of that month;
(f) the appellant has occupied the complex with his family since May 11, 1996;
(g) more than 90 percent of the goods and services tax relating to the rebate application was payable on or before December 31, 1997.
[5] The Minister of National Revenue (the "Minister) established that, as of May 11, 1996, the day on which the appellant began to occupy the complex, the construction work was substantially completed (at least 90 percent) and the complex was reasonably habitable. Thus, according to the Minister, the appellant had until May 11, 1998, to apply for a new housing rebate.
[6] The parties admit that the rebate amount to which the appellant is entitled, if any, is $2,051.26.
[7] The appellant testified and explained that he himself had built the duplex. His family's dwelling was to comprise the ground floor and basement. The dwelling for rent was on the upper floor. That dwelling was ready on May 1, 1996. He himself occupied the ground floor of his dwelling on May 11, 1996. However, he always felt that his dwelling was not completed because the basement was not finished. In 1996, he purchased sheets of plasterboard and everything he needed to complete the basement. All those materials were in the basement.
[8] The building plan had been approved by the city, but subject to the installation of a fireproof ceiling between the ground floor and basement and of some fireproof insulation around certain beams in the basement.
[9] The appellant and his spouse had one child and wanted another. The ground floor had two bedrooms and the basement two more. In the appellant's mind, the basement was an integral part of the dwelling they occupied and was to be completed right from the start.
[10] The heating in the rented dwelling was electric, while the heating of the appellant's dwelling was hot air. In May 1996, a number of ventilation ducts had not yet been permanently installed. In 1997, the appellant did the landscaping for his child's needs. As a result of the requirements set by municipal authorities, the exterior work was completed in May 1998. The appellant completed the basement work in the summer of 1998 with the help of a few friends. With respect to the basement bathroom, the sewer pipe and water intake pipes had already been installed, but the bathroom was completed in 1998. The interior walls were also built in the summer of that year.
Arguments
[11] Counsel for the respondent argued that the day on which construction was substantially completed was the day the dwelling was occupied, that is May 11, 1996. Counsel referred to the decision by Judge Hamlyn of this Court in Vallières v. The Queen, [2001] T.C.J. No. 528 (Q.L.), more particularly to the following passages:
[15] The term "substantially completed", as it appears in paragraph 256(3)(b) of the Act, is not specifically defined in the legislation.
[16] The 90% threshold test is used by the CCRA as an administrative rule of thumb. However, this test is very imprecise and has consistently been criticized. There is a complete absence of criteria on which to base such an estimate. Ostensibly, the CCRA may consider "substantially complete" to mean something less than 90%. However, it is unlikely that a level of completion below 70% would amount to "substantial completion" as envisaged by the Act.
[17] The 90% or more rules must always be qualified by the fact that the purchaser must be able to reasonably inhabit the premises. To a large extent, that can have a subjective component and one has to take into account the particular purchaser, but not to the point where objective standards can be disregarded.
[18] To be "substantially completed" a residential complex must be capable of being used for the purpose for which it was constructed.
[19] In determining what constitutes "substantial completion" there must be a certain common-sense assessment of what, on the facts of the particular case, a reasonable person would regard as substantial completion.
[12] He also referred to another decision by Judge Hamlyn of this Court in Pickering v. The Queen, [2000] G.S.T.C. 1 (T.C.C.), more particularly to the following passages:
[5] Construction of the complex was substantially completed on or around September 3, 1997. The Appellants did submit however that as of September 3, 1997 they had not started a proposed basement apartment and the landscaping was not complete.
. . .
[12] In this case, I conclude the house was substantially completed at the time of occupancy notwithstanding landscaping was not complete and the basement was not finished in terms of creating an apartment. Indeed, at the date of hearing, the proposed basement apartment still has not been addressed.
[13] He also cited Memorandum 19.3.4 of August 1998 entitled "Rebate for Owner-Built Homes", which clearly explains how this rebate scheme works, in paragraphs 23 and 24:
Time limit for filing rebate application
23. The rules affecting the time limits for filing a rebate application have changed for applications filed on or after April 23, 1996. For these applications, the time limit for claiming a rebate for an owner-built single unit residential complex or residential condominium unit, is the day that is two years after the earliest of:
· the day that is two years after the day the complex is first occupied by the individual or a relation of that individual after the construction or substantial renovation began;
· the day ownership is transferred under an exempt sale before the complex is ever occupied; or
· the day construction or substantial renovation is substantially completed.
24. In the case of a residential complex that is occupied while it is being constructed or substantially renovated, the owner may apply for the rebate up to two years after the construction or substantial renovation is substantially completed, provided that the construction or substantial renovation is substantially completed within two years of the date of occupation. If the owner takes longer to substantially complete the work, the time limit for filing the application is still a maximum of four years from the date of occupation, but only tax that has been paid and which became payable up to two years after the date that the unit was occupied may be included in calculating the rebate amount.
[14] The appellant cited Judge Hamlyn's decision in Vallières, supra, more particularly paragraph 18:
[18] To be "substantially completed" a residential complex must be capable of being used for the purpose for which it was constructed.
The appellant argues that his residence was not completed until it was able to achieve the purpose for which it had been built and that this occurred when the basement was completed.
Analysis
[15] I find that the evidence showed that the appellant's initial plan was to build a two-storey family dwelling. It was not a plan with two chronological stages or an eventual plan for an undetermined future. Completion of the basement was an immediate plan. That completion was necessary in order to achieve the purpose the appellant had in mind when he began building the complex in question. The facts supporting this contention and intention are the purchase of materials in 1996 and 1997 and the number of rooms the appellant deemed necessary for his family's purposes. All the materials necessary to complete the basement were purchased before the end of 1997 and stored in the basement itself. The appellant did certain jobs such as landscaping and paving before completing the basement because municipal authorities had required that those items be immediately completed.
[16] The day that is two years after the day the complex was first occupied by an individual would be May 11, 1998. The day construction was substantially completed was in June or July 1998. The first of the two days is thus May 11, 1998. The application had to be filed within two years after the earlier of the two days described above, that is, on or before May 11, 2000. The appellant's application was filed on May 3, 2000, and was therefore filed within the prescribed time.
[17] The appeal is allowed.
Signed at Ottawa, Canada, this 7th day of December 2001.
|
"Louise Lamarre Proulx" |
J.T.C.C.