Docket: 2012-2850(GST)I
BETWEEN:
SASHA TSENKOVA, SVETOZAR GARNENHOV,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal
heard on September 20, 2013, at Calgary, Alberta
Before: The Honourable
Justice G. A. Sheridan
Appearances:
|
Agent for the Appellant:
|
Sasha
Tsenkova
|
|
Counsel for the Respondent:
|
Jeff Watson
|
____________________________________________________________________
JUDGMENT
In accordance with the attached Reasons for
Judgment, the
appeal is allowed on the basis that the Appellant has satisfied the
requirements of section 256.2 of the Excise Tax Act.
Signed at Ottawa, Canada this 9th day of
October 2013.
"G. A. Sheridan"
Citation: 2013 TCC 321
Date: 20131009
Docket: 2012-2850(GST)I
BETWEEN:
SASHA TSENKOVA, SVETOZAR GARNENHOV,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan J.
[1]
The issue in this
appeal is whether the Minister of National Revenue was justified in denying the
Appellant’s application for a GST/HST New Residential Rental Rebate Property
Rebate on the basis that the property in question was not a
"qualifying residential unit" under subsection 256.2(1) of the Excise
Tax Act.
[2]
The relevant portions of
the definition of "qualifying residential unit" are as follows:
256.2(1)
“qualifying residential unit” of a person, at a particular time, means
(a)
a residential unit of which, at… the
particular time, the person is… a co-owner …, where
…
(iii)
it is the case, or can reasonably be expected by the person at the particular
time to be the case, that the first use of the unit is or will be
…
(B)
as a place of residence of individuals, each of whom is given continuous
occupancy of the unit, under one or more leases, for a period, throughout which
the unit is used as a primary place of residence of that individual, of at
least one year…
[3]
On
December 3, 2010, the Appellant became the co-owner, along with her spouse, of
a new residential condominium unit (“Unit”) and the GST was paid at that time. On
December 30, 2010, the Appellant entered into an agreement with Premier
Executive Suites
(“Premier Suites Agreement”) to lease the Unit. In the preamble to the standard-form
Premier Suites Agreement, the Appellant is identified as the “Landlord” and
Premier Executive Suites as the “Tenant”. In clause 2, the dates for the term
of the Premier Suites Agreement have been written in the spaces provided: “Jan
15 2011” to “Jan 14 2012”. Clause 2 further states that the “… Landlord agrees
that the intention of the Tenant is to sub-let the premises to corporate
executives for the purpose of providing temporary accommodation”.
[4]
It
is this last clause that gives rise to the current dispute. The Minister denied
the Appellant’s claim for a rebate based on the assumption that the first use
of the Unit was as “temporary
accommodation”
to Premier
Executive Suites’ clients rather than as a “primary place of residence”
occupied by a sub-lessee(s) throughout a period of at least one year as
required by clause 256.2(1)(a)(iii)(B) of the Excise Tax Act.
[5]
In Melinte
v. Her Majesty the Queen,
one of the few cases dealing with the interpretation of clause 256.2(1)(a)(iii)(B),
Webb, J. (as he then was) noted that the term “at a particular time”, as used
in that provision, is defined under subsection 256(3) to mean when the unit is
acquired and the GST is payable. But at that time, he queried, how “… would
anyone know … how the unit will actually be used in the next year?” In view of that impossibility,
Webb, J. held that it is the expectation in respect of the first use of
the unit at the time the GST is paid that is relevant for determining whether the
conditions of clause 256.2(1)(a)(iii)(B) have been met; namely,
whether “… one individual throughout the period of one year … uses the unit as
his or her primary place of residence…”.
[6]
Applying
these principles to the present matter, the Appellant could not have known
what the “actual” first use of the Unit would be as of
December 3, 2010 when she acquired the Unit and paid the GST; thus,
it is her reasonable expectation as of that time that is key to her entitlement
under clause 256.2(1)(iii)(B).
[7]
The
Appellant had the onus of satisfying the Court that the Unit was a “qualifying
residential unit”. She was the only witness to testify. Her evidence was
well-organized, credible and remained unshaken on cross‑examination.
[8]
The
Appellant purchased the Unit as an investment property. Because she lacked the
experience and time to handle the rental of the Unit herself, she interviewed
various property managers, ultimately deciding on Premier Executive Suites to
take on the task. At no time between the purchase and lease of the Unit did the
Appellant occupy or intend to occupy the Unit
nor was it ever intended that Premier Executive Suites would do so. Rather, it
was always the Appellant’s intention to find a long-term tenant for the Unit. Her
reason for imposing this condition was to reduce the wear and tear on the Unit
that would otherwise be likely to occur. This intention was communicated to
Premier Executive Suites.
[9]
Thus
it was that, acting as the Appellant’s agent, Premier Executive Suites secured
a tenant who agreed to use the Unit continuously as his/her primary place of
residence for at least one year. Further support for this is found in a letter
from the representative of Premier Executive Suites as well as in the documentation
and timing of the transactions leading up to the first occupancy of the Unit: it
was purchased on December 3, 2010; on December 30, 2010 the Premier Suites
Agreement was executed leasing the Unit for a one-year period commencing
January 15, 2011; on the same date, the subleasing tenant occupied
the Unit. Two days later, on January 17, 2011, the Appellant signed the GST
rebate application which was received by the Minister on
January 28, 2011.
[10]
In all
the circumstances, notwithstanding the use of the term “temporary
accommodation” in the standard-form Premier Suites Agreement, I am satisfied
that at the time the GST was paid, it was the Appellant’s reasonable
expectation under the Premier Suites Agreement that an individual would use the
Unit throughout a period of at least one year as his/her primary place of
residence. Indeed, as of the hearing date, the original subleasing tenant continued
to reside in the Unit under a series of renewals of the original sublease pursuant
to the Premier Suites Agreement.
[11]
The
Appellant has met the requirements of section 256.2 Excise Tax Act and accordingly, the appeal is allowed.
Signed at Ottawa, Canada this 9th
day of October 2013.
"G. A. Sheridan"
CITATION: 2013 TCC 321
COURT FILE NO.: 2012-2850(GST)I
STYLE OF CAUSE: SASHA TSENKOVA, SVETOZAR GARNENHOV AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Calgary, Alberta
DATE OF HEARING: September 20, 2013
REASONS FOR JUDGMENT BY: The
Honourable Justice G. A. Sheridan
DATE OF JUDGMENT: October 9, 2013
APPEARANCES:
|
Agent for the
Appellant:
|
Sasha Tsenkova
|
|
Counsel for the
Respondent:
|
Gregory Perlinksi
Jeff Watson
|
COUNSEL OF RECORD:
For the Appellant: n/a
Name:
Firm:
For the
Respondent: William F. Pentney
Deputy
Attorney General of Canada
Ottawa,
Canada
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