Date: 20020423
Docket: 2001-2217-GST-I.
BETWEEN:
PAUL K. SNIDER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
O'Connor, J.T.C.C.
ISSUE
[1]
The issue in this appeal is whether the Appellant is entitled to
a goods and services tax ("GST") new housing rebate in
an amount of $4,512.61, whether under section 254 or section 256
of the Excise Tax Act ("Act"). Section
256 is applicable to builder-built or owner-contracted
residential complexes. Section 254 relates to residential
complexes built by and purchased from a builder.
FACTS
[2]
In January of 1996 the Appellant contracted for the purchase of a
custom-built home and lot from Robert J. Scott Construction
("Scott"). The Appellant and Scott had agreed to the
terms of sale of the home and lot which is described as 198
Orchard Crescent, R. R. #3, Perth, Ontario and had agreed to
incremental payments at various stages of construction.
[3]
The Appellant filed a new housing application
("Application") for a rebate of GST in the amount
mentioned above. This Application was received by the Minister of
National Revenue ("Minister") on July 20, 2000.
[4]
By a Notice of GST assessment dated December 11, 2000 the
Minister notified the Appellant that the Application had been
disallowed.
[5]
In so disallowing the Minister made the following assumptions of
fact:
(a)
In April 1996, the Appellant bought a piece of land from a
builder before the construction of the residential complex was
started and entered into a contract that the same builder would
build the residential complex;
(b)
the Application does not qualify as a builder-built residential
complex pursuant to subsection 254(2) of the
Act since the ownership of the residential
complex was not transferred to the Appellant after the
construction was substantially completed;
(c)
the Appellant hired a contractor to construct a residential
complex, that was a single unit residential complex for use as
his primary place of residence, located at 198 Orchard Crescent,
RR #3, Perth, ON (the "Complex");
(d)
the Appellant was the first individual to occupy the Complex
after the construction was begun;
(e)
construction of the Complex was substantially completed in or
around June 28, 1996;
(f)
the Appellant occupied the Complex as his primary place of
residence in or around June 28, 1996;
(g)
the Appellant filed an Application and the Minister received the
said Application (Agency stamped) on July 20, 2000;
(h)
the Application was filed on or after April 23, 1996;
(i)
subsection 256(3) of the Act requires an
Application for an owner-built residential complex to be filed
within two years after the earlier of the day that is two years
after the day the complex is first occupied after its
construction has begun or the day ownership is transferred to
another person without the complex having been occupied and the
day construction of the complex is substantially completed;
(j)
in accordance with subsection 256(3) of the
Act, the Appellant's Application should
have been filed two years after the day the construction of the
Complex was substantially completed which is on or before
June 28, 1998;
(k)
the Appellant's Application was not filed within the
two-year time limit referred to in paragraphs 6(i) and
6(j) above.
[6]
It will be observed that some of the assumptions set forth above
are assumptions of law.
SUBMISSIONS
[7]
The Appellant submits that his Application was filed on time as
he was filing under section 254 of the Act. The Minister
contends that section 254 of the Act which relates to
homes purchased from builders cannot apply, principally because
ownership of the home was not transferred to the Appellant after
construction was substantially completed. The Appellant contends
that this condition in effect was met because when he made his
first payment of $17,000 on April 14, 1996 that represented an
amount of $15,000 with respect to the lot and $2,000 with respect
to certain materials which were to be incorporated into the home
and because the arrangement was for incremental payments as
construction advanced. The Appellant also points to the
restrictive covenant in the deed of transfer to the effect that
the Appellant was obliged to have the transferor construct his
home. The Appellant concludes that he met the conditions of
section 254.
ANALYSIS
[8]
In my opinion section 254 of the Act is not applicable
because the ownership of the residential complex was not
transferred to the Appellant after the construction was
substantially completed. The transfer took place on
April 14, 1996 and originally affected the lot and the
housing materials which were on the lot at that time. With
respect to further house materials and improvements to be made
after that date reference is made to The Right Honourable Sir
Robert Megarry, The Law of Real Property, 5th edition at
page 731 and following:
The meaning of "real property" in law
extends, as has been seen, to a great deal more than
"land" in everyday speech. 94 It comprises,
for instance, incorporeal hereditaments; and it also includes
fixtures. The general rule as to fixtures is "quicquid
planatur solo, solo cedit"95 (whatever is
attached to the soil becomes part of it). Thus if a building is
erected on land and objects are permanently attached to the
building, then the soil, the building and the objects affixed to
it are all in law "land", i.e. they are
real property, not chattels. They will all become the property of
the owner of the land, unless otherwise granted or conveyed.
...
... The materials used for building a house are thereby
converted from chattels into land, and so automatically pass out
of the ownership of the person who owned them as chattels and
become the property of the owner of the land to which they are
attached; and it makes no difference whether the person who
attached them had a right to do so or not.
[9]
Thus, in my opinion, because the transfer took place before
construction was substantially completed section 254 of the
Act is not applicable.
[10] The
applicable subsections of the Act are 256(2) and 256(3).
They provide, so far as material, as follows:
256. In this
section, ...
(2)
Where
(a) a
particular individual constructs or substantially renovates, or
engages another person to construct or substantially renovate for
the particular individual, a residential complex that is a single
unit residential complex or a residential condominium unit for
use as the primary place of residence of the particular
individual or a relation of the particular individual,
(b)
the fair market value of the complex, at the time the
construction or substantial renovation thereof is substantially
completed, is less than $450,000,
(c)
the particular individual has paid tax in respect of the supply
by way of sale to the individual of the land that forms part of
the complex or an interest therein or in respect of the supply
to, or importation by, the individual of any improvement thereto
or, in the case of a mobile home or floating home, of the complex
(the total of which tax under subsection 165(1) and sections
212 and 218 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
(ii)
[not applicable]
the Minister shall, subject to subsection (3), pay a rebate to
the particular individual equal to ... [ a formula follows]
...
(3) 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) [not
applicable]; and
(b)
the day construction or substantial renovation of the complex is
substantially completed.
[11]
Subsection 256(3) quoted above was introduced by S.C. 1997, c.
10, s. 66(3), and is applicable to any rebate in respect of
a residential complex for which an Application is filed with the
Minister of National Revenue on or after April 23, 1996 subject
to certain exceptions which do not apply in this case as the
Appellant only occupied the home after April 23, 1996.
[12] David M.
Sherman in Canada GST Service, Binder C5, explains the former
subsection 256(3) and the amendment as follows:
Deadline for Claiming Rebate
As originally enacted, the deadline for claiming the rebate
was two years from the earlier of:
(a)
the day the complex was first occupied as described in
subparagraph 256(2)(d)(i) or the home was sold before being
occupied as described in subparagraph 256(2)(d)(ii),
and
(b)
the day construction or substantial renovation of the complex is
substantially completed.
This led to numerous cases where taxpayers were denied the
rebate because they applied for it more than two years after
moving in. See below under "Case Law-Rebate
Application Deadline".
The amendments enacted in 1997, first released on
April 23, 1996, changed the rebate deadline
significantly. It is now limited by a combination of subsections
256(3) and 256(2.01).
The application deadline is two years from the
earliest of:
·
two years after occupancy of the home (i.e., this deadline
is 4 years from occupancy);
· the
day the home is sold by the applicant before being occupied (this
situation is rather rare); and
· the
"substantial completion" of the construction or
substantial renovation.
The change relates to the occupancy of the home, which now
starts a four-year rather than a two-year clock running. However,
substantial completion still starts a two-year clock. Whichever
clock runs out first sets the deadline.
In addition, subsection 256(2.01) prevents any GST from being
included where that GST accrues after two years from when the
home is first occupied. In other words, once one moves into the
home, one has two years to finish it off, after which any later
costs will not be eligible for the rebate.
These changes generally took effect for rebate applications
filed after April 23, 1996, with grandfathering for homes
occupied, substantially completed or resold before that date. See
the History annotation above.
The courts are unlikely to accept a claim beyond the deadline
on the grounds of equity, compassion or unjust enrichment to the
government. See the discussion of this point in the commentary to
subsection 261(3), as well as the cases below under the heading
"Case Law-Rebate Application Deadline". However,
if the deadline expires on a weekend or holiday, it may be
extended by the Interpretation Act or the case law. See
the commentary to section 301.
In addition, Cabinet has granted a number of remission
orders to individuals who missed the deadline. (For
discussion of remission orders, which are granted under the
Financial Administration Act, see the commentary to
subsection 165(1).)
[13] In the
present case the construction was completed on June 28, 1996 and
the Application was only received by the Minister on July 20,
2000, i.e. a date more than two years after the
construction of the complex was completed.
[14]
Consequently since section 254 of the Act does not apply
and since the Appellant is beyond the delay contemplated in
amended subsection 256(3) of the Act, the Appellant is not
entitled to the rebate and the appeal must be dismissed.
[15] As
mentioned above, the Appellant might consider applying for a
remission order under the Financial Administration
Act.
Signed at Ottawa, Canada, this 23rd day of April, 2002.
"T. O'Connor"
J.T.C.C.
COURT FILE
NO.:
2001-2217(GST)I
STYLE OF
CAUSE:
Paul K. Snider v. Her Majesty the Queen
PLACE OF
HEARING:
Ottawa, Canada
DATE OF
HEARING:
February 4, 2002
REASONS FOR JUDGMENT BY: The
Honourable Judge Terrence O'Connor
DATE OF
JUDGMENT:
April 23, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Justine Malone
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
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