REASONS
FOR JUDGMENT
V.A. Miller J.
[1]
Mr. Iqbal has appealed the denial of his claim
for a GST/HST New Housing Rebate (the “Rebate”) for a house purchased at 141
Elbern Markell Drive in Brampton, Ontario (the “Elbern Property”). Mr. Iqbal’s
application for the Rebate was filed on October 31, 2011. The Minister of
National Revenue (the “Minister”) denied the Rebate by notice dated March 15,
2013 and assessed a Rebate adjustment amount of $24,000 and arrears interest of
$1,814.22.
[2]
The Rebate in question is an Ontario rebate. In
order to qualify for it, the Appellant had to demonstrate that he intended to
acquire the Elbern Property for use as his primary residence or as the primary
residence of a qualifying relation. The Appellant failed to satisfy this onus.
Preliminary Matter
[3]
At the beginning of the hearing, counsel for the
Respondent brought a motion to file an Amended Reply. The Reply was amended to
clarify an assumption of fact; to include additional facts which the Respondent
had to prove and to expand the “Grounds Relied On” section of the Reply. The
Appellant opposed the motion.
[4]
I allowed the Amended Reply to be filed and, in
so doing, I considered the following:
a)
The Appellant was represented by counsel;
b) Counsel for the Respondent forwarded the Amended Reply to Appellant’s
counsel on October 7, 2015 which was 20 days prior to the hearing;
c)
The proposed amendments did not raise a new
argument; and
d) The proposed amendments did not raise a new section of the Excise
Tax Act (“ETA”) or the New Harmonized Value-Added Tax System
Regulations, No. 2 (the “Regulations”).
Facts
[5]
The witnesses at the hearing were the Appellant
and his real estate agent, Masood Khan. The Appellant’s testimony conflicted
with some of his documentary evidence on key points and I have found that he
was not credible.
[6]
The Appellant is now retired. In his
professional life, he was a designer and builder of packaging materials.
Appellant’s Evidence
[7]
The Appellant has lived at 21 Blackmere Circle
in Brampton (the “Blackmere Property” or “Blackmere”) since November 2005. He
continues to live in the Blackmere Property. It was his evidence that this home
is 28 years old and in need of upgrades and repairs. He stated that he sought
out a new “dream” home that he and his wife could live in.
[8]
On March 30, 2011, the Appellant entered into an
assignment agreement for the purchase of the Elbern Property. This property was
in the process of being constructed and initially had an anticipated move-in
date of July 30, 2011.
[9]
The Appellant stated that he then advertised the
Blackmere Property for sale on Kijiji, in newspapers and in postings around his
community. On May 10, 2011, he sold Blackmere to Muhammad Afroz who
was a friend of one of his friends. The sale price was $450,000 and Mr. Afroz
gave him a deposit of $1,000 cash and the closing was set for July 27, 2011
which coincided with the closing date for the Elbern Property. It was the
Appellant’s evidence that the agreement with Mr. Afroz was a “gentlemen’s
agreement”.
[10]
The Appellant stated that he received a notice
that the builder of the Elbern Property had postponed the closing date for that
property to September 29, 2011. He tried to negotiate a new closing date for
Blackmere with Mr. Afroz but was unsuccessful. He was required to pay Mr. Afroz
$2,000 to be released from their agreement.
[11]
The Appellant said that he offered the Blackmere
Property for sale for a second time in 2011 through an exclusive listing with
Mr. Khan.
[12]
On September 27 or 28, 2011, the Appellant and
his real estate agent, Masood Khan, conducted a Pre-Delivery Inspection of
Elbern and discovered numerous problems including a stove exhaust pipe that did
not conform to regulations, standing water in the basement, no mirrors, no
shower door, and problems with the stairs.
[13]
Upon taking possession of the home on September
29, 2011, the problems persisted and additional problems were noticed which
included a malfunctioning heating unit, standing water on the main floor and
water leaking near an electrical panel.
[14]
Masood Khan conducted a TARION inspection on
October 28, 2011. I note that this report did not indicate any problems
concerning standing water or heat.
[15]
The Appellant testified that he moved into the
Elbern Property. However, he brought only one full bedroom set, a dressing
table, a wardrobe, a dining room table and chairs, a side table, a microwave, a
small two burner stove and a small oven. He left the remainder of his
belongings at the Blackmere Property so that it would show well to prospective
purchasers.
[16]
It was the Appellant’s evidence that, for the
next 4 months, he lived at Elbern 60-70% of the time with the remaining time at
Blackmere. This was mainly due to the fact that the Elbern Property continued
to have issues with the heating system and the Appellant has sensitivties in
his extremities to cold weather. He stated that he slept and did his laundry at
Blackmere. He would often shower at Blackmere as that property had a more
accessible bath as opposed to the standing shower at Elbern. During one of
these four months, the Appellant was in Australia; however, he testified that
his wife remained at Elbern during this time.
[17]
The Appellant listed the Elbern Property for
sale on December 2, 2011 with Masood Khan acting as his real estate agent. The
Appellant alleged that he was frustrated with the repairs needed in the Elbern
Property.
[18]
The Elbern Property sold on December 30, 2011
and closed on January 20, 2012 for a sale price of $780,000. The Appellant
had purchased this property from the builder for $603,530.97.
Law
[19]
Subsection 254(2) of the ETA provides for
a Rebate where a particular individual purchases a new home from a builder
under prescribed circumstances. It reads:
New housing
rebate
(2) Where
(b) at the time the particular individual becomes liable or assumes
liability under an agreement of purchase and sale of the complex or unit
entered into between the builder and the particular individual, the particular
individual is acquiring the complex or unit for use as the primary place of
residence of the particular individual or a relation of the particular
individual,
the Minister
shall, subject to subsection (3), pay a rebate to the particular individual
equal to […]
[20]
Section 256.21 of the ETA provides that
the Minister shall pay a rebate in a prescribed manner under prescribed
circumstances. It reads:
256.21 (1) If a
sales tax harmonization agreement with the government of a participating
province allows for rebates in respect of residential property relating to the
new harmonized value-added tax system in respect of that participating
province, the Minister shall pay in prescribed circumstances a rebate in
respect of prescribed property to a prescribed person, or a person of a
prescribed class, equal to an amount determined in prescribed manner.
[21]
A person is a ‘prescribed person’ or ‘prescribed
individual’ if they meet the requirements found in subsection 41(2) of the Regulations,
which reads:
Rebate in Ontario
41(2) If an
individual is entitled to claim a rebate under subsection 254(2) of the Act
in respect of a residential complex that is a single unit residential complex,
or a residential condominium unit, acquired for use in Ontario as the primary
place of residence of the individual or of a relation of the individual, or the
individual would be so entitled if the total consideration (within the meaning
of paragraph 254(2)(c) of the Act) in respect of the complex were
less than $450,000, for the purposes of subsection 256.21(1) of the Act,
the individual is a prescribed person and the amount of a rebate in respect of
the complex under that subsection is equal to the lesser of $24,000 and the
amount determined by the formula
A × B
where
A is
75%; and
B is
the total of all tax under subsection 165(2) of the Act paid in respect
of the supply of the complex to the individual or in respect of any other
supply to the individual of an interest in the complex.
Position of the Parties
[22]
The Appellant stated that it was his intention
to acquire the Elbern Property as his primary residence. He moved into Elbern
shortly after the closing on September 29, 2011. He sold Elbern because he was
frustrated with the builder and by all the repairs which were necessary.
[23]
It is the Respondent’s position that the
Appellant did not move into Elbern and he did not acquire Elbern with the
intention that it would be the primary place of residence for him or one of his
relatives.
Analysis
[24]
There were key documents produced by the
Appellant or Mr. Khan which contradict the Appellant’s testimony that he moved
into the Elbern Property. They are:
a)
On November 16, 2011, the Appellant started a Small
Claims Action against the builder of the Elbern Property. In his Statement of
Claim, he wrote that he had never moved into the Elbern Property; that he
immediately listed it for sale upon taking possession on September 29, 2011;
and, that potential buyers had been scared off by the issues with the property.
As relief, he requested the costs “to keep the house
vacant”, among other costs.
On
cross-examination the Appellant tried to explain away his statements by saying
that he knowingly made untrue or exaggerated statements on the Statement of
Claim in order to put pressure on the builder to fix the problems in the home.
The claim was settled on March 30, 2012.
I
do not believe the Appellant’s explanation.
b) In the Reply, the Minister assumed that the Appellant first listed
the Elbern Property for sale on September 30, 2011 – one day after the closing.
The Appellant denied this assumption. However, on June 9, 2012, the Appellant
wrote to the builder to complain that he had been charged for increased development
charges of $2,812.41. He requested a refund for upgrades which he stated were
never provided. In this letter, he also wrote that he did not move into the
Elbern Property because of various deficiencies and he “put
the house up for sale”. He also wrote that the “house
did not sell for 3 months”. It is my view that this statement confirmed
the Minister’s assumption that the Appellant listed the Elbern Property for
sale on September 30, 2011.
c)
The Appellant did submit a listing for the
Elbern Property which showed that it was listed for sale on December 2, 2011.
The listing was prepared by Masood Khan and it declared as an extra that the
home was “Brand New” and had never been lived in. In cross-examination, Mr.
Khan tried to explain away this statement by saying that it was a “trick of the trade” to say that the home had never
been lived in.
[25]
The Appellant stated that he moved into the
Elbern Property and Mr. Khan paid all moving costs as a gift for the Appellant.
However, neither the Appellant nor Mr. Khan submitted a receipt to support
their evidence.
[26]
It was the Appellant’s evidence that he listed
Elbern for sale on December 2, 2011 because he was frustrated with all the
repairs which were necessary. However, according to an email from the builder
to the Appellant and Mr. Khan, the builder had sent emails to them on November
17 and November 22, 2011 requesting entry into the Elbern Property so that it
could complete its warranty obligations.
[27]
Mr. Khan testified that all deficiencies had
been satisfied and all repairs had been completed prior to listing Elbern for
sale on December 2, 2011.
[28]
The Appellant has not convinced me that the
Blackmere Property was offered for sale in 2011. He gave no documentary
evidence to show that he advertised Blackmere for sale. He did not call Mr.
Afroz as a witness at the hearing. Counsel for the Respondent had asked the
Appellant for Mr. Afroz’s address so that she could subpoena him and the
Appellant refused to give it. I have drawn an adverse inference from the
Appellant’s failure to call Mr. Afroz as a witness.
[29]
The New Housing Rebates officer (the “Officer”)
with the Canada Revenue Agency (“CRA”) requested a copy of the agreement of
purchase and sale between the Appellant and Mr. Afroz. The Appellant stated
that it was a gentleman’s agreement. However, he sent the Officer an Agreement
of Purchase and Sale on a 2013 version of the Ontario Real Estate Association
form (along with a Mutual Release). Both Mr. Khan and the Appellant testified
that the CRA requested that the Agreement of Purchase and Sale be on a “proper document in a proper format”. The Appellant
provided an excerpt from a working paper prepared by the Officer which he
stated confirmed that she had asked him to put the agreement on a proper form.
[30]
The working paper does not support Mr. Khan and
the Appellant’s testimony. It reads:
“I said that the Purchase Agreement which
he sent dated 2011 was on a form dated 2013 and I would not be able to accept
his information, I told him I will disallow the rebate and he has the right to
appeal that decision. He said that they had originally done the agreement on
plain paper since it was a private deal. He said that when I asked for a copy
he thought I would want it more presentable than what he had, so he went to the
person he had the deal with and they agreed to put it on a form.”
[31]
The Appellant alleged that after he took
possession of the Elbern Property in 2011, the Blackmere Property was listed
for sale through an exclusive listing with Masood Khan. No sale occurred.
Neither he nor Mr. Khan submitted this alleged listing as an exhibit and I do
not believe that it existed.
[32]
Although the inconsistencies in the evidence and
the lack of essential documents are sufficient for me to conclude that the
Appellant did not have the intention to acquire the Elbern Property as his
primary residence, there was additional evidence which reinforced my
conclusion.
[33]
In 2007, the Appellant purchased the property at
3189 Cabano Crescent, Mississauga, Ontario (the “Cabano Property”) prior to its
construction. The purchase price was $344,792.95. He took possession of the
Cabano Property on December 12, 2007 and sold it on January 30, 2008 for
$385,000. The Appellant claimed and received a Rebate of $7,447.53 which he
assigned to the builder. In cross-examination, the Appellant stated that he
purchased the Cabano Property to “make some money”.
[34]
On the same day that he purchased the Elbern
Property, March 30, 2011, the Appellant also purchased a property at 37 Bear
Run Road, Brampton, Ontario (the “Bear Run Property” or “Bear Run”). This
property was also purchased by way of an assignment agreement. It was the
Appellant’s evidence that the Bear Run Property was purchased for his daughter
who was estranged from her spouse; she was unable to obtain a mortgage on her
own and he purchased the property for her. The Appellant held the title for
this property. The purchase price of the Bear Run Property was $524,769.91.
[35]
According to the Appellant, his daughter and her
spouse reunited and she moved out of the Bear Run Property and he moved into it
on July 23, 2012. On August 28, 2012, the CRA received an application for a New
Housing Rebate for this property from the builder; the Appellant and his spouse
were the claimants and they had assigned the Rebate to the builder. The amount
of the Rebate was $24,000 and it was allowed. The Appellant sold the Bear Run
Property on November 9, 2012 for $685,000 to his cousin.
[36]
The Appellant has resided in the Blackmere
Property since 2005 and at the time of the hearing of this appeal he continued
to reside in the Blackmere Property. In the meantime, he has purchased and sold
the Cabano Property, the Bear Run Property and the Elbern Property and he
claimed the Rebate for each of these properties. It appears to me that the
Appellant is in the business of buying and selling homes and while this
practice is not prohibited, it definitely disentitles him from claiming a
GST/HST New Housing Rebate.
[37]
The appeal is dismissed.
Signed at Ottawa, Canada, this 17th day of March 2016.
“V.A. Miller”
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