REASONS FOR JUDGMENT
Paris J.
[1]
This is an appeal from an assessment by the
Minister of National Revenue (Minister), under
the Excise Tax Act (Act),
denying a goods and services tax/harmonized sales tax (GST/HST) rebate in the
amount of $12,090 paid by the appellant on the purchase of vacant land.
[2]
The appellant was the only person to testify.
Facts
[3]
The appellant, a non-registrant for the purposes
of the Act, acquired a plot of vacant land in Rockland, Ontario, on November 30,
2010, for consideration of $93,000, plus $12,090 in GST/HST.
[4]
The land was previously part of a block of land that
was used for agricultural activities. Later, the block of land was divided up
for resale.
[5]
The appellant acquired the land to build a
personal residence on it. The appellant admitted that he never carried on a
business or made any improvements to the land at all material times.
[6]
Subsequently, the appellant’s plans changed and
he decided to sell the land. To this end, he communicated with a construction
company interested in acquiring the land for commercial purposes. The company
told the appellant that he could not claim GST/HST from it because the Canada
Revenue Agency (CRA) would reimburse him the GST/HST amount that he paid when
he purchased the land on November 30, 2010.
[7]
The appellant stated, in his testimony, that he
then contacted the CRA office to ensure that he would receive a GST/HST rebate further
to the sale of the land. Following the advice of a CRA employee, the appellant filed
form GST22 “Real Property – Election to Make Certain
Sales Taxable”, under paragraph 9(2)(b) of Part I of
Schedule V of the Act. The appellant filed that form on May 28, 2012.
[8]
On September 27, 2012, the appellant sold the
land to the buyer, for consideration of $93,000, without GST/HST.
[9]
In a letter dated October 11, 2012, the CRA declined
to give effect to form GST22 and to make the sale of the land taxable on the
ground that the appellant did not sell the land in the course of a business or an
adventure.
[10]
In November 2012, the appellant filed form GST189
“General Application for Rebate of GST/HST – Option 7” for a rebate of the
GST/HST he paid when he acquired the land. That form applies to rebates pursuant
to subsection 257(1) of the Act.
[11]
On December 18, 2012, by notice of assessment,
the CRA also declined to give effect to form GST189 and to allow the
application for rebate because the sale was not a taxable supply by the
appellant.
[12]
The appellant testified that he would not have
sold the land for less than what he had paid including the GST/HST if he had
known that he was not entitled to a rebate of the GST/HST that he had already
paid.
Analysis
[13]
Subsection 257(1) of the Act sets out that a
person who is not a registrant and who makes a particular taxable supply of
real property by way of a sale is entitled to a tax rebate. It reads as follows:
257. (1) Non-registrant sale of real
property -- If a person who is not a registrant makes a particular taxable
supply of real property by way of sale, the Minister shall, subject to
subsections (1.1) and (2), pay a rebate to the person equal to the lesser of
(a)
the basic tax content of the property at the particular time, and
(b) the tax that is or would,
in the absence of section 167 or 167.11, be payable in respect of the
particular supply.
[14]
It is clear from the wording of this provision
that the non-registrant must have made the taxable supply of real property to
be entitled to the rebate set out in section 257. Taxable supply means a supply
that is made in the course of a commercial activity, according to the
definition of this expression in subsection 123(1) of the Act.
[15]
The expression “commercial activity” is also
defined in subsection 123(1) of the Act, which states the following:
“commercial activity” of a person means
(a) a business carried on by
the person (other than a business carried on without a reasonable expectation
of profit by an individual, a personal trust or a partnership, all of the
members of which are individuals), except to the extent to which the business
involves the making of exempt supplies by the person,
(b) an adventure or concern of
the person in the nature of trade (other than an adventure or concern engaged
in without a reasonable expectation of profit by an individual, a personal
trust or a partnership, all of the members of which are individuals), except to
the extent to which the adventure or concern involves the making of exempt
supplies by the person, and
(c) the making of a supply
(other than an exempt supply) by the person of real property of the person,
including anything done by the person in the course of or in connection with
the making of the supply;
[16]
By that definition, the making of exempt supplies
is excluded from commercial activity.
[17]
Subsection 9(2) of Part I of Schedule V sets out
that the sale of real property by an individual is an exempt supply, except in
the circumstances listed in subsections 9(2)(a) to (f).
[18]
One of the exceptions, at subparagraph 9(2)(b)(ii)
of Part I of Schedule V of the Act, sets out that the supply of real property
made in the course of an adventure or concern in the nature of trade is not an exempt
supply if the individual filed an election with the Minister containing prescribed
information. The election is made on form GST22. That election makes the supply
of real property taxable and allows a non-registrant to claim a rebate under
subsection 257(1) of the Act. Subparagraph 9(2)(b)(ii) reads as follows:
9 (2) A supply of real property made by way
of sale by an individual or a personal trust, other than
. . .
(b) a supply of real property
made
. . .
(ii) where the
individual or trust has filed an election with the Minister in prescribed form
and manner and containing prescribed information, in the course of an adventure
or concern in the nature of trade of the individual or trust;
[19]
In this case, there is no question that
subparagraph 9(2)(b)(ii) does not apply in the circumstances because the
appellant was not exercising an adventure or concern in the nature of trade
with respect to the land. Therefore, the appellant could not choose to treat
the supply as a taxable supply and was not entitled to the rebate. Clearly, the
CRA officer’s advice to the appellant to submit that form was erroneous.
[20]
The appellant’s main argument is based on
considerations of fairness. The appellant argued that he made inquiries with
the CRA about the possibility of obtaining a rebate of the taxes that he paid
when he acquired the land. He sold his land based on the advice provided by the
CRA. At the hearing, the respondent did not dispute that the appellant was
mislead by CRA representatives.
[21]
However, the Court cannot be bound by erroneous departmental
interpretations. In Moulton v. The Queen, [2002] 2
CTC 2395, Associate Chief Judge Bowman (as he was then) stated the
following at paragraph 11:
The appellant argues with great conviction
that he should be entitled to rely on advice given by the CCRA and relied upon
by him in good faith. I agree that the result may seem a little shocking to
taxpayers who seek guidance from government officials whom they expect to be
able to give correct advice. Unfortunately such officials are not infallible
and the court cannot be bound by erroneous departmental interpretations. Any
other conclusion would lead to inconsistency and confusion. . . .
[22]
As a result, the appeal is dismissed.
[23]
In consideration of the erroneous advice that the
appellant received from the CRA, this is a case where he might consider seeking
a remission order under the Financial Administration Act. It must also
be noted that, in this case, it is quite likely that the government will
collect the GST/HST on the real property on two occasions: first during its
sale to the appellant and then during its sale by the buyer, the construction
company, which has used the land for its homebuilding company. That result
would seem to go against the policy of the Act to tax the disposition of
property only once.
Signed at Toronto, Canada, this 3rd day of July 2015.
“B. Paris”
Translation certified true
on this 14th day of August 2015
Janine Anderson,
Translator
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