Citation:
2014TCC155
Date:
20140515
Docket: 2012-1891(GST)I
BETWEEN:
ANDRÉ
LEGARÉ,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Favreau J.
[1]
The appellant is appealing from an assessment
made by the Minister of National Revenue, through the Minister of Revenue of
Quebec (the Minister), on October 27, 2006, under Part IX of the Excise Tax
Act, R.S.C. 1985, c. E-15, as amended (the ETA), in which an amount of
$3,865.59 claimed by the appellant as a New Housing Rebate was disallowed.
[2]
The dispute concerns primarily the date on which
the appellant's complex was substantially completed.
[3]
In making and confirming the assessment, the
Minister relied, among other things, on the following findings and assumptions
of fact:
•
The appellant undertook
himself, or through a person he had hired, the construction of a residential complex
located at 53 Bord-de-l’Eau Street in Portneuf [the complex]; (admitted)
•
The complex was entered
on the municipality’s assessment roll on September 1, 2002; (admitted)
•
An application for a
tax rebate for new housing was filed with the Minister on June 20, 2006;
(admitted)
•
A review of the
purchase invoices submitted by the appellant with his rebate application showed
the Minister that the expenses were incurred mostly in 2001 and 2002; (denied)
•
In 2003, the appellant
purchased paint, an alarm system, sod, fencing, and other materials for
landscaping; (admitted)
•
In 2004, work was done
almost exclusively on the shed and the finishing of a workshop; (admitted)
• The Minister therefore determined that
January 1, 2004, was the date when the complex was substantially completed. (denied)
[4]
The appellant claims that, when he applied for
the tax rebate on June 20, 2006, less than 90% of the construction work on
the new housing had been completed, despite the fact that he had moved into the
new housing on July 14, 2004. He also claims that his rebate application
was made within the time limit prescribed by the ETA, namely, on June 20, 2006,
which is within two (2) years of the move-in date to the new residence.
[5]
The appellant testified at the hearing and
provided the timeline of the construction work on the residential complex
located at 53 Bord-de-l’Eau Street in Portneuf (the complex). The lot was acquired
in the spring of 2001 and the work began in October 2001. The construction of
the foundation, exterior walls and roof was entrusted to a contractor. The
appellant kept the finishing of the complex for himself as a retirement
project. At that time, the appellant lived in Donnacona about ten kilometres
away from the complex.
[6]
The appellant retired from the education sector
in 1993, but from 1993 to 2006, he provided consulting services. His primary
clients were Aboriginal people, who often lived in remote areas of Quebec. The
appellant had to travel across Quebec to meet with his clients and carry out
his mandates. His absences, which were both frequent and long, considerably
delayed the construction work on the complex, which lasted from 2001 to 2006.
[7]
The appellant enclosed with his tax rebate application
original invoices for the expenses incurred. The total cost of the work (materials
and labour) was $153,605.39, and the price paid for the lot was $42,000. The
percentages of expenses incurred over each of the years 2001, 2002, 2003 and
2004 as compared with total expenses for the construction project, are as
follows:
|
|
Appellant
|
Revenu
Québec
|
|
2001
|
52.99%
|
53.53%
|
|
2002
|
34.37%
|
34.72%
|
|
2003
|
5.68%
|
5.74%
|
|
2004
|
3.74%
|
3.78%
|
[8]
By December 31, 2003, the appellant had incurred
93.04% of the expenses while, according to Revenu Québec's calculations, the
percentage of expenses incurred in 2001, 2002 and 2003 was 93.99% of total expenses.
The difference between the expense percentages is not really significant.
[9]
The complex was entered on the assessment roll
of the Ville de Portneuf on February 28, 2003, for 2003. The lot was assessed
at $10,410 at that time and the building at $84,000. For 2004, the value of the
lot was $23,200, and the value of the building was still $84,000.
[10]
For insurance purposes, the value of the building
(without the lot) was as follows on the following dates:
|
2001 (November)
|
$100,000
|
|
2002 (August)
|
$106,000
|
|
2003 (August)
|
$106,000
|
|
2004 (August)
|
$112,000
|
|
2004 (September)
|
$130,000
|
|
2005 (August)
|
$137,000
|
|
2006 (August)
|
$175,000
|
[11]
At the hearing, the appellant submitted a list
of work that had to be done, as of January 1, 2004, in order to finish the
construction of the complex. The list included the following work:
−
Staircase to the second floor, banister and rungs
−
Finishing under the stairs
−
Constructing a built-in bookshelf in the wall
facing the staircase
−
Construction of storage under the stairs,
plastering and painting
−
Replacing the support post of the cantilevered
floor with a permanent pillar.
−
Finishing the ceiling in the staircase
−
Finishing the ceiling in the foyer and painting
the ceiling
−
Finishing the floating floor in the foyer
−
A half wall at the top of the stair enclosure
−
Dividing wall in the office with four sliding
doors to the bedroom and bathroom
−
Painting the second floor: bedroom, bathroom,
office, billiard room
−
Framing door and window openings
−
Installing mouldings
−
Paint finish
−
Second floor flooring, floating hardwood
− Finishing the billiard room: cherry wood half-wall panelling,
lighting (drop ceiling for a billiard lamp); floating floor
[12]
The appellant also explained that, during the
construction of the complex, the billiard room was used as a workshop for working
on the second floor and that the stairs, railing, banister, low wall, bookshelf
and painting could not be finished before the piano and the billiard table were
moved. The appellant specified that the temporary post supporting the cantilevered
floor of the second floor was replaced by a finishing pillar and that, after that,
the second-floor ceiling was plastered and painted and the foyer floor was
completed.
[13]
According to the appellant, the materials were
largely purchased, stored and used as needed based on his availability.
[14]
Subsection 256(3) of the ETA sets out the time
limit within which the individual must apply for his or her tax rebate. Section
256(3) reads as follows:
256(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 on or before
(a) the
day (in this subsection referred to as the “due date”) that is two years after
the earliest of
(i)
the day that is two
years after the day on which the complex is first occupied as described in
subparagraph (2)(d)(i),
(ii) the day on which ownership is transferred
as described in subparagraph (2)(d)(ii), and
(iii) the day on which construction or
substantial renovation of the complex is substantially completed; or
(b) any
day after the due date that the Minister may allow.
[15]
There is no doubt in this case that the relevant
provision is subparagraph 256(3)(a)(iii). The appellant filed his application
within two (2) years of the date that he had moved in, while the time limit
prescribed by the ETA is within two (2) years after the day on which construction
of the complex is substantially completed. The appellant never agreed that
January 1, 2004, was the relevant date for the purposes of calculating the
time limit for filing the application. The appellant argues that he did not
move in until July 14, 2014, because the complex was not suitable for habitation
before that date, that is, the complex could not be used for the purpose for
which it had been constructed.
[16]
The expression "substantially
completed" is not defined in the ETA, and we must be guided by the
interpretation that a reasonable person would give it. Over the years, the case
law has applied the criterion of 90% of work completed to determine when the
construction was substantially completed. This interpretation is generous and
very favourable to taxpayers because 90% is normally used to define the
expression "all or substantially all" found often in the ETA. The ETA
requires only that the construction of the complex be substantially completed,
not that all or substantially all of it be completed.
[17]
In a recent decision in Claude Mercure v. The
Queen, 2013 FCA 102, the Federal Court of Appeal considered that the
construction of the taxpayer's house was substantially completed in December
2006, because at that time, the taxpayer had incurred 97.3% of the total
expenses related to the construction of the house, even though the taxpayer had
stored a certain amount of the materials in his garage. The Court wrote the
following at paragraph 22:
. . . While Mercure did store a certain amount
of supplies in his garage, as he argued before this Court, the high percentage
of the expenses incurred by the end of 2006 leaves no room for doubt that the
construction of the house was substantially completed in December 2006. . . .
[18]
The appellant's situation is very similar to
that of Mr. Mercure in the decision cited in the previous paragraph. By
January 1, 2004, the appellant had incurred no less than 93.04% of the total
expenses related to the construction of the house. By December 31, 2002, over
87% of total construction expenses had already been incurred.
[19]
The volume of construction work completed in
2001, 2002 and 2003 tends to show that, by January 1, 2004, the appellant's
house was habitable or on the verge of being habitable. The appellant put his Donnacona
residence up for sale in March 2004, and moved in to his new residence on July
14, 2004. Let us recall that, in 2004, the appellant was still working as a
consultant and that he could not spend all of his time on the construction of
the house.
[20]
The list of work to be completed as of January
1, 2004, as provided by the appellant, indicates that it was essentially the
second floor (office with built-in bookshelf and billiard room) that had to be
finished. The appellant also admitted that the work done in 2004 was almost
exclusively done on the complex’s shed and on finishing a workshop.
[21]
For these reasons, the appeal is dismissed
because the application was filed after the expiry of the time limit prescribed
by the ETA.
Signed at Ottawa, Canada, this 15th day of May 2014.
"Réal Favreau"
Translation certified true
on this 17th day of July 2014
Margarita Gorbounova, Translator
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