Citation: 2014 TCC 56
Date: 20140224
Docket: 2013-2774(GST)I
BETWEEN:
SUJATA KUKREJA,
appellant,
and
HER MAJESTY THE QUEEN,
respondent.
REASONS FOR JUDGMENT
Jorré J.
Introduction
[1]
This is an appeal
relating to the goods and services tax/harmonized sales tax new housing rebate.
[2]
In 2009 the appellant
signed an agreement of purchase and sale for a house to be constructed, the
Thorndale property.
[3]
Although the purchase
closed the appellant never moved into the property.
[4]
The issue in this
appeal is whether, at the time the appellant signed the agreement, she was
purchasing the house with the intention of using it as her primary place of
residence.
[5]
If the answer is yes,
then the appeal should be allowed and the appellant is entitled to the new
housing rebate. If the answer is no, the appeal should be dismissed.
[6]
This case turns
entirely on the facts. The appellant testified, as well as her husband, her
brother-in-law and her mother-in-law.
[7]
It is well established
that, when it is necessary to determine intention, one must consider not only
the individual’s stated intention but also all the surrounding factual
circumstances.
The Evidence
[8]
It will be useful to
first set out where the appellant actually lived and what properties were
bought or rented over the course of several years.
Residences/Properties
2003-2009
[9]
From some time in 2003
until approximately September 2009, the appellant and her family lived with her
brother-in-law and his family as well as her mother‑in-law in a house on Reindeer Crescent.
2009
[10]
Some time prior to September
2009, the appellant and her family became aware that the brother-in-law
intended to sell the house on Reindeer Crescent.
[11]
As a result, the
appellant’s husband agreed to purchase a house to be constructed on Thorndale Road. Subsequently, her husband decided that the appellant should be the purchaser
of the house and she signed an agreement of purchase and sale with respect to
the Thorndale house on August 20, 2009, the purchase price being $525,000.
The purchase was to close over a year later. Subsequently, in May 2010, the
price was increased to $540,000 because the appellant had opted for certain
upgrades to the home.
[12]
Around September 2009,
the brother-in-law moved to a house on Mallory Road. After spending a short
period at the brother-in-law’s new residence, the appellant and her family
moved into a rental apartment at 420 Greenview Road for about one year.
2010
[13]
In October 2010, the
appellant and her family moved to India owing to financial difficulties that
arose because of problems in the family business.
[14]
The appellant gave her
brother-in-law a power of attorney to complete the purchase of the Thorndale
property.
[15]
The purchase of the
Thorndale property closed on November 25, 2010; the brother-in-law and
sister-in-law used funds they had as well as funds they borrowed on their lines
of credit to complete the purchase of the Thorndale property on behalf of the
appellant.
[16]
Because the brother-in-law
and sister-in-law needed to repay the large amounts they had borrowed on lines
of credit in order to close the purchase of the Thorndale property, the appellant
had to repay them quickly and the brother-in-law was therefore instructed to
put the property up for sale.
2011
[17]
It is not clear exactly
when the appellant’s husband returned from India to Canada, but this took place
prior to the appellant’s return and may have been at the very end of 2010 or in
early 2011.
[18]
On January 19, 2011,
an offer to purchase the Thorndale property was received and the sale by the
appellant of the Thorndale property closed in February 2011.
[19]
The appellant sold the
property for a price slightly more than $100,000 more than her purchase price.
According to the appellant, the gain was actually less than that because of
various expenses, but even allowing for expenses, the appellant made a
significant gain.
[20]
While the precise date
is not clear from the evidence, around the end of the appellant’s stay in India in 2010, or soon after her return, the appellant agreed to purchase a house on Daden
Oaks Drive.
[21]
Initially, upon
returning from India the appellant and her family again lived with her
brother-in-law for a couple of months.
[22]
They could not move to
Daden Oaks Drive at that time because, according to the testimony, the house
was delayed.
[23]
They then tried to rent
a dwelling, but were unable to do so because of the husband’s credit rating, so
the appellant then bought a condo unit on Eglinton Avenue. The family moved
into the condo unit.
2012
[24]
In April 2012, the
appellant’s purchase of the Daden Oaks property closed and the appellant and
her family moved there. The statement of adjustments for the Daden Oaks
property
shows the appellant as having received the GST/HST new housing rebate in
respect of that property.
[25]
The appellant and her
husband being unable to carry both the Eglinton property and the Daden Oaks
property, the Eglinton property was sold to generate funds. The evidence does
not disclose when the Eglinton property was sold.
Stated Intention
[26]
Both the appellant and
her husband stated that their intention had been to move into the house on Thorndale Road. They expected to have no difficulty obtaining a mortgage in time for the closing.
[27]
The appellant knew that
at the time she had a good credit rating and was sure she could get a mortgage.
[28]
The appellant’s husband
testified that he had decided that they should buy the house, and that at the
time the business was going well and he foresaw no difficulty getting a
mortgage. However, he also testified that he had a binding contract to buy and
that, because his business was starting to have difficulties, he decided to
take his name out of the contract and have the appellant contract for the
purchase of the house in his place; however, he still thought it might work
out.
[29]
Neither the appellant
nor her husband had lined up mortgage financing at the time of the agreement of
purchase and sale. Neither of them had made a budget or an estimate of what their
monthly home ownership costs would be.
[30]
They also expected the appellant’s
mother-in-law to move in with them and contribute toward the monthly expenses,
although not to the purchase of the house.
[31]
According to the appellant
and her husband, their plan to move into the house was thwarted because of (i)
financial problems in the family business, problems that brought the business
to an end, (ii) their inability to get a mortgage, and (iii) the decision
of the mother-in-law to continue living with the brother‑in‑law.
[32]
The appellant’s mother-in-law
testified that she had intended to move in with them and would have contributed
toward the monthly expenses, but not to the purchase of the house.
[33]
The mother-in-law
decided to stay with the brother-in-law when it became clear that the appellant
and her family were not going to move into the Thorndale house.
Other Circumstances
Family Income
[34]
At this point, I should
mention that it was the appellant’s repeated testimony that in all financial
matters she trusted and relied on her husband. She simply did not involve
herself in financial matters. Her husband made the financial decisions,
including those relating to the purchase of a home. She went along with his
decisions.
[35]
The only source of family
income was the family business, part of which was operated by a proprietorship
and part of which was incorporated. The proprietorship belonged to the appellant’s
husband while the incorporated company belonged to the appellant. One was
called Mr. Golfshirt while the other was called Mr. Golfshirts.
[36]
The incorporated
company was a retail business and acquired most of its goods from the
proprietorship.
[37]
The appellant worked
for the incorporated company and reported the following income:
|
Year
|
Income
|
|
|
|
|
2005
|
$8,250
|
|
2006
|
$8,500
|
|
2007
|
$9,500
|
|
2008
|
$12,500
|
|
2009
|
$12,000
|
|
2010
|
$12,000
|
|
2011
|
$12,500
|
[38]
The appellant’s husband
reported a gross income of $78,200 and a net income of $13,148 from his
proprietorship in 2009; the proprietorship was his only source of income in
2009. At the beginning of 2009, the business had $51,600 in inventory. During
the year it bought $8,100 in inventory, and at the end of 2009 it had no
inventory whatsoever.
[39]
In 2010 the appellant’s
husband reported no gross or net income from the proprietorship and no other
income of any kind. Clearly, the proprietorship had ceased operating some time
before 2010.
[40]
With respect to 2008,
the appellant’s husband testified that, although at one point the Canada Revenue
Agency had claimed that he had earned an income for that year of about $65,000,
they subsequently accepted that his income was about $9,700. He stated that
$9,700 was the correct amount.
[41]
The mother-in-law
testified that she might have been able to contribute $400 or $500 a month toward
the expenses.
[42]
There was no evidence
about the financial state of the incorporated company. The husband said that the
company had ceased operations and that its accounts had not been brought up to
date. I also note that at one point the husband testified that they did not
take anything out of the company.
[43]
There was no evidence
showing that the appellant or her husband had in the past saved up a large sum
of money.
Other
[44]
The floor plan for the
Thorndale house shows it to have a floor area of some 3,800 square feet, with
six bedrooms (one of which is a loft), four full bathrooms and a powder room.
[45]
When the appellant was
asked how many bedrooms and bathrooms there were in the house, she had no idea.
When the mother-in-law was asked, she said four bedrooms.
Analysis
[46]
I do not accept the appellant’s
evidence of her intention for two reasons.
[47]
The first and primary
reason is the following. In 2008, the year before the purchase, the appellant
and her husband had a combined income of under $23,000. In 2009, the year the appellant
signed the purchase agreement, they had a combined income of under $26,000. It
is also clear that the financial difficulties of the business started some time
during that year.
[48]
I do not think that the
appellant or her husband, who also had two children at the time, could
reasonably have expected that they would have been able to pay all their other living
expenses and also finance the purchase of a $500,000 house, even with very low
interest rates and with the modest assistance the mother-in-law could provide.
[49]
Although the appellant
and her husband testified that the business had been going well, the evidence
does not show that it had been generating the kind of income that could support
such a purchase.
[50]
The husband suggested
that they were perhaps dreamers and that this explained their unrealistic
expectations as well as the business difficulties he had had. I do not accept
that they would have been unrealistic to that degree.
[51]
Although, in itself, it
would not be persuasive, my second reason is that it is unlikely that the appellant
would not remember the number of bedrooms and bathrooms in the house. The
prospect of acquiring a large house of their own would have been an exciting one
for the family, and I would expect the appellant to remember significant
features such as the fact that they would have six bedrooms, more than enough
bedrooms for everyone.
Conclusion
[52]
Given that I do not
accept the appellant’s evidence of intention, it follows that she did not
purchase the Thorndale house with the intention of using it as her primary
place of residence, and the appeal must be dismissed.
Signed at Halifax, Nova Scotia, this 24th day of February
2014.
“Gaston Jorré”
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