Citation: 2007TCC198
Date: 20070403
Docket: 2005-4476(GST)I
BETWEEN:
CONSTRUCTION BERGEROY INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1] These appeals are
from assessments, whose notices are dated February 25, 2005,
and bear the numbers D6E-2552, D6E-2553, D6E-2550 and D6E‑2551, in
respect of the goods and services tax (“GST”) for the period from January 1 to
January 31, from June 1 to June 30, from September 1 to
September 30 and from November 1 to November 30 of 2004, respectively. In fact,
the Minister of National Revenue (the “Minister”), through
the Quebec Minister of Revenue, assessed the Appellant and
is requiring it to repay the
rebate of
the GST provided as a “rebate in respect
of land and building for residential rental accommodation” (the “rebate”) on four
residential complexes it built and which are located at 82, 88, 92 and 96
Gendron Street in Victoriaville (the “complexes”).
Facts
[2] The Appellant built
the complexes in 2003 and 2004. In July 2004, the Appellant received the rebate
on the complexes. For each residential complex, the construction start and end
dates were established as follows:
|
Location
|
Construction start
date
|
Construction end date
|
|
82 Gendron Street
|
2003.08.02
|
2004.09.01
|
|
88 Gendron Street
|
2003.05.03
|
2004.11.01
|
|
92 Gendron Street
|
2003.05.03
|
2004.06.01
|
|
96 Gendron Street
|
2003.05.03
|
2004.01.01
|
[3] Once construction
ended, the complexes were rented out to individuals and then sold to the
Société Habitation Bergeroy Inc. (“Bergeroy”), a corporation controlled by the
same shareholders as the Appellant, on the following dates:
|
Location
|
Occupancy date
|
Sale to Bergeroy
|
|
82 Gendron Street
|
2004.09.01
|
2004.09.22
|
|
88 Gendron Street
|
2004.11.01
|
2004.11.02
|
|
92 Gendron Street
|
2004.06.01
|
2004.06.02
|
|
96 Gendron Street
|
2004.01.01
|
2004.05.31
|
Issue
[4] The issue is
whether the Minister can require the Appellant to repay the rebate provided in
July 2004 on the complexes.
The law
[5] The provisions
relevant to the Excise Tax Act (“E.T.A.”) read as follows:
191.(1) For the purposes of this Part, where
(a) the construction or substantial renovation of a
residential complex that is a single unit residential complex or a residential
condominium unit is substantially completed,
(b) the builder of the complex
(i)
gives possession
of the complex to a particular person under a lease, licence or similar
arrangement (other than an arrangement, under or arising as a consequence of an
agreement of purchase and sale of the complex, for the possession or occupancy
of the complex until ownership of the complex is transferred to the purchaser
under the agreement) entered into for the purpose of its occupancy by an
individual as a place of residence,
(ii) gives possession
of the complex to a particular person under an agreement for
(A) the supply by way of sale of the building or part thereof in which the
residential unit forming part of the complex is located, and
(B) the supply by way of lease of the land forming part of the complex or the supply
of such a lease by way of assignment,
other than an agreement for the
supply of a mobile home and a site for the home in a residential trailer park,
or
(iii) where
the builder is an individual, occupies the complex as a place of residence, and
(c) the builder, the particular person
or an individual who is a tenant or licensee of the particular person is the
first individual to occupy the complex as a place of residence after
substantial completion of the construction or renovation,
the builder shall be deemed
(d) to have made and received, at the later of the time the construction or
substantial renovation is substantially completed and the time possession
of the complex is so given to the particular person or the complex is
so occupied by the builder, a taxable supply by way of sale of
the complex, and
(e) to have paid as a
recipient and to have collected as a supplier, at the later of those
times, tax in respect of the supply calculated on the fair market value of the
complex at the later of those times.
[Emphasis added.]
256.2
(3) If
(a) a particular person, other than a cooperative housing
corporation,
(i)
is the recipient
of a taxable supply by way of sale (in this subsection referred to as the
“purchase from the supplier”) from another person of a residential
(ii)
is a builder
of a residential complex, or of an addition to a multiple unit
residential complex, who makes an exempt supply by way of lease
included in section 6 or 6.1 of Part I of Schedule V that results in the
particular person being deemed under section 191 to have made and received a
taxable supply by way of sale (in this subsection referred to as the
“deemed purchase”) of the complex or addition,
(b) at
a particular time, tax first becomes payable in respect of the purchase from
the supplier or tax in respect of the deemed purchase is deemed to have
been paid by the person,
(c) at
the particular time, the complex or addition, as the case may be, is a
qualifying residential unit of the person or includes one or more qualifying
residential units of the person, and
(d) the person is not entitled to
include the tax in respect of the purchase from the supplier, or the tax
in respect of the deemed purchase, in determining an input tax
credit of the person,
the
Minister shall, subject to
subsections (7) and (8), pay a rebate to the person. . . .
[Emphasis added.]
256.2
(1)
The
definitions in this subsection apply in this section.
“qualifying residential unit” of a person, at a particular time,
means
(a)
a residential unit of which, at or immediately before the particular time, the
person is the owner, a co-owner, a lessee or a sub-lessee or has possession as
purchaser under an agreement of purchase and sale, or a residential unit that
is situated in a residential complex of which the person is, at or immediately
before the particular time, a lessee or a sub-lessee, where
(i)
at the particular time, the unit is a self-contained residence,
(ii)
the person holds the unit
(A)
for the purpose of making exempt supplies of the unit that are included in
section 5.1, 6, 6.1 or 7 of Part I of Schedule V, or
(B)
if the complex in which the unit is situated includes one or more other
residential units that would be qualifying residential units of the person
without regard to this clause, for use as the primary place of residence of the
person,
(iii)
it is the case, or can reasonably be expected by the person at the particular
time to be the case, that the first use of the unit is or will be
(A) as
the primary place of residence of the person or a relation of the
person, or of a lessor of the complex or a relation of that lessor, for a
period of at least one year or for a shorter period where
the next use of the unit after that shorter period is as described in
clause (B), or
(B) as
a place of residence of individuals, each of whom is given continuous occupancy
of the unit, under one or more leases, for a period, throughout which
the unit is used as the primary place of residence of that individual, of at
least one year or for a shorter period ending when
(I)
the unit is sold to a recipient who acquires the unit for use as the
primary place of residence of the recipient or of a relation of the
recipient, or
(II)
the unit is taken for use as the primary place of residence of the person
or a relation of the person or of a lessor of the complex or a relation
of that lessor, and
(iv)
except where subclause (iii)(B)(II) applies, if, at the particular time, the
person intends that, after the unit is used as described in subparagraph (iii),
the person will occupy it for the person’s own use or the person will supply it
by way of lease as a place of residence or lodging for an individual who is a
relation, shareholder, member or partner of, or not dealing at arm’s length
with, the person, the person can reasonably expect that the unit will be the
primary place of residence of the person or of that individual; or
(b)
a prescribed residential unit of the person.
[Emphasis added.]
256.2
(10) If a person was entitled to claim a rebate under
subsection (3) in respect of a qualifying residential unit (other than
a unit located in a multiple unit residential complex) and, within one
year after the unit is first occupied as a place of residence after the
construction or last substantial renovation of the unit was substantially
completed, the person makes a supply by way of sale (other than a
supply deemed under section 183 or 184 to have been made) of the unit to
a purchaser who is not acquiring the unit for use as the primary place of
residence of the purchaser or of a relation of the purchaser, the
person shall pay to the Receiver General an amount equal to the rebate plus
interest at the prescribed rate less 2% per year, calculated on that amount for
the period beginning on the day the rebate was paid or applied to a liability
of the person and ending on the day the amount of the rebate is paid by the
person to the Receiver General.
[Emphasis added.]
Appellant’s position
[6] The Appellant
submits that subsection 256.2(10) of the E.T.A. must be interpreted in light of
the purpose which it is intended to serve, that is to protect the residential
character of a qualifying residential unit by preventing it from being
sold within a period of one year and by a person who would not hold the unit
for use as the primary place of residence.
[7] The Appellant goes
on to claim that subsection 256.2(10) of the E.T.A. applies to the “person” who
is an individual referred to in subparagraph (iii)(A) of the definition of “qualifying residential unit” provided for in
subsection 256.2(1) of the E.T.A. and not to the company which expects that the unit will be “a place of residence of individuals.”
[8] The Appellant adds
that, in order for subsection 256.2(10) of the E.T.A. to be applicable, it
is imperative that the right of occupancy of the individual who resides in the
unit under a residential lease end at the time of the sale, which ensures that
the lessee shall leave the premises, as the same person cannot be the lessee
and the owner of the unit.
[9] Finally, the
Appellant submits that subsection 256.2(10) of the E.T.A. must be read in
conjunction with the definition of “qualifying residential unit.” Thus, this provision would only
apply to temporary leasing, that is to say, where the lease is terminated
before a 12-month period, and that the unit is sold to a purchaser who is not acquiring the
unit for use as the primary place of residence of the purchaser or of a
relation of the purchaser.
Analysis and conclusion
[10] First, it is important to note that, according
to well-established principles of interpretation, where the terms of a statute
are clear, they must simply be applied without interpretation. Such are the
teachings of the Supreme Court of Canada in Shell Canada Ltd. v.
Canada, [1999] 3 S.C.R. 622:
40 Second, it is well established in this Court’s tax
jurisprudence that a searching inquiry for either the “economic realities” of a
particular transaction or the general object and spirit of the provision at
issue can never supplant a court’s duty to apply an unambiguous provision of
the Act to a taxpayer’s transaction. Where the provision at issue is
clear and unambiguous, its terms must simply be applied:
. . .
[Emphasis added.]
[11] Second, it is
important to add that, according
to well-established principles of interpretation, where the terms of a
statute are clear, the Court must apply them even if the result is absurd.
[12] In the case at bar,
I am of the opinion that the provisions of subsection 256.2(10) of the E.T.A.
are clear and unambiguous and therefore are not to be interpreted in light of
the general purpose and intent of the provisions provided for in
section 256.2 of the E.T.A.
[13] Thus, under
subsection 256.2(10) of the E.T.A., the repayment of a rebate must be made
(a) by a
person who was entitled to
claim a rebate under subsection 256.2(3) of the E.T.A.;
(b) in respect of a qualifying residential
unit;
(c) where the qualifying residential unit is sold within one year after the unit is first
occupied as a place of residence.
[14] There is no
repayment of rebate in the following two situations:
(a) the qualifying residential unit is
located in a multiple unit
residential complex;
(b) the unit is sold to
a purchaser who is acquiring
the unit for use as the primary place of residence of the purchaser or of a
relation of the purchaser.
[15] In my opinion,
subsection 256.2(10) of the E.T.A. applies to the Appellant for the
following reasons:
(a) The Appellant was entitled to the
rebate under subsection 256.2(3) of the E.T.A.;
(b) The complexes fell
within the definition of “qualifying
residential unit” enacted by section 256.2 of the E.T.A., especially as the first use of the unit was as a place of
residence of individuals, under one or more leases, for a period of at least
one year;
(c) Each of the
complexes were sold within
one year after they were first occupied as a place of residence. In this regard, it is
irrelevant that the complexes were sold a few days or months after they were
leased;
(d) The complexes are
not units located in a
multiple unit residential complex owing to the following definitions in
subsection 123(1) of the E.T.A.
“multiple unit residential complex” means a residential complex
that contains more than one residential unit, but does not include a
condominium complex;
“condominium complex” means a residential complex that contains
more than one residential condominium unit;
“residential condominium unit” means a residential complex that
is, or is intended to be, a bounded space in a building designated or described
as a separate unit on a registered condominium or strata lot plan or
description, or a similar plan or description registered under the laws of a
province, and includes any interest in land pertaining to ownership of the
unit;
(e) The complexes are residential condominium units which are excluded from
the definition of “multiple
unit residential complex” pursuant to the above definitions. Accordingly, the
complexes do not fall within the exception provided for in
subsection 256.2(10) of the E.T.A.;
(f) The complexes were
not sold to a purchaser for
use as the primary place of residence of the purchaser or of a relation of the
purchaser.
The Appellant submits that subsection 256.2(10) of the E.T.A. only
applies where a qualifying residential unit is sold to a purchaser who is an
individual. By interpreting the subsection in this manner, the Appellant adds
to the provision words it does not contain. In fact, subsection 256.2(10)
of the E.T.A. requires as a condition that a qualifying residential unit be
sold within one year after
the unit is first occupied as a place of residence. The only exception provided for
in subsection 10 of section 256.2 of the E.T.A. is the sale to an
individual who is acquiring the qualifying residential unit for use as the primary place of residence
of the purchaser or of a relation of the purchaser.
[16] For these reasons,
the appeals are dismissed.
Signed at Ottawa, Canada, this 3rd day of
April 2007.
“Paul Bédard”
Translation certified true
on this 31st day of July 2007.
Daniela Possamai, Translator
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