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Citation: 2004TCC315
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Date: 20040430
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Docket: 2003-2539(GST)I
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BETWEEN:
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CHRISTIANE HAMEL,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal from a decision of the Respondent to disallow a Goods and Services Tax ("GST") rebate. The application for the rebate was filed on May 6, 2003, following the construction of a personal family dwelling.
[2] The application for the rebate was filed on the basis of subsection 256(2) of the Excise Tax Act (the "ETA"). Even though the date of completion remains uncertain as to whether it was June 2001 or September 1st, 2001, the application was certainly filed before the two-year deadline provided for in subsection 256(3) of the Act, which reads as follows:
Application for rebate- 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 within two years after the earliest of
(a) the day that is two years after the day the complex is first occupied as described in subparagraph (2)(d)(i),
(a.1) the day ownership is transferred as described in subparagraph (2)(d)(ii); and
(b) the day construction or substantial renovation of the complex is substantially completed.
[3] In making the assessment, the Minister of National Revenue (the "Minister") relied on the following facts in paragraph 5 of the Reply to the Notice of Appeal (the "Reply"):
[TRANSLATION]
(a) The above-mentioned known facts;
(b) During 2001, the Appellant constructed a residence for herself located at 123 des Grenadiers Street in Boischâtel;
(c) Alain Crépeault and the Appellant are the undivided co-owners of the residence;
(d) the value of the residence is approximately $195,000;
(e) on or about May 6, 2002, the Appellant, in her capacity as self-builder, filed a "GST" Rebate Application for $4,637.40 for the benefit of the co-owners;
(f) the Respondent rejected the application for the following reasons:
(g) on or about July 25, 2002, the Appellant informed the auditor that, since the dwelling was ready for occupancy, only one of the co-owners (herself) used of the dwelling as an ordinary residence;
(h) Mr. Crépeault lived at 1630 de Niverville, in Québec when the application was filed;
(i) during the conversation, the Appellant has stated that her relationship with Mr. Crépeault is only a friendly relationship;
(j) later in the conversation, the Appellant admitted that Mr. Crépeault is actually her boyfriend. She added that they do not live together so that she does not lose the tax advantages resulting from her single-mother status, and the amount of spousal support she receives;
(k) in her letter dated September 10, 2002, the Appellant mentioned that the notarial deed was written in the name of both co-owners in consideration of the fact that Mr. Crépeault built the residence without receiving any compensation;
(l) the Appellant added in her letter that she pays the mortgage herself;
(m) the mortgage deed was issued in the name of both co-owners;
(n) Mr. Crépeault's name also appears on the contract to purchase the land, on the insurance contract covering the dwelling and on the municipal registry;
(o) many purchase invoices for supplies were issued in Mr. Crépeault's name;
(p) other purchase invoices were issued in the name of third parties or were claimed twice;
(q) Tax guide VD-366.G (2000-10) states at page 6, in the general information section, that, where a home is purchased by more than one person, only one of the purchasers may submit a rebate application. However, all of the purchasers must meet the eligibility requirements.
[4] The issue at bar is whether the Appellant is entitled to claim reimbursement of the GST she has paid with respect to the self-building of the residence.
[5] The Appellant is a single mother and has two minor children; she befriended one Alain Crépeault and together they developed a plan to build a family dwelling. The residence was indeed built and the Appellant moved in with her children. She then applied for a GST rebate.
[6] Since the Appellant shared ownership of the residence at issue with her friend Alain Crépeault, who was the prime contractor, the Respondent did an initial investigation in order to ascertain the residential address of the two co-owners of the building for which the rebate was claimed.
[7] The investigation revealed that the Appellant did, in fact, live in her new residence. However, co-owner Crépeault resided at 1630 Niverville Street in Québec.
[8] The Respondent then did other investigations in order to corroborate the initial finding that Mr. Crépeault did not reside with the Appellant in the new residence. These investigations, undertaken particularly in connection with the Société de l'Assurance Automobile du Québec confirmed that Mr. Crépeault did not reside with the Appellant at the new address.
[9] The Appellant neither denied nor objected to the Respondent's finding with respect to Mr. Crépeault's residential address; she made no attempt to conceal the truth. She explained that he was a friend that she saw on a regular basis. Both of them are divorced and were planning to eventually form a blended family.
[10] As they wanted to live together, they decided together to build the residence at issue, all of which was significantly simplified because of Mr. Crépeault's expertise in construction matters.
[11] The veracity of their future plans is not a fabrication or a self-interested explanation presented by the Appellant in order to become eligible for the rebate; its veracity is well-documented and rests on solid and undeniable proof. In fact, Crépeault co-owns the land, is a co-borrower with respect to the mortgage, etc.; the Respondent was aware of these facts as she alleged them in subparagraphs m, n and o of paragraph 5 of the Reply.
[12] The Appellant explained that their plan to live together had been delayed because her children showed signs of integration difficulties. She explained she consulted professionals in order to alleviate these difficulties. She and her friend also took some courses. She completed this part of her testimony by saying that she started living with the co-owner at the beginning of January 2004.
[13] The Respondent rejected the application on the ground that both co-owners must fulfil the requirements listed in subsection 256(2) of the ETA: specifically, because Alain Crépeault did not live in the new dwelling when the application was filed.
[14] Since the new dwelling was not the ordinary residence of Alain Crépeault within the meaning of subsection 256(2) of the ETA, the Respondent determined that the application should be denied because he was one of the co-owners. Moreover, he was not related to the Appellant within the meaning of subsection 256(1) of the ETA.
[15] Here are the applicable provisions of the ETA:
256. (1) Definitions - In this section,
. . .
"relation" of a particular individual means another individual who is related to the particular individual or who is a former spouse or common-law partner of the particular individual;
(2) Rebate for owner-built homes - Where
(a) a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a residential complex that is a single unit residential complex or a residential condominium unit for use as the primary place of residence of the particular individual or a relation of the particular individual,
(b) the fair market value of the complex, at the time the construction or substantial renovation thereof is substantially completed, is less than $450,000,
(c) the particular individual has paid tax in respect of the supply by way of sale to the individual of the land that forms part of the complex or an interest therein or in respect of the supply to, or importation by, the individual of any improvement thereto or, in the case of a mobile home or floating home, of the complex (the total of which tax under subsection 165(1) and sections 212 and 218 is referred to in this subsection as the "total tax paid by the particular individual"),
(d) either
(i) the first individual to occupy the complex after the construction or substantial renovation is begun is the particular individual or a relation of the particular individual, or
(ii) the particular individual makes an exempt supply by way of sale of the complex and ownership of the complex is transferred to the recipient before the complex is occupied by any individual as a place of residence or lodging,
the Minister shall, subject to subsection (3), pay a rebate to the particular individual equal to
(e) where the fair market value referred to in paragraph (b) is not more than $350,000, the lesser of $8,750 and 36% of the total tax paid by the particular individual before an application for the rebate is filed with the Minister in accordance with subsection (3), and
(f) where the fair market value referred to in paragraph (b) is more than $350,000 but less than $450,000, the amount determined by the formula
A x [($450,000 - B)/$100,000]
where
A is the lesser of $8,750 and 36% of the total tax paid by the particular individual before an application for the rebate is filed with the Minister in accordance with subsection (3), and
B is the fair market value of the complex referred to in paragraph (b).
262 (3) If
(a) a supply of a residential complex or a share of the capital stock of a cooperative housing corporation is made to two or more individuals, or
(b) two or more individuals construct or substantially renovate, or engage another person to construct or substantially renovate, a residential complex,
the references in sections 254 to 256 to a particular individual shall be read as references to all of those individuals as a group, but only one of those individuals may apply for the rebate under section 254, 254.1, 255 or 256, as the case may be, in respect of the complex or share.
[16] If the Court admits the Respondent's interpretation of the facts, then the Appellant would be penalized for her responsible attitude and behaviour.
[17] All the facts stated by the Appellant are consistent and perfectly logical, especially given that the presence of young children would have an impact upon this type of plan.
[18] The Appellant and her friend, Mr. Crépeault, are both co-owners of the new dwelling and they simply did not want to skip some steps and risk traumatizing the children. They acted with maturity and in a responsible manner.
[20] When the application was submitted in May 2002, there is no doubt that Mr. Crépeault was not using the new dwelling as his primary place of residence; he did not move there until January 2004.
[21] However, when the application was filed, it was possible, if not probable, that Mr. Crépeault would move in some day. This is perfectly consistent with all his actions and deeds. In fact, he had already acquired the land as co-owner, he was a co-borrower in financing the project, his name appeared in many registers as a co-owner, particularly in the municipal and insurance documents. Moreover, he had supervised the construction site himself.
[22] Memorandum No. 19.3 entitled Real Property Rebates is rather interesting in this respect. Here is an excerpt:
If a person has more than one place of residence, the following are some of the factors that are taken into consideration when determining if the residence qualifies as the primary one: whether the individual intends to use the home as his or her primary place of residence, the length of time the individual inhabits the premises, and the designation of that address on personal records.
An individual's intention to use a residence as the individual's primary place of residence must be evident at the outset of acquiring, constructing or substantially renovating the residence. The intention to use the residence as a primary place of residence upon some more distant occasion such as retirement does not qualify that residence as the primary place of residence. Note that "primary place of residence" does not necessarily have the same meaning as a person's "principal place of residence" under the Income Tax Act.[1]
[23] The issue of intention has been examined very appropriately in Boucher v. Canada[2002] T.C.J. No. 359 (Q.L.).
[24] Although it is difficult to prove the intentions of a person at any point in time on a balance of probabilities, I believe that in the case at bar, this fact was unequivocally demonstrated.
[25] All of Mr. Crépeault's deeds and actions are consistent with the actions of a person who intended to eventually move into the dwelling. It certainly is but circumstantial proof, but my only conclusion is that he firmly intended that the dwelling in question would sometime be his primary place of residence. Here are all the facts that point in this direction:
· During the construction of the said house, Mr. Crépeault and the Appellant had been in an exclusive relationship for about three years and wished to live together;
· Mr. Crépeault built the house, and he did so without receiving any compensation;
· Mr. Crépeault's name was written, as co-owner, on all the contracts and registers relating to the house;
· The Appellant, her children and Mr. Crépeault's children attended some counselling sessions for blended families in order to facilitate the integration of Mr. Crépeault into the family;
· The Appellant, her children and Mr. Crépeault's children have lived in the said house since January 2004.
[26] As to the other ground for rejecting the application, that Alain Crépeault is not a relation of the Appellant, I will only say that I would have some difficulty in determining whether an adult is a relation of another adult on the sole basis of the address. Does living in the same residence and sharing expenses constitute evidence that two persons are spouses? I do not believe so. Conversely, it is possible for two persons to be spouses without living permanently at the same residence. Does being a spouse or a relation entail an exclusive relationship? These questions show how different it is to make a determination with respect to this issue.
[27] In the case at bar, the balance of probabilities shows that her new residence was already the Appellant's primarily place of residence when she filed the application in May 2002. As for the co-owner, Alain Crépeault, it was satisfactorily established before this Court that he had a real intention to make the new dwelling his primary place of residence, and his intention materialized in January 2004. The intention existed when the parties planned and executed the project and when the application was filed.
[28] The appeal is therefore allowed. The matter must be sent back to the Minister for a new assessment to be made in consideration of the fact that the Appellant is entitled to the reimbursement. She is only entitled, however, to the eligible amounts: the evidence shows that the Appellant also claimed some ineligible amounts that shall be subtracted from the amount to which she is entitled.
[29] The whole without costs.
Signed at Ottawa, Canada, this 30th day of April 2004.
Tardif J.
Translation certified true
on this 28th day of October 2004.
Ingrid B. Miranda, Translator
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