Date: 20010208
Docket:
2000-456-GST-I
BETWEEN:
LOUISETTE ASSELIN
TRUDEL,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasonsfor
Judgment
P.R. Dussault,
J.T.C.C.
[1]
The appellant is contesting an assessment made under Part IX of
the Excise Tax Act ("GST") ("the
Act") for the period from April 1 to 30, 1991, notice
of which is dated October 24, 1997, and bears number PS97L0521.
The assessment is for a total of $11,061.66, which is made up of
$7,540.37 in net tax and $3,521.29 in
interest.
[2]
The assessment was made pursuant to subsection 191(1), which
concerns the self-supply of a single unit residential
complex. The Minister of National Revenue ("the
Minister") assumed that the appellant first began renting a
newly built complex located at 1580 Rue Hansen in Terrebonne,
Quebec, on April 9, 1991. Subsection 191(1) reads as
follows:
191. (1) Self-supply of single
unit residential complex or residential condominium unit
— 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.
[3]
The respondent argued that, under paragraph 191(1)(e) of
the Act, the appellant is deemed to have paid as a
recipient and to have collected as a supplier, at the time the
complex was rented, tax in respect of the supply calculated on
the fair market value of the complex at that time.
[4]
The respondent further submitted that, in accordance with the
rules set out in subsection 238(2) and paragraph 245(1)(a)
of the Act, the appellant, who is not a GST registrant,
had to file a return in May 1991 and, at that time, remit the tax
deemed to have been collected.
[5]
In reliance on a number of provisions, namely
subparagraph 298(1)(a)(i), paragraph 298(1)(b)
and subsections 298(4) and (5) of the Act, the respondent
also argued that the assessment is valid and not
statute-barred.
[6]
The appellant, while acknowledging the applicability of
subsection 191(1) of the Act, argued that the assessment
is not valid because it was made after the four-year time
limit set out in paragraph 298(1)(c) of the Act.
She further submitted in reliance on subsection 298(4) of the
Act that the assessment could not be made after that time
limit because she did not make a misrepresentation attributable
to her neglect, carelessness or wilful default.
[7]
Before addressing the issue of whether the assessment is
statute-barred, which the parties consider the only issue
in this case, reference should be made to certain facts brought
out in the testimony of the appellant herself and in that of
Richard Houde, who was a Revenu Québec auditor at the
relevant time.
[8]
While Mr. Houde was auditing the affairs of the appellant's
spouse in 1995, the appellant told Mr. Houde that the newly built
complex at 1580 Rue Hansen in Terrebonne, Quebec, was
owned by her and had first been rented in May 1992. An original
assessment was therefore made against the appellant pursuant to
subsection 191(1) of the Act for the period of May 1
to 31, 1992. The notice of assessment was dated October 19,
1995, and bore number T95L067.
Some confusion followed because, according to the appellant, the
notice referred to the complex at 1570 Rue Hansen, her place of
residence, and not to the complex at 1580 Rue Hansen, which was
the one that had been rented.
[9]
In any event, the appellant objected to and then appealed the
assessment. At the hearing of the appeal by the Tax Court of
Canada in May 1997, the appellant said that, during
Mr. Houde's 1995 audit, she had said whatever came into
her head in response to his question as to when the complex at
1580 Rue Hansen had first been rented. At that hearing, she even
stated that it had first been rented in November 1990.
[10]
At the hearing of the instant appeal, the appellant said that she
had answered the questions asked by Mr. Houde during his 1995
audit in all good faith and that it was rather at the May 1997
hearing that she had not testified accurately.
[11]
At the hearing of the instant appeal, Mr. Houde said that he had
obtained a letter from the tenant of the complex at 1580 Rue
Hansen, a Mr. Dery, who said that he had started renting the
complex on April 9, 1991. Mr. Houde also checked with
Hydro-Québec, which confirmed that the complex had indeed
been connected on that date.
[12]
Since the assessment made on October 19, 1995, concerned the
period of May 1 to 31, 1992, and since it turned out that Mr.
Dery had actually started renting the complex on April 9, 1991,
the appeal from the assessment was allowed by a judgment of this
Court dated May 27, 1997.
[13]
On October 24, 1997, in response to the judgment, Mr. Houde made
a reassessment covering the period of April 1 to 30, 1991. That
assessment is the one the appellant is now contesting on the
basis that it was made after the four-year time limit set
out in paragraph 298(1)(c) of the Act. As noted
above, the appellant also argued that the assessment could not be
made after the normal limitation period of four years after the
tax became payable in reliance on subsection 298(4) of the
Act because she did not make a misrepresentation
attributable to her neglect, carelessness or wilful default. She
said that she had answered the question asked by Mr. Houde during
his 1995 audit in all good faith.
[14]
Counsel for the respondent argued that the assessment is valid
even though it was made after the four-year time limit
because the appellant made a misrepresentation that is
attributable at the very least to her neglect or carelessness,
since she made no effort to check with her tenant whether the
answer she had given Mr. Houde was true. Counsel for the
respondent therefore argued that the assessment is valid under
subsection 298(4) of the Act. However, counsel for the
respondent referred first to subparagraph 298(1)(a)(i),
paragraph 298(1)(b) and subsection 298(5) to show
that the assessment is valid under all of those provisions. In my
opinion, the reference to those many provisions is liable to
create some confusion, which it is necessary to clear
up.
[15]
First of all, it is important to reproduce the various provisions
relied on by the parties. They are subparagraph
298(1)(a)(i), paragraphs 298(1)(b) and (c)
and subsections 298(4) and (5). Those provisions read as
follows:
298.
(1) Period for assessment — Subject
to subsections (3) to (6.1), an assessment of a person shall not
be made under section 296
(a) in the
case of
(i) an assessment
of net tax of the person for a reporting period of the
person,
. . .
more than four
years after the later of the day on or before which the person
was required under section 238 to file a return for the period
and the day the return was filed;
(b) in the
case of an assessment of tax payable by the person under Division
II in respect of a supply of real property made by way of sale to
that person by a supplier in circumstances in which subsection
221(2) applies, more than four years after the later of the day
on or before which the person was required to file the return in
which that tax was required to be reported and the day the return
was filed;
(c) in the
case of an assessment of tax payable by the person under Division
II, other than tax referred to in paragraph (b), more than
four years after the tax became payable;
. . .
298(4) Idem — An assessment in respect of any
matter may be made at any time where the person to be assessed
has, in respect of that matter,
(a) made a
misrepresentation that is attributable to the person's
neglect, carelessness or wilful default;
(b)
committed fraud
(i) in making or
filing a return under this Part,
(ii) in making or
filing an application for a rebate under Division VI,
or
(iii) in supplying,
or failing to supply, any information under this Part;
or
(c) filed a
waiver under subsection (7) that is in effect at that
time.
298(5)
Idem — Where, in making an
assessment, the Minister determines that a person has paid in
respect of any matter an amount as or an [sic] account of
tax payable or net tax remittable for a particular reporting
period of the person that was in fact payable or remittable for
another reporting period of the person, the Minister may at any
time make an assessment for that other period in respect of that
matter.
. . .
[16]
Subsection 296(1) of the Act provides as
follows:
296. (1)
Assessments — The Minister may assess :
(a) the net
tax of a person under Division V for a reporting period of the
person,
(b) any tax
payable by a person under Division II, IV or IV.1,
(c) any
penalty or interest payable by a person under this
Part,
(d) any
amount payable by a person under any of paragraphs
228(2.1)(b) and (2.3)(d) and section 230.1,
and
(e) any
amount which a person is liable to pay or remit under subsection
177(1.1) or Subdivision a or b.1 of Division VII,
and may reassess or
make an additional assessment of tax, net tax, penalty or
interest.
[17]
Subsection 168(1)
provides that the GST in respect of a taxable supply is payable
by the recipient on the earlier of the day the consideration for
the supply is paid and the day the consideration for the supply
becomes due. Although the recipient of a taxable supply is liable
for the GST and may be assessed in that regard under paragraph
296(1)(b) of the Act, the supplier is normally the
one assessed. However, if the recipient of the taxable supply has
been assessed, paragraph 298(1)(c) limits the normal
assessment period to four years after the tax became payable. In
the case before the Court, paragraph 191(1)(e) of the
Act provides that the builder, namely the appellant, is
deemed to have paid the GST as a recipient. In my opinion, that
presumption eliminates the need to make an assessment against the
builder as the deemed recipient of the taxable supply. However,
paragraph 191(1)(e) also provides that the builder is
deemed to have collected the GST as a supplier. On that basis,
the builder must remit the tax deemed to have been collected by
the builder and may be assessed for it, which is precisely what
happened in the instant case.
[18]
It is Division V of the Act that deals with the collection
and remittance of Division II tax. According to subsection 221(1)
of the Act, a person who makes a taxable supply must
first, as agent of Her Majesty in right of Canada, collect the
tax payable by the recipient under Division II of the Act
in respect of the supply. Subsection 238(2) then provides that a
person who is not a registrant must file a return with the
Minister for each reporting period of the person for which net
tax is remittable by the person within one month after the end of
the reporting period. Subsection 245(1) specifies that the
reporting period of a person who is not a registrant is a
calendar month. The net tax to be remitted for a reporting period
is established in subsection 225(1) and is equal to all amounts
that became collectible and all other amounts collected by the
supplier minus the input tax credits and other amounts that may
be deducted in determining the net tax. Since in the case at bar
the complex at 1580 Rue Hansen was rented as a place of
residence, the rental was exempt
and the appellant could not claim any input tax credit. It is
paragraph 228(2)(b) that, in this case, provides that the
net tax must be remitted to the Receiver General on or before the
day on or before which the return for the period is required to
be filed. What all this means is that, in May 1991, the
appellant had to file a return and remit the GST resulting from
the application of subsection 191(1) of the Act for the
period of April 1 to 30, 1991, since, according to the evidence
adduced, the complex was first rented as a place of residence
starting on April 9, 1991.
[19]
Paragraph 296(1)(a) provides that the Minister may assess,
reassess or make an additional assessment of the net tax of a
person under Division V for a reporting period of the person.
With regard to a person's net tax for a reporting period,
subparagraph 298(1)(a)(i) provides that an assessment may
not be made more than four years after
the later of the day on or before which the person was required
under section 238 to file a return for the period and the day the
return was filed. However, the appellant never filed a
return pursuant to paragraph 191(1)(e) of the
Act, according to which she is deemed to have collected
the GST when she rented her complex in April 1991. Thus, the time
limit for assessing the appellant had not expired on October 24,
1997. The assessment was therefore validly made on that
date.
[20]
This is sufficient to dispose of the instant case. However, since
counsel for the respondent also referred to paragraphs
298(1)(b) and (c) and subsections 298(4) and
(5), a few additional comments are in order.
[21]
It is clear that paragraph 298(1)(b) could not apply in
the circumstances. The case at bar in no way concerns the
application of subsection 221(2), which, at the relevant time,
provided for the supply of real property by way of sale in
special circumstances, namely where the supplier was a
non-resident person, the recipient was a registrant and the
supply was not a supply of a residential complex made to an
individual.
[22]
As I said above, paragraph 298(1)(c) concerns tax
payable by the recipient and is, in my opinion, inapplicable here
given the wording of paragraph 191(1)(e) of the
Act.
[23]
Since the time limit in which the Minister could assess under
subparagraph 298(1)(a)(i) had not expired on October
24, 1997, there is absolutely no need in the circumstances to
consider subsection 298(4) and discuss whether or not a
misrepresentation was made that was attributable to neglect,
carelessness or wilful default.
[24]
Finally, it is my view that subsection 298(5) of the Act
cannot apply in the instant case because it refers to a situation
in which a person has paid tax payable or net tax remittable for
the wrong reporting period, which is not the case here, since
nothing was paid.
[25]
In short, I consider that the assessment of October 24, 1997, is
valid under subparagraph 298(1)(a)(i) of the Act
because the appellant never filed a return as she was required to
do pursuant to subsection 191(1) of the Act.
[26]
Therefore, the appeal is dismissed.
Signed at Ottawa, Canada, this 8th day of
February 2001.
"P. R. Dussault"
J.T.C.C.
Translation certified
true on this 10th day of June 2002
[OFFICIAL ENGLISH
TRANSLATION]
Stephen Balogh,
Revisor
[OFFICIAL ENGLISH TRANSLATION]
Docket: 2000-456(GST)I
BETWEEN:
LOUISETTE ASSELIN TRUDEL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on January 30, 2001, at
Montréal, Quebec, by
the Honourable Judge P.R. Dussault
Appearances
Agent for the
Appellant:
Pierrette Asselin
Counsel for the Respondent:
Gérald Danis
JUDGMENT
The
appeal from the assessment made under part IX of the Excise
Tax Act notice of which is dated October 24, 1997 and bears
number PS97L0521 is dismissed in accordance with the attached
Reasons for Judgment.
Signed at Ottawa, Canada,
this 8th day of February 2001.
J.T.C.C.
Translation certified
true
on this 10th day of June
2002
Stephen Balogh, Revisor
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