[OFFICIAL ENGLISH TRANSLATION]
Date: 20011207
Docket: 2001-1538(GST)I
BETWEEN:
DANIEL TESSIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre Proulx, J.T.C.C.
[1] This is an appeal under the
informal procedure concerning the assessment notice of which is
dated July 4, 2000, and bears
number 001380007229G0001.
[2] The issue concerns the rebate
provided for in section 256 of the Excise Tax Act
(the "Act") in respect of a single unit
residential complex built by an individual. The point for
determination is which of the day that is two years after
the day the complex is first occupied or the day construction of
the complex is substantially completed is the earlier within the
meaning of subsection 256(3) of the Act.
[3] Subsection 256(3) of the
Act reads as follows:
256(3) 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),
(b) the day
construction or substantial renovation of the complex is
substantially completed.
[4] The facts admitted by the parties
are as follows:
[TRANSLATION]
(a) the appellant is an
individual who built a residential complex to serve as his
ordinary place of residence. The said residential complex is a
duplex, thus a "single unit residential complex" as
defined in subsection 256(1) of the Act;
(b) on May 3, 2000, the appellant
filed an application for rebate of goods and services tax for a
new residential complex;
(c) the application was filed within
two years of the day that is two years after the day he
began to occupy the complex with his family after the start of
the work;
(d) the complex began to be occupied
in May 1996;
(e) the dwelling located on the
upper floor has been rented since May 1, 1996, and was
occupied in the first days of that month;
(f) the appellant has occupied
the complex with his family since May 11, 1996;
(g) more than 90 percent of the
goods and services tax relating to the rebate application was
payable on or before December 31, 1997.
[5] The Minister of National Revenue
(the "Minister) established that, as of May 11, 1996,
the day on which the appellant began to occupy the complex, the
construction work was substantially completed (at least
90 percent) and the complex was reasonably habitable. Thus,
according to the Minister, the appellant had until May 11,
1998, to apply for a new housing rebate.
[6] The parties admit that the rebate
amount to which the appellant is entitled, if any, is
$2,051.26.
[7] The appellant testified and
explained that he himself had built the duplex. His family's
dwelling was to comprise the ground floor and basement. The
dwelling for rent was on the upper floor. That dwelling was ready
on May 1, 1996. He himself occupied the ground floor of his
dwelling on May 11, 1996. However, he always felt that his
dwelling was not completed because the basement was not finished.
In 1996, he purchased sheets of plasterboard and everything he
needed to complete the basement. All those materials were in the
basement.
[8] The building plan had been
approved by the city, but subject to the installation of a
fireproof ceiling between the ground floor and basement and of
some fireproof insulation around certain beams in the
basement.
[9] The appellant and his spouse had
one child and wanted another. The ground floor had
two bedrooms and the basement two more. In the
appellant's mind, the basement was an integral part of the
dwelling they occupied and was to be completed right from the
start.
[10] The heating in the rented dwelling was
electric, while the heating of the appellant's dwelling was
hot air. In May 1996, a number of ventilation ducts had not yet
been permanently installed. In 1997, the appellant did the
landscaping for his child's needs. As a result of the
requirements set by municipal authorities, the exterior work was
completed in May 1998. The appellant completed the basement work
in the summer of 1998 with the help of a few friends. With
respect to the basement bathroom, the sewer pipe and water intake
pipes had already been installed, but the bathroom was completed
in 1998. The interior walls were also built in the summer of that
year.
Arguments
[11] Counsel for the respondent argued that
the day on which construction was substantially completed was the
day the dwelling was occupied, that is May 11, 1996. Counsel
referred to the decision by Judge Hamlyn of this Court in
Vallières v. The Queen, [2001] T.C.J.
No. 528 (Q.L.), more particularly to the following
passages:
[15] The term
"substantially completed", as it appears in
paragraph 256(3)(b) of the Act, is not specifically
defined in the legislation.
[16] The 90% threshold test is
used by the CCRA as an administrative rule of thumb. However,
this test is very imprecise and has consistently been criticized.
There is a complete absence of criteria on which to base such an
estimate. Ostensibly, the CCRA may consider "substantially
complete" to mean something less than 90%. However, it is
unlikely that a level of completion below 70% would amount to
"substantial completion" as envisaged by the Act.
[17] The 90% or more rules must
always be qualified by the fact that the purchaser must be able
to reasonably inhabit the premises. To a large extent, that can
have a subjective component and one has to take into account the
particular purchaser, but not to the point where objective
standards can be disregarded.
[18] To be "substantially
completed" a residential complex must be capable of being
used for the purpose for which it was constructed.
[19] In determining what
constitutes "substantial completion" there must be a
certain common-sense assessment of what, on the facts of the
particular case, a reasonable person would regard as substantial
completion.
[12] He also referred to another decision by
Judge Hamlyn of this Court in Pickering v. The
Queen, [2000] G.S.T.C. 1 (T.C.C.), more particularly to the
following passages:
[5] Construction of
the complex was substantially completed on or around
September 3, 1997. The Appellants did submit however that as
of September 3, 1997 they had not started a proposed
basement apartment and the landscaping was not complete.
. . .
[12] In this case, I conclude
the house was substantially completed at the time of occupancy
notwithstanding landscaping was not complete and the basement was
not finished in terms of creating an apartment. Indeed, at the
date of hearing, the proposed basement apartment still has not
been addressed.
[13] He also cited Memorandum 19.3.4 of
August 1998 entitled "Rebate for Owner-Built Homes",
which clearly explains how this rebate scheme works, in
paragraphs 23 and 24:
Time limit for filing rebate application
23. The rules affecting
the time limits for filing a rebate application have changed for
applications filed on or after April 23, 1996. For these
applications, the time limit for claiming a rebate for an
owner-built single unit residential complex or residential
condominium unit, is the day that is two years after the
earliest of:
· the day
that is two years after the day the complex is first
occupied by the individual or a relation of that individual after
the construction or substantial renovation began;
· the day
ownership is transferred under an exempt sale before the complex
is ever occupied; or
· the day
construction or substantial renovation is substantially
completed.
24. In the case of a
residential complex that is occupied while it is being
constructed or substantially renovated, the owner may apply for
the rebate up to two years after the construction or
substantial renovation is substantially completed, provided that
the construction or substantial renovation is substantially
completed within two years of the date of occupation. If the
owner takes longer to substantially complete the work, the time
limit for filing the application is still a maximum of
four years from the date of occupation, but only tax that
has been paid and which became payable up to two years after
the date that the unit was occupied may be included in
calculating the rebate amount.
[14] The appellant cited
Judge Hamlyn's decision in Vallières,
supra, more particularly paragraph 18:
[18] To be "substantially
completed" a residential complex must be capable of being
used for the purpose for which it was constructed.
The appellant argues that his residence was not completed
until it was able to achieve the purpose for which it had been
built and that this occurred when the basement was completed.
Analysis
[15] I find that the evidence showed that
the appellant's initial plan was to build a two-storey family
dwelling. It was not a plan with two chronological stages or an
eventual plan for an undetermined future. Completion of the
basement was an immediate plan. That completion was necessary in
order to achieve the purpose the appellant had in mind when he
began building the complex in question. The facts supporting this
contention and intention are the purchase of materials in 1996
and 1997 and the number of rooms the appellant deemed necessary
for his family's purposes. All the materials necessary to
complete the basement were purchased before the end of 1997 and
stored in the basement itself. The appellant did certain jobs
such as landscaping and paving before completing the basement
because municipal authorities had required that those items be
immediately completed.
[16] The day that is two years after
the day the complex was first occupied by an individual would be
May 11, 1998. The day construction was substantially
completed was in June or July 1998. The first of the
two days is thus May 11, 1998. The application had to
be filed within two years after the earlier of the
two days described above, that is, on or before May 11,
2000. The appellant's application was filed on May 3,
2000, and was therefore filed within the prescribed time.
[17] The appeal is allowed.
Signed at Ottawa, Canada, this 7th day of December 2001.
J.T.C.C.
Email this Content