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GOODS AND SERVICES TAX (GST) - Rebates - New housing

Tuesday, March 20, 2018 @ 6:52 AM  


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Appeal by the Crown from a Tax Court of Canada decision in favour of the respondent, Cheema, allowing an appeal from a reassessment of GST under the Excise Tax Act. An individual other than the respondent entered an agreement of purchase and sale for a single unit residential complex to be constructed. The other individual signed the agreement solely for the purpose of assisting the respondent in obtaining the mortgage to finance the acquisition, and had no real interest in the property. The respondent paid all amounts related to the purchase of the home and moved into it with his family as their primary place of residence. The Minister reassessed the respondent, denying a new housing GST rebate, due to the respondent's failure to satisfy the occupancy requirements of s. 254(2) of the Excise Tax Act. The Tax Court allowed the respondent's appeal from the Minister's ruling. The judge ruled that the respondent's co-purchaser was a bare trustee who had signed the purchase agreement without any interest in the property itself, and thus the respondent qualified for the rebate. The Crown appealed to the Federal Court of Appeal.

HELD: Appeal allowed. The Tax Court interpreted s. 254 of the Excise Tax Act as a benefits-conferring section without proper consideration of the circumstances in which the rebate was available. The prerequisites for claiming a new housing rebate were set out in s. 254 using precise wording. Where supply of a complex was made to two or more individuals, the supply occurred to those individuals as a group. Therefore, both the respondent and his co-purchaser were required to use the complex as their primary place of residence. Only the respondent did so, as his co-purchaser never intended to occupy the property. The nature of their arrangement, and the fact of a trust agreement documenting the arrangement was irrelevant. The requirements for the rebate were not met. The Tax Court judge erred in relying upon the arrangement between the respondent and his co-purchaser as extraneous to the requirements in s. 254. The decision was quashed and the Minister's reassessment was restored.

Cheema v. Canada, [2018] F.C.J. No. 199, Federal Court of Appeal, M. Nadon, D.W. Stratas and W.W. Webb JJ.A., February 27, 2018. Digest No. TLD-March192018005