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.[1] 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.[2]
[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)[3] 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[4] 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.
|
"P.R. Dussault" |
J.T.C.C.
Translation certified true
on this 10th day of June 2002
Stephen Balogh, Revisor