Digests

Canada v. Polygon Southampton Development Ltd.

A-125-02

2003 FCA 193, Malone J.A.

29/3/03

25 pp.

Central issue whether certain conveyances by respondent to purchasers of new residential condominium units subject to self-supply rules in Excise Tax Act (ETA), s. 191(1)--If not, and if new housing rebates (NHR) available to purchasers consequently under-calculated, collateral issue whether Polygon, as builder, now entitled to portion of rebates not yet claimed by purchasers--Application for judicial review of Tax Court Judge (T.C.J.) decision ([2002] G.S.T.C. 17) allowing appeal from M.N.R.'s assessment of goods and services tax (GST) with respect to units--T.C.J. determined self-supply rules did not apply, that disposition of units by respondent non-exempt taxable supply, that NHRs could be claimed on full purchase price pursuant to ETA, s. 254(2)-- Under ETA, s. 191(1)(b)(I), (b)(iii), when builder builds new condominium unit, self-supply rules deeming builder to have sold unit to himself, and GST thus payable by builder on fair market value of unit--In calculating NHRs available to purchasers of units, respondent instituted internal practice of allocating purchase price between land and buildings (76% to buildings, 24% to land)--Pursuant to ETA, s. 254.1, NHRs claimed on only building portion of purchase price-- Respondent credited amounts to purchasers, deducted amounts from collectible GST--In assessment dated January 4, 2000, M.N.R. did not agree with objection raised by respondent that respondent not obliged to self-supply--T.C.J. concluded self-supply rules did not apply as transactions by which respondent's interest in 99-year lease transferred to buyer not assignment of lease but, "more in nature of sale for purposes of ETA"--Each transaction taxable sale, self-supply rules did not apply--Therefore ETA, s. 254(2) applied, not s. 254.1; NHRs could be claimed on 100% of purchase price-- Respondent had under-calculated rebate, in effect remitted too much GST to M.N.R.--While Act stipulating rebate belonging to purchaser, here, purchaser agreed to let respondent credit NHR towards purchase price--Accordingly, ETA, s. 234 enabling respondent to deduct from calculation of net GST amount equal to credit--Since purchasers can look to respondent to be credited with correct amount, T.C.J. concluded respondent ought to be able to look to M.N.R. to obtain extra credit or rebate--Application allowed--Self-supply rules not applicable as conveyance at issue here qualifying as single taxable supply, not because akin to sale of interest in fee simple, but because no separate sale of building distinct from assignment of lease of land on which building located--Respondent's interest in ground lease that of lessee, City of Vancouver having retained fee simple interest--All respondent could dispose of was its interest in ground lease and model strata lot lease; respondent could only supply condominium units by way of assignment of its leasehold interest--Present case not sale of separate ownership interest in home coupled with lease--On basis of documentary evidence, of B.C. Condominium Act, of B.C. Land Title Act, supply of residential condominium units constructed on land leased from City of Vancouver can only be viewed as single transaction; namely assignment of leasehold interest in land, and accompanying fixtures, which includes buildings-- Assignment of leasehold interest in land with buildings not within ETA, s. 191(1)(b), nor s. 191(1)(b)(I) (applicable to lease, licence or similar arrangement, but not to assignment of lease)--Therefore, assignment of leasehold interests taxable supply to purchasers, as respondent not deemed to self-supply in accordance with provisions of ETA, s. 191(1)(b), and assignment of lease not exempt supply under ETA, s. 5.1 of Part I of Schedule V--Respondent accordingly required to collect GST pursuant to ETA, s. 221(1)--ETA, s. 194 providing, in case such as this, where purchasers have been erroneously told by builder that their purchase GST exempt, to deem purchase price to have included GST, and to deem that GST to have been collected by builder--As to NHRs, as respondent not subject to self-supply rules on transactions, purchasers taxable on full purchase price and entitled to rebates calculated on amount in accordance with ETA, s. 254(2)--NHRs belong to purchasers, not builders-- Respondent did not, in its own right, have entitlement to NHRs--Even though respondent did over-calculate GST by under-calculating rebate, remedy between Minister and purchasers--Application therefore allowed in part-- Assessment remitted to T.C.J. for redetermination on basis transaction constituting single assignment of leasehold interest to each purchaser; respondent therefore not deemed to self-supply in accordance with provisions of ETA, s. 191(1)(b), and that NHRs to be calculated in accordance with ETA, s. 254(2)--As builder, respondent not in position to claim any excess rebate that would result from calculation under ETA, s. 254(2)--Excise Tax Act, R.S.C., 1985, c. E-15, ss. 191(1)(b) (as enacted by S.C. 1990, c. 45, s. 12; 1993, c. 27, s. 56), 234 (as enacted by S.C. 1990, c. 45, s. 12; 1993, c. 27, s. 95; 1997, c.10, s. 52), 254(2) (as enacted by S.C. 1990, c. 45, s. 12; 1993, c. 27, s. 109), Schedule V, Part I, s. 5.1 (as enacted by S.C. 1993, c. 27, s. 147)--Land Title Act, R.S.B.C. 1996, c. 250--Condominium Act, R.S.B.C. 1996, c. 64.