http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/110630/index.do
Grondin v. The Queen (February 26, 2015 – 2015 TCC 169, Paris J.).
Précis: Mr. Grondin purchased a piece of land in vacant land in Rockland, Ontario, on November 30, 2010, for consideration of $93,000, plus $12,090 in GST/HST. He sold it in 2012 and applied for a rebate of the GST/HST, which was denied and he then appealed to the Tax Court.
The Tax Court denied the appeal. Mr. Grondin had purchased the land for use as a principal residence and later changed his mind. He had never used the land as part of a commercial activity. No costs were awarded as this was an informal procedure appeal.
Decision: The decision, unfortunately for Mr. Grondin, was open and shut. He acquired the land to use as a principal residence and never used it as part of a commercial activity:
[17] Subsection 9(2) of Part I of Schedule V sets out that the sale of real property by an individual is an exempt supply, except in the circumstances listed in subsections 9(2)(a) to (f).
[18] One of the exceptions, at subparagraph 9(2)(b)(ii) of Part I of Schedule V of the Act, sets out that the supply of real property made in the course of an adventure or concern in the nature of trade is not an exempt supply if the individual filed an election with the Minister containing prescribed information. The election is made on form GST22. That election makes the supply of real property taxable and allows a non-registrant to claim a rebate under subsection 257(1) of the Act. Subparagraph 9(2)(b)(ii) reads as follows:
9 (2) A supply of real property made by way of sale by an individual or a personal trust, other than
. . .
(b) a supply of real property made
. . .
(ii) where the individual or trust has filed an election with the Minister in prescribed form and manner and containing prescribed information, in the course of an adventure or concern in the nature of trade of the individual or trust;
[19] In this case, there is no question that subparagraph 9(2)(b)(ii) does not apply in the circumstances because the appellant was not exercising an adventure or concern in the nature of trade with respect to the land. Therefore, the appellant could not choose to treat the supply as a taxable supply and was not entitled to the rebate. Clearly, the CRA officer’s advice to the appellant to submit that form was erroneous.
[20] The appellant’s main argument is based on considerations of fairness. The appellant argued that he made inquiries with the CRA about the possibility of obtaining a rebate of the taxes that he paid when he acquired the land. He sold his land based on the advice provided by the CRA. At the hearing, the respondent did not dispute that the appellant was mislead by CRA representatives.
[21] However, the Court cannot be bound by erroneous departmental interpretations. In Moulton v. The Queen, [2002] 2 CTC 2395, Associate Chief Judge Bowman (as he was then) stated the following at paragraph 11:
The appellant argues with great conviction that he should be entitled to rely on advice given by the CCRA and relied upon by him in good faith. I agree that the result may seem a little shocking to taxpayers who seek guidance from government officials whom they expect to be able to give correct advice. Unfortunately such officials are not infallible and the court cannot be bound by erroneous departmental interpretations. Any other conclusion would lead to inconsistency and confusion. . . .
[22] As a result, the appeal is dismissed.
[23] In consideration of the erroneous advice that the appellant received from the CRA, this is a case where he might consider seeking a remission order under the Financial Administration Act. It must also be noted that, in this case, it is quite likely that the government will collect the GST/HST on the real property on two occasions: first during its sale to the appellant and then during its sale by the buyer, the construction company, which has used the land for its homebuilding company. That result would seem to go against the policy of the Act to tax the disposition of property only once.
The appeal was dismissed without costs as this was an informal procedure appeal.