In Cheema v. The Queen, in which Mr. Mohammad Cheema was represented by Nanda & Associate Lawyers, Mr. Cheema appealed a Canadian Revenue Agency (CRA) decision to deny his application for a new housing rebate (NHR) worth $24,000. Justice Guy R. Smith’s decision hinged on the meaning of the expression “particular individual,” as used in subsection 254(2) of the Excise Tax Act (ETA). Let’s take a closer look at the case.
The Facts
In March 2012, Mr. Cheema (sometimes referred to in Justice Smith’s decision as “the Appellant”) and Dr. Din Mohammed Akbari, a friend, signed an Agreement of Purchase and Sale (APS) for the purchase of a new property in Vaughan. To assist with mortgage financing, Mr. Cheema asked Dr. Akbari to co-sign his application for credit. On the day the transaction closed – July 26, 2014 – both Mr. Cheema and Dr. Akbari signed a Trust Declaration, in which Dr. Akbari was designated the Trustee and Mr. Cheema and his spouse the beneficiaries.
Under their agreement, Mr. Cheema acquired 99 per cent of the new property, and Dr. Akbari one per cent. Dr. Akbari did not contribute to the down-payment, nor did he make payments towards the property’s mortgage, property taxes, insurance, or utilities after the closing date. Upon closing, Mr. Cheema and his spouse immediately took possession of the property; Dr. Akbari had no intention of occupying the Property, and did not do so after the closing date.
In his judgment, Justice Smith emphasized that he had “no difficulty believing the version of the facts put forward by the Appellant, as corroborated by Dr. Akbari.”
Position of the CRA
The CRA denied Mr. Cheema’s rebate application on the grounds that Dr. Akbari, because he signed the APS, is a “particular individual” under subsection 254(2) of the ETA. This subsection dictates that a “particular individual” must occupy the premises in order to be eligible for a rebate. Because Dr. Akbari admittedly did not occupy the residence, the CRA posited, the preconditions for the NHR had not been met, and Mr. Cheema was thus ineligible to receive it.
Position of Mr. Cheema
John Ennis of Nanda & Associate Lawyers stated on Mr. Cheema’s behalf that though Dr. Akbari held legal title to the property, Mr. Cheema and his spouse were its sole beneficial owners, and that Dr. Akbari was not a “particular individual,” but rather a nominee.
“In essence,” wrote Justice Smith in his decision, “the Appellant argues that he has satisfied all the necessary conditions set out in subsection 254(2) of the ETA and that he is entitled to the NHR.”
Decision
Justice Smith found that Dr. Akbari acted as a bare trustee, and that only Mr. Cheema was a “particular individual” for the purposes of section 254(2) of the ETA.
“In the end, for the purposes of all the conditions set out in subsection 254(2) of the ETA, Dr. Akbari was merely a conduit or agent of the Appellant and his spouse,” Justice Smith wrote. “The Appellant is therefore entitled to the NHR.”
