Sharma v. The King – Tax Court of Canada Upholds GST/HST New Housing Rebate Despite Short Ownership Period

In October 2025, the Tax Court of Canada (TCC) in Mandeep Sharma v. His Majesty the King, 2025 TCC 145, allowed an appeal by a taxpayer, ruling that she was entitled to the GST new housing rebate. The case clarifies the distinction between the “intention” and “occupancy” tests under the Excise Tax Act (ETA) and reinforces that life’s unpredictable changes—such as career promotions and family health crises—can plausibly explain a short period of occupancy of a property as a place of residence.

Background – A Dream Home Derailed by Career and Family

The appellant, Mandeep Sharma, and her husband, Mr. Sharma, acquired a newly built freehold townhouse in Guelph, Ontario (the “Property”). The history of the acquisition was marked by specific circumstances.

The husband, Mr. Sharma, signed the original purchase agreement in June 2014 as the sole purchaser of the Property. In November 2015, the appellant’s name, Mandeep Sharma, was substituted for Mr. Sharma’s to facilitate financing due to his financial challenges related to his food business.

The couple chose Guelph because Mr. Sharma worked there in a family food business associated with the University of Guelph and located on the University of Guelph campus. They also had family connections in the area. The couple chose the Property because it satisfied all the criteria that they considered to be their “dream home”. After some delays, the purchase finally closed on December 1, 2015. The Appellant applied for the GST/HST New Housing Rebate under section 254(2) of the Excise Tax Act (ETA) to claim the GST/HST paid in respect of new or substantially renovated housing.

However, just a month afterwards, by January 20, 2016, the Appellant signed an agreement to sell the Property, and the sale closed in February 2016.

The Canada Revenue Agency (CRA) then denied the rebate, suspecting the property was not intended as a primary residence given the ownership period was too short.

The Legal Issues: Intention vs. Occupancy

The appeal centered on two distinct statutory requirements under section 254(2) of the Excise Tax Act:

• The Intention test: Whether the appellant acquired the Property with the intention to use it as a primary place of residence, as required under paragraph 254(2)(b); and
• The Occupancy test: Whether the appellant, or a family member of the appellant, was the first to actually occupy the Property as a place of residence after substantial completion, as required under paragraph 254(2)(g).

Intention was clear and settled

The Tax Court of Canada evaluated whether the appellant’s subjective statements that the Property was intended to be the couple’s dream home were supported by objective manifestations of purpose.

The Court found that at the time the purchase agreement was entered into (both in June 2014 when Mr. Sharma originally signed the agreement and in November 2015 when the Appellant replaced her husband as the purchaser), the couple had a “clear and settled intention” to live in Guelph, as evidenced by Mr. Sharma’s work location and the family connections to the area.

Their change in plans, leading them to sell the Property, was caused by two unforeseen “wrenches” in their life plan:

• Career promotion: In January 2016, the Appellant was promoted to a prestigious Chief of Staff role in the provincial government, requiring her to be in Queen’s Park, Toronto, daily, making a Guelph commute unworkable.
• Business disruption: The University of Guelph discontinued its relationship with Mr. Sharma’s food business, creating uncertainty for his business operation in that city.

Lower Bar for Occupancy

The Tax Court of Canada emphasized a critical legal distinction: while paragraph (b) requires a “primary place of residence”, paragraph (g) only requires the property to be a “place of residence”. The Court noted that the bar for paragraph (g) is low, compared to “primary” in paragraph (b).

The Court accepted that the couple had occupied the Property because:

• They moved their personal belongings, including a sofa, mattress, and television, to the Property.
• They had no other home during that period.
• Low utility bills, while potentially indicating a non or superfluous occupancy, were plausibly explained by the Appellant travelling for work and the couple staying with ailing in-laws to provide care.

Pro Tax Tips—Short Ownership Period Is Not Inherently Detrimental

Furthering the Appellant’s case, the Tax Court of Canada found the Appellant and her husband to be credible witnesses, accepting their explanations for a lack of certain documentary evidence (due to her lost access to work emails). Eventually, the Court held that the couple had intention to occupy the Property as their primary place of residence and, in fact, occupied the Property as their place of residence.

This case serves as a reminder that the Court will look at the quality of residence measured against the lifestyle of the individual. Professional and family commitments can affect how much the individuals can practically occupy a property. Furthermore, to claim the GST/HST New Housing Rebate, the claimants do not have to primarily occupy the property.

The decision underscores that a taxpayer’s choice to sell a property quickly is not inherently abusive or disqualifying for a rebate if the original intention to reside there was genuine and subsequently frustrated by practical events.

FAQ

What is the difference between the “Intention” test and the “Occupancy” test for the New Housing Rebate?

The Excise Tax Act (ETA) sets out two distinct requirements that must be met:

• The Intention test: At the time you purchase a home, you must intend for it to be your primary place of residence. This is a higher bar that looks at your long-term plans.
• The Occupancy test: You (or a relative) must be the first person to occupy the home as a place of residence. This is a lower bar that only requires you to live there before selling the home.

Does a short period of ownership automatically disqualify me from the New Housing Rebate?

No. While the CRA often views a short ownership period (such as less than three months) as a sign that the property was acquired for “flipping” rather than as a residence, it is not an absolute bar. The Tax Court will allow the rebate if the taxpayer can prove they had a “clear and settled intention” to live there at the time of purchase. If an unforeseen “wrench”—such as a sudden job promotion in another city or a family health crisis—forces a quick sale, the rebate may still be permitted.

DISCLAIMER: This article provides broad information. It is only accurate as of the posting date. It has not been updated and may be out-of-date. It does not give legal advice and should not be relied on as tax advice. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.