Case Number

CA 2026/92

Date Decided

5-20-2001

Decision Type

Appellate

Document Type

Full Opinion

Abstract

Facts: Respondents 2 and 3 were partners in the ‘Sadot’ Partnership. These two partners established a corporation, Sadot Transportation Company (1982) Ltd., and transferred all the assets and obligations of the partnership to this company, allocating the Company’s shares to the respondents at an identical proportion to their holdings in the original partnership.

These partnership assets included trucks. The dispute between the parties relates to the characterization of the transfer of these trucks from the partnership to the company The respondents presented this transfer as free of gain, while the income tax assessor believes that the transfer of assets from the partnership to the Company is a ‘sale’ according to the definition in section 88 of the Income Tax Ordinance, and that this transfer therefore triggered a capital gains tax.

Held: The majority opinion was written by Justice Englard. The key question in this case relates to the essence of the transfer of an interest in a partnership in the eyes of the Tax Authority. Specifically the question arose as to whether it was possible to transfer an overall share of a partnership, or rather, whether only individual assets be transferred. The Court accepted the view of the court of first instance that for purposes of taxation the transfer of the partnership business from the partners to the corporation was to be seen as a transfer of the interest of each partner in the partnership and not as the transfer of each and every asset separately. The appeal was therefore denied.

Keywords

Contracts -- Terms, Tax

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