In our case, the appellant did not bring witnesses to prove the alleged error, and even refrained from bringing relevant witnesses. In practice, she did not even make a mistake, but acted according to the advice of consultants that was given prior to the submission of her reports to the respondent.
- A distinction must be made between an assessment amendment requested by the taxpayer and an assessment amendment performed by the respondent. This is because there are information gaps between the taxpayer, who examines the transaction documents in real time, is familiar with them in depth and consults with experts when reporting the transaction, and the respondent, who received the taxpayer's declaration on the basis of the documents submitted to him.
The Respondent does not claim that a taxpayer cannot request an assessment amendment under Section 85(a)(3) due to a legal error, and there may be circumstances that would justify such a request. However, in the case at hand, when all the relevant information was available to the appellant in real time, and in light of the fact that it expressed its legal interpretation regarding the contractual system in the framework of the self-assessment, and there was no change in the contractual system, the request to amend the self-assessment should not be granted, since it is based on new advice received by the appellant.
- Article 85 The law is intended to balance the purpose of the finality of the assessment, stability and certainty with the purpose of paying real tax. Acceptance of the appellant's position that any "mistake" will always constitute grounds for correcting the assessment will expand the range of cases that will fall under Article 85 to the point of an imbalance between its purposes due to a disproportionate increase in the uncertainty with respect to the finality of the assessment.
- The arguments on the merits:
- Appeals are to be dismissed out of hand due to judicial estoppel. The appellant acted after winning the "Buyer's Price" tenders as the owner of a "right in the land", In practice, vis-à-vis the state authorities, the banks that accompany the projects, and vis-à-vis third parties, it is the tenants who buy the apartments.
The appellant sold to a large number of purchasers the lease right in the residential apartments that she built, and in each of the sale agreements, to which the ILA is not a party, the lease right being sold is mentioned. The appellant continued to constantly present to the apartment buyers a representation according to which she was selling them a right in the land. The appellant's obligations in the sales contracts to the apartment buyers are the obligations of the seller of a "right in the land", and they are identical to its obligations in sales contracts with tenants who purchased apartments from the appellant in the Kiryat Ono project within the framework of the free market.
- The appellant submitted to the respondent a report on the purchases of a right in the land in the framework of each of the tenders that are the subject of the appeals, made a calculation of the self-assessment and paid purchase tax accordingly.
In some cases, the appellant even filed motions to amend an assessment, in which she requested a refund of one-sixth of the purchase tax, while repeating her claim that she had executed a real estate transaction.
- The appellant even submitted reports on each date on which she sold an apartment to those eligible, according to which she was the seller (and not the ILA). In addition, the appellant requested approval from the tax assessor according to Article 50 of the Real Estate Taxation Law, for each of the aforementioned sales. This is a huge scope of declarations, for which no assessment amendment was requested. The rights purchased by the appellant constitute inventory in its possession, the nature of which is sold on an ongoing basis, otherwise it will lead to apartments built by the appellant and not sold within a short period of time from the date of completion of the construction – from inventory to permanent property.
- In the appellant's financial statements as well, she explicitly stated that she had purchased a lease right in the "Buyer's Price" tenders. A review of the financial statements shows that the appellant does not see any difference between the purchase of rights in the land in the "Buyer's Price" tenders and any other purchase of rights in the land. The appellant also classified in its financial statements the projects of "Buyer's Price" as an asset of the type "building inventory for sale" – that is, even according to the accepted accounting rules, it is an asset and not a service. In describing the corporation's business in the financial statements, the appellant describes its activity as including the acquisition of rights in real estate, inter alia in "Buyer's Price" projects. The expert on behalf of the appellant, CPA Marco, testified that if it was a contract for the provision of construction services, it would not have been reflected in the accounting books.
The appellant's statements, including in its financial statements, are from 2019, after it had already held the new position as claimed in the application to amend the assessment, and they contradict the position presented in the appeals at hand.
- The appellant gave the residents guarantees by virtue of the provisions The Sale Law (Apartments) (Securing Investments of Apartment Buyers) 5735 - 1974 (hereinafter - The Sale of Apartments Law), which are granted only by the person who sells a right in the land. The appellant was defined in these guarantees as a "seller", and therefore it should certainly be considered as the owner of a right in the land.
- In the framework of the "Buyer's Price" projects, Mishkana appellates its right to the land in favor of various banks, on the basis of its declaration that it is the owner of the rights in the land. It was proven that there is no material difference between the financing and bank accompaniment agreements signed by the appellant in relation to the projects that are the subject of the appeals, as opposed to financing and bank accompaniment agreements in other projects in which it purchased a right in real estate from the ILA.
The banks prepared zero reports prior to the provision of financing in order to examine the economic feasibility of the projects, and the said reports were based on the data according to which the appellant has capitalized leases in relation to the real estate for a period of 98 years with an option for an additional 98 years. The aforementioned zero reports are no different from the zero reports in any other entrepreneurial project of the appellant that is not part of the "buyer's price".
- By virtue of being the owner of the rights in the land, the appellant submitted the applications for a building permit for all the buildings in the projects that are the subject of the appeals and received building permits. Moreover, the appellant submitted about 20 requests for project concessions to the planning committee in order to maximize its profits in the projects: in the Kiryat Ono project, the appellant received requests to add 84 legal investigations, some of which are on the free market, such as adding floors, easing the height of the buildings, etc. In the project in Tirat Carmel, the request to add 10 legal investigations was approved, and in the project in Kiryat Eliezer, the appellant requested changes in the attachment of garden areas. Therefore, even in the projects in Tirat Carmel and Kiryat Eliezer, which are ostensibly presented as mere "buyer's price" tenders, the appellant acted as the owner of the land rights in order to maximize its profits from the project. The applications were submitted by the appellant alone and without any involvement of the ILA, and it even invested considerable effort in these requests. The aforementioned applications contradict the argument that the appellant served only as a service provider, but rather that these were actions of a person who holds a right in the land in order to increase his profits.
- If it were not a matter of purchasing a "right in real estate", then the appellant had acquired another capital right, and hence she would have been obligated to report the acquisition of such a right to the tax assessor and to pay a capital gain advance according to Section 91(d) to the Income Tax Ordinance. It was not claimed or proven that the appellant acted in this way, and in light of her reports, it is clear that she did not act in this way, and therefore she received various benefits, such as not imposing fines for failure to report on time, charging linkage and interest differences, etc. For this reason, too, the appellant is silenced by judicial estoppel from arguing otherwise in the appeals at hand.
- The transactions that are the subject of the appeals are clearly real estate transactions under Real Estate Taxation Law. In the "Buyer's Price" tender, the winner is the contractor who offered the lowest final price per square meter of an apartment, and he pays the ILA a significantly reduced payment for the purchase of the rights in the land. The consideration for the sale of the apartments is received by the winning contractor directly from the residential buyers. In addition, in some of the projects of the "Buyer's Price" program, approval was given to the contractor, according to his requests, to add a number of housing units that would be offered for sale on the free market in order to maximize his profits from the project. With respect to these apartments, the appellant claims that it is a matter of purchasing a right in the land and that it is derived from this the payment of purchase tax.
- In the contractual system between the ILA and the appellant, it was determined that the appellant was acquiring a lease right from the ILA for a period of 98 years, with the possibility of an extension of an additional 98 years.
There is no contract between the ILA and the residential purchasers, but only between them and the appellant, and in any contractual system, between the ILA and the appellant, and between the appellant and the residential purchasers, it was noted that this was a sale of a right in the land in accordance with the law. The appellant signed a variety of agreements in which she was defined as a "lessee and even as a holder of rights in the land".
- There is no material difference between the "Buyer's Price" tenders and other tenders published by the ILA for developers or contractors for the purchase of lease rights in real estate. The appellant's arguments in the framework of the present appeals contradict and deny the many agreements to which it signed, and accepting this position will affect the rights of third parties, such as the apartment buyers, to whom the appellant presented a representation that she is the owner of the lease rights in the apartments she sold to them.
- The Respondent's position that in the "Buyer's Price" tenders it is a "sale" of a "right in real estate" under the Law is reflected in the Respondent's ongoing conduct vis-à-vis taxpayers who reported the transactions, as well as in a number of tax decisions from 2018, and this position was known to the Appellant and the other bidders in the tenders as of that year.
- The appellant was registered as the owner of the lease rights in the land and she was the one who transferred the lease right to the purchasers. The appellant's argument that this is a temporary technical registration should not be accepted, since this claim has no mention in the contractual system.
- The appellant's argument that she cannot hold the land for a period exceeding 25 years should not be accepted. The appellant involves two different and separate aspects: one, the type of property that the appellant purchased in the "Buyer's Price" tenders, which is the lease right for 98 years with an option to extend for an additional 98 years, and the second – the period of actual possession of the property, as a result of the parties' agreements for a common contractual purpose.
In other words, the appellant confuses the fact that she acquired an enforceable legal right to receive a lease right for generations in the land, and the period of actual possession of that right, which corresponds to the objectives of the parties in the engagement, for the purpose of which contractual sanctions were set at most. This is similar to any other contractual system between landowners and a developer or contractor, in the framework of a consideration transaction or a combination transaction, in which there is no dispute that the owner sells a right in the real estate (lease or ownership) to that developer, and the latter undertakes to build the apartments and sell them, in whole or in part, in accordance with the contractual system between the parties. The consideration for the real estate can be construction services, part of the apartments or a percentage of the proceeds from the apartments that will be sold, but in any case it is clear that the contractor/developer has purchased a "right in the land".
- Even if it is determined factually that the appellant was limited during her possession of the land, the contractual limitation does not prejudice her right to lease, which is a legal right to lease for 98 years with the possibility of an extension for an additional 98 years. The test for the existence of a "right in real estate" according to the law is not the test of actual possession of the right, but rather the maximum period that is the subject of the acquired right, and in this case it is a period of 98 years with an option for an additional 98 years. Thus, we are clearly dealing with a "right to the land". Contrary to the appellant's argument, a distinction must be made between the right itself and the period of its actual possession, and in any case the period of actual possession is due to a contractual obligation that the appellant undertook and which was not imposed on her. It was also proven that the appellant can register the lease rights in her name at the Land Registry Office immediately after the signing of the lease contract.
- According to Real Estate Law "Ownership" is the right to hold and use real estate, as well as to do anything and transaction with it, subject to restrictions by law or agreement. Therefore, in a contractual agreement, it is possible to set conditions regarding the acquisition of the right, including limitations on the actual period of possession and which do not detract from the existence of the right in the land.
In other contracts with the ILA, which are not in the "Buyer's Price" format, there are many restrictions on the developer in the lease contract, for example, the completion of construction within a specified period of time, but these limitations are part of the lease right, which is not ownership, and they derive from contractual agreements between the lessor and the lessee, which do not impair the determination that this is the purchase of a "right in the land".
- The appellant also exercised the right in the land that she purchased by selling the apartments to those entitled for monetary consideration. The apartment purchasers even received a lease right for generations in the apartments from the appellant, and there is no dispute that the purchase of the rights by the beneficiaries is a "purchase of a right in real estate" within the meaning of the law.
Therefore, the appellant's argument that she received a limited and "thin" lease right creates a logical fallacy – both because the appellant was the one who signed the sale agreements of the apartments with the apartment buyers, and she was also the one who transferred the lease right in the apartments to the apartment buyers.
- This is evidence that no contractual restriction prevented the appellant from transferring a lease right to the apartment buyers. And even if the argument were accepted that the state transferred to the appellant the ability to transfer the lease right to the apartment purchasers without restriction, it is, at the very least, a right to order a grant, which is a "sale" under the law.
- There is no stipulation in the contractual system that stipulates that the appellant cannot hold the apartments for more than a few years.
Fixed time periods for the execution of construction work are also fixed in other ILA tenders. It is not for nothing that the appellant does not refer to any specific provision in the contractual system in order to support her claim. The clauses in the construction contract relate to the obligation to sell to those entitled but not to the date of the sale. In the testimony of the appellant's CEO, he was unable to refer to any provision in the tender that requires the sale of the apartments within a number of years, and in the end he admitted that these were rules set after the tender by the control company. Tax liability is examined at the time of the tax event, and events external to the transaction that occur after its formation do not retroactively affect the tax liability.
- There is no difference between the "Buyer's Price" tender and other tenders published by the ILA with regard to the timetables defined for construction, and this does not detract from the existence of the right to the land. In addition, in every ILA tender, it has the right to impose sanctions against a developer who violates the provisions of the tender or the lease contract, whether financially or cancelling a contract.
- Even if the argument is accepted that the appellant is obligated to sell the apartments within a few years, this is a contractual limitation, the sanction for which is monetary and not the cancellation of the contract, and it does not negate the fact that in the "Buyer's Price" tender the appellant purchased a "right in the land". In any event, a representative of the ILA who was brought to testify by the respondent testified that the sanction of cancellation of a lease contract is done in exceptional and extreme cases.
- There is no difference between the "Buyer's Price" tenders and other ILA tenders for the sale of rights in real estate with regard to the cancellation of a contract due to a breach. The appellant's argument that a breach of a contractual stipulation that may lead to the cancellation of the contract in the future is liable to harm the very agreement to sell a right in the land in any ILA tender.
- The deadlines set in the tender are in any case extended in practice for developers' requests, as a matter of routine. Therefore, the appellant's conclusion that a potential infringement means that she does not hold the right to the lease for more than a few years is erroneous and unfounded.
- In accordance with the provisions of the tender, some of the "Buyer's Price" apartments are sold for longer periods of time to housing developers or without restrictions. Such a situation occurred in practice in a number of areas and of course led to the extension of the deadlines claimed by the appellant.
- The appellant was obligated to sell the apartments within a few years due to the requirements of the lending bank, and not due to any provision in the "Buyer's Price" tender.
This is the only reason why the appellant actually owns the apartments for only a few years, due to her commitment to the lending bank and due to the nature of her business as an owner of an inventory of apartments, similar to any contractor who purchases real estate for the purpose of building and selling apartments.
- The appellant's argument that she did not receive the status of a "lesee" in the land and that we are in fact dealing with an agreement for the provision of construction and planning services is an argument that contradicts the language and substance of the agreements. A perusal of the contractual array allows only one linguistic interpretation, according to which the parties' engagement is in a transaction of the sale of a lease right for generations.
- Accepting the appellant's claim now, several years after she won the tender, that she was not transferred a right in the land, also violates the principle of equality vis-à-vis other bidders in the tender, who understood it in the only possible way – as an agreement for the purchase of a lease right in the land. The appellant is trying to improve its positions and improve its situation by changing the conditions set out in the tender. If the other bidders in the tender had known that we are not dealing with the purchase of a right in real estate and that they would not be subject to purchase tax, it is reasonable to assume that they would have taken this into account in their proposal and calculated their steps accordingly.
- A material examination of the contractual system reveals that the obligations that the appellant undertook in the framework of the tender constitute undertakings that go beyond the provision of construction services only, and clearly characterize the obligations of a right holder in the land, who sells it to various purchasers. Thus, payment to the ILA of the value of the land and development expenses; payment of taxes applicable to it, such as purchase tax and betterment levy; registration of the lease rights in its name and later in the name of the purchasers of the apartments from it; Publication of the project as well as the application of instructions The Sale Law (Apartments) (Securing Investments of Apartment Buyers) This includes consent to the obligation to deposit guarantees that apply by virtue of the Sale of Apartments Law to ensure the correction of defects in the sale during the inspection period. The appellant even requested building permits in relation to all the buildings in the project, and even submitted to the planning and building committees dozens of requests for relief in the projects that are the subject of the appeals.
- The authority to classify a transaction according to its essence is a power given to the respondent, where it is of the opinion that the formal presentation of the transaction is intended to evade partial or full tax payment. According to the law, a taxpayer will not be allowed to reclassify his transactions for tax purposes except in exceptional cases. In the present case, the appellant seeks to reclassify the agreements in the "Buyer's Price" tenders and in a manner that contradicts what is stated in the contracts, which should not be accepted. The burden on the taxpayer who wishes to convince that the transaction as reported does not reflect the true will of the parties is a very heavy burden and the appellant does not meet it.
- The appellant's arguments that various characteristics in the "Buyer's Price" tender mean and their essence are the provision of construction services are erroneous. This is a regular tender by the ILA for the sale of rights in the land, with the only different characteristic relating to the identity of the apartment buyers, who are referred to the appellant by the state. The lease right, by definition, is not ownership of the land and is subject to the limitations set out in the agreement between the purchaser and the lessor (ILA). These limitations exist in many ILA tenders and do not lead to the conclusion requested by the appellant, as if they cancel the lease right of the winner of the "Buyer's Price" tender.
- The bidders in the "Buyer's Price" tenders set the price at which an apartment will be sold, already in the framework of their bid in the tender, and after weighing the discount they received at the price of the land, which is not in dispute. This does not lead to the conclusion that this is an agreement for the provision of construction and/or planning services, and it does not lead to the conclusion that the price of the apartment was not determined by the appellant.
- The appellant's argument that the unique nature of the risks and prospects in the "Buyer's Price" tender leads to the conclusion that it is an agreement for the provision of construction and planning services and not an agreement for the purchase of a "right in real estate" within the meaning of the law. Whatever the risks and chances in the "Buyer's Price" tenders, they do not detract from the fact that the appellant purchased a right in the land of a lease for generations, for 98 years, with an option for an additional 98 years. In addition, the appellant's argument required an expert opinion regarding the profit model, risks and prospects – and such was not presented to the appeals committee. In any event, the State did not approve the appellant's building plans or planning and did not pay the appellant any consideration for the construction and planning services, but rather the apartment purchasers paid the appellant consideration for the apartments.
- The appellant is the one who determines her profit and the price at which she will sell the apartments in accordance with the economic calculation she makes, and not according to the consideration for the construction services she supposedly provides. The price per square meter of an apartment was determined according to the appellant's economic calculation, based on the assumption she received at the price of the land, the expected construction and planning costs, and the profit she expected to receive in such a project.
This is a model that is in fact identical to the model in regular projects in which the appellant operates as an entrepreneurial company. Moreover, even in terms of the profit model, the appellant itself assumed that it was purchasing and selling a long-term lease right.
- The appellant's chances and risks in the "Buyer's Price" tenders derive from contractual business activity and constitute a characteristic of the acquisition of a right in the land. The appellant received a chance of a substantial profit in these tenders, and in addition, there is a chance of increasing the profit by the possibility of submitting a request for relief and an increase in the building rights without paying additional consideration to the ILA.
In addition, the appellant is guaranteed at a certain market price, that is, even if the prices of the apartments fall from the date of the tender until the date of the actual sale, the appellant will not be harmed. Additional risks, such as the removal of nuisances, are risks that characterize the acquisition of a right in real estate, and as for the risk on the increase in planning and construction expenses, the risk is not unique to the "Buyer's Price" tender.
- In some of the "Buyer's Price" tenders, there is an option to sell some of the apartments under the conditions of the free market and some under the conditions of "Buyer's Price" - see the Kiryat Ono tender. The attempt to separate apartments sold to those eligible under the "Buyer's Price" framework and apartments sold to "uneligible" under the conditions of the free market is erroneous, forced, unreasonable and even artificial, since this is a single tender that has an array of risks and chances and its parts should not be separated. There is no difference between the risks and chances that the appellant is talking about, and in particular with regard to the acquisition of a right in real estate in the "Buyer's Price" apartments and apartments that were sold on the free market. It is not possible to separate the construction, marketing, specifications, etc. in mixed projects, since the project begins and ends together.
- The argument that the contractual system does not fall within the framework of the definition of a "sale" of a right in real estate as defined in the Real Estate Taxation Law is incorrect. The contractual system clearly fulfills the first alternative of the definition of "sale", since the appellant was granted a "right in the land". The appellant was granted the right of lease for generations even before the lottery was carried out, which determines the identity of those who are eligible. At the stage of signing the lease contract between the ILA and the appellant, the occupant is not in the picture at all.
The appellant mixes the stage of engagement between the ILA and the winner of the "Buyer's Price" tender with the stage of engagement between the appellant and the apartment buyers.
- In light of the clear fact regarding the existence of the first alternative to the definition of "sale", there is no need to examine the second alternative, but more than necessary, it should be said that the appellant received, from the moment she won the tender, a contractual right to receive a proprietary right in the land.
- As to the third alternative of the definition of "sale", the appellant herself claimed that she received a limited lease right from the State and received from the State the ability to transfer the lease right but without restrictions to the occupants. Therefore, it appears that the appellant also falls within the scope of the third alternative of the definition of "sale" in section 1 of the Real Estate Taxation Law.
Discussion and Decision:
- The relevant normative infrastructure:
- Section 1 The Real Estate Taxation Law, which is the definitions section, defines a "right in real estate" as defined in this law, as follows:
"Right in Real Estate" – ownership or lease for a period exceeding twenty-five years, whether by law or by law, including authorization to use the land, which can be considered in terms of content as an ownership or lease for such a period; and regarding authorization in Israeli lands – even if the authorization was granted for a period of less than twenty-five years; For this purpose –