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- This key test, which differentiates between cancellation of a transaction and a resale, has been ruled many times. Thus, in the case of Family Appeal 1843/97 Ahmad Muhammad Harija v. Land Appreciation Tax Administration (November 24, 1999) in paragraphs 16 and 17 (hereinafter: "the Harija case"), it was held that:
"A cancellation that does not apply retroactively will not be considered a true cancellation in light of the tests of section 102, as will be presented below, and even the tax results will be double-charged on the resale, i.e., the tax will not be refunded for the first transaction and the new transaction will not be recognized as a cancellation but as a taxable sale, even though it is made between those parties to the first transaction ..... As stated, the applicability of the cancellation must be retroactive, since if the advantage in the cancellation action was "born" after the initial sale, and the parties until the cancellation saw this sale as valid and existing, but at a later date they sought to withdraw from it, then it is a re-sale."
- When will a transaction be considered as if it has already been absorbed into reality and the parties saw it as valid and exists? When will it be considered as if it never existed and was canceled retroactively, and its cancellation is sufficient to "turn the wheel back"?
It seems that for this purpose, it is necessary to ask, inter alia, how much time elapsed between the conclusion of the agreement and its cancellation, whether the transaction was completed in the registration, whether a possession was given, whether changes were made to the land, whether the land was improved, whether income was generated from it (and who handled it), whether there is a family or other connection between the parties, what is the purpose of the cancellation (see the review of the tests in the case of Kharija and inHC 26/92). and whether this is a genuine and honest cancellation that is carried out solely for business and economic considerations, or with the aim of achieving a tax advantage (see: Civil Appeal 2881/10 Eli Levy v. Rehovot Betterment Tax Administration (April 23, 2012) and Civil Appeal 8340/10 M.V. Investments in Tax Appeal v. Tax Authority (January 30, 2013)).