| In the Supreme Court sitting as a Court of Civil Appeals |
Civil Appeal 6867/22
| Before: | Honorable Vice President Noam Sohlberg
The Honorable Judge Yael Willner The Honorable Judge Yechiel Kasher
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| Appellants: | 1. Eli Kahane Holdings Ltd.
2. Elia Kahane 3. Eisenberg Brothers Ltd. |
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Against
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| Respondent: | Tax Assessor Tel Aviv 3
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Appeal against the judgment of the Tel Aviv-Jaffa District Court (Judge Y. Seroussi), dated June 29,2022, in C.A. 30423-01-20, C.A. 30442-01-20, and C.A. 30454-01-20.
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| Date of Meeting: | 12 Shevat 590Declaratory Judgment – General (February 10,2025)
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| On behalf of the appellants:
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Adv. Gilad Wakselman; Adv. Or Avi Wazna |
| On behalf of the Respondent: | Adv. Yoram Hirshberg |
Judgment
Judge Yechiel Kasher:
We have before us an appeal against the judgment of the District Court (Judge Y. Seroussi), dated June 29,2022, B-A"From 30423-01-20, Appeal 30442-01-20, andAppeal 30454-01-20. In the framework of the judgment, tax appeals filed in relation to the classification of a receipt received by appellant No. 2, Mr. Elia Kahane, in respect of the sale of an activity by Appellant No. 3, Eisenberg Brothers Ltd."M, whose shares he held through appellant 1, Eli Kahane Holdings Ltd."M (hereinafter, respectively: כהנא; Eisenberg Company; The Holding Company; And all three together: The Appellants).
Background
- In 1976, Kahane began working at Eisenberg, which engages, among other things, in the field of electron microscopes, and for 40 years he was the dominant and active figure in it. In addition, Kahane is the sole owner of the holding company that holds all of Eisenberg's shares.
On January 1,1998, an agency agreement was signed between Eisenberg and thePhilips Electron Optics B.V. from the FEI group, which has been automatically renewed over the years (hereinafter: Agency Agreement). As part of the agency's agreement, Eisenberg undertook to act as an independent intermediary with customers in Israel for the sale of products and spare parts in the field of electron microscopes, in exchange for a commission.
- After a number of years, as part of the FEI Group's policy to carry out its activities in countries around the world through branches and not external agents, on November 4,2014, FEI Microscopy Solutions Ltd. entered into two agreements: (hereinafter: the Purchasing Company) in two agreements:
The First Agreement: An agreement for the acquisition of Eisenberg's assets and activities, in the field of electron microscopes, by the acquiring company (hereinafter: Activity Purchase Agreement). In the framework of the Activity Acquisition Agreement, it was stipulated, in clause 1.5 The agreement is that the acquiring company will pay Eisenberg a total of $3.3 million during the years 2014-2015. In addition, clause 4.7 of the activity purchase agreement stipulates a non-compete clause according to which Eisenberg (the seller) must refrain for three years from a series of actions, including marketing and distribution of products that compete with the acquiring company's products, contacting customers and suppliers, taking action to persuade employees of the acquiring company to leave their workplaces, and engaging in sales or providing services in the relevant field of activity. The non-competition clause is drafted in such a way that Eisenberg must refrain from the aforementioned actions both for itself and for or through another: