The second - It concerns Kahane's claim that a capital loss of ILS 170,000 should be deducted from his income"for a loan he gave to his nephew in 2011. In this regard, the court clarified that it is not possible to offset a capital loss against income derived from In section 2(4) 30Income Tax Ordinance, and that it was not proven that this was a bad debt. Therefore, the court rejected this argument.
The third - With regard to the implications of classifying the capital or fruit receipts, the court noted that even if there was room to classify the cash receipt, there was room to determine the date of purchase of the right according to the date Kahane began working in the company in 1976, so that the dispute regarding the tax difference was smaller than the parties had originally thought. The court noted that against this background it tried to bring the parties to a compromise, but to no avail.
- Therefore, the court rejected the appeals in full and left the respondent's tax assessments intact. At the same time, the court ordered each of the appellants to pay expenses in the amount of ILS 25,000.
The Appeal
- The appellants filed the appeal before us against the judgment of the District Court. In their appeal, the appellants raised many arguments, from the threshing floor and the winery, most of which are directed against the various factual determinations of the District Court. However, it appears that the appellants' arguments can be grouped into three groups: arguments relating to the authenticity of the non-compete agreement; arguments relating to the taxation classification of the receipt that Kahane received as fruitful receipt; and other arguments.
- With regard to the court's determination that the non-compete agreement was not authentic, the appellants argued that the trial court erred in determining that there was serious doubt as to the authenticity of the non-competition clause in which Kahane undertook, for several reasons: First, according to the appellants, the demand that Kahane personally undertake not to compete was a demand of the purchasing company, as a condition for the transaction. This is what they claim from the affidavit of Ms. Baran. In this context, the appellants argued that the court erred in determining that Ms. Baran was not personally involved in the negotiations. In addition, according to them, this is also evident from the agreement for the purchase of the activity itself, which they claim was drafted for the most part by the acquiring company, in which it was determined (in clause G of the agreement) that Kahane's commitment to non-competition is a condition of the transaction.
Second, according to the appellants, the court erred when it examined the question of the authenticity of the split of the consideration between Kahane and Eisenberg, while the relevant question is the authenticity of the split between the agreement for the purchase of the activity with Eisenberg and the non-competition agreement with Kahane, which, as stated, was done at the request of the acquiring company. The appellants further argued that the court erred in determining that the consideration for Kahane was arbitrarily determined at a certain rate (40%) of the total consideration. This is because there were various calculations behind the consideration for Kahane, and this consideration represents compensation for his agreement to the competition restrictions. Moreover, according to the appellants, there is no relevance to the manner in which the consideration was calculated when it was determined in the negotiations between the parties.