A construction entrepreneur contended that it is entitled to a tax benefit in relation to the entire area of the building that has been approved as a new building for residential rent, and not only in relation to the part of the building intended for rent.
The Supreme Court held that the entrepreneur is entitled to an exemption only due to the part of the building intended for residential rent. The Israeli Investment Encouragement Law is designed to encourage entrepreneurs to build apartments for investment in order to increase the supply of residential apartments. For that purpose, an entrepreneur may submit a plan for approval, and as long as it shows that the building is intended for residential rent, it may be entitled to a tax relief. However, the relief shall only be given in relation to the part of the building intended for residential rent, and not the entire area. Here, only part of the building constructed by the entrepreneur is intended for residential use, therefore it is determined that the benefit will be given only in relation to this part of the building, and not for the entire built area.