A person sold his shares in a company and continued to provide it with consulting for a fee. Later, an agreement was signed which states that the amount of US $ 400,000 bonus he received for the extension of the company's service agreement with a third party is in fact an update of the share sale price due to rise in value. The tax authorities refused to recognize that and determined that the payment was on account of work income and not capital gains.
The Court held that any direct or indirect income of an employee will be considered earned income if the employee would not have received it unless worked for the employer. The extra income is due to the work and not due to the sale of shares because the original agreements signed reflect the true intent of the parties and when the intent is clear the classification of the transaction by the tax authorities will be in accordance with such intent.