TA 30398-12-11 M.G.D.S. Investments Ltd. v. State of Israel
TA 30398-12-11 M.G.D.S. Investments Ltd. v. State of Israel (Nevo 16.01.2014):
The court accepted the appeal filed by the appellants against the VAT Director's decision to impose double tax, and annulled the assessments, the notice of book disqualification, and the demand for double tax payment.
The court held, under the circumstances of the appeal, that where the basis for the assessment differs from that established in the decision rejecting the objection, the appellant was not afforded an opportunity to challenge the decision, thereby infringing upon a fundamental right vested in her, and the objection decision must be regarded as a surprise.
The appeal concerned the refund of VAT included in credit notes issued by one of the appellants to the others due to the alleged cancellation of a real estate sale transaction, on the grounds that the other appellants who purchased the land had breached the purchase agreement. Conversely, the purchasers argued that the cancellation was unlawful and that they were entitled to enforce the agreement, and therefore the credit note issued to them by the seller had no legal effect.
The court held that insofar as the VAT authority believed these were artificial transactions, it should have invoked Section 138 of the VAT Law, and having failed to do so and instead choosing to issue assessments under Section 50 of the VAT Law — which is not relevant to our matter — the assessment must be annulled, in addition to the reasons stated above.
