The judgment CA 2699/23 CI Software Israel Ltd. v. Assessing Officer Tel Aviv 3 (rendered by the Supreme Court on July 30, 2026 by Chief Justice Y. Amit and Justices H. Kabub and Y. Kasher) addresses a critical and highly complex issue in the taxation of technology groups: the valuation of intellectual property (IP) sold for tax purposes. Below is a detailed analysis of the judgment, the positions taken, the decision rendered, and the operative implications:

Subject of the Judgment and the Core Dispute

At the heart of the case is a transaction in which the intellectual property (IP) of an Israeli high-tech company (CI Software Israel Ltd.) was sold. To determine the tax liability arising from the transaction, it was necessary to establish the proper economic value of the intellectual property sold. Because the asset is intangible, determining its value relies on complex economic valuations involving numerous working assumptions.

Positions of the Parties

• Position of the Tax Authority (Respondent): The Tax Authority presented an expert opinion on its behalf that determined a certain value for the intellectual property. The Tax Authority demanded that its expert opinion be adopted in full and argued that the economic assumptions it presented were the most accurate. The District Court (lower instance) accepted this position and adopted the Tax Authority’s expert opinion as written and in its entirety.
• Argument of the Taxpayer (Appellant): The appellant submitted a counter expert opinion on its behalf that determined a different value (most likely lower, in order to reduce the tax liability on the sale). The company argued that the lower court erred by blindly and absolutely adopting the Tax Authority’s expert opinion (“as is”), while disregarding the legitimate economic assumptions presented on its behalf.

Determination of the Supreme Court

The Supreme Court partially accepted the company’s appeal and invalidated the District Court’s method of decision:

• Rejection of the Binary Decision: The justices ruled that the District Court was not required to adopt a binary decision rule forcing it to choose “in an all-or-nothing manner” between the appellant’s expert opinion and the Tax Authority’s expert opinion as is.
• Appointment of an Objective Expert on Behalf of the Court: The Supreme Court ordered the case returned to the District Court (lower instance) so that it may appoint a neutral expert on its behalf to conduct an independent assessment of the value of the intellectual property sold.
• Definition of Core Issues for Examination: The Supreme Court instructed the expert to be appointed to focus on the two core issues in dispute between the parties’ experts:
  1. The useful life of the intellectual property sold (that is, over how many years the technology is expected to generate cash flow before becoming obsolete).
  2. The growth rates of the intellectual property used in the discounting model.

Conclusions Regarding “What Is Permitted and What Is Prohibited” for Tax Purposes

What Is Prohibited?

• The Tax Authority or the court may not assume that valuation is a precise science to be accepted as a whole without challenge.
• The District Court may not avoid delving into the economic substance and simply choose the assessing officer’s expert opinion solely because it is a governmental authority.
• Value may not be determined based on agreements drafted retroactively without the support of valuations performed in real time (similar to the artificiality parameters we saw in the judgment Q Cyber).

What Is Permitted?

• It is permitted (and even recommended) for the taxpayer to appeal and challenge the assessing officer’s underlying assumptions – especially sensitive parameters such as the discount rate, growth rate, and useful life of the intellectual property (IP). This judgment grants full legitimacy to the principle that each case must be examined on the merits of its own economic variables.
• The court is permitted to depart entirely from the expert opinions of both parties and to determine an intermediate value or a value based on a combined model proposed by an independent expert appointed by the court.

How to Proceed in Similar Cases in the Future?

To prevent severe assessment disputes and to prepare properly for transactions involving the sale of intellectual property (IP) or group restructurings, it is recommended to take the following steps:

1. Conducting a Professional Valuation in Real Time (Day One): One should never determine the value of an IP transaction “by eye” or attempt to justify a value retroactively during an assessment audit. A certified and experienced valuation expert should be engaged (for example, using the DCF method or the royalty method) before the transaction is executed.
2. Preparing a Sensitivity Analysis: The company’s valuation expert should present a range of values based on minor changes in the growth rate and the asset’s useful life. This will assist in defense and will present a range of commercial reasonableness.
3. Support with Comparative Market Data (Transfer Pricing): A transfer pricing report (market study) should be prepared demonstrating that the transaction was conducted under arm’s length conditions and that the chosen growth rates are consistent with what is customary in the specific technology sector.
4. Consideration of Early Approach to the Tax Authority (Pre-Ruling): In material transactions, it is advisable to consider submitting a request for an advance tax ruling (pre-ruling) in order to reach prior agreement with the professional department on the valuation method and its variables, thereby securing full certainty.
5. In the Event of Legal Proceedings – Active Request for Appointment of an Expert on Behalf of the Court: If the assessing officer entrenches itself in a rigid position based on an exaggerated expert opinion, the company’s representatives should use CA 2699/23 as legal authority and request that the court appoint an independent expert already in the early stages, rather than being dragged into a risky binary decision.