1 Witkon, A. and Ne'eman, Y., Tax Law (Schocken, Tel Aviv, 4th ed., 1969)Google Scholar.

2 1 L.S.I. [N.V.[ 145.

3 In their reference to the distinction between active and passive income, no mention is made of the importance and object of the distinction. See, for example, p. 66 et seq. For the distinction between these forms of income see, inter alia: Goode, R., The Individual Income Tax (Washington, 1955)Google Scholar; Miller, P., “Capital Gains, Taxation of the Fruits of Personal Efforts” (1954) 64 Yale L.J. 1–83CrossRefGoogle Scholar; Edrey, J. M., Taxation of Income from Employment (Thesis submitted for the degree Doctor Juris, Jerusalem, 1979) 329–336Google Scholar.

4 Sec. 9 of the I.T.O.; yet the book hardly refers to exemptions listed in other laws (pp. 193–196).

5 I.T.O., secs. 17–24; but see infra n. 19.

6 Assessing Officer of Petach Tikva v. Mark Brothers Ltd. (1975) 30(i) P.D. 557.

7 In that case, the taxpayer, a corporation, had suffered business losses for Five consecutive years. It decided to rent its business as a going concern and collected the annual rent. In its tax return, the taxpayer sought to offset the previous year's losses against the rent. The assessing officer denied on the ground that under the “source doctrine”, given the classification of income into the different statutory sources of income, there is only one statutory source to each kind of activity. Once an income (or loss) is classified as coming from one source, it cannot be reclassified into another. Here the loss was classified as business activity (sec. 2 (1) of the I.T.O.), whereas the income was classified as rent (sec. 2 (7) of the I.T.O.). Since the statutory provisions which deal with loss carry-over (sec. 28(b) of the I.T.O.) refer only to business activity, there was no way to accept the above offset.

The Supreme Court rejected this argument: “The fact that the income was received as rent and that under section 2 of the Income Tax Ordinance, which lists the source of income, gains or profits from property other than land appear in a separate subsection, subsection 7, whereas gains or profits from a business appear in subsection 1, does not mean that income from rent cannot be income from a business”. Ibid., at 560. This idea is developed in the article (published after the publication of the book) by Edrey, J. M. and Dotan, A., “The Income Tax on Prepaid Rent – Legal and Financial Analysis” (1985) 4 Mehkarei Mishpat 79, at 83–90Google Scholar. See also Edrey, J., “Justice Y. Kahan and His Contribution to the Tax Law in Israel” (1985) 36 HaPraklit 345Google Scholar. See recently, Kiryat Yehudith, Industrial Park Inc. v. Assessing Officer for Large Enterprises (1987) 14 P.D.E. 24, where the Tel Aviv District Court adopted this thesis fully.

8 For example, it is difficult to understand sec. 18(d) of the Ordinance in its amended form without a numerical example. In addition, in their discussion of sec. 8B of the Ordinance the authors reach the conclusion that the subsection achieves the correct result in economic terms (pp. 474–475). A closer examination would, in our opinion, lead to the opposite conclusion. See Edrey and Dotan, supra n. 7.

9 36 L.S.I. 249.

10 See, e.g., Pinson, B., On Revenue Law (London, 15th ed., 1982)Google Scholar; Whiteman, & Wheatcroft, , On Income Tax (London, 2nd ed., 1976)Google Scholar.

11 See, e.g., Tiley, J., Revenue Law (London, 3rd ed., 1981)Google Scholar.

12 See, e.g., Chirelstein, M. A., Federal Income Taxation (Mineola N.Y., 2nd ed., 1979)Google Scholar.

13 See Barak, A., “The Codification of the Civil Law in Israel” (1973) 3 Iyunei Mishpat 5Google Scholar; and see also Barak, , “The Independence of the New Civil Codification: Risks and Prospects” (1976) 7 Mishpatim 15Google Scholar.

14 Foundations of Law Act, 1980 (34 L.S.I. 181). On this trend, see inter alia, the articles of Barak, supra n. 13 and infra n.30, and also Ne'eman, infra n. 29.

15 Landau, M., “The Land Law, 5729–1969, in General and Particularly Servitudes Under the Land Law” (1973) 3 Iyunei Mishpat 86, at 88Google Scholar.

16 Supra n. 13, at 6–7.

17 Smith, A., An Inquiry Into the Nature and Causes of the Wealth of Nations (London, Cannan, E. ed., 4th ed., 1925) Book V, ch. II, vol. 2, pp. 310–311Google Scholar.

18 These questions are discussed inter alia in Tiley's book, supra n. 11; in H. Simons' book, infra n. 22; and also in Musgrave, R. and Musgrave, P., Public Finance Theory and Practice (Inter Student ed., 1973) chs. 9–10Google Scholar.

19. The discussion of depreciation is a good example of the authors' conservative attitude. During the late 1950's the Israeli Supreme Court concluded, from statutory language that no longer exists today in the current I.T.O., that the purpose of depreciation was to compensate for “wear and tear”, and no depreciation was allowed for intangible assets (see in the book, pp. 260–264). Even though sec. 21 of I.T.O. has been changed drastically, the authors still stick to the earlier concept, while ignoring developments in Israel and the U.K. and overlooking the fascinating debate between Kahn, Chirelstein and Blum, , published in (1979–1980) 78 Mich. L.R. 1–80CrossRefGoogle Scholar; 1174–1186.

20 To our knowledge the distinction originated by definition, from the very fact that the tax base is income, namely: consumption plus saving (investments). Obviously in order to calculate income it is inconceivable to deduct any of its components – neither private consumption nor investment.

21 Supra nn. l9 and 20.

22 Simons, H. C., Personal Income Taxation (Chicago, 1938)Google Scholar.

23 See, e.g., J. Tiley, supra n. 11.

24 The authors overwhelm the reader with a long list of tests prescribing what a business is. However, on the one hand, they do not bother to distinguish clearly between the different tests for defining a business and the tests for defining a single commercial transaction, and, on the other hand, they state – without giving any reasons – that there is a difference between a business and a single commercial transaction, and that these two sources are distinct and subject to different provisions.

25 See, e.g., Mark Brothers, supra n. 6; Kiryat Yehudith, supra n. 7; Assessing Officer of Kfar Saba v. Friends of the Hebrew University Ltd. (1979) 11 P.D.A. 44. See also Edrey, J., “The Source Doctrine – End of the Road: On the Definition of Income in the Israeli Income Tax Law”, forthcoming in (1987) 17 Mishpatim 25Google Scholar.

26 Lapidoth, A., “Personal Status or Territorial Status” (1968) 18 Roeh HaHeshbon 504, at 506Google Scholar.

27 Ibid., at 506–507.

28 Sofer v. Minister of Interior (1956) 10 P. D. 1213, at 1221, per Sussmann J.

29 Ne'eman, Y., “The Test of Place of Performance and the Principle of Residence as a Basis for Imposing Income Tax” (1970) 20 Roeh HaHeshbon 283, at 285Google Scholar.

30 Barak, A., “Interpretion and Judging: Elements of an Israeli Theory of Satutory Interpretation” (1984) 10 Iyunei Mishpat 467, at 480Google Scholar. An enlightening application of these ideas in the interpretation of tax laws may be found in the Supreme Court opinion in Kibbutz Hatzor v. Assessing Officer of Rehovot (1985) 39(ii) P.D. 70, which was handed down after the publication of the book under review. This Supreme Court opinion strays from the tax interpretation adopted by the Court in the past (one that was based on the British interpretation), since that interpretation is no longer applicable to a modern welfare State such as Israel. For a discussion of this opinion and its far reaching application, see J. Edrey, supra n. 25.

31 Dan Cooperative Society v. Assessing Officer of Tel Aviv 5 (1959) 14 P.D. 2088.

32 Supra n. 12.

33 See Barak, supra n. 30; Barak, , “On the Judge as an Interpreter” (1982) 12 Mishpatim 248Google Scholar; Barak, , “Judicial Law-Making” (1983) 13 Mishpatim 25Google Scholar. On the adoption of these trends by the case law before the writing of the book under review here, see the references mentioned in these articles.