Section 4(b) of the Value Added Tax Law (VAT Law) states that: "On the activity in Israel of a financial institution, a payroll and profit tax will be imposed as a percentage of the wages paid and the profit earned, as determined by the Minister of Finance with the approval of the Knesset...". It seems that this definition leaves no room for doubt that profits arising from the sale of fixed assets – capital gains in the terms of the Income Tax Ordinance – are indeed included in the term "profit" in the VAT Law, in addition to "fruitful" current profits.

To reinforce this, the court adds that the payroll and profit tax regime created for financial institutions is intended to be parallel to the value-added tax taxation system applicable to businesses. According to the law, a business is liable to VAT on a "transaction", and according to the first alternative in the definition of this term in Section 1 of the law, "transaction" includes "the sale of equipment". "Equipment" includes any "property that has been used, is used or is intended to be used, by the business in its business, and its sale is not part of the business of the business" – that is, capital assets that are related to the business. Therefore, if a business is liable to VAT on the sale of fixed assets used in its business, then there is no reason why a financial institution should not be liable to profit tax due to the sale of assets used in the management of its activity.

However, the court clarifies that if a particular asset has not "been used, is used or is intended to be used" in the conduct of the activity of a financial institution as a financial institution, then there is no special justification for imposing profit tax on the profit generated from its sale.