2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The defendant's decision that the disposition of imposing corporate tax of KRW 4,173,615,340 (including additional tax of KRW 894,00,916) against the plaintiff on February 3, 2014 is revoked.

A. The plaintiff is a local public enterprise that AAA invests in full for the purpose of acquiring, developing, and supplying land for housing development, etc. and constructing, selling, etc. of housing, and jointly carries out the housing site development project (hereinafter referred to as the "DD zone") developed and supplied as housing land, commercial business, and public facility site development project (hereinafter referred to as the "development project in this case") from 2005 to * Dong, * Dong, * Dong, * Dong, * Dong, * Dong, * Dong, * Dong, * Dong * Dong * Dong * Dong * Dong * Dong * * Dong * * * * * 1,30,00 square meters (hereinafter referred to as the "D zone") of Dong 10,000 square meters as housing site, commercial business, and public facility site development project.

B. The Plaintiff, while performing the instant development project, deemed the entire D district as one unit and reported and paid corporate tax by including the profits and expenses calculated based on the total cumulative amount of expenses incurred from the sale to the completion of the project (i.e., the total cumulative amount of expenses incurred from the end of the pertinent business year / the total estimated cost of construction) in the gross income and deductible expenses for the pertinent

C. At around 2007, the Plaintiff calculated the cost of housing site development based on Article 18-2 of the former Housing Site Development Promotion Act (amended by Act No. 8852, Feb. 29, 2008; hereinafter the same shall apply), Article 11 of the Enforcement Rule of the same Act (amended by Ordinance of the Ministry of Land, Transport and Maritime Affairs No. 4, Mar. 14, 2008; hereinafter the same shall apply) and Article 11 of the Enforcement Rule of the same Act (amended by Ordinance of the Ministry of Land, Transport and Maritime Affairs No. 2006-288, Mar. 14, 2008; hereinafter “Public Notice of the cost of housing site creation”) and estimated the sum of the cost of construction and the cost of construction of infrastructure (excluding construction charges) among the individual items constituting the said cost of housing site

D.** Following the consolidated investigation of corporate tax on the Plaintiff’s income for the business year from March 25, 2013 to August 26, 2013, the Director of the Regional Tax Office confirmed that, in the case of construction items of the instant development project, the Plaintiff adjusted the first estimated construction cost as the actual contract amount and then calculated the total estimated construction cost for each business year after the adjustment of the first estimated construction cost as the actual contract amount. The profit and expenses calculated based on the rate of work progress as calculated should be included in the gross income and deductible expenses for the pertinent business year and re-calculated the total estimated construction cost after the completion of part of the construction work for each business year.

E. Accordingly, the Defendant calculated the total estimated construction cost by reflecting the difference between the construction cost presumed by the Plaintiff with respect to the items of construction for which the subcontract contract was concluded as of the end of each business year as follows, calculated again the rate of work progress, and calculated profits and expenses again, and included the difference in the gross income and deductible expenses. On February 3, 2014, the Defendant corrected and notified the Plaintiff of corporate tax of 4,462,965,630 (including additional tax of 974,245,985) for the business year 2010.

F. On April 8, 2014, the Plaintiff appealed to the Board of Audit and Inspection, but the Board of Audit and Inspection dismissed the request for examination on January 19, 2017.

G. Since September 1, 2016, the Defendant issued a revised and notified the reduction of corporate tax of KRW 289,350,290 (including additional tax of KRW 80,245,069) among corporate tax for the business year 2010 as stated in the foregoing paragraph (e) of the same paragraph (hereinafter referred to as “the disposition of imposition of corporate tax of KRW 4,173,615,340 (including additional tax of KRW 894,00,916) for the business year 2010; and “the disposition of imposition of additional tax of this case”).”

Facts that there is no dispute for recognition, described in Gap evidence 1, 2, and 6 (including virtual numbers), the purport of the whole pleadings, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) As to the estimation method of the total cost of the instant construction project

With respect to the estimation of the total cost of construction works, the Plaintiff calculated the cost of construction works by estimating the items indicating the actual progress of construction works as the total cost of construction works on the basis of Article 18-2 of the former Housing Site Development Promotion Act, Article 11 of the Enforcement Rule of the same Act, and the announcement of the cost of construction of housing site, and expressed that the cost of construction of housing site was verified by the Advisory Committee and the Deliberation Committee (No. 3-1-4), and that the Plaintiff’s total cost of construction works was adequate for delivery of external audits as to the presumption of the total cost of construction works and the accounting thereof. Furthermore, the contract price is naturally expected to change in the case of a contract of individual construction works in a large-scale housing site development project, such as the instant development project, in light of price fluctuation, design change, and other factors such as changes in the terms of contract after concluding the contract at the time of estimating the total cost of construction works at around 207.

Therefore, even if the Plaintiff did not estimate the total estimated construction cost as the total estimated construction cost in the process of an individual construction project after estimatinging the total estimated construction cost as the amount of the individual construction project that the Plaintiff initially concluded, it cannot be deemed that the total estimated construction cost was not reflected in the situation of change up to the end of the pertinent business year under Article 34(2) of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 187, Feb. 28, 2011; hereinafter the same shall apply). The term “change situation” in the above provision refers to a case where an additional situation was incurred when the total estimated construction cost was entirely un

2) As to the legitimate grounds for exemption from the instant additional tax

Even if it is not so, the imposition of the penalty tax in this case is due to the interpretation of the "total expected cost of construction", " changed matters", and the establishment of an opinion about the method of estimating the progress of construction as a result thereof. The plaintiff's method was verified as appropriate by the Advisory Committee and the Deliberative Committee, and there was a reasonable ground to obtain appropriate opinions in the accounting audit of the accounting firm, the imposition of the penalty tax on the ground that the tax payer did not properly perform his duty of return and payment by taking different opinions from the tax authority's opinion, results in harsh results, and there was no difference in the total amount of gains from sale, but only the time when the profit accrued due to the progress of construction is only a problem. Thus, there is a justifiable reason not to prove that the imposition of the penalty tax in this case was negligent in the plaintiff with respect to the imposition of the penalty tax in this case.

B. Relevant statutes

[Attachment] The entry in the relevant statutes is as follows.

C. Determination

1) Determination on the first argument

A) Article 40(1) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010) provides that the business year of accrual of earnings and losses of a domestic corporation for each business year shall be the business year which includes the date on which the relevant earnings and losses are settled, and Article 69(1) of the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010; hereinafter the same shall apply) provides that the business year of accrual of earnings and losses from the provision of construction, manufacturing, or other services shall be the business year which includes the date of delivery of the relevant assets, in the application of the provisions of the main sentence of paragraph (2) provides that where the construction contract period is not less than one year, the earnings and losses of each business year from the business year which includes the date of commencement of construction, etc. to the business year which includes the date of delivery of the relevant assets shall be included in the relevant earnings and losses, notwithstanding the provisions of the same paragraph.

Accordingly, Article 34 (1) of the former Enforcement Rule of the Corporate Tax Act provides that "the degree of completion of construction, etc." shall be the ratio of the total construction cost accumulated until the end of the relevant business year by dividing the total construction cost accumulated by the total construction cost as the total construction cost (the ratio of work progress)" and Paragraph (2) of the same Article provides that the total construction cost estimated at the time of contract shall be the construction cost reasonably estimated by reflecting the estimated construction cost at the time of

B) In light of the following circumstances, it is reasonable for the Defendant to calculate the rate of work progress by estimating the total estimated work cost by reflecting the actual contract price of the construction project executed in the business year 2010 based on Article 34(2) of the former Enforcement Rule of the Corporate Tax Act based on the evidence and relevant provisions revealed in the above facts. The Plaintiff’s assertion is without merit.

(1) Article 34(1) of the former Enforcement Rule of the Corporate Tax Act shall include the cumulative amount of total construction expenses incurred until the end of the relevant business year in earnings and losses by calculating profits and expenses according to the ratio calculated by dividing the cumulative amount of total construction expenses by the total construction cost.

(2) In order to apply the work progress rate, it is necessary to calculate the work progress rate in a reliable manner in accordance with objective standards. This is based on the premise of an accurate total of actual cost and a reasonable presumption of total cost. Therefore, if an accurate total of cost is not premised, the work progress rate itself cannot be applied.

③ In fact, it is impossible to accurately estimate the total cost of construction before the actual cost is disbursed. Article 34(2) of the former Enforcement Rule of the Corporate Tax Act provides that the total cost of construction shall be estimated based on the estimated cost of construction at the time of the first agreement, and the total cost of construction shall be reasonably calculated based on the estimated cost of construction at the time of each business year, and the estimated cost of construction shall be reasonably calculated based on the changes until the end

(4) In light of the language and purport of Article 34(2) of the former Enforcement Rule of the Corporate Tax Act, it is clear that each business year requires a reasonable presumption of the total estimated construction cost by reflecting the changes in the situation up to the end of the relevant business year, and, if not properly reflected, it is likely that a taxpayer’s distortion of taxation may arise with regard to the period

⑤ However, the Plaintiff did not reflect the change in the contract due to price fluctuation until the business year 2012 after the conclusion of the contract for the six sections of the DD District Site Development Project, even though the change in the contract was 14 times (20.9 billion won) and 36 times (134.3 billion won) due to the change in design and authorization conditions, which was not reflected in each business year. This change is deemed to fall under the “case of change” under Article 34(2) of the former Enforcement Rule of the Corporate Tax Act, but the Plaintiff failed to calculate the rate of work progress by reflecting it.

2) Judgment on the second argument

A) Under the Corporate Tax Act, the additional tax is a kind of administrative sanction, which would be imposed when a taxpayer corporation imposes a duty of sincere return of tax base and payment of tax amount in order to ensure the propriety of taxation, and the taxpayer corporation neglects its performance as a security measure.

Such sanctions may not be imposed, in cases where there is a justifiable reason to believe that a taxpayer is not aware of his/her duty due to a conflict of opinion due to an intention in the interpretation of tax-related Acts beyond a simple scope of land or misunderstanding, or where there is a circumstance that makes it difficult for the taxpayer to properly present his/her duty, or where there is a circumstance that deemed that the performance of his/her duty cannot be remarkably anticipated to the parties, such as when there is a circumstance that makes it impossible for the taxpayer to be negligent in performing the duty (see, e.g., Supreme Court Decisions 2008Du2330, Feb. 10, 201; 2002Du666, Aug. 23, 2002).

B) In light of the following circumstances revealed in full view of the above facts and the evidence revealed earlier, the ground for the plaintiff's assertion is merely based on the law's land or misunderstanding and it cannot be deemed that there is a justifiable ground that the plaintiff neglected the duty of report and payment of corporate tax. Thus, the disposition imposing additional tax in this case is lawful, and the plaintiff's assertion is without merit.

① It is relatively clear that each business year requires the reasonable presumption of the total estimated construction cost by reflecting the changes in the situation until the end of the relevant business year in light of the language and purport of Article 34(2) of the former Enforcement Rule

② It is difficult to view that there exists a justifiable ground solely on the grounds that the Plaintiff received a general reasonable opinion from an accounting firm’s audit on the calculation of the total expected cost of construction, or the housing site developer was verified by the Advisory Committee and the Deliberative Committee, and no special opinion inquiry procedure with respect to the tax authorities, etc. was conducted.

③ Furthermore, it is difficult to see the proper comment of an accounting firm auditor, etc. as the Plaintiff’s expression of opinion based on the Plaintiff’s specific and adequate provision of data, and it is not deemed that there was a practice of accounting, and there is no other evidence to deem that there was any inevitable circumstance that the Plaintiff could not reflect the amount of the actual contract

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.