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

The court's reasoning concerning this case is the same as the reasoning of the judgment of the court of first instance except for the following parts. Thus, this court's reasoning is cited pursuant to Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

2. Parts to be dried;

In the reasoning of the judgment of the court of first instance, the part on “2.b.(3) judgment” (from 5th to 9th 7th son of the judgment of first instance) shall be as follows:

[3] Sales Board:

According to the above facts, this case’s donation constitutes money and valuables donated free of charge to the State or a local government under Article 24(2)1 of the Corporate Tax Act. However, in light of the following circumstances, it is reasonable to evaluate this case’s donation as an act of reducing the Plaintiff’s tax burden by including the amount equivalent to the donation in deductible expenses by taking the appearance of the donation to the Magsan Tourist Development Corporation in substance, even though it is an act of providing funds to the Magsan Tourist Development Corporation in a special relationship with the Plaintiff, by taking into account the following circumstances: (a) the Defendant’s disposition that did not include the Plaintiff’s donation in deductible expenses by applying the principle of substantial taxation or the rule of denial of wrongful calculation and calculation under the Corporate Tax Act is legitimate; and (b) the Plaintiff’s assertion that this case’s donation is legitimate.

A) At the time when the Plaintiff made the instant contribution, Tae-si was the Plaintiff’s shareholder (holding 1.25% of shares) and the two were specially related persons. The Tae-si Tourism Development Corporation held 11.7% of shares of the said Corporation on July 15, 2012, as the Plaintiff held 11.7% of the shares of the said Corporation, both parties were also the specially related persons. In addition, Tae-si was also a specially related person by holding more than 50% of shares of the Tae-si Tourism Development Corporation.

B) After the establishment of the Taebag Tourism Development Corporation, it was running a business to build and operate a large-scale golf course, skiing ground, and accommodation in Taebag-dong, Taebag-si, Taebag-si. Before the instant contribution act, it had experienced serious financial difficulties in relation to the construction and operation of the Obag-dong.

C) Thai City, as the largest shareholder of the Taecheon Tourism Development Corporation, was under the condition of guaranteeing the payment of KRW 146 billion to the National Agricultural Cooperative Federation with respect to the obligations of the Taecheon Tourism Development Corporation. Therefore, Tae Tae Gyeong-si could face a serious financial crisis if Tae Masan Development Corporation was in default.

D) At the end, Taecheon Tourism Development Corporation requested the Plaintiff to provide funds. However, the Plaintiff’s management continued to refuse to provide the above financial support on the ground that it could constitute a crime of breach of trust (in that process, the Plaintiff’s board of directors passed a resolution to provide loans to the said Corporation within the maximum of 30 billion won according to the above evaluation value after going through the evaluation procedure of collateral to be provided by the Taecheon Tourism Development Corporation, but it did not have any actual financial support due to the evaluation of collateral).

E) The Plaintiff proposed a plan to contribute a total of KRW 15 billion to the Masan Tourism Development Corporation as the above donation at the time of Taesan, and the Non-Party’s director selected and appointed at Tae Tae Seo-si submitted the Plaintiff’s proposal to the effect that “The Non-Party’s director, who was designated and appointed at Tae Seo-si, submitted the proposal to the effect that “The Non-Party shall provide emergency operational funds through Taecheon Tourism Development Corporation to prepare a plan for normalization” at the 109, 110, and 111 meeting of the board of directors. In particular, the above proposal was specified as “the emergency operational funds of the Taecheon Tourism Development Corporation” for the purpose and purpose of use.

F) During that process, the chairperson of the Thai-si market and the Thai-si Council jointly prepared a joint letter of undertaking to the effect that, “If the said proposal was the original resolution and the emergency operating funds are provided to the Thai-si Construction through Thai-si, the Thai-si will assume civil and criminal responsibilities when the director’s breach of trust arises, and deliver it to the Plaintiff Council.”

G) The Plaintiff’s board of directors passed the above funding plan on July 12, 2012. Following the designated deposit process as seen earlier, the Plaintiff’s board of directors deposited KRW 4 billion on August 14, 2012; KRW 4 billion on November 15, 2012; KRW 4 billion on December 31, 2012; KRW 3 billion on August 21, 2013; and KRW 15 billion on August 21, 2013. The said money was deposited into the account of Taecheon Tourism Development Corporation as it was, after the Plaintiff’s deposit was made, through an accounting management and a resolution of expenditure of Tae Tae Seo-gu Tourism Development Corporation.

H) In addition, the designated deposit statement submitted by the Plaintiff in the process of the deposit was stating that “the purpose of designation was to contribute to the revitalization of the regional economy through the inducement of normalization of the Magsan Development Project,” and was stated as the purpose of use and purpose of use as “the contribution to the revitalization of the regional economy, such as the inducement of normalization through the inducement of emergency operational funds of the

I) Examining the developments leading up to such contribution act, the Plaintiff’s contribution act in this case does not differ from the Plaintiff’s act of directly subsidizing funds to the Taesan Tourist Development Corporation. However, it is reasonable to deem that the Plaintiff only took the appearance of the contribution act to the Tae Taecheon City by attracting a person with a special interest to the interested parties due to the Plaintiff’s breach of trust, etc. In fact, the Plaintiff did not suggest the reasons why “the Plaintiff,” instead of “the form in which the Plaintiff directly provided funds to the Taecheon Tourist Development Corporation,” “the Plaintiff,” instead of “the form in which the Plaintiff,” provided the “the Plaintiff, while making the contribution, to the Tae Tae Seobuk Tourist Development Corporation as it is, without giving any economic rationality, other than the Plaintiff’s managerial breach of trust.”

(j) In addition, if the Plaintiff did not make such external composition, the amount equivalent to the above donations could not be included in deductible expenses. Therefore, the act of donation to the Plaintiff’s Thai City is objectively deemed to be unfair in terms of tax law as an abnormal bypassing act disregarding economic rationality. Therefore, it is determined that the calculation by the act of donation in this case may be denied in accordance with Article 52(1) of the Corporate Tax Act.

(k) Furthermore, even if the main purpose of the external structure of this case was to avoid the Plaintiff’s breach of trust liability, the Plaintiff appears to have sufficiently known that the Plaintiff would be able to include the said donations in deductible expenses when the act of donation in this case was taken, and that the corporate tax may be reduced to a considerable extent. As long as corporate tax has been reduced or exempted accordingly, the intent to avoid the tax burden can be sufficiently confirmed. Accordingly, in applying the tax law pursuant to Article 14(3) of the Framework Act on National Taxes, the act of donation in this case may be deemed as the Plaintiff’s act of direct assistance to the Taecheon Tourist Development Corporation, and in this respect, the donation in this context should be excluded from the calculation of deductible expenses.

3. Conclusion

Therefore, the judgment of the first instance is just, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.

Judges Kim Jae-ho (Presiding Judge)

1) The Plaintiff asserts to the effect that “The Plaintiff was merely an owner of the convertible bonds of the Taecheon Tourism Development Corporation at the time when the board of directors of the Plaintiff resolved to contribute funds in the Taecheon City, and thus, did not have any special relationship with the said Corporation.” However, whether the Plaintiff constitutes a specially related person should be determined at the time of transaction. The Plaintiff’s resolution at the board of directors is merely an internal decision-making process within the Plaintiff, and the actual time of contribution should be determined at least after August 14, 2012, or at least after the Plaintiff submitted a letter of deposit containing the intent to contribute funds to Tae Tae Tae Seo-si. At the above time, the Plaintiff was a shareholder of the said Corporation. Therefore, the Plaintiff’s assertion is without merit. Moreover, considering that the Plaintiff’s resolution at the board of directors was made on July 12, 2012, converted convertible bonds of an amount equivalent to KRW 300,000,000 for ordinary share shares (11.7%) from July 15, 2012).

2) The Plaintiff asserts to the effect that “The purpose of the Special Act on the Assistance to the Development of Abandoned Mine Areas, a law which is the basis for the establishment of the Plaintiff, is to “the promotion of the economy of the abandoned mine area and the balanced development between regions and the improvement of the living standard of the residents”, and thus, the Plaintiff’s assistance in the Pacific City is reasonable. However, even if the above assertion can be deemed to fall under the grounds for which the decision on the assistance to the Pacific Tourism Development Corporation was made, it cannot be deemed as the grounds for whether the Plaintiff should have provided the assistance without directly providing the assistance to the Pacific Tourism Development Corporation and through the Pacific City.