2. Of the appeal costs, the part arising between the Plaintiff 1 Company and the vice-director of the District Tax Office shall be borne by each party, while the part arising between the Plaintiff 2 and the Defendant North Korean Tax Office shall be borne by the said Defendant.

The disposition of imposition of KRW 673,933,00 as corporate tax belonging to the business year of 1999 against the Plaintiff Company by the Head of Jung-gu Tax Office on February 5, 2002 and KRW 662,61,560 as gift tax imposed on the Plaintiff 2 on May 21 of the same year by the Head of Seongbuk-gu Tax Office shall be revoked.

2. Purport of appeal

The purport of appeal by the plaintiff 1 corporation: The part against the plaintiff 1 corporation seeking cancellation under the judgment of the court of first instance shall be revoked. The disposition of imposition of KRW 166,209,447 among the disposition of imposition of KRW 673,93,00 of the corporate tax belonging to the business year 199 against the plaintiff 1 corporation shall be revoked on February 5, 202.

The purport of appeal by the defendants: The part against the defendants in the judgment of the court of first instance shall be revoked. The plaintiffs' claims are dismissed.

The reasoning for a member’s explanation on this case is as follows, except for adding the following judgments to the newly asserted matters in the trial, and thus, it is consistent with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Additional matters to be determined;

A. The defendants' assertion

(1) Since the non-party company’s own shares are the assets of a corporation represented by the shares owned by the external shareholders, the profits earned by its own shares should not be deemed the profits of the non-party company, but be distributed to them according to the shares owned by the shareholders. Therefore, the judgment of the court of first instance rendered a decision on the calculation of profits and losses after the capital increase to be reverted to each shareholder of the non-party company on the premise that

(2) The judgment of the court of first instance is inappropriate in this regard, since the treasury stocks owned by the non-party company fall under a de facto decrease of capital, and the calculation of profits and losses to be reverted to the plaintiff 2 is different from the calculation of the judgment of the court of first instance except from the total number

(3) In the judgment of the court of first instance, although the value per share of the non-party company was assessed as 955 won per share, it is reasonable to view the value per share as 1,191 won per share regardless of whether the non-party company’s own shares are included in the total number of outstanding shares, and therefore, the judgment of the court of first instance that calculated the profit distributed by the plaintiff company to the plaintiff company to the plaintiff 2 is unreasonable.

B. Determination

(1) As to the first argument

Inasmuch as a juristic person and its shareholders have a separate character, it cannot be deemed that the increased value of assets belongs to the shareholders immediately because the value of assets of the domestic juristic person increases, the first assertion by the Defendants is based on the erroneous premise that the increased assets of the company immediately belong to the shareholders, and therefore, is without merit.

(2) As to the second argument

Article 341 subparagraphs 2 through 5 of the Commercial Act and the proviso of Article 341-3 of the Commercial Act provide that if a company acquires its own stocks for the purpose of stock retirement, it shall without delay take the procedure of stock invalidation, and if it acquires its own stocks due to a merger of the company or an acquisition of the whole business of another company, it shall dispose of its own stocks or pledge rights at a reasonable time.

However, it cannot be deemed that the company's own stocks fall under the actual reduction of capital, and there is no provision that the company's own stocks should be excluded from the total number of issued stocks in any place other than the Commercial Act or the old Inheritance Tax and Gift Tax Act. Therefore, the defendants' above assertion based on the premise that the shares should be excluded from the total number of issued stocks is without merit.

(3) As to the third argument

Unlike the court of first instance, the Defendants assessed the value of non-listed stocks only by net asset value of the company, and calculated the value per share of the non-indicted company as KRW 1,191. However, the judgment of the court of first instance is justifiable in calculating the value per share of the non-indicted company as KRW 955 is in accordance with the provisions of Article 54(1) of the former Inheritance Tax and Gift Tax Act. Rather, the formula alleged by the Defendants in the court of first instance is evaluated by the net asset value only in accordance with the above provision, which provides that the value of non-listed stocks should be assessed by weighted average of net asset value and net profit value, and thus, it cannot be accepted (In addition, the Defendants considered the value of the non-indicted company stocks as KRW 955 per share and the gift tax and the gift tax were imposed on the non-party company stocks to be assessed as KRW 1,191 per share, and it is difficult to view that there is a separate specific disposition necessary for the determination in the court of first instance as the party members did not

3. Conclusion

Therefore, the judgment of the court of first instance is justified, and all appeals by the plaintiff 1 corporation and the defendants are dismissed. It is so decided as per Disposition.

Judges Cho Yong-ho (Presiding Judge)

Note 1) The formula applicable: M2 where a treasury stock is included in the total number of issued stocks: = (A+2M2d)/Kx1/2, where a treasury stock is not included in the total number of issued stocks: M1/2 (A: net asset value, D: the number of treasury stocks, M1/2 (A: net asset value, d: the number of treasury stocks, and M1/2: the value of stocks where treasury stocks are not included in the total number of issued stocks, K: the total number of issued stocks, and M2: the value of stocks where treasury stocks are included in the total number of issued stocks)