[2] The purport of Article 18(3)1 and (7) of the former Enforcement Rule of the Corporate Tax Act

[3] Criteria for determining "justifiable grounds" under Article 18 (3) 1 of the former Enforcement Rule of the Corporate Tax Act

[2] According to Article 18(3)1 and (7) of the former Enforcement Rule of the Corporate Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 1968 of March 12, 1994), land not directly used for the business of a corporation shall be deemed real estate for non-business use: Provided, That in cases where land is directly used for the business within a certain grace period, it shall be deemed that it is real estate for business use from the date of its acquisition; and in cases where the land is cancelled before the grace period expires and the land is returned or disposed of for non-business use, it shall be deemed that it constitutes real estate for non-business use until the grace period expires. Thus, in such cases, it shall not be deemed that it constitutes real estate for non-business use.

[3] "Justifiable reasons" under Article 18 (3) 1 of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1968 of March 12, 1994) includes not only external reasons that the corporation cannot use in its work with the mind, such as prohibition, restriction, etc., but also internal reasons for exceeding the grace period due to lack of time to make normal efforts to use in work. In determining whether a justifiable reason exists, considering the legislative intent of holding non-business real estate as the requirement for non-profit expenses in the calculation of the interest paid to the corporation as non-profit corporation or non-profit corporation, whether the corporation is a profit-making corporation, or not, in light of the purpose of acquiring real estate, the length of preparation period required for use in work in work in question, the reason and degree of disability of the law, the reason for and degree of disability of the corporation, and whether the corporation has made a serious effort to use real estate

A. On the first ground for appeal

Based on its employment evidence, the court below acknowledged that the plaintiff concluded a sales contract for the land of this case with Gwangju Metropolitan City and completed the registration of ownership transfer on August 20, 193, but terminated the sales contract and returned it to Gwangju Metropolitan City by cancelling the registration of ownership transfer under the name of the plaintiff for the land of this issue on September 21, 1995. The purport of the non-taxation of interest paid on loans related to non-business under Article 18-3 of the former Corporate Tax Act (amended by Act No. 5581 of December 28, 1998) is to prevent unreasonable corporate expansion dependent on non-business capital and encourage corporate sound economic activities through the production and management of corporate funds, so long as the plaintiff was able to actually use and profit from the land of this case after obtaining the approval of land use from Gwangju Metropolitan City and completed the registration of ownership transfer under its name, the court below determined that the plaintiff's real estate was returned from the point of acquisition of the land of this issue to the date of non-business use.

In light of the relevant laws and records, the judgment of the court below is just, and there is no error of law in the misapprehension of legal principles as to the retroactive effect of termination of contract. The grounds of appeal disputing this issue are not accepted.

B. On the second ground for appeal

According to Article 18-3 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998), Article 43-2 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14468 of Dec. 31, 1994), and Article 18 (3) 2 of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1968 of Mar. 12, 1994), the lower court determined that the Plaintiff’s land used directly in a building for factories and exceeding the standard area for factory sites under Article 84-4 (3) 6 of the Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 14063 of Dec. 31, 1993) cannot be deemed as real estate for non-business purposes. Accordingly, the lower court determined that the Plaintiff’s land of this case was 164-166 of the former Enforcement Rule of the Local Tax Act (amended by Presidential Decree No. 14764 of Dec. 67, 197).

In light of relevant laws and records, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to non-business real estate. The ground of appeal on this point is rejected.

C. On the third ground for appeal

According to Article 18(3)1 and (7) of the former Enforcement Rule of the Corporate Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 1968 of March 12, 1994), land not directly used for the business of a corporation shall be basically deemed non-business real estate: Provided, That where land is directly used for the business within a certain grace period, it shall be deemed real estate for the business purpose from the date of its acquisition, and where the land is not used for the business purpose within the said period, it shall be deemed non-business real estate from the date of its acquisition. Thus, where the sales contract is cancelled before the expiration of the grace period, and the land concerned is returned or disposed of as the sale of the land, etc., it shall be determined whether it constitutes non-business

The decision of the court below to the same purport is just, and there is no error in the misapprehension of legal principles as to the grace period as otherwise alleged in the grounds of appeal. The grounds of appeal on this point shall not be accepted.

2. We examine the defendant's grounds of appeal.

"Justifiable reasons" under Article 18 (3) 1 of the former Enforcement Rule of the Corporate Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 1968 of March 12, 1994) includes not only external reasons that the corporation cannot use in its work, such as prohibition and restriction under Acts and subordinate statutes, but also internal reasons beyond the grace period due to lack of time to make normal efforts to use in work. In determining whether a justifiable reason exists, the legislative intent of the holding of real estate for non-business use as a requirement for non-profit in deductible expenses of interest paid to a corporation shall be sufficiently taken into account, whether the corporation is a profit-making corporation or a non-profit corporation, and whether the preparation period required for use in work in light of the purpose of acquiring real estate, the length of the preparation period required for use in work, the reason and degree of de facto disability in the law, which cannot be used in work, and whether the corporation has made a serious effort to use real estate in work (see, e.g., Supreme Court Decisions 90Nu2963, Mar. 29, 199).

The court below determined that the disposition of imposition of corporate tax and special tax for rural development was unlawful on the ground that since the end of July of the same year when the plaintiff approved the return of part of the land of this case from Gwangju Metropolitan City on May 195, when it was approved by Gwangju Metropolitan City on the return of the land of this case from Gwangju Metropolitan City or from the end of July of the same year when the contract for sale and purchase of part of the land of this case was terminated, on the ground that the issue falls under the case where "justifiable cause" under the Corporate Tax Act to use the land of this case for the plaintiff's business was not used directly for the plaintiff's business, such as the plaintiff constructed a factory building on two occasions on the land of this case.

In light of the relevant statutes and the records, the above fact-finding and judgment of the court below are just, and there is no error in the misapprehension of legal principles as to the misconception of facts or legitimate reasons due to a violation of the rules of evidence. The grounds of appeal disputing this issue are not accepted

3. Therefore, all appeals are dismissed, and the costs of appeal are assessed against each losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yoon Jae-sik (Presiding Justice)