2. The plaintiff's remaining claims are dismissed.

3. 7/10 of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

A. The Plaintiff (hereinafter “Plaintiff”) was a subsidiary of a new financial holding company (hereinafter “new financial holding company”) established on June 4, 2002 as an unlisted company established for credit card business purposes on October 1, 2002.

B. Although the Plaintiff intended to grant stock options to its executives and employees, the stocks of an unlisted corporation did not grant stock options on the grounds that the market price is difficult to calculate, and instead, a new financial holding company granted stock options to the Plaintiff’s executives and employees for five times from May 2002 to March 2006 (hereinafter “instant stock options”).

The 1,80 won in 1,800 won in 21,595 won in 28,06 won in 38,829 won in 11,80 won in 21,80,800 won in 21,595 won in 21,5,006 won in 21,829 on May 22, 2002, 2005. < Amended by Presidential Decree No. 18475, Mar. 21, 2006> 1, 2004; Presidential Decree No. 18574, Mar. 21, 2005; Presidential Decree No. 18578, Mar. 21, 2006; Presidential Decree No. 18578, Mar. 24, 2004>

Note 1) The difference compensation type

Note 2) Share delivery type

C. Around May 2005, the Plaintiff issued a new financial holding company a certificate of payment of funds as follows (hereinafter “instant preservation agreement”), and the Plaintiff accounting of the preservation cost of KRW 4,364,316,996 (hereinafter “instant stock option cost”) to be paid to the new financial holding company following the instant stock option (hereinafter “instant preservation cost”).

1. Table 1 contained in the main text, the Plaintiff accounting of the compensation cost for new financial holding companies (amount corresponding to the period of continuous service) granted to the Plaintiff’s executives and employees as the Plaintiff’s salary, and confirmed that funds should be paid or borne when the Plaintiff’s executives and employees exercise their rights during the period of exercising the stock option. The number of stocks granted to the Plaintiff’s executives and employees: the number of stocks granted to the Plaintiff: the number of stocks granted to the Plaintiff: the number of stocks granted to the Plaintiff: the number of stocks granted to the Plaintiff: March 30, 2005; the period of exercise: the period of payment to the director for four years after the lapse of three years from the date of exercising the stock option: 20 days after the date of exercising the stock option: 2. The above matters are applied on May 22, 2002, May 15, 2003, and March 31, 2004 to the Plaintiff’s compensation cost for the stock option (the Plaintiff also corresponding to the continuous service period).

D. Meanwhile, the new financial holding company operated the stock option system in cash with the difference between the exercising price and the market price when the executives and employees exercise their stock options. The new financial holding company's stock option business continues to be as listed below.

The procedures for exercising stock options in the difference compensation type under Article 8 (Procedures for Exercising stock options in the difference compensation type) of the Table New Stock option Business contained in the main text shall be determined by the contract. (a) A person who intends to exercise Stockholm options shall enter the kind and number of stocks to be exercised in two copies of a written application for the exercise of stock options, sign and seal or sign and submit them to the affiliated company. (b) The company shall send one copy of the written application to the holding company, and shall pay in cash

After that, on around 2007, part of the Plaintiff’s officers and employees exercised part of the instant stock option, following the said exercise of stock option, the new financial holding company paid cash according to the difference settlement method to the executives and employees who exercised the stock option, and made up for the Plaintiff’s expenses to the new financial holding company pursuant to the instant preservation agreement. However, the Plaintiff directly paid KRW 1,432,580,821 to its executives and employees (hereinafter “instant amount of compensation”).

E. After October 1, 2007, the Plaintiff transferred its business to EL branch card Co., Ltd. 3) 2,931,736,175 won (=4,364,316,96 - 1,432,580,821 won (hereinafter “transfer amount”) which is the amount obtained by deducting the preservation amount of the instant stock option costs from the stock option costs to be paid to the new financial holding company.

F. The Plaintiff prepared a list of total amount of corporate tax to adjust the income in the business year 2007 and declared and paid the corporate tax in the business year 2007. On March 16, 201, the Plaintiff filed a request for correction with the Defendant to the effect that the Defendant included the total amount of the stock option costs in the deductible expenses and refund KRW 1,091,079,249 out of the corporate tax in the business year 2007. On September 26, 2011, Article 19 subparag. 19 of the Enforcement Decree of the Corporate Tax Act (hereinafter “new Enforcement Decree”) newly incorporated by Presidential Decree No. 21302, Feb. 4, 2009, the Plaintiff rejected the instant stock option costs that were first compensated for the exercise costs after February 4, 2009, on the ground that the new Enforcement Decree of the Corporate Tax Act cannot be applied (hereinafter “instant disposition”).

G. On December 16, 201, the Plaintiff appealed and filed an appeal with the Tax Tribunal, but was dismissed on September 24, 2012.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 5, 7 to 12, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

1) Plaintiff

The instant stock option cost is a kind of “work cost” required by the Plaintiff for the payment of bonus in kind to its executives and employees, which falls under subparagraphs 3 and 18 of Article 19 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009; hereinafter “former Enforcement Decree”), and thus, should be included in deductible expenses under the Corporate Tax Act. However, the instant disposition based on different premise is unlawful.

2) Defendant

Of the stock option costs, the amount of compensation in this case constitutes bonuses based on the disposal of profits under Article 43(1) of the former Enforcement Decree of the Corporate Tax Act, not labor costs, and thus constitutes non-deductible expenses. The amount of transfer in this case does not fall under deductible expenses due to the arrival of the time of

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) As to the preservation amount of the instant case

A) Article 19 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter “former Corporate Tax Act”) provides that the amount of losses incurred from transactions which reduce the net assets of the pertinent corporation, except as otherwise provided in this Act and other Acts and subordinate statutes, shall be the losses or expenses incurred in connection with the corporation’s business and directly related to ordinary or profit-making. Paragraph (3) provides that matters necessary for the scope, classification, etc. of the amount of losses shall be prescribed by Presidential Decree. Article 19 of the former Enforcement Decree provides that losses shall be included in the following subparagraphs except as otherwise provided in the Act and this Decree, and subparagraph 3 provides that “labor expenses” and subparagraph 18 provides that “the amount of losses shall be attributed or payable to the corporation as other losses.”

B) Comprehensively taking account of the following facts, the amount of preservation of the instant case actually borne by the Plaintiff’s officers and employees upon exercising the instant stock option can be deemed as personnel expenses incurred in relation to the Plaintiff’s business to generate business profits, and even if not, at least, the amount of preservation can be deemed as “the amount attributed or to be attributed to the corporation as other losses” under Article 19 subparag. 18 of the former Enforcement Decree, and thus constitutes losses under the Corporate Tax Act.

(1) A stock option is a right to acquire new shares at a predetermined price or to allow its executives and employees to purchase their own shares at a certain price to contribute to the management, technological innovation, etc. of the company, which is established to maximize their business performance by inducing the future profits from the purchase of shares. In addition, Article 38(1)17 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 21301 of Feb. 4, 2009) provides that “the profits from the exercise of the stock option granted to the executives or employees of the corporation or the corporation in a special relationship under Article 87 of the Enforcement Decree of the Corporate Tax Act with the corporation concerned during the period of work for the corporation, etc.” as one of the wage and salary income. The stock options, etc. are paid as part of the price for provision

② Articles 19(1) and 20 subparag. 1 of the former Corporate Tax Act, and Article 43(1) of the former Enforcement Decree of the same Act provide that “the amount appropriated as losses for the disposal of surplus” or “the bonus paid by a corporation to its executives or employees by the disposal of profits shall not be included in the calculation of losses in principle.” The term “profit disposal” refers to the amount paid by the disposal of profits with the approval of the general meeting of shareholders stated in the disposal of profits in the disposal of profits. There is no evidence to deem that the amount of compensation paid to the Plaintiff’s executives or employees

③ Article 8 of the New Financial Holding Company’s Stock option Business (Procedures for Exercising Stock Options) of the New Financial Holding Company provides, “A person who intends to exercise Stockholm options shall submit to the company to which he/she belongs the same kind and number of stocks to be exercised in two copies of the written application for the stock option, and shall send one copy of the written application to the holding company, which shall be paid in cash in accordance with the payment procedure.” The Plaintiff’s prompt payment to the Plaintiff’s officers and employees without paying the instant preservation amount to the new financial holding company is the party to the instant preservation agreement, which constitutes “the so-called “the so-called “the so-called”-called “the long-term payment” directly provided to the Plaintiff’s executives and employees, who are the parties to the instant preservation agreement, according to the business new financial holding company’s new financial holding company that is the parties to the instant contract, and thus, the party who has granted the instant stock option to the Plaintiff’s executives and employees, even if the new

④ The purpose of Article 19(1) of the former Enforcement Decree is to newly establish a provision that sets deductible expenses under Article 19(1) of the Corporate Tax Act (see Supreme Court Decision 2012Du3491, Nov. 17, 2015) with regard to “in the event that an executive or employee exercises a stock option granted under Article 542-3 of the Commercial Act, the amount to be compensated, etc. as expenses for exercising the stock option,” and Article 19 subparag. 19 of the former Enforcement Decree of the same Act is to confirm the cost of exercising the stock option (see Supreme Court Decision 2012Du3491, Nov. 17, 2015).

2) As to the transfer amount of this case

Article 40(1) of the former Corporate Tax Act provides that "The fiscal year of accrual of earnings and losses of a domestic corporation for each fiscal year shall be the fiscal year which includes the date on which the concerned earnings and losses are settled."

In the instant case, as recognized earlier, the time for the Plaintiff to pay expenses to the executives and employees who have exercised the stock option to the new financial holding company or to exercise the stock option according to the instant preservation agreement is the time when the stock option is exercised, and the above expenses are determined by the difference between the market price and the exercise price of the stock at the time of the exercise of the stock option, and if the stock option is not exercised before the exercise of the stock option, it is impossible to determine the above expenses. In light of the principle of confirmation of rights and obligations, the transfer amount of this case did not meet the requirements of inclusion in deductible expenses in the business year 2007, and actually satisfies the requirements of inclusion in deductible expenses in the business year during which the stock option was exercised. Accordingly, the Plaintiff’s assertion on other premise is without merit.

3) Calculation of a justifiable amount of tax

As seen above, in calculating the Plaintiff’s corporate tax for the business year of 2007, the preservation amount of the instant stock option costs should be recognized as deductible expenses. Accordingly, if corporate tax for the business year of 2007 is re-calculated, the amount to be refunded to the Plaintiff shall be KRW 358,145,205. Accordingly, the portion in excess of KRW 732,934,04 (i.e., KRW 1,091,079, 249, 358,145,205) of the disposition of this case shall be revoked as unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the above scope of recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Kim Jong-Un (Presiding Judge)

Note 1) The difference between the event price and the market price is paid in cash.

2) The method by which the new financial holding company issues and delivers new shares at an exercise price.

3) On October 1, 2007, the Plaintiff transferred the card business sector to EL Branch Card Co., Ltd., and on October 5, 2007, EL Branch Card Co., Ltd., a change of its trade name to a new card Co.,, Ltd. on October 5, 2007