(b) Reduction of capital and calculation of income amount in respect of onerous retirement of treasury stocks;

B. Where a corporation acquires a certain amount of treasury stocks at its basic asset (loan) and retires them for value by taking lawful procedures for capital reduction under the provisions of the Commercial Act as part of the capital reduction procedure by means of stock retirement, this constitutes a refund of capital which is a capital transaction. Thus, it does not affect the corporation’s profit or income amount under the Corporate Tax Act. Thus, except for special cases cited as the object of the avoidance of wrongful calculation in relation to capital transactions, such as Article 46(1)1 and 2 of the Enforcement Decree of the Corporate Tax Act, although the corporation purchased stocks at its face value and refunded its capital at its face value, it does not affect the corporation’s income by converting the amount of excess capital refund into deductible expenses.

The costs of appeal shall be borne by the defendant.

Article 20 of the Corporate Tax Act, where it is deemed that the corporation has unjustly reduced the tax burden on the corporation's income under Article 46 (2) of the Enforcement Decree of the Corporate Tax Act means the case where it attempts to unjustly avoid or reduce the tax burden by abusing the various forms of transactions listed in each subparagraph of Article 46 (2) of the Enforcement Decree of the Corporate Tax Act, or where the form of transactions is deemed to have neglected the economic rationality without such intent. This means that no analogical interpretation or expanded interpretation is allowed in accordance with the general principles of tax laws and regulations (see Supreme Court Decision 84Nu337 delivered on May 28, 1985). If a corporation acquires a certain amount of its own stocks with its basic asset (loan) in accordance with the capital reduction procedure under the Commercial Act as part of the capital reduction procedure under the method of stock retirement, and retires them with a certain amount of its own stocks at its face value, it constitutes a refund of the corporation's income amount under the Corporate Tax Act, and thus, it does not affect the corporation's income amount or its face value.

Upon examining the facts established by the court below in light of the records, the non-party 40,00 shares of the non-party 8 personal shareholders including the non-party, etc. (the stock price per share under Article 16-2 of the Enforcement Rule of the Corporate Tax Act and Article 5 (5) of the Enforcement Decree of the Inheritance Tax Act) are purchased at 200 million won per share total face value, and borrowed 200 million won from the plaintiff company with the capital refund fund with the capital refund fund, and take the capital reduction procedure for the above purchased shares with the capital refund procedure under the Commercial Act. To the above purport, the acquisition of the shares for the retirement of this case is included in the refund of capital, which is the capital transaction, and thus, the excess amount of the market price does not affect the income amount. Accordingly, the decision of the court below is justified in holding that the non-party 1, who is the merged company, shall not be subject to the rejection of unfair calculation and calculation, and there is no error in the misapprehension of legal principles as to the rejection of unfair calculation due to incomplete review as pointed out.

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

Justices Kim Yong-sung (Presiding Justice)