1. Judgment prior to remand

Seoul High Court Decision 2011Na36161 Decided October 28, 2011

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

A. On September 27, 2001, the Plaintiff purchased 00,000 won of the instant apartment 10 BB, 3203 square meters (hereinafter “the instant apartment 156,857 square meters”). On the ground that the Plaintiff’s apartment 200m2 and the instant apartment 200m2 were not subject to tax reduction or exemption under the proviso of Article 99-3(1)1 of the former Restriction of Special Taxation Act (amended by Act No. 6762, Dec. 11, 2002; hereinafter the same) on the apartment 200m2, the Plaintiff purchased the instant apartment 15m2 from theCC Industry Development Co., Ltd., and sold 7m2 to the Plaintiff the instant apartment 200m2 without being subject to tax reduction or exemption for the transfer income tax on the apartment 204m3(1) of the instant apartment 204m2.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 5 (including a provisional number; hereinafter the same shall apply), Eul evidence No. 1, the purport of the whole pleadings

2. The parties' assertion and judgment

A. The parties' assertion

1) Summary of the Plaintiff’s assertion

At the time of the instant disposition, there was a practice of national tax administration excluding the area of balcony part when calculating the area of the balcony part at the time of the instant disposition. Nevertheless, the Defendant calculated the area for exclusive use including the balcony area of the instant apartment, and imposed capital gains tax on deeming it as a high-class house with the proviso to the special taxation provisions excluding the application of the capital gains tax reduction and exemption provisions. The instant disposition is null and void on the ground of serious and apparent defects. Accordingly, the Defendant is obliged to refund OO members and damages for delay paid by the Plaintiff without any legal grounds.

2) The defendant's argument

This case’s disposition cannot be deemed as going against the practice of national tax administration, and even if the disposition was contrary to the practice of national tax administration, it cannot be deemed as null and void as it is difficult to deem the defect to be externally apparent.

B. Determination

1) In order for a tax disposition to be deemed null and void as a matter of course, the mere fact that there is an illegality in the disposition is insufficient. The defect must be objectively obvious as it seriously violates the important part of the law. In determining whether there is a significant and apparent defect, the purpose, meaning, function, etc. of the law that serves as the basis for the said tax disposition should be examined in a teleological perspective and reasonable consideration of the specificity of the specific case itself at the same time, as well as in a case where there is no room for dispute over the interpretation of the law, even though there is no room for dispute over a certain legal relationship or fact, if the tax disposition was made by applying the provisions of the law, even though there is no clear legal reasoning that the provision of the law cannot be applied to the legal relation or fact, it is not clear that the tax disposition erred by interpreting the taxation disposition, which is merely a mistake in the fact requiring taxation (see, e.g., Supreme Court Decision 2006OO. 206 andO. 207O. 20500).

2) The legal provisions relevant to the instant case are as follows:

Article 99-3 (1) 1 of the former Restriction of Special Taxation Act provides that a tax amount equivalent to 100/100 of capital gains tax shall be reduced or exempted on any income accruing from transfer of a newly-built house acquired from a housing developer by a person who first concludes a sales contract with the housing developer during the newly-built house acquisition period within five years from the date of its acquisition, except where such newly-built house constitutes a de facto house that is excluded from the subject of non-taxation of capital gains tax pursuant to Article 89 (3) of the Income Tax Act, and Article 89 (3) of the former Income Tax Act (amended by Act No. 6781 of Dec. 18, 2002) provides that one house for one household (excluding a high-class house whose total floor area, value, facilities, etc. exceed the criteria prescribed by the Presidential Decree) and the income accruing from the transfer of land appurtenant thereto, and Article 156 (2) 2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 1751 of Oct. 1, 2002) provides that it is exempt from an exclusive residential area.

Meanwhile, Article 18(3) of the former Framework Act on National Taxes (amended by Act No. 911, Jan. 1, 2010; hereinafter referred to as the "Framework Act on National Taxes") provides that after construction of balcony or the practice of national tax administration generally accepted taxpayers, any act or computation according to such construction or practice shall be deemed lawful, and no tax shall be imposed retroactively by new construction or practice. Meanwhile, according to the above evidence, in relation to the interpretation of the above income tax law, high-class houses with an area for exclusive use by its occupant is not the area in the public register, but the area of the balcony constructed by the public law is not the area for exclusive use by its owner. Unlike the general balcony, since it constitutes a space that can be used for residential purposes in the building structure, it is difficult to recognize that the building area of the balcony was included in the construction work of the apartment and its construction work of the apartment to be excluded from the construction work of the public law, the Supreme Court also accepted the construction work of the apartment building as a practice or practice.

① The principle of retroactive taxation under the new interpretation or practice under Article 18(3) of the Framework Act on National Taxes applies only to cases where there are special circumstances deemed that the protection of taxpayers’ trust is consistent with the concept of justice even if there are sacrificeing the principle of legality. The burden of proving the existence of “an interpretation or practice of tax-related Acts accepted generally by taxpayers” under the above legal provisions is on taxpayers (see, e.g., Supreme Court Decisions 2005DuO00, Jun. 29, 2006; 91NuO00, Sept. 8, 1992). In order that the practice of national tax administration is established as a practice subject to Article 18(3) of the Framework Act on National Taxes, it is difficult to readily conclude that the existing regulations on the exclusive use area of an apartment house and the existing regulations on the exclusive use area of the apartment house have been established in the same way as the existing regulations on the exclusive use area of the apartment house prior to the final judgment of the court.

④ The instant disposition, except for the balcony part of the instant apartment in its exclusive area by pressing Caltain and by the Public Law, does not go against the provisions of the Acts and subordinate statutes that prescribe specific taxation requirements.

3. Conclusion

Therefore, the plaintiff's claim shall be dismissed as it is without merit. Since the judgment of the court of first instance is justified as the conclusion is, the plaintiff's appeal shall be dismissed. It is so decided as per Disposition.