Article 67 (Disposition of Income under the former Corporate Tax Act)

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

A. The plaintiff is a corporation engaged in automobile repair and its accessory manufacturing business, etc. from 2001 to 2004, while filing a corporate tax return from 2001 to 2004, the plaintiff filed a corporate tax return by appropriating expenses, such as transportation expenses, for processing. The defendant conducted a tax investigation on the plaintiff from August 18, 2005 to November 30, 2005 upon receipt of a report on tax evasion of corporate tax, and then the plaintiff included 304,529,500 won of credit purchase in the counterpart account (hereinafter referred to as "the credit purchase amount in this case") among the processing expenses in the business year 2003 to the other bank account (hereinafter referred to as "the credit purchase amount in this case") and 120,000,000 won of credit purchase amount in this case and the other bank account (hereinafter referred to as "payment bill amount in this case") for each of the above processing expenses belonging to the plaintiff's 306,506,700.

B. Accordingly, on April 20, 2007, the Plaintiff requested the Defendant to rectify the tax base and tax amount of wage and salary income tax on the Plaintiff’s representative for the business year 2003 as KRW 554,254,402, and KRW 187,3871,580, respectively, on the ground that the instant processing expenses cannot be deemed as bonus for the Plaintiff’s representative, since they were not leaked out of the company. However, on June 14, 2007, the Defendant rendered the instant disposition rejecting the Plaintiff’s request for correction.

C. On July 2, 2007, the Plaintiff filed an appeal with the National Tax Tribunal on the instant disposition, but the National Tax Tribunal dismissed the said appeal on December 31, 2007.

[Reasons for Recognition] Unsatisfy, Gap evidence 1, 4, 5, Eul evidence 3, 11 (including each number), Eul evidence 5-3, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) On October 16, 2006, the Plaintiff received from the National Tax Tribunal a ruling on the purport that “the Plaintiff shall not be deemed to have leaked because it appropriated the instant processing costs in cash as the processing costs not accompanied by cash,” but the disposition of this case refusing the Plaintiff’s request for correction without following the purport of the said ruling, is unlawful, contrary to Article 80 of the Framework Act on National Taxes.

2) Since the instant processing costs were not leaked for the following reasons, the instant disposition rejecting the Plaintiff’s claim for correction on the premise that the instant processing costs were leaked out of the private school is unlawful.

A) Although the Plaintiff’s accounting officer did not request the Plaintiff to transport goods to the ○○○ Transit Co., Ltd. (hereinafter “○○○ Transit”), the Plaintiff requested the Plaintiff to transport goods on credit eight occasions, and did not pay the transport cost, the instant credit purchase amount was accounts at his own discretion without the Plaintiff’s approval or permission, and such amount was not leaked out of the company in fact.

B) The amount of the bill of this case paid to the Plaintiff on April 11, 2004, when the Plaintiff lent to ○○○○ Co., Ltd. (hereinafter referred to as “○○○○○”) a sum of KRW 120,00,000 at face value to KRW 120,00 at face value, and appropriated it as processing expenses. However, on April 8, 2004, the amount of the bill of this case paid to the Plaintiff on April 11, 2004, which is the payment date of the bill of this case, deposited the amount equivalent to the face value of each of the bill of this case into the Plaintiff’s current account, and the said amount was not actually leaked.

B. Relevant statutes

Article 80 (Effect of Decision under Framework Act on National Taxes)

Article 67 (Disposition of Income under the former Corporate Tax Act)

Article 106 (Disposition of Income)

C. Determination

1) Whether the instant disposition violates Article 80 of the Framework Act on National Taxes

① On March 16, 2006, the Plaintiff received a notice of change in the amount of income from the Defendant on April 10, 2006, reported to the Defendant the withholding income tax amount of 324,312,770 won for the business year 2003, and requested the National Tax Tribunal for the above disposition of income on May 18, 2006. On October 16, 2006, the National Tax Tribunal filed an appeal against the above disposition of income with the National Tax Tribunal. Of the processing expenses belonging to the 2003 business year, “The processing expenses of this case cannot be deemed to have been discharged outside cash,” and the head of this case cannot be deemed to have obtained a notice of change in the amount of income from the Defendant, and the Defendant did not go through a re-examination as to the processed expenses of this case as to which the amount was actually leaked, and the Defendant did not obtain a notice of change in the amount of income from the Plaintiff 201 to the 32015 business year.

In light of the above facts, inasmuch as the Defendant conducted a reinvestigation on the processed expenses of this case in accordance with the decision of the National Tax Tribunal No. 2006Da2019 and notified the Plaintiff of the change in income amount on November 2, 2006, even if the Plaintiff filed a request for correction in accordance with his previous argument, the Defendant is deemed to have fulfilled all the measures to be taken in accordance with the purport of the above decision of the National Tax Tribunal. Thus, the instant refusal disposition cannot be deemed to have been taken against the binding force of the above decision of the National Tax Tribunal. Accordingly, the Plaintiff’s assertion that the instant disposition was against Article 80 of the Framework Act on National Taxes is unlawful is without merit.

2) Whether the credit purchase amount of the instant case was leaked out of the company

A) According to Article 67 of the former Corporate Tax Act and Article 106(1) of the former Enforcement Decree of the Corporate Tax Act, where a corporation’s income subject to taxation is omitted by omitting sales or appropriating expenses, if it is clear that the amount included in the calculation of earnings has been leaked out of the company, the tax authority shall dispose of the income through bonus, dividend, and other outflow from the company according to the person to whom the income belongs, and where it is clear that the person to whom the income accrues is attributed, but it is unclear who is the person to whom the income accrues, the income shall be disposed of as a recognition for the representative. Thus, where a corporation fails to enter the sales in the account despite the fact of sales in the account book or calculates the ratio of processing in the account book, the corporation’s income equivalent to the omitted sales or processing expenses shall be deemed to have been leaked out of the company, and in such case, special circumstances, such as the total amount omitted sales, need to be proved in the corporation’s side that asserts it (see, e.g., Supreme Court Decision 2003Du1797

B) In the instant case, the Plaintiff included the amount of the credit purchase in the account book as deductible expenses and reported the corporate tax as deductible expenses. Therefore, the amount of the credit purchase in this case is inevitable to be deemed to have been discharged out of the company unless the Plaintiff proves special circumstances to deem that the amount of the credit purchase in this case was not leaked out of the company. However, the Plaintiff did not dispute between the parties, or obtained the total statement of the evidence Nos. 7, 9, 10, 11, 12, 11, 12, 13-1, 13-1, i.e., (i) although the amount of the credit purchase in this case was stated in the account statement for the 2003 business year, it was not stated in the account statement on the account settlement statement, i.e., whether the amount of the credit purchase in this case was leaked out of the account No. 2004 business year from 2003 to 300, 2005.

3) Whether the amount of the instant bill paid was leaked out of the company

The fact that the Plaintiff included the amount of the instant payment in the account book as stated below does not conflict between the parties, or can be recognized according to the evidence No. 12, as stated below.

In light of the Plaintiff’s account settlement, even if the Plaintiff calculated the instant payment bill as a debt for a bill of exchange with the payment on April 8, 2004, when it appropriated the amount of the instant payment bill as a debt for a bill of exchange with the payment on the part of the Plaintiff, and the account was kept as to the said payment bill as the payment on April 11, 2004, each payment date, as long as it is apparent in the account book that the Plaintiff’s above payment was the loan to the Plaintiff’s counterpart to the transaction of the loan, such transaction does not entail the change or increase in the net assets of the corporation, and thus is irrelevant to the profit or cost of the corporation. Thus, the instant payment bill amount is already leaked as it is deemed to have been reverted to the other party to the said loan transaction, and thus, it shall be deemed to have been reverted to the Plaintiff’s representative because the other party to the loan was unclear (see Supreme Court Decision 2003Du3726, Jan. 11, 2002).

4) Sub-committee

Therefore, the disposition of this case rejecting the Plaintiff’s request for correction on the ground that the processing expenses of this case were not leaked out of private areas is legitimate.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.