B. Whether the shares issued by the merged company held by the merged company are subject to taxation (negative), and whether the profits from disposal of the newly issued shares of the merged company held by the merged company are subject to taxation (affirmative)

C. Whether there exists a legal nature of the General Rules of the National Tax Service (negative) and whether the provisions of the General Rules of the Basic Rules of the National Tax Service were considered in relation to the interpretation of taxation

D. The principle of good faith or the requirement for the application of the principle of respect for tax practice under Article 18(3) of the Framework Act on National Taxes and the burden of proof for its existence (=taxpayer)

E. The meaning of retroactive taxation, the establishment time of tax liability and the legality of measures applying a new interpretation of the new tax-related law in the case of interpretation of the new tax-related law during the process of the taxation period (affirmative)

B. The shares issued by the merged company held by the merged company is the treasury shares acquired by succession due to the merger and the disposal profit is not included in the merger marginal profit as stipulated in Article 15(1)3 of the Corporate Tax Act. However, the shares issued by the merged company, i.e., the shares issued by the merged company, which were held by the merged company, are the treasury shares when the merger new shares are issued, but such disposal profit is not included in the merger marginal profit because it is not the assets owned by the merged company, which were originally owned by the merged company, and thus the disposal profit is not included in the merger marginal profit.

C. General rules of the National Tax Service are merely an administrative rule that issued the criteria for interpretation and enforcement of the tax law within the tax authority, and it is not a law that has the effect of binding the court or the people, so long as the tax law is based on the tax law at the time of the establishment of the tax liability, even though the provision of the basic rules amended or enacted after such interpretation is considered, it cannot be deemed a retroactive taxation unless it violates the principle of respect for tax practice, as well as a mistake.

D. The principle of good faith or the principle of respect for tax practice under Article 18(3) of the Framework Act on National Taxes applies only to cases where there are special circumstances that, even if there are cases where the duty payer’s trust is deemed to be in accordance with the justice, the duty payer’s trust should be protected. The interpretation of the tax law or the practice of national tax administration, which is generally accepted by the duty payer under the above provision, refers to a case where a wrongful interpretation or practice is accepted by a general taxpayer, who is not a specific duty payer, without any objection, to the extent that it is not unreasonable for the duty payer to trust such interpretation or practice. The mere fact that there was a public opinion on the standard of interpretation of the tax law does not necessarily mean that such interpretation or practice exists, and the duty payer, who is the claimant, bears the burden of proving such interpretation or practice.

E. Retroactive taxation means the retroactive taxation by new tax laws, interpretation or practice after the establishment of the obligation to pay national taxes with respect to the income, profit, property, act or transaction, and the tax liability is established when the tax requirements under each tax law are completed, that is, when the tax requirements under each tax law are calculated in accordance with the relevant laws and regulations and can be imposed by applying the tax rate. For corporate tax on the income other than liquidation income, the tax liability is established at the time of the end of the business year stipulated in Articles 5 and 6 of the Corporate Tax Act, which is the taxable period. Thus, in the case of a new interpretation of the tax law during the taxable period, the new interpretation at the end of the taxable period should be applied to the total income of the taxable period, and it cannot be said that

Article 341 and Article 369(2) of the Commercial Act (see Article 342 of the Commercial Act and Article 191(4) of the Securities and Exchange Act). However, since the acquisition of treasury stocks by a company as part of the capital reduction procedure is limited and its voting rights are not recognized, it is necessary to dispose of them within a considerable period of time, unless it is the treasury stocks acquired for retirement (see Article 342 of the Commercial Act and Article 191(4) of the Securities and Exchange Act), it is not an essential difference between the stocks issued by another company and the stocks issued by the other company in terms of the transfer performance and asset nature. Furthermore, according to Articles 9(1), 2, 15(3), 15(1)2 and 3 of the Corporate Tax Act, Article 459 of the Commercial Act, etc., it is reasonable to deem that the acquisition of treasury stocks by a company, or the acquisition and disposal of treasury stocks by a company through a merger, has the nature of the increase or decrease of capital, it constitutes capital transactions (see Supreme Court Decision 207Nu197.

In addition, the shares issued by the merged company held by the merged company is the treasury shares acquired by succession due to the merger and the disposal profit is not included in the merger marginal profit as stipulated in Article 15 (1) 3 of the Corporate Tax Act. However, the shares issued by the merged company, that is, the shares issued by the merged company, are treasury shares if they are issued by the merged company, but the shares issued by the merged company is treasury shares if they are issued by the merged company, which is not originally owned by the merged company, and the disposal profit is not included in the merger marginal profit, but its disposal profit is not changed to the capital transaction due to the merger.

However, according to the reasoning of the judgment below, on August 31, 1985, the court below held that the Plaintiff issued new shares for merger with the shares of the merged company, which were owned by the non-party 1, and sold most of them, from February 1987 to December 198 of the same year, and disposed of the difference between the book value, disposal fees and securities transaction tax at the time of the transfer as capital surplus, and that it was not included in the tax base of the 1987 business year, and that the Defendant calculated the transfer marginal profit of the 1987 business year by treating the transfer marginal profit of the 1987 as income from the transfer of the 3rd corporation, and that it was unlawful for the Plaintiff to calculate the transfer marginal profit of the 196th corporate tax without deducting the difference between the Plaintiff's new tax base and the 194th corporate tax base for taxation without deducting the difference between the Plaintiff's new tax assessment marginal profit and the 196th corporate tax assessment marginal profit.

However, the general rule of the National Tax Service is merely an administrative rule that issued the criteria for interpretation and enforcement of the tax law within the tax authority, and it is not an effective law that binds the court or the people (see, e.g., Supreme Court Decisions 87Nu564, Sep. 12, 1989; 86Nu96, May 26, 1987). Thus, insofar as a taxation disposition is based on the tax law at the time of establishment of the tax liability, even though the provision of the basic rule was considered in relation to such interpretation, it cannot be viewed as an retroactive taxation unless it violates the principle of respect for taxation practice (see, e.g., Supreme Court Decisions 85Nu349, Mar. 10, 1987; 87Nu564, Mar. 10, 1987; 87Nu564, etc.). Accordingly, according to the records, the defendant did not err in the misapprehension of the general rule of the Framework Act on National Taxes or the basic rule of the Act.

In addition, the principle of good faith or the principle of respect for tax practice prescribed in Article 18(3) of the Framework Act on National Taxes shall apply only to cases where there are special circumstances deemed that the protection of taxpayer's trust is consistent with the justice even if there is a sacrifice of the principle of legality (see, e.g., Supreme Court Decisions 91Nu9848, Apr. 28, 1992); and the interpretation of the tax law or the practice of national tax administration generally accepted by taxpayers under the above provision refers to the extent that it is deemed unreasonable for taxpayers to trust such interpretation or practice by accepting taxpayers who are not specific taxpayers even through erroneous interpretation or practice without objection (see, e.g., Supreme Court Decisions 91Nu9824, Mar. 31, 1992; 86Nu537, Aug. 18, 1987; 84Nu98169, Feb. 1968, 198).

However, according to the records, the Commissioner of the National Tax Service (1) expressed the opinion that (2) as well as the retirement of treasury shares by the 1264.21-9611 established rules as of June 27, 1984 and (2) as established rules as of June 27, 1984; (3) as of the sale of treasury shares, the difference between the above established rules as of September 10, 1987 and the 22601-2454 established rules as of November 10, 1987, and (4) as to the sale of treasury shares as of November 18, 1987, the above revised rules as to the 197th sale of treasury shares as well as the 2601-302 established rules as of November 18, 1987, and (5) as to the 194th sale of treasury shares as well as the 12601-307070 established rules as above.

Nevertheless, the court below determined that the rules set forth in paragraphs (1), (2) and (3), (4), and (5) are not a new interpretation, but a new interpretation has been expressed only by the above basic rules, and that there has been no deliberation as to whether the above rules set forth in paragraphs (1) and (2) have been treated as non-taxation for the gains from the sale of treasury stocks in accordance with the above basic rules, without any evidence, and that the rules set forth in paragraphs (1) and (2) have been established by recognizing that the rules did not impose tax on the gains from the sale of treasury stocks until the basic rules set forth in the above basic rules were newly established. Accordingly, the court below erred in the facts, and erred by misapprehending the legal principles as to the requirements for the establishment of non-taxation practice, thereby failing to exhaust all necessary deliberation, or recognizing non-taxation practices without any evidence.

In addition, retroactive taxation refers to a retroactive taxation by new tax laws, interpretation or practice after the establishment of the obligation to pay national taxes on the income, profit, property, act or transaction (see Article 18(2) and (3) of the Framework Act on National Taxes). The tax liability is established when the taxation requirements prescribed by each tax law are completed, that is, when the tax base is calculated and the tax rate can be applied as prescribed by each law (see Article 90Nu7050, Feb. 26, 1991). In case of corporate tax on income other than liquidation income, the tax liability is established at the end of the business year prescribed in Articles 5 and 6 of the Corporate Tax Act (Article 21(1)1 of the Framework Act on National Taxes). Thus, in case where a new tax law interpretation is in the process of the taxation period, the new interpretation at the end of the taxation period should be applied to the entire income at the end of the taxation period, and it cannot be said that it is a retroactive taxation.

Therefore, as determined by the court below, if the date of establishment of corporate tax liability for the transfer margin of treasury stocks of this case on December 31, 1987, the application of the above provisions to the transfer margin is not a retroactive taxation, as well as the application of the above (3), (4), and (5) provisions to the transfer margin prior to the date of establishment of tax liability, and even though they were established on March 1, 198, as seen earlier, the above basic rules are not a comprehensive and organized rule, and as such, they are nothing more than the application of the above provisions, and thus, they cannot be deemed a retroactive application of a new interpretation. Thus, the court below did not determine that the application of the above basic rules to the transfer margin of treasury stocks of this case violates Article 18 (3) of the Framework Act on National Taxes as a retroactive application of a new interpretation.

The argument pointing this out is with merit.

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-sung (Presiding Justice)