The costs of appeal are assessed against the defendant.

Article 17(2)4 of the former Value-Added Tax Act (amended by Act No. 9268 of Dec. 26, 2008) provides that the input tax amount related to the business that supplies goods or services exempt from value-added tax shall not be deducted from the output tax amount.

Meanwhile, Article 106 (1) (main sentence) and 7 of the former Restriction of Special Taxation Act (amended by Act No. 921 of Jan. 1, 2010; hereinafter the same) provides that the Plaintiff shall be exempted from value-added tax on the supply of "railroad facilities that the Plaintiff supplies to the State in a manner that reverts to the State under subparagraph 2 of Article 3 of the Framework Act on Railroad Industry Development and acquires a right to manage railroad facilities under Article 26 of the same Act, and Article 26 (1) of the former Framework Act on Railroad Industry Development (amended by Act No. 8852 of Feb. 29, 2008) provides that "the Minister of Construction and Transportation may establish a right to manage railroad facilities and to collect fees from persons who use or utilize the railroad facilities (hereinafter referred to as "right to manage railroad facilities")."

In light of the language and purport of the above provisions, the railroad facilities exempt from value-added tax pursuant to Article 106 (1) 7 of the former Restriction of Special Taxation Act include not only the railroad facilities that the Plaintiff has already reverted to the State in order to obtain the right to manage the railroad facilities, but also the railroad facilities that the Plaintiff has reverted, or is scheduled to revert, to the State through the repair or supplementary construction of defects in the railroad facilities for which the right to manage the railroad facilities has been established. However, it does not include the railroad facilities that the Plaintiff has reverted, or is scheduled to revert, to the State in the course of performing the duty to maintain and repair the railroad facilities in return for the fees collected from the person using or using the railroad facilities.

The court below acknowledged the following facts based on the adopted evidence: (a) the high-speed rail of this case at the time when the Plaintiff was granted the right to manage the railroad of this case on April 1, 2004; (b) the high-speed rail of this case is deemed to have been completed; (c) it is difficult to deem that the Plaintiff acquired the facility property of this case increased from 2005 to 2007, to have been subject to the establishment of the right to manage the railroad of this case; and (d) the Plaintiff’s provision of tracks to the Korea Railroad Corporation and the collection of the fees is clear that it is a value-added tax taxable business; and (e) the Plaintiff’s provision of tracks to the Korea Railroad Corporation based on the right to manage the railroad, and thus, it is reasonable to view that the facility property of this case, as alleged by the Defendant, would have been purchased in relation to taxable business even if it would be attributed to the State in the future; and (e) the Plaintiff’s provision of the tax exemption amount under Article 10(1)7 of the former Restriction of Special Taxation Act is unlawful.

Furthermore, even if based on the record, there is no clear evidence to view that the instant facility asset is a railroad facility that has reverted or is scheduled to revert to the State through the defect repair or supplementary construction of the instant high-speed rail facility for which the Plaintiff established the right to manage railroads.

Therefore, in light of the legal principles as seen earlier, the lower court’s conclusion that the instant disposition imposing value-added tax was unlawful on the purport that the instant facility assets cannot be deemed as the railroad facilities that were reverted or expected to revert to the State through the defect repair or supplementary construction of the instant high-speed rail facilities for which the right to manage railroads was established. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal principles on input tax

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