[환급거부처분취소][공2006.2.15.(244),254]
Whether delay damages caused by delay in payment of retirement allowance constitutes “other income” under Article 21(1)10 of the Income Tax Act (affirmative)
A labor contract is a bilateral contract under which a worker agrees to provide his/her labor to the employer and the employer agrees to pay his/her wages to the employer, and the amount of his/her labor and wages are exchanged with each other. The retirement allowance paid as the effect of his/her labor contract is the income subject to income tax as his/her retirement income. Meanwhile, the compensation for delayed payment of his/her monetary obligation cannot be the damage to the payment itself which forms the contents of the original contract. Thus, the compensation for delayed payment of the retirement allowance payment obligation constitutes "compensation for damage caused by breach or termination of a contract on property rights" under Article 21 (1) 10 of the Income Tax Act and Article 41 (3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17032 of Dec. 29, 200).
Article 21 (1) 10 of the Income Tax Act, Article 41 (3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17032 of Dec. 29, 2000)
Supreme Court Decision 94Da3070 Decided May 24, 1994 (Gong1994Ha, 1810) Supreme Court Decision 95Nu7406 Decided March 28, 1997 (Gong1997Sang, 1272) Supreme Court Decision 96Nu16315 Decided September 5, 1997 (Gong197Ha, 3161), Supreme Court Decision 2000Da60890, 60906 Decided August 23, 2002 (Gong2002Ha, 2177)
Plaintiff (Law Firm Barun Law, Attorneys Jeong Jin-jin et al., Counsel for the plaintiff-appellant)
Masan Tax Office (Law Firm Sejong, Attorneys Yellow-ho et al., Counsel for the plaintiff-appellant)
Busan High Court Decision 2003Nu3734 delivered on March 19, 2004
The judgment below is reversed, and the case is remanded to Busan High Court.
The grounds of appeal are examined.
1. Relevant statutes;
Article 21(1)10 of the Income Tax Act is one of other incomes, and Article 21(1)10 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17032, Dec. 29, 2000; hereinafter “Enforcement Decree”) provides that “the penalty or compensation for breach or termination of a contract” refers to the value of the money or other goods to compensate for the damages exceeding the damages to the payment itself which forms the contents of the original contract, regardless of the title thereof, as compensation for breach or termination of a contract on the property right.
2. The judgment of the court below
Based on its adopted evidence, the court below acknowledged that the plaintiff filed a claim for retirement allowance against the ○○○○○○○○○○, and that the ○○○○○○ rendered a judgment ordering the plaintiff to pay damages for delay at the rate of 25% per annum as stipulated in the former Act on Special Cases Concerning Promotion, etc. of Legal Proceedings (amended by Act No. 6868 of May 10, 2003) from the day following the delivery of the principal of retirement and the copy of the complaint to the day of full payment. The ○○○○○○○ paid damages for delay to the plaintiff pursuant to the above judgment, along with the principal of retirement, KRW 10,036,478 (hereinafter “the damages for delay in this case”). The court below determined that the damages for delay in this case are damages due to the nonperformance of the obligation to pay retirement allowance, but the obligation itself does not constitute “compensation for damages due to breach of a contract on property rights” as stipulated in the above Act, and therefore does not constitute other income.
3. Judgment of the Supreme Court
However, we cannot accept the above judgment of the court below for the following reasons.
The purport of Article 41 (3) of the Enforcement Decree of this Act, which limits the "liability for penalty or compensation" under Article 21 (1) 10 of this Act as "compensation received due to a breach or cancellation of a contract concerning property right", is that in case where monetary claims themselves are not subject to income tax, such as compensation for damages or consolation money due to infringement of non-property interest, such as personal interests such as life and body, family rights, etc., it is reasonable to view that the compensation for delay should not be subject to income tax.
However, a labor contract is an bilateral contract under which an employer agrees to provide an employer with labor and the employer agrees to pay wages (Article 17 of the Labor Standards Act), and the amount of labor and wages are exchanged with each other in quid pro quo (see Supreme Court Decision 2000Da60890, 60906, Aug. 23, 2002). The retirement allowance paid as the effect of a labor contract is itself subject to income tax as retirement income, and it cannot be deemed as losses to the payment itself, which is the contents of the original contract (see Supreme Court Decision 94Da3070, May 24, 1994; Supreme Court Decisions 95Nu7406, Mar. 28, 1997; 96Nu16315, Sept. 5, 197; 2007).
The Supreme Court precedents cited by the lower judgment are not appropriate to invoke the instant case, since the issues and issues are different.
Nevertheless, the court below held that the damages for delay caused by delay of payment of retirement allowance cannot be viewed as other income on the premise that the damages for delay does not constitute "compensation for damage caused by breach or termination of a contract on property rights" as stipulated in the above Article. This decision of the court below is not erroneous in the misunderstanding of legal principles as to other income. Accordingly, the ground of appeal pointing this out is justified.
4. Conclusion
Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices.
Justices Yang Sung-tae (Presiding Justice)