Article 19 of the Enforcement Decree of the Corporate Tax Act

2. The plaintiff's remaining claims are dismissed.

3. Litigation costs shall be borne by the plaintiff.

Cheong-gu Office

The defendant imposed corporate tax of KRW 606,869,390 on the plaintiff on July 1, 2002, imposed corporate tax of KRW 211,847,290 on the plaintiff for the business year of 1999, imposed corporate tax of KRW 211,847,290 for the business year of 1999, notified of the change in income amount of KRW 1,605,214,034 for the year of 1998, and notified of the change in income amount of KRW 558,110,37 for the year of 199.

A. The Plaintiff received purchase tax invoices from ○○ Trade Co., Ltd. (hereinafter referred to as “○○ Trade”) during the business year of 1998, from 10,459,285,486 won in total, as shown in the attached tax invoice list. During the business year of 1999, the Plaintiff received the purchase tax invoices from ○○○○○○ Co., Ltd. (hereinafter referred to as “○○○○○○”) for the period of 1999 up to 507,373,070 won in total of supply values, and then included the total of supply values under the above tax invoice in deductible expenses for the business year of 1998, and reported and paid KRW 287,281 as corporate tax for the business year of 198, Mar. 31, 1999; and reported and paid KRW 324,242,202 and won as corporate tax for the business year of 193.

B. As a result of conducting a tax investigation on ○○ Trade, the head of ○○ Tax Office revealed that ○ Trade simply issues a processed tax invoice without a real transaction. Each of the above tax invoices in the name of ○ Trade was also issued without a real transaction, and notified the Defendant of such fact. In addition, the Defendant, as the tax office having jurisdiction over ○○○○○○○, revealed that the amount of supply on each of the above tax invoices received by the Plaintiff from ○○ Trade and ○○○○○○○○○○○○○○○, included the amount of supply in deductible expenses, as well as the gross income. On July 1, 2002, the amount of supply on each of the above tax invoices received by the Plaintiff from ○○○○○○○○○○○○○○○○○○○○○○○○, which was included in the gross income, was 606,869,390 won for the corporate tax for the business year of 199, and 211,840 won for 197,20000 won for each of 196.

[Ground of recognition] Facts without any dispute, described in Gap's evidence 1, 2, Eul evidence 1, 2-1 to 10, Eul evidence 3, 4

2. Whether the part seeking cancellation of notice of change in the amount of income in the lawsuit of this case is legitimate

The plaintiff sought revocation on the premise that the notice of change in the amount of income in this case is an administrative disposition. However, the notice of change in the amount of income in this case or the notice of change in the amount of income pursuant to the Corporate Tax Act is merely a provision that sets forth the procedural requirements for the taxing authority to make a collection disposition by deeming the tax liability automatically established and confirmed at the time of the payment of the amount of income pursuant to Articles 21(2)1 and 22(2)3 of the Framework Act on National Taxes, and thus, it does not cause any change in the existence or scope of the tax liability of the withholding authority, thereby constituting an independent administrative disposition subject to appeal litigation (see, e.g., Supreme Court Decisions 2002Du10360, Jan. 24, 2003; 200Du10360, Apr. 12, 1994); and the plaintiff's lawsuit in this part is unlawful.

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff actually purchased building materials equivalent to the amount stated in the tax invoice from ○○ who actually operates ○○ trade and ○○○○○○○○. The defendant's accusation or criminal punishment on ○○ and ○○○○○’s material that he operated with ○○○○ and ○○○○○○, alone, makes the transaction with the plaintiff a full processing transaction, and it is erroneous in the misunderstanding of facts.

B. Relevant statutes

Before the Specialized Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998)

○ Income for each business year under Article 9

(1) The income of a domestic corporation for each fiscal year shall be the amount obtained by deducting the total amount of losses which falls or comes to fall under the fiscal year from the total amount of earnings which falls or comes to fall under the fiscal year.

(2) The term "gross income" in paragraph (1) means the amount of profits generated by transactions which increase the net assets of the concerned corporation, except for capital input or financing and other transactions as provided in this Act.

(3) The term "deductible expenses" in paragraph (1) means the amount of losses incurred by transactions which reduce the net assets of the corporation, except as otherwise provided in this Act, such as refund of capital or shares, disposition of surplus funds, and transactions which reduce

○ Decision and Rectification of Article 32

(2) Where a domestic corporation files a report under Article 26, the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall correct the tax base and amount of corporate tax on the income

1. Where there are errors or omissions in the contents of the report;

(3) Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office determines or revises the tax base and amount of corporate tax on income for each business year pursuant to paragraphs (1) and (2), he shall make it based on the account books and other documentary evidence: Provided, That where it is impossible to calculate the amount of income using account books

5.In filing a report on the corporate tax base under the provisions of Article 26, or determining or revising the corporate tax base pursuant to the provisions of paragraphs 1 to 4, the amount included in the calculation of earnings shall be disposed of as bonus, dividends, other outflows, retained earnings, etc. according to the person to whom they belong as prescribed by the Presidential Decree.

former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998 and amended by Act No. 6293 of Dec. 29, 200)

Article 19 (Scope of Loss)

(1) Deductible expenses shall be the amount of losses incurred by transactions which reduce the net assets of the concerned corporation, excluding return of capital or financing, disposition of surplus funds, and what is provided in this Act.

(2) The losses under the provisions of paragraph (1) shall be losses or expenses generated in connection with the business of a corporation which are generally accepted as normal or directly related to profit, except as otherwise prescribed by this Act and other Acts and subordinate statutes.

(3) Matters necessary for the scope and types of losses under the provisions of paragraphs (1) and (2) shall be prescribed by the Presidential Decree.

○ Decision and Rectification of Article 66

(2) Where a domestic corporation makes a report under Article 60 falls under any of the following subparagraphs, the superintendent of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall correct the tax base and

1. Where there are errors or omissions in the contents of the report;

(3) Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office determines or revises the tax base and amount of corporate tax pursuant to paragraphs (1) and (2), he shall calculate it based on the account books and other documentary evidence: Provided, That where it is impossible to calculate the amount of income using account books

(4) If any error or omission is found in the determination or correction of the tax base and amount of corporate tax, the superintendent of the competent district tax office or the Commissioner of the competent Regional Tax Office having jurisdiction over the place of tax

(c) Fact of recognition;

(1) On June 1, 2001, the head of the ○○ Tax Office received a tax invoice of KRW 46,316,100,000 from ten companies during the period from January 1, 1998 to December 31, 1998; however, he received a tax invoice of KRW 1,905,310,00 from eight companies, which was issued without real transactions. During the same period, the said company issued a tax invoice of KRW 48,428,520,00 for 14 companies including the Plaintiff, total supply value of KRW 48,428,520,00, and the total supply value of KRW 2,30,00,000, the total supply value of KRW 46,31,310,000, and the total supply value of KRW 630,000,000, which was issued by the ○○ Tax Station.

(2) Around January 1, 2002, the Defendant: (a) conducted a tax investigation with respect to ○○○○○ in which ○○○ is a de facto operator; (b) received a tax invoice amounting to KRW 2,141,751,00 from the purchaser during the period from January 1, 1999 to December 31, 199; (c) the total amount of the supply value of KRW 1,981,47,00 is the processed tax invoice issued without real transaction; and (d) during the same period, the company issued a tax invoice amounting to KRW 2,185,213,00 in total of supply value to the Plaintiff and the seller including the Plaintiff; and (e) filed an accusation with the ○○ Police Station on the aggregate amount of KRW 1,437,594,000 (the total amount of supply value issued to the Plaintiff is KRW 507,37,700,200).

(3)In relation to an accusation filed by the Director of ○○ Tax Office on the charge of issuing processed tax invoices in the course of operating ○ trade, ○○○ District Court on February 11, 2003 sentenced one year of imprisonment, two years of suspension of execution, probation, and 240 hours of community service order to the violation of the Punishment of Tax Evaders Act, and filed an appeal against the above judgment, on July 22, 2003, ○○ District Court on July 22, 2003 was sentenced one year of imprisonment and two years of suspension of execution, and the dismissal of the appeal was declared final and conclusive by the Supreme Court on December 12, 2003.

[Ground of recognition] Evidence Nos. 3 through 5, Eul evidence Nos. 7, Eul evidence No. 10, Eul evidence No. 11-8, Eul evidence No. 12-12, Eul evidence No. 13-1 and 2, and the purport of the whole pleadings

D. Determination

In a lawsuit seeking revocation on the grounds of illegality of taxation disposition, the tax authority bears the burden of proving the legality of disposition and the existence of the taxation requirement fact. Therefore, in principle, the tax authority bears the burden of proving the amount of expenses to be included in deductible expenses, which are the basis for determining the amount of income as the corporate tax base. However, in a case where the taxpayer contests whether some of the expenses reported are actual expenses or not, and the taxpayer asserts that it is false or that the reported amount was required for other expenses equivalent to the same amount, the taxpayer needs to prove the existence and amount of other expenses (see Supreme Court Decision 94Nu5816, Oct. 28, 1994).

The judgment was affirmed as a violation of the Punishment of Tax Evaders Act in relation to the issuance of false tax invoices in the name of ○○ trade. The judgment was affirmed. Of the total value of the tax invoices received by the Plaintiff from ○○ trade, the amount of KRW 1,459,285,486 out of the total value of the tax invoices received by the Plaintiff was recognized in the criminal judgment as a false tax invoice issued without real trade. Of the tax invoices received by ○○○○○○○○ from the purchaser during the 1999 business year, approximately KRW 92.5% of the tax invoices received by ○○○○○○○○○○○○ received from the purchaser during the 1999 business year (=1,981,47,000, KRW 2,141,751,00). In full view of the fact that the Plaintiff was found to have received from ○○○○○’s actual tax invoice without actual tax invoice or actual tax invoice, it was necessary to establish that the Plaintiff received from ○○○○○○.

However, as to whether the Plaintiff actually purchased the construction materials from 198 and 199, the health stand, Gap evidence Nos. 5-11, Gap evidence Nos. 6-2 through 4, 5 (the part concerning Gap's statement), Gap evidence Nos. 7-4, 12, 15, Eul evidence Nos. 6 and 8, witness 00, and witness testimony of 4-1 through 17, Gap evidence Nos. 5-13, 14, 16, 17, Gap evidence Nos. 7-18, Gap evidence Nos. 8-1 through 39, Gap evidence Nos. 9-1, 10-2, Gap evidence Nos. 10-1 through 29, Gap evidence Nos. 11 through 25-1, 25-2, and there is no other evidence to acknowledge them.

Therefore, the defendant's disposition of this case, which determined the tax base and tax amount of the corporate tax of this case by denying the amount of supply price of the tax invoice as deductible expenses.

4.In conclusion

Therefore, the part of the lawsuit of this case seeking the cancellation of notice of change in income amount is unlawful, and it is dismissed as the remaining claims of the plaintiff are without merit. It is so decided as per Disposition.

Schedule of Tax Invoice

(unit: won)

No.

Issuance Date

Suppliers

Value of Supply

1

April 30, 1998

○ ○ Trade

52,630,000

2

April 30, 1998

○ ○ Trade

37,000,000

3

April 30, 1998

○ ○ Trade

202,860,000

4

July 31, 1998

○ ○ Trade

287,884,130

5

August 31, 1998

○ ○ Trade

133,459,430

6

September 30, 1998

○ ○ Trade

214,394,050

7

October 30, 1998

○ ○ Trade

49,504,500

8

October 31, 1998

○ ○ Trade

260,117,000

9

November 30, 1998

○ ○ Trade

109,937,280

10

December 31, 1998

○ ○ Trade

111,49,096

Sub-committees

1,459,285,486

11

April 30, 1999

○○○○

86,422,780

12

May 31, 1999

○○○○

69,709,000

13

July 31, 1999

○○○○

97,183,000

14

August 31, 1999

○○○○

7,558,260

15

September 30, 1999

○○○○

69,106,150

16

October 30, 1999

○○○○

36,429,430

17

October 30, 1999

○○○○

70,964,450

Sub-committees

507,373,070