Article 17-3 of the Enforcement Rule of the former Inheritance Tax and Gift Tax Act (the method of calculating net profit and loss for the last three years per share)

2. On July 1, 2011, the Defendant’s disposition on the Plaintiff on July 1, 2008 (from April 1, 2008 to March 31, 2009) the part of the disposition on the Plaintiff, which exceeds the sum of the corporate taxxxx and the sum of the sum of the sum of the sum of the sum of the corporate taxxxxx and the additional refundxxxxxx, shall be revoked.

3. All costs of the lawsuit shall be borne by the defendant.

A. Status of the parties

The plaintiff (the former trade name was cc corporation, but it was changed to the current trade name on April 26, 201) was established on February 28, 2002 and was engaged in credit business in accordance with the Act on Registration of Credit Business, etc. and Protection of Finance Users.

(b) Issuance of convertible bonds;

1) The Plaintiff issued foreign currency convertible bonds as listed below [Do table 1]. Among them, 2 and 3 convertible bonds (hereinafter referred to as "instant convertible bonds") were all acquired by dd Co., Ltd. (hereinafter referred to as "d") which is not a party with a special relationship with the Plaintiff and e Co., Ltd. (hereinafter referred to as "e"), which is a major shareholder of the Plaintiff, e Co., Ltd. (hereinafter referred to as "e").

2) Under the issuance contract of the instant convertible bonds, the Plaintiff shall pay interest each month in 12 installments a year.

corporation shall pay the principal of the bonds at maturity, and with respect to the conversion of the shares of the bonds,

was determined.

(10) Matters concerning conversion;

(A) A bondholder may demand us to convert into shares under the conditions prescribed below.

(1) Conversion ratio: It shall be a ratio of 100% of the number of stocks calculated by dividing the face value of bonds (in cases of two or more corporate bonds, the aggregate face value thereof) by the conversion value, and shall be paid in cash when the conversion certificate is issued.

(2) Conversion value: x won per share.

(3) The class of shares to be issued by conversion shall be our registered common shares.

(4) The period of request for conversion shall begin 35 months after the date of issuance of bonds and end on the day before the date of redemption of this bonds.

(5) Time when conversion takes effect.

1. Conversion shall take effect when the bondholder has notified us in writing of a demand for conversion.

2. The dividends of profits and interest accrued from the conversion shall be deemed to have been converted at the end of the business year immediately preceding the business year in which the date of request for conversion belongs;

(B) our head office will issue shares issued by conversion to the bondholder within 10 days after the date of the request for conversion.

C. The details of the investment in kind of the instant convertible bonds

1) After the issuance of the instant convertible bonds, the increase in the K/N exchange rate from the beginning of 2008 as follows:

At the beginning of this year and around August 2008, Won/N exchange rate began to rise rapidly.

2) In order to avoid the burden of raising exchange rates as above, the Plaintiff’s conversion of this case

Before maturity of the bonds, the method of investment in kind of the convertible bonds of this case shall be sought.

On August 28, 2008, the board of directors of the Plaintiff agreed to the above measures. On the same day, the board of directors of the Plaintiff adopted a resolution on the following contents: (a) x members of the instant convertible bonds assessed as d basic exchange (100N=91 won); (b) x members of the instant convertible bonds were invested in kind; (c) x members of the common share (5,000 won per share, and x members of the issue value per share) were allocated new stocks; and (d) the Plaintiff made a resolution on the same contents through a resolution of the temporary general meeting of shareholders.

3) On August 29, 2008, the Plaintiff entered into an investment-in-kind agreement (hereinafter “instant investment-in-kind agreement”) with D and D as to the effect that D and D will invest the instant convertible bonds in kind and receive the Plaintiff’s x owners (5,00 won per share, and the issue value per share) x (x won per share).

4) Meanwhile, the Plaintiff requested aff to evaluate the value of the instant convertible bonds. On August 28, 2008, theff evaluated the instant convertible bonds as xx members according to the base exchange rate (100N=91 won) on which August 28, 2008, and on the other hand, the converted pricex members as stipulated in the contract to issue the instant convertible bonds as the issue price per share was calculated as x share as indicated below (Domark 2).

5) On September 9, 2008, the Plaintiff obtained authorization from the Seoul Central District Court on the investment in kind from the Seoul Central District Court on the basis of the aboveff’s valuation report, and completed the registration of the investment in kind of this case on September 23, 2008. On the other hand, D completed the foreign investment report on September 23, 2008 on the acquisition of new shares, etc. (including the acquisition of new shares X, xx, xxxxxxx) with respect to the shares acquired under the investment in kind of this case (hereinafter “the shares in this case”).

6) The Plaintiff acquired the instant convertible bonds from D on August 29, 2008, and then retired (cancellation) on September 22, 2008. Meanwhile, the primary convertible bonds issued by the Plaintiff were fully repaid on September 18, 2008, and the primary convertible bonds were converted into x shares of ordinary shares on March 11, 2008 upon the exercise of e’s convertible right.

D. Accounting of the plaintiff and request for correction

1) With respect to the investment in kind contract of this case, the Plaintiff: xx won, which is the book value of the instant convertible bonds, as indicated below (Do table 3) (i.e., face valuexx won - conversion right adjustment - bond discount xx won - bond discount xx won) shall account as capital increase (capital xx won + issuance of stocks in excess of the issuance of stocks). Based on this, the Plaintiff filed a corporate tax return for the business year (from April 1, 2008 to March 31, 2009) of 208.

2) On September 11, 2009, the Plaintiff asked the Commissioner of the National Tax Service with regard to the “acquisition value, etc. of stocks at the time of investment in kind of convertible bonds,” and on February 8, 2010, the Commissioner of the National Tax Service sent a reply that “the acquisition value of stocks acquired at the time of investment in kind shall be the market value at the time of acquisition when the stocks are invested in kind to the corporation issuing the convertible bonds before the date of exercise of the right to conversion and the maturity date, and in this case, the corporation issuing the convertible bonds shall include the difference between the amount obtained by deducting the adjustment of convertible rights from the face value of the convertible bonds and the amount of investment in kind in calculating the income

3) Accordingly, on June 7, 2010, the Plaintiff filed a request for correction on the ground that, if the accounting accounts as indicated below [Attachment 4] are revised, the amount of the investment in kind of the instant convertible bonds should be included in the deductible expenses related to corporate tax in the business year 2008.

3) The Defendant accepted the Plaintiff’s request for correction and included the issue amount in the deductible expenses, and around August 2010, the Plaintiff refunded corporate taxxx members and additional refundx members for the business year 2008 to the Plaintiff.

4) However, according to the provisions of Article 72 (1) 3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009; hereinafter "former Enforcement Decree of the Corporate Tax Act"), the Board of Audit and Inspection pointed out that the acquisition value of the asset acquired by the investment in kind in the account book shall be the value of the investment in the account book, and thus, it is unfair to recognize the key amount as tax deductible expenses and refund corporate tax in the account book, and made a disposition to collect the refunded corporate tax. Accordingly, on July 1, 2011, the Defendant issued a disposition to impose corporate tax xxx and additional dues xx (hereinafter "the instant disposition").

5) The Plaintiff filed an appeal with the Tax Tribunal on July 22, 2011, but the Tax Tribunal rendered a decision to dismiss the Plaintiff’s appeal on April 10, 2013.

[Ground of Recognition] A’s without dispute, A’s evidence 1 to 4, A’s evidence 2-1 to 3, A’s evidence 4-1, 2, 3, A’s evidence 5, 6, 7, A’s evidence 8-1, 2, A’s evidence 9, 12, 13, A’s evidence 18-1 through 4, A’s evidence 19-1, 2, 3, 22, 1, 2, and 6’s evidence, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion and judgment on this issue

1) The plaintiff's assertion

Article 72(1)3 of the former Enforcement Decree of the Corporate Tax Act does not apply to the instant contract for investment in kind since it is not the acquisition of assets, but the repayment of debts. Meanwhile, the book value of the instant convertible bonds at the time of investment in kind was xx members, but the issue value of new stocks issued in the course of repaying the instant convertible bonds was x members and repaid the said convertible bonds through this. In addition, among xx members, the difference between the book value of the instant convertible bonds and the book value of the instant convertible bonds was x members, which is the difference between the book value of the instant convertible bonds and the book value of the instant convertible bonds, the remaining x members, excluding xx members already included in deductible expenses through tax adjustment, shall be included in deductible

2) Relevant statutes

It is as shown in the attached Form.

3) Determination

In full view of all the following circumstances known by the facts recognized as above and relevant statutes, it is determined that the redemption loss of the bonds of this case should be included in the deductible expenses unless there are special circumstances. Therefore, the Plaintiff’s assertion is with merit.

This case’s investment in kind includes both a capital transaction that constitutes a conversion of debt into equity through an investment in kind and a transaction of profits and losses arising from redemption loss equivalent to the difference between the book value and the appraised value of bonds (=acquisition value). Therefore, in calculating the income of the corporation, the redemption loss of the bonds in this case should be recognized as a "deductible expenses" in calculating the income of the corporation. In addition, it reflects that the general rule of the Corporate Tax Act provides that "where one acquires one’s bonds for the purpose of purchase and retirement, the difference between the issue value of the bonds and the acquisition value of the bonds shall be included in the deductible expenses for the business year to which the acquisition date belongs."

In light of the fact that the Plaintiff, while acquiring the instant convertible bonds, did not include the acquisition value in the account book but instead included in the original debt account, extinguished the instant convertible bonds. In light of the fact that the Plaintiff issued the instant convertible bonds in accordance with the actual value of the instant convertible bonds, and thus, the actual value of the instant convertible bonds corresponding to the value of the said stocks should be considered as the acquisition value. The acquisition value of the instant convertible bonds should be considered as the “actual value of the new stocks at the time of the investment in kind.” The Plaintiff cannot be deemed as the original book value by applying Article 72(1)3 of the former Enforcement Decree of the Corporate Tax Act only on the ground that the Plaintiff did not include the investment value of the instant convertible bonds as the value of the new stocks at the time of the investment in kind. Therefore, it should be deemed

Article 71(3) of the former Enforcement Decree of the Corporate Tax Act provides that "bonds discount shall be included in deductible expenses according to the method of depreciation of bond discount in accordance with corporate accounting standards." Article 76(5) of the former Enforcement Decree of the Corporate Tax Act provides that "the profits or losses in the Korean won currency amount and the Korean won currency account amount that a domestic corporation redeems or redeems foreign currency claims shall be included in the gross income or deductible expenses for the pertinent business year." However, when examining the specific contents of the bond redemption loss (x won) of this case, among them, xx won constitutes "foreign exchange loss arising from the difference between the exchange rate as of the date of issuance of the bonds and the exchange rate as at the date of the investment in kind, and the remaining x won constitutes "bonds discount". Therefore, the bond discount should be included in deductible expenses in accordance with Article 71(3) of the former Enforcement Decree of the Corporate Tax Act, and the above foreign exchange loss shall be included in deductible expenses pursuant to Article 76

B. The defendant's assertion and judgment

1) Whether the exercise of the right of conversion should be deemed substantially the same

A) Defendant’s assertion

Considering the content of the instant investment in kind, the genuine intent of the parties at the time of concluding the contract, motive, purpose, etc., the instant investment in kind shall be deemed as substantially the same as the exercise of the conversion right stipulated in the instant contract for the issuance of convertible bonds, and the instant investment in kind cannot be deemed as the redemption of the bonds.

B) Determination

(1) Article 14(2) of the former Framework Act on National Taxes (amended by Act No. 911, Jan. 1, 2010) provides that “The provisions pertaining to the calculation of tax base in the tax-related Acts shall apply mutatis mutandis to the name or form of income, profit, property, act or transaction.” As a result, the instant convertible bonds have been repaid upon the contribution in kind. As a result, the instant convertible bonds have been repaid in the course of the contribution in kind. As a result, the amount of Korean won currency (xN x 9.91 won) of foreign currency liabilities and Korean won account amount (xN xx x xx x xx xx x x x x x x x 97 won) are generated.

6) According to corporate accounting standards, the difference in bond discount recognized at the time of issuance of bonds is depreciated under the so-called Effective Interest Rate Act and the difference in bond discount stated in the book at the time of early redemption of bonds, so x members of the balance in the bond discount at the time of the investment in kind of this case may be included in deductible expenses.

7) Article 76(5) of the former Enforcement Decree of the Corporate Tax Act only stipulates that it is a foreign currency debt repaid by a domestic corporation, but does not limit the financial resources for repayment in cash. Therefore, the recognition of a redemption profit and loss does not vary depending on what the financial resources for repayment are.

The principle of substantial taxation is a practical principle for realizing the principle of equality, which is the basic ideology under the Constitution, in a tax law relationship. In a case where unreasonable form or appearance separate from the substance of the facts requiring taxation is taken for the purpose of evading tax burden, the main purpose of this principle is to regulate unfair acts of tax evasion and to realize tax justice by enhancing equity in taxation (see, e.g., Supreme Court en banc Decision 2008Du8499, Jan. 19, 201) by imposing tax on a place with the capacity to pay taxes according to the substance, irrespective of the form or appearance (see, e.g., Supreme Court Decision 2008Du963, Aug. 21, 2001). However, taxpayers may choose one of the various legal relationships in order to achieve the same economic purpose in economic activities, and the tax authorities shall respect the legal relations chosen by the parties, barring any special circumstances (see, e.g., Supreme Court Decision

(2) Examining the following circumstances in light of the legal principles seen earlier, it is reasonable to view that the Plaintiff received the instant convertible bonds from D as an investment in kind. Accordingly, the Defendant’s aforementioned assertion cannot be accepted.

A contribution in kind is made with assets other than money, and the convertible bonds of this case also subject to such assets.

Therefore, the Plaintiff that issued the instant convertible bonds and (d) that received them may choose the method of investment in kind to the Plaintiff, which is not able to exercise the convertible rights due to the arrival of the exercise period for the convertible rights.

The instant contract for investment in kind is concluded between the Plaintiff and D without a special relationship. In particular, the Plaintiff, as at the time of the increase in the UN exchange rate, may increase losses caused by cash redemption of the instant convertible bonds or the exercise of the convertible right. Therefore, in order to prevent this, it appears that the instant convertible bonds were invested in kind early.

The plaintiff has passed a resolution of the board of directors on the investment in kind of the convertible bonds of this case, and all the procedures prescribed by the Commercial Act, such as the appraisal of the value, etc. of the convertible bonds of this case, subject to an examination by the court.

The first foreign currency convertible bonds issued by the Plaintiff prior to the instant convertible bonds were repaid without exercising the right to convert, such as early redemption in cash, and the instant convertible bonds are deemed as part of reasonable transactions taking into account the current business situation, etc., and it is difficult to find any circumstances to deem that the issuance price of stocks under the instant convertible bonds was equal to the initial conversion price, or the Plaintiff was unable to properly account at the time of the said investment in kind. However, even if the issuance price of stocks under the instant convertible bonds was equal to the initial conversion price, or the Plaintiff did not properly account at the time of the said investment in kind, such circumstance alone does not immediately lead

2) Whether the issue price of the instant shares ought to include the portion calculated by deducting the market price of the instant shares in the gross income as the gains from debt exemption.

A) Defendant’s assertion

(1) On August 29, 2008, D entered into a stock transfer contract (hereinafter “sale price X”) with E to transfer the instant shares. When converted the sale price into Korean currency at the time of the contract date of stock transfer or the exchange rate as of the date of delivery of shares, D/D’s price per share of the instant shares shall be calculated as x members and x members, respectively. However, the price per share of the instant shares can be deemed as the market price of the instant shares as of the date of the instant investment in kind. As such, the portion calculated by deducting the said market price from the issue price of the instant shares shall be included in gross income pursuant to the proviso of Article 17(1)1 of the former Corporate Tax Act (amended by Act No. 9276, Dec. 26, 2008; hereinafter “former Corporate Tax Act”).

(2) If the market value of the instant shares is unclear, xx value per share assessed by weighted average of the net value of profit and loss and net asset value in accordance with Article 63(1)1(c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9269 of Dec. 26, 2008; hereinafter the same shall apply) and Article 54(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 21292 of Feb. 4, 2009; hereinafter the same shall apply) shall be deemed as the market value. Accordingly, the portion calculated by deducting the market value from the issue value of the instant shares should be included in gross income with the gains from debt exemption in accordance with the proviso of Article 17(1)1 of the former Corporate Tax Act.

B) the facts of recognition

(1) As of March 31, 2007, the total number of the Plaintiff’s outstanding shares was xx. The total amount of the Plaintiff’s issued shares was xx members. e was the largest shareholder holding x (x per share ratio) out of the above issued shares. Meanwhile, the fourth convertible bonds issued on April 2, 2007 by the Plaintiff was accepted by e-ROMs. e exercised its conversion right on March 11, 2008, the said 4 convertible bonds were converted into x (5,000 won in face value) of registered common shares xx shares (amount 5,00 won in face value). As of March 11, 2008, the total number of the Plaintiff’s issued shares became x share as of March 11, 2008 through the conversion of the above company’s shares. The total amount of the Plaintiff’s issued shares became x source, and e became x share ratio out of the Plaintiff’s issued shares.

(2) On August 29, 2008, D entered into the instant investment in kind with the Plaintiff, and on the same day, D entered into a share transfer contract with E (hereinafter “instant share transfer contract”) with the following contents.

[This case’s share transfer contract]

Article 1 (Transfer of Stocks)

The seller(d) agrees that the buyer(e) sells all registered common shares of the subject company (=the subject company) granted by the subject company (=the Plaintiff) on the basis of the separate agreement on investment in kind, according to the determination of this agreement with respect to the buyer(e).

Article 2 (Sales Price)

The purchase price of the shares of this case shall be x00 million United Nations.

Article 3 (Execution of Transfer)

1. The seller shall transfer the shares of the subject company to the purchaser at the same time with the delivery of the shares of the subject company in accordance with the attached Form of investment in kind, affix his name and seal to the entry in the register of shareholders prescribed by the subject company within one week from the date of execution of the transfer, and deliver them to the purchaser, etc., and the purchaser shall cooperate therein;

2. The buyer shall pay the purchase price in the old account as designated by the seller within one month from the date of the transfer under the preceding paragraph on the condition that the conditions of the premise prescribed in Article 4 be met (hereinafter, the buyer shall be omitted).

(3) On September 10, 2008, D transferred the instant shares to e and delivered documents necessary for the implementation of the transfer process. Accordingly, D and e prepared a written confirmation of transfer of the instant shares as of September 22, 2008, and D and e reported that “D transferred the instant shares to e” to e on December 17, 2008.

(4) Meanwhile, at the time of the conclusion of the instant stock transfer contract, there was a sudden increase in the K/N exchange rate before and after the conclusion of the instant stock transfer contract, and the exchange rate (standard transaction rate) based on the date of conclusion of the contract is as set forth below [Attachment 5].

[Reasons for Recognition] Unsatisfy, Gap evidence 4-2, Gap evidence 13, 22, 23, 24, Eul evidence 6, 8, 11;

Eul evidence 12-1, 2, Eul evidence 13-16, Eul evidence 17-1, 2-2, and the purport of the whole pleadings

C) Determination

(1) Determination on the first argument

The proviso of Article 17(1)1 of the former Corporate Tax Act provides that the amount of stocks, etc. issued in excess of the market price of the relevant stocks, etc. shall be included in gross income when the stocks, etc. are issued through debt-equity swap. Article 52(2) of the former Corporate Tax Act provides that “The price applied or deemed to be applied to sound social norms and commercial practices and normal transactions between persons other than persons with a special relationship shall be determined by the Presidential Decree.” Meanwhile, Article 52(4) of the former Corporate Tax Act provides that “the matters necessary for the calculation, etc. of market price shall be determined by the Presidential Decree.” Article 89(1) of the former Enforcement Decree of the Corporate Tax Act provides that, in applying Article 52(2) of the former Corporate Tax Act as delegated by the former Corporate Tax Act, where there is a price generally traded between many and unspecified persons other than the relevant transaction or a third party who is not a specially related person, such price shall be determined by the former Corporate Tax Act.” According to the relevant relevant provision, the “market price” under the proviso of Article 17(1)1)1) of the former Corporate Tax Act shall be acknowledged.

In full view of all the following circumstances revealed by the facts in the instant case, the value converted into won currency at the exchange rate as of the date of the contract or the date of delivery of shares cannot be deemed to be an adequate reflection of the objective exchange value of the instant shares, by applying the purchase price (xN) stipulated in the instant stock transfer agreement. Accordingly, the Defendant’s allegation in this part is unacceptable.

D through the instant investment in kind contract, D acquired the instant shares by investing the convertible bonds equivalent to xN equivalent thereto. However, D, on the day of the conclusion of the instant investment in kind contract with e, the Plaintiff’s major shareholder, entered into the instant share transfer contract with e, thereby transferring the instant shares to xx. D’s transfer of the instant shares acquired by dd’s contribution to xx on the same day as x. It is difficult to view it as a transaction made in a general and normal manner by itself.

If the parties to a transaction where economic interests conflict, to maximize each other’s interests, the actual transaction price formed between them came to a market debate, thereby securing an objective exchange value of the stocks. However, e is the same as at the time of the issuance of the instant convertible bonds at the time of the issuance of the instant convertible bonds, and d is the same as at the time of the conclusion of the instant stock transfer contract, and d is the same as at the time of the issuance of the instant convertible bonds on March 30, 2007. However, e, a major shareholder of the Plaintiff, was determined as x members despite the acquisition of the instant convertible bonds on April 24, 2007, when acquiring the instant convertible bonds on April 24, 2007, e, a major shareholder of the Plaintiff, was determined as xx (in the case of conversion into xx) (in the case of conversion into xx). In light of the fact that e, a major shareholder of the Plaintiff, had superior status in the transaction compared to d.

The instant stock transfer contract is concluded between Japanese corporations by setting the settlement unit as the United Nations. However, since the original/N exchange rate was sharply changed before and after the conclusion of the said contract, there is a big difference in the value of the stock converted into the Republic of Korea based on the application of the foreign exchange rate at any time. Given such circumstances, it is difficult to view that the price converted into the Republic of Korea at a certain point is an adequate reflection of the objective exchange value of the instant stocks.

(2) Judgment on the second argument

As seen earlier, the Plaintiff’s capital has been increased due to the conversion of the fourth convertible bonds into stocks on March 11, 2008, which were within the period from the beginning date of the business year ( April 1, 2005) to the end date ( August 29, 2008) of the three years before the conclusion of the instant investment in kind (the date before being amended by Ordinance of the Ministry of Strategy and Finance No. 74 of April 23, 2009; hereinafter referred to as the “former Enforcement Rule of the Inheritance Tax and Gift Tax Act”) which was within the period from the beginning date of the business year (the date of April 1, 2005) to the base date of appraisal (the date of August 29, 2008). However, such a reason constitutes grounds under Article 17-3(

For the foregoing reasons, the assessment of the value of the instant shares according to the supplementary assessment method as alleged by the Defendant is not permitted pursuant to Article 56(1) of the former Inheritance Tax and Gift Tax Act, and Article 17-3(1)3 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (see, e.g., Supreme Court Decisions 2010Du26988, Apr. 26, 2012; 201Du9140, May 24, 2012; 2011Du31253, Nov. 14, 2013). Moreover, the statement of 10 evidence is insufficient to acknowledge the fact that the value of the instant shares calculated according to the supplementary assessment method is xx won, and there is no other evidence to acknowledge it differently (the Defendant also has a simplified assessment of unlisted shares pursuant to the evidence No. 10, and thus, the Defendant’s accurate assessment method cannot be accepted.

C. Sub-decision

In calculating the corporate tax for the business year 2008 of the Plaintiff, the total amount of redemption loss of the bonds of this case shall be included in deductible expenses. Meanwhile, where the loss of redemption of the bonds of this case is included in deductible expenses, the legitimate amount of corporate tax shall be xx members, and the reasonable amount of additional refund on refund is x cause no dispute between the parties concerned. Therefore, the above legitimate amount of tax of this case and the portion exceeding the reasonable amount of the disposition

3. Conclusion

Therefore, the plaintiff's claim of this case is justified, and the judgment of the court of first instance is unfair. Therefore, the judgment of the court of first instance is revoked, and the part which exceeds the legitimate amount of corporate tax and additional dues on refund among the disposition of this case shall be revoked, and it is so decided as per Disposition.