Article 61 of the Enforcement Decree of the Value-Added Tax Act

2. The costs of the lawsuit are assessed against the defendant.

A. On January 1, 2005, the Plaintiff was a corporation established for the purpose of railroad passenger business, cargo transportation business, etc. pursuant to the Korea Railroad Corporation Act, and was organized into 640 railroad stations and 87 offices as of 2008, 17 branches, 3 vehicle management groups, and 1 human resources development source.

B. Among the projects operated by the Plaintiff, passenger transportation services for high-speed railroads (the section from the KTX Seoul to the East Daegu Station), freight transportation services for small-speed railroads, high-speed railroads maintenance and repair services, general railroads maintenance and repair services, entrusted services such as the State and local governments, etc., and other tax supply services (such as lease, advertisement, sale, etc.) are value-added tax taxable projects. General railroad passenger transportation services (the Saemaulho, Rose of Sharon, commuting car), metropolitan railroad services, high-speed passenger transportation services (the section from the Busan metropolitan zone to the Busan metropolitan zone and the area from the west metropolitan zone) are value-added tax-free projects.

C. When the Plaintiff reported and paid the first value-added tax in 2005 to the Defendant, the Plaintiff interpreted that the Plaintiff did not distinguish the related businesses to which the goods or services purchased are actually attributed, but rather applied the proportional distribution ratio (34.89%) in accordance with the method of calculating the non-deductible input tax amount by multiplying the total supply amount of all the tax-free businesses and all the tax-free businesses for each taxable period by the ratio of the total supply amount of all the tax-free businesses to the total supply amount of all the tax-free businesses and all the tax-free businesses for each taxable period (hereinafter “total business place method”).

D. However, around February 2009, the Board of Audit and Inspection, with regard to the Plaintiff’s return and payment of value-added tax, requested the Daejeon Regional Tax Office to correct the amount of value-added tax by applying the proportional distribution ratio to the total supply value of the tax-free business sector and the tax-free business sector’s entire supply value of the goods or services, such as transit, engine car purchase cost, general railroad car purchase cost, and high-speed train car purchase cost, to the proportion of the goods or services to the total supply value of the tax-free business sector, which belongs to the actual place of business, by multiplying the relevant goods or services by the input tax amount. However, as a result of the proportional distribution of the common purchase tax according to the entire method of business as seen above, the Board of Audit and Inspection demanded the Plaintiff to estimate the amount equivalent to the value-added tax on the ground that the Plaintiff under-reported return and payment of value-added tax was made for the period

E. Accordingly, the Defendant presented the first passenger and freight sales (passenger share 2,68 billion won, freight portion 1,55.8 billion won) at the place of business of the Daejeon Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling Rolling KS, and issued a revised assessment (63.24%) according to the method as pointed out by the Board of Audit and Inspection (hereinafter “instant disposition”). On July 2, 2010, the Defendant corrected and notified the Plaintiff of value-added tax amounting to 65,314,600 (including additional tax) for the first term portion of rolling stock in

F. On September 24, 2010, the Plaintiff filed an appeal with the Tax Tribunal on September 24, 2010, but the Tax Tribunal dismissed the appeal on December 1, 2010.

[Ground of recognition] Facts without dispute, Gap 1, 2 evidence, Eul 1 through 3 (including paper numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons.

A) Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act (amended by the Act on Telecommunications Business and the Korea Railroad Corporation under the Korea Railroad Corporation Act) applies only to telecommunications business operators under the Korea Railroad Corporation Act and the Korea Railroad Corporation under the Korea Railroad Corporation Act, which makes it difficult to accurately calculate the amount of the input tax due to the nature of the business, and the characteristics of the business that concurrently operates both taxable business and tax-free business, and most of the facilities are used for both taxable business and tax-free business, and allows them to divide the amount of the common purchase tax on the basis of the entire business place. If the Defendant’s intent is to divide the amount of the input tax by business division and to divide the amount of the input tax, as argued by the Defendant, only the input

B) Since the interpretation of tax laws must be strictly interpreted as the legal text, it is reasonable to interpret that the meaning of Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act, which provides for the method of calculating common input tax amount, refers to the entire place of business operated by the plaintiff. It is against the principle of no taxation without law or strict interpretation to interpret it as the whole place of business by the division related to common input tax amount as alleged by the defendant.

2) The defendant's assertion

The Defendant asserts that the instant disposition is lawful for the following reasons.

A) Article 61(1) of the Enforcement Decree of the Value-Added Tax Act provides that when an entrepreneur concurrently operates a taxable business and a tax-free business based on the principle of substantial taxation and the method of deducting input tax from the former input tax amount, Article 61(1) of the Enforcement Decree of the Value-Added Tax Act provides that the calculation of input tax amount related to the tax-free business shall first be based on the actual reversion, and that the proportion of the total supply value to the total supply value shall be applied only when the actual reversion of the goods or services that are commonly used for the taxable business and the tax-free business is unclear. Thus, even if the actual reversion of the goods or services that are commonly used for the tax-free business cannot be separated, it accords with the purport of the Value-Added Tax Act to divide the common purchase tax amount only for the relevant business establishments that are actually used. Therefore, Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act should be construed as the "all business establishments related to the common purchase tax amount of the Plaintiff." This is not a violation of the principle

B) If the former place of business under Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act is interpreted as the Plaintiff’s whole place of business, it is not permissible as it goes against the purport of Article 17(2) Subparag. 4 of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006, hereinafter “former Value-Added Tax Act”).

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Review of relevant legislation

A) Each provision of Article 17(1) and (2)4 of the former Value-Added Tax Act provides that the value-added tax to be paid by an entrepreneur shall be the amount calculated by deducting the input tax amount from the output tax amount, but the input tax amount related to the business of supplying goods or services exempt from the value-added tax shall not be deducted from the output tax amount. Article 61(1) of the Enforcement Decree of the Value-Added Tax Act delegated under Article 61(6) of the same Act provides that where an entrepreneur concurrently runs a taxable business and a tax-free business, the input tax amount related to the tax-free business shall be calculated based on the actual ownership, but the input tax amount related to the tax-free business shall not be separated from the actual ownership due to the common use in the taxable business and the tax-free business (hereinafter

B) Meanwhile, in applying Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act, in the case of telecommunications business operators under the Telecommunications Business Act and the Korea Railroad Corporation under the Korea Railroad Corporation Act, the input tax amount related to the tax-free business = Common purchase tax amount 】 the total tax amount of tax-free business 】 the common purchase tax amount can be calculated according to the formula of the former place of business / total tax-free supply amount of business / the former place of business / the former place of business after the amendment by Presidential Decree No. 22043 on February 18, 2010, Article 61(1) of the former Enforcement Decree of the Value-Added Tax Act provides that when applying Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act, the amount of tax-free business related to the former place of business can be calculated by calculating the common purchase tax amount by the formula of the former place of business / total tax-free supply amount of business for all taxable periods.

2) Legislative intent and details of Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act

A) Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 15563, Dec. 31, 1997; the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1563) provides that telecommunications business operators under the Telecommunications Business Act are newly established as special cases for Article 61(1) of the Enforcement Decree of the same Act. The purpose of the provision is that in the case of telecommunications business, due to the characteristics of the telecommunications business, purchases of assets, etc. are related to various places of business, and most facilities are used for taxable business and tax-free business, and it is difficult to accurately calculate the amount of the input tax used for taxable business and the input tax used for the tax-free business separately for each place of business, taking into account the fact that it is difficult to calculate the amount of the tax-free business and the increase of the cost for tax-free cooperation. In addition, the payment by each place of business should be made by considering the characteristics of the telecommunications business operator’s claim for the exception of telecommunications business.

B) Since then, Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 15563, Dec. 31, 1997; Presidential Decree No. 18175, Dec. 30, 2003; Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 18175, Dec. 10, 2003; Presidential Decree No. 18175, Dec. 10, 2000) applied to telecommunications business operators under the Telecommunications Business Act in order to ensure that the assets purchased are related to various business places, and most facilities are used for taxable business and tax-free business, and it is difficult to calculate input tax by business place. In addition, Article 4(1)10 of the Enforcement Decree of the above Act provides that the place where overall control over the business of a high-speed rail under the High-Speed Construction Promotion Act operated by the

3) Determination

A) As to how to interpret the meaning of the "former place of business" under Article 61 (5) of the former Enforcement Decree of the Value-Added Tax Act, each of the language and text of Article 61 (5) of the former Enforcement Decree of the Value-Added Tax Act and Article 18-2 (4) of the Enforcement Rule of the Value-Added Tax Act (i.e., "the total value of the previous place of business" and "the total value of the previous place of business". However, the meaning of the "all place of business in the relevant taxable period" is defined as "all place of business" in the Enforcement Rule of the Telecommunications Business Act in the form of "all place of business related to the common place of business related to the common place of business". It is difficult to view that the principle of the "former place of business" under the former Enforcement Decree of the Value-Added Tax Act is interpreted as "all place of business" without distinguishing between the common place of business and the common place of business related to the supply of goods and its contents (i.e., "the total value of the previous place of business supplied" as well.).

B) Judgment on the defendant's assertion

On the other hand, Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act provides technical matters concerning the calculation of the non-deductible ratio of the common input tax in order to calculate the input tax amount related to the tax-free business with respect to the scope of the input tax amount not deducted pursuant to delegation under Article 17(7) of the Value-Added Tax Act, considering the various characteristics of the business operated by the Plaintiff. Accordingly, the principle does not deviate from the principle that the remaining input tax amount except the input tax amount related to the tax-free business. Thus, it is difficult to view that the interpretation of the tax law goes against the principle of substantial taxation or Article 17(1) and (2)4 of the Value-Added Tax Act, which provides for non-deductible ratio of the input tax amount related to the tax-free business, and it is not allowed to interpret the interpretation of the tax law or analogical interpretation without reasonable grounds (see, e.g., Supreme Court Decision 2003Du7392, May 28, 2004).

C) Sub-determination

Therefore, by interpreting the meaning of the pre-sale business place under Article 61(5) of the former Enforcement Decree of the Value-Added Tax Act as the pre-sale business place, the instant disposition against the Plaintiff should be revoked as it is unlawful without further review.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is decided as per Disposition by the assent of all participating Justices.