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

The defendant's disposition of imposition of corporate tax of 1,068,113,650 won on October 14, 2005 against the plaintiff on March 14, 2001, corporate tax of 113,707,620 won on September 2001, corporate tax of 3,272,013,050 won on September 2002, corporate tax of 1,359,694,090 won on September 2003, and corporate tax of 71,712,510 won on September 2004 shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked, and all the plaintiff's claims are dismissed.

The following facts may be recognized by adding up the whole purport of pleadings to each subdivision of Gap's 1 to 19 and Eul's 1 to 6 (including each subdivision number):

A. Status of the plaintiff, etc.

On February 7, 200l, JJ 3 Korea Capal I and Ltd (hereinafter “J 3KC”) established by a domestic corporation that invested 100% by the JJ 10%. The Plaintiff is also a corporation established by the CCC fund. Loneone Mar International Finance, Loneone International Finance, Loneone International Finance (hereinafter “GG”), LLC (hereinafter “DDD”), Hudson Korea Ro Tra Rod D D D D D D D D D D D D Korea (hereinafter “H”).

B. Purchasing non-performing loan claims by the JJ and transferring the status of assignee

On December 1, 200, J entered into an asset acquisition agreement between the KJ and the KJ on December 1, 200, with the effect that the KJ would transfer its book value of KRW 359.7 billion to the KJ in an amount equivalent to KRW 22.7 billion, and on January 2001, the KJ transferred the Plaintiff’s status as a transferee under the asset acquisition agreement.

C. Issuance of asset-backed securities against the Plaintiff’s bad loans wind

(1) On February 23, 2001, the Plaintiff issued asset-backed securities (ABS) with bond-backed securities (ABS) with 31.8 billion won as underlying assets, ① 1/7 of the issue value as shares in an amount equivalent to KRW 31.8 billion, ② 6/7 of the issue value as shares in an amount equal to USD 154,705,008 ($ 190.9 billion), 7-year maturity, interest rate of 17% per annum.

(2) On February 23, 2001, JJ 3K accepted the entire bond-backed securities of the above shares and bond-backed securities, and on April 20, 2001, the J3K sold the bond-backed securities (hereinafter “instant bond-backed securities”) to GG.

(h) Borrowing of GG funds and paying interest to the Plaintiff’s GG;

(1) In order to purchase the claim-backed asset-backed securities of this case from JJ 3K, GGG borrowed US$108,293,001 at maturity of October 20, 2003 (2.5 years) and annual interest rate of 8.5% (hereinafter “the loan transaction of this case”) from the EE Bank on April 23, 2001, equivalent to 70% of its initial issue value.

(2) The Plaintiff paid interest on the instant bonds-backed securities to GGG as follows.

(e) A report or revised report on corporate tax related to consulting services rendered by the plaintiff;

(1) On December 8, 200, DD paid USD 1,840,183.80 to the Hong Kong Ro Road and Ltd (hereinafter “Stilla”) located in Hong Kong as the consulting service cost for a special purpose company, and requested HH to bear the above consulting service cost. HH assessed assessed the above consulting service cost as the investment cost for the acquisition of assets of a special purpose company and divided the above consulting service cost to five special purpose companies including the Plaintiff. Accordingly, on March 30, 2001, the Plaintiff paid the consulting service cost of KRW 876,74,000 (excluding value added tax) divided to DD to DD and reported its corporate tax base by including it as the deductible expenses for the business year of March 2001.

(2) The plaintiff revealed that the above consulting service costs were processed expenses paid without actual provision. The plaintiff added the consulting service costs of 876,744,000 won to deductible expenses and adjusted the tax adjustment of the disposal of other income. On September 30, 2005, the plaintiff held a temporary general meeting of members on September 30, 2005 and approved 876,743.00 won subtracting 1,000 won from the consulting service costs of 876,74,000 won to the shareholders as above and the revised statement of profits reflecting it. After the plaintiff filed a revised return of income deduction pursuant to Article 51-2 of the Corporate Tax Act (amended by Act No. 6293, Dec. 29, 200; hereinafter referred to as the "Corporate Tax Act"). On October 18, 2005, the plaintiff filed an application for the revised return of income deduction (hereinafter referred to as "the revised return").

F. The Seoul Regional Tax Office’s imposition of this case by the Defendant of this case

(1) The Seoul Regional Tax Office conducted a tax investigation with respect to the Plaintiff during the business year from February 4, 2003 to June 13, 2003 (hereinafter referred to as the “first tax investigation”) between February 7, 2001 to September 30, 202, and thereafter, conducted a tax investigation (hereinafter referred to as the “second tax investigation”) with regard to the period for further investigation from October 1, 2002 to September 30, 2004, and the period for investigation from July 7, 2005 to August 25, 2005 (the period for further investigation shall be extended from October 31, 2005).

(2) On October 14, 2005, the director of Seoul Regional Tax Office calculated the amount exceeding 30.1% per annum 8.5% per annum among the interest paid by the Plaintiff to GGGG, the foreign related party (hereinafter referred to as "interest rate of this case") prior to amendment of the Adjustment of International Taxes Act (amended by Act No. 7956, May 24, 2006; hereinafter referred to as "international tax law") 30.5% per annum of the loan transaction of this case as comparative loan transaction; 1.30% per annum 8.5% per annum; 2.05% per annum from the interest paid by the Plaintiff to GGG; 2.1.6% per annum 9 of the annual interest rate of this case; 3.6% per annum 1.6% per annum from the Plaintiff's revised report of this case; 3.5% per annum 2.65% per business year from the date of non-taxation; 2008.45% per business year from the Plaintiff's revised the corporate tax amount of this case.

2. The plaintiff's assertion

A. Interest rate on the instant loan transaction

In light of the fact that the instant asset-backed bonds are substantially non-performing loans and the instant loan transactions are relatively stable claims that are substantially different from non-performing loans, etc., the instant loan transactions cannot be subject to comparative transactions that compute the normal interest rate for the instant asset-backed securities.

B. A revised report of this case

(1) Dividend under Article 51-2 of the Corporate Tax Act refers to a dividend resolution, and the validity of such dividend resolution cannot be denied solely on the ground that the resolution of dividend is for tax avoidance under the principle of strict interpretation of the principle of no taxation without law.

(2) In addition, dividends that a special purpose company is entitled to income deduction are not necessarily limited to distributable profits.

C. Investigation of this case

In the second tax investigation, the part of the tax investigation conducted for the same tax item and taxable period as the first tax investigation falls under the shocking tax investigation, and it does not fall under the exceptional reasons for allowing duplicate tax investigation.

3. Related statutes;

It is as shown in the attached Table related statutes.

4. Whether each of the dispositions of this case is legitimate

A. Whether the comparable interest rate on the loan transaction of this case exists

(1) Facts of recognition

The following facts may be acknowledged by integrating the purpose of the entire pleadings in the entry of Category A No. 4.6 and 30.

(A) Detailed plans for interest payment of principal redemption light of asset-backed securities pursuant to the Plaintiff’s asset-backed securitization plan are as follows.

(1) The plaintiff shall pay to the acquirer of asset-backed securities each month an amount less than the amount calculated by subtracting operating expenses from the amount recovered from underlying assets of asset-backed securities in the relevant month, and an amount calculated by adding the interest and 98.6% of the asset-backed securities recovered in the previous month to 98.6% of the asset-backed securities.

(2) Only interest on bonds-type asset-backed securities shall be paid out of the estimated amount of redemption within one year after issuance of bonds-type asset-backed securities.

(3) The payment after redemption of bonds-backed securities in the above manner shall be used for the payment and redemption of dividends on stock-type asset-backed securities in the balance.

(B) In the instant loan transaction, the terms and conditions of the contract for the redemption of principal and the installment payment are as follows.

(1) The interest shall be paid on 20 days in uH contact, and GG may early repay the principal and accrued interest to the EE Bank even before maturity, but the fee equivalent to one percent of the early repayment amount shall be undue.

(2) When the repayment of principal and interest payment are delayed, 13.5% per annum for overdue interest shall be appropriated, and in particular, where the final repayment is overdue, the interest on the relevant principal and the total amount of interest shall be appropriated.

(3) GGG shall open a separate operation account, storage account, and reservation account, and the Plaintiff shall maintain the separate operation account and reservation account in the EE bank, and shall maintain these accounts until the full repayment of the loan is made.

(4) HH shall ensure that all the amounts recovered from the underlying assets of the issuance of asset-backed securities shall be deposited into the Plaintiff’s operating account, and if there is dividends to be vested in the Plaintiff’s shareholder, the dividends shall present at present. GGG shall pay the amount so that it can be used for the redemption of the principal and interest of the asset-backed securities through the EE bank in accordance with the redemption Schedule of bond-backed securities.

5. Where the EE Bank, as its agent, receives payment from the bond-backed securities as the agent at the present time of bond-type entertainment securities, it shall deposit the first three-month interest amount of the loan in the reserved account of GGG, deposit the amount of the loan in the depository account as of the second payment date, deposit the balance, and deposit the balance in the operating account if any. GGG shall have the right to freely use the amount deposited in the principal’s operating account.

6. The amount, etc. deposited in the safekeeping account of GIST shall be used compulsorily for the repayment of the loan until the loan is repaid in full.(On the other hand, in connection with this prior loan transaction, the EE bank shall generally be bound by the determination of whether to grant the loan or the interest rate, and (1) the maturity of the loan shall normally be affected by the determination of whether to grant the loan or the interest rate, and (2) the other terms and conditions of the loan shall be identical and shall be highly likely to be determined if only the loan amount increases, and (3) the other terms and conditions of the loan shall be same and shall be highly likely to be determined at the interest rate if the maturity increases.

(2) Determination

(A) The arm's length price computation method and selection criteria

(1) Method of computation

Article 2 subparag. 10 of the National Tax Adjustment Act (amended by Presidential Decree No. 19650 of Aug. 24, 2006). Article 5(1) of the International Tax Adjustment Act provides that the arm's length price shall be determined by the "reasonable method of a house" among the methods in the following subparagraphs. Article 5(1) of the International Tax Adjustment Act provides that the arm's length price shall be determined by the "reasonable method of a house"; subparagraph 4 provides that the method of resale under subparagraph 2 shall be determined by Presidential Decree, the method of calculating the cost under subparagraph 3, the method of resale under subparagraph 4 shall be determined by Presidential Decree and other reasonable methods under subparagraph 4; Article 2 subparag. 2 of the Enforcement Decree of the International Tax Adjustment Act (amended by Presidential Decree No. 19650 of Aug. 24, 2006; however, Article 4 of the Enforcement Decree of the International Tax Adjustment Act shall apply only to cases where some provisions were modified during the taxable period of this case but its purport is the same.

정상가격용 '가장 합리적인 방법'에 의하여 계산한 가격으로 산출하도록 하고 있는바, 앞서 본 정상가격 산출방법을 선택함에 있어서는, 국제조세법 시행령 제5조 제1항에서 규정하고 있는 바와 같이, ㉠ 비교가능성이 높을 것(제1호). ㉡ 사용되는 자료의 확보ㆍ이용 가능성이 높을 것(제2호), ㉢ 비교하기 위하여 설정한 경제여건ㆍ경영환경 등에 대한 가정이 현실에 부합하는 청도가 높을 것(제3호). ㉣ 사용되는 자료 또는 설정된 가정의 결함이 산출된 정상가격에 미치는 영향이 작을 것(제4호)이라는 기준을 감안하여 가장 합리적인 방법을 선택하여야 하는데, 그 중 비교가능성이 높기 위해서는 비교가능 제3자 거래와 당해 국제거래 사이의 차이가 비교되는 거래의 가격이나 순이익에 중대한 영향을 주지 아니하는 경우(제1호 가목)가 원칙이겠으나, 중대한 영향을 주는 경우에도 그러한 영향에 의한 차이를 제거할 수 있는 합리적 조정이 가능한 경우 (제1호 나목)라면 비교가능성이 높다고 할 수 있을 것이다.

On the other hand, Article 5(2) of the Enforcement Decree of the International Tax Law requires an analysis of the function of business activities that may affect price or profit, contract terms, risks accompanying trades, kinds and features of goods or services, change in market conditions, and economic situation plesy, by assessing the difference between comparable third party trade and the relevant international trade.

(B) The illegality of the selection of the prior comparable transaction

The Seoul Regional Tax Office adopted the comparable third party's price method (the transaction price between a resident and a foreign related party in a transaction similar to the relevant transaction, and the transaction price between an independent business operator who is not a related party is the arm's length price) in selecting the normal interest rate on the bonds-backed securities in advance, and selected the loan transaction in this case as the comparable transaction.

However, in light of the following overall circumstances admitted by the evidence as seen earlier, the difference between the issue transaction of bonds-backed securities in this case and the loan transaction in this case has a significant impact on the calculation of the normal interest rate, and the difference in the circumstances in this situation is an important factor that is applied to the calculation of the interest rate. Since it is too difficult or almost impossible to make reasonable adjustment, the prior loan transaction in this case cannot be the comparable transaction because the possibility of comparison is low.

1) The bond-backed securities issuance transaction of this case is based on the non-performing loan-backed claims, and is a high-risk transaction with no security other than the non-performing loan-backed claims. On the other hand, the loan transaction of this case was not only provided as collateral but also provided as credit by GGGG to deny the ultimate responsibility for borrowed loan in the name of the navigationist of the loan transaction in addition to the collection of the basic non-performing loan-backed claims. In addition, the amount of 30% directly contributed by GGGGG out of the bond-type bond-backed bond acquisition fund, and the risk of default is relatively less likely to have been removed by acting as the watcher for the loan transaction of this case.

2) The collateral value ratio (LTV) of the instant bond-backed securities is 86% (=6/7). Since the collateral value ratio of the instant loan transactions is about 60% (86% x 70%), the instant bond-backed securities are highly likely to be placed in default than the instant loan transactions. (A) The Defendant, in applying the above normal interest rate, was excluded from the Defendant’s deductible expenses only for part of the instant loan, on the ground that the difference between the bond-backed securities and the instant loan is high in the above reasonable interest rate, and thus, there is no need to adjust the difference between the bond-backed securities of this case and the collateral value ratio claimed by the Plaintiff, and such circumstance alone does not require to determine the difference between the collateral value ratio and the aforementioned collateral value ratio).

3) 이 사건 채권형 유동화증권의 반기는 7년인 반연, 이 사건 차입거래의 만기는 약2.5년이므로, 만기가 짧은 이 사건 차입거래가 경제적 상황 변종에 따른 불확실성이 적어 위험프리미엄이 낮다.(이에 대하여 피고는, 원고가 이 사건 채권형 유동화증권의 만기가 도래하기 훨씬 전에 GGGG에게 그 훤리금을 모두 상환하고, GGGG도 이 사건 차 입거래의 만기가 도래하기 전에 EE은행에게 그 원리금을 모두 상환하였으며, 원고나 GGGG가 위 각 원리금의 조기 상환을 충분히 예측하고 있었으므로, 이 사건 채권형 유 동화증권의 만기 7년은 아무런 의미가 없다고 주장EE, 위와 같은 사정만으로 이 사건 채권형 유동화증권의 반기 7년이 아무런 의미가 없다고 불 수 없다.)

4) Even if both the Plaintiff and GGG were corporations established by the CCC fund, they are different legal entities, and thus, they cannot be deemed identical to the Plaintiff’s loan transaction. [On the other hand, the Defendant borrowed additional money from the Seoul Special Metropolitan City Capital Investment Investment Fund II (hereinafter “CCC Fund”), which is managed by the CCC Fund, in order to raise the remaining funds to purchase the bond-backed securities of this case. Since the interest rate of the loan transaction of this case is 10% per annum, the interest rate of the loan transaction of this case can be deemed as the normal interest rate of the bond-backed securities issue transaction of this case. Accordingly, since GGG is a company controlled by the CCC Fund, the interest rate of the transaction from the loan of this case cannot be deemed as the interest rate determined between the Plaintiff and the independent company that does not have any relation with the Plaintiff. Accordingly, on the basis of the interest rate, the interest rate of the loan transaction of this case cannot be deemed as the bonds-backed securities issue of this case.

(C) Whether the type of business required with respect to the computation of the arm's length price

The burden of proving the legality of the disposition shall be borne by the tax authority (see, e.g., Supreme Court Decision 98Du1826, Feb. 25, 2000). In a case where the transfer price with a person with a special relationship overseas shows a difference between the reasonable arm's length price and the arm's length price calculated based on the data secured by the tax authority to request the person liable for duty payment to submit data and documentary evidence under Article 11(2) of the Enforcement Decree of the International Tax Act by means of the best effort, such as requesting the person liable for duty payment to submit data and documentary evidence under Article 19(1) of the Enforcement Decree of the International Tax Act, the transaction price between an independent business operator who is comparable can constitute the scope of the arm's length price due to the existence of several types of reliable values, and the transfer price with a person with a special relationship overseas cannot be deemed to lack economic rationality due to the lack of the arm's length price (see, e.g., Supreme Court Decision

However, as seen earlier, in selecting the normal interest rate on the bonds-backed securities of this case, it is difficult to view that the Defendant’s selection of the loan transaction of this case as the comparative transaction constitutes the calculation of the arm’s length price reasonably. Therefore, it is difficult to view that there is a need to prove overlapping, etc. that the interest rate on the bonds-backed securities of this case cannot be deemed to lack economic rationality because it falls under the scope of the arm’s length price.

(D) Sub-committee

Therefore, among the dispositions of this case, the part that the Defendant selected the loan transaction of this case as the comparative transaction, and deemed the B.5% of the interest rate as the normal interest rate, which exceeds the above interest rate of 8.5%, including the asset-backed securities interest rate of this case, is unlawful.

B. Legitimate fishing division of the revised report of this case

(1) Facts of recognition

The following facts may be acknowledged by integrating the purpose of the whole pleadings in each entry described in Gap 7 through 11, 27 through 29:

(A) On June 30, 201, the Plaintiff deposited KRW 876,744,00 as consulting service cost to DDR on the same background as the above 1. E. (1), and included it in the grandchildren for the business year of March 2001.

(B) In the process of the second tax investigation, even though the Silla did not provide any consulting service, it was confirmed that the Plaintiff’s funds were paid for consulting service fees. Accordingly, the JJ, etc. concluded that the CCC fund embezzled USD 12,158,337.61 from the CCC fund companies related to the CCC funds over 17 times from the 199B to the 17th day without involvement of other officers and employees of DD or HH as the representative director of DD as a result of the request for self-inspection and the investigation on the above issues to the BBB legal company located in the United States.

(C) On October 18, 2005, the Plaintiff submitted to the Defendant a revised return of this case and an application for dividend income deduction related to the above consulting service cost, and received the notice of each of the dispositions of this case around October 18, 2005, around 15:57.

(D) After AAri’s embezzlement was fully performed, the entire amount embezzled was returned. DDR returned the amount equivalent to the consulting service cost that the Plaintiff received from the Plaintiff on May 26, 2006, around May 26, 2006.

(2) Determination

(A) The legality of an additional dividend resolution

1) Article 51-2 (1) of the Corporate Tax Act provides that "if a special purpose company, etc., such as the plaintiff, distributes not less than 90/10 of distributable profits as prescribed by the Presidential Decree, such amount shall be deducted in calculating the income amount for the pertinent business year," and Article 86-2 (1) of the Enforcement Decree of the Corporate Tax Act (amended by the Presidential Decree No. 19255, Dec. 31, 2005; hereinafter referred to as the "Enforcement Decree of the Corporate Tax Act") provides that "the purpose of some of the provisions on the entry into the taxable period of this case was to be changed, but the same is the same; hereinafter referred to as "the Enforcement Decree of the Corporate Tax Act")" means the amount calculated by deducting the corporate tax expense on the financial statements prepared in accordance with the corporate accounting standards and then subtracting the profits carried forward (referring to the amount which is less than the profits and losses from the evaluation of the securities; hereinafter the same shall not apply to an investment company under the Indirect Investment Asset Management Business Act)".

The purpose of the income deduction system for dividends of a special purpose company is to facilitate the financing of financial institutions and to enhance the soundness of the financial structure by facilitating the financing of financial institutions, etc. and by facilitating the disposal of bad debts with the awareness of the fact that a special purpose company does not have any substance as a company on the documents established for the purpose of asset securitization, including bonds and real estate, and, unlike general corporations, distributes not less than 90% of distributable profits by deducting all dividends from the income amount of a special purpose company.

2) However, in cases where dividends have been distributed 90% or more of the distributable profits, the business year during which the dividend income is deducted refers to the business year in which the profit is the object of the annual dividend, and in cases where the distributable profit increases by modifying the accounting due to the accounting error after the dividend payment, it constitutes a case where additional dividends are distributed within the scope of such increased profit by a resolution of the board of directors or the temporary general meeting of shareholders. In this case, an application for additional income deduction should be made by the method of filing a revised return pursuant to Article 45 of the Framework Act on National Taxes and the method of claiming competition pursuant to Article 45-2, and the existence of tax avoidance through the dividend income deduction does not affect the recognition of dividend income deduction.

3) With respect to this case, as seen earlier, the plaintiff revealed in the second tax investigation that the above consulting service costs were processed expenses that were paid without actual provision of the service, and found that AAAri, the representative director of DD, embezzled the amount equivalent to the above consulting service costs, and approved the additional dividend payment and revised appropriation of retained earnings at a provisional general meeting of shareholders, after re-induating the accounting and tax adjustment of the above consulting service costs, the amount equivalent to the above consulting service costs, which were treated as losses, shall be deemed to have increased the distributable profit and income for the business year. The plaintiff increased profits or income of 876,74,743,000 won, excluding 1,000 won, among the above consulting service costs that were treated as losses, and applied for dividend income deduction. Thus, the above additional resolution shall be deemed to constitute a dividend under Article 51-2 of the Corporate Tax Act, regardless of the purpose of tax avoidance.

(B) Financing subject to dividend income deduction

1) As seen earlier, Article 51-2(1) of the Corporate Tax Act and Article 86-2(1) of the Enforcement Decree of the Corporate Tax Act provide that the amount equivalent to dividends that can be distributed only within the scope of distributable profits shall be limited to the scope of distributable profits, and Article 86-2(6) of the Enforcement Decree of the Corporate Tax Act provides that "where dividends that are deducted pursuant to Article 51-2(1) of the Act exceed the amount of income for the pertinent business year, the excess amount shall be deemed non-existent." Meanwhile, Article 30(3) of the Asset-Backed Securitization Act provides that "a special purpose company may make dividends in excess of its profits (referring to the amount after deducting liabilities, capital and reserves from the asset on the balance sheet) as prescribed by the articles of incorporation, notwithstanding Article 462 of the same Act applied mutatis mutandis pursuant to Article 583 of the Commercial Act, it is reasonable to interpret that a special purpose company may receive dividend income deduction only within the scope of income for the pertinent business year.

2) As to the instant case, the Plaintiff’s accounting and tax adjustment of the above consulting service costs again, at the provisional shareholders’ meeting approved the additional dividend proposal and the revised appropriation statement of profits and losses, and applied for dividend income deduction within the scope of increased income, the Plaintiff’s additional dividend and income deduction application is a salt that is lawful. [On the other hand, in the event that the Plaintiff embezzled the corporation’s assets by deceiving the corporation, the Plaintiff’s embezzlement would not be deemed as out of the amount of embezzlement (see Supreme Court Decision 2002Da9254, Apr. 9, 2004). Thus, even if the Plaintiff disposed of the above consulting service costs as other income without being disposed of as a reservation of the above consulting expenses, it cannot be said that the Plaintiff’s voluntary exclusion of profits and losses was not subject to the Plaintiff’s exclusion of profits and losses, and thus, the Plaintiff’s voluntary exclusion of profits and losses was not subject to the Plaintiff’s exclusion of profits and losses from DD or 206.

(C) Sub-determination

Therefore, the part of the disposition of this case imposing corporate tax is unlawful after the revised return of this case and the application for dividend income deduction was based on the premise that it is illegal.

5. Conclusion

Therefore, each disposition of this case is unlawful without considering the argument about double tax investigation, and all of the plaintiff's claims of this case shall be accepted. The judgment of the court of first instance is just, and the defendant's appeal is all dismissed. It is so decided as per Disposition.