Law Firm LLC (LLC)

[Defendant-Appellee] Me. Me. Me. Me. Me. *

Head of Donggsan Tax Office

Litigation performers & & & & &

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

Preliminary Claim: Preliminaryly, the Defendant’s disposition of imposition of KRW 2,245,381,06 for the business year 2010 against the Plaintiff on May 2, 2016 (including penalty tax of KRW 13,173,05,056, additional tax of KRW 335,51,644) and corporate tax of KRW 2,19,41,584 for the business year 201.

A. The Plaintiff was established in 1973 and is a corporation that manufactures and sells ships, offshore structures, plants, engines, etc.

B. The director of the Seoul Regional Tax Office, from April 1, 2015 to October 8, 2015, conducted an integrated tax investigation of corporate tax against the Plaintiff (hereinafter “instant tax investigation”) and notified the Defendant of the rectification and notification of corporate tax from 2010 to 2014 by reflecting each of the following tax investigation recovery as stated in the table:

A person shall be appointed.

A person shall be appointed.

C. As a result of the instant tax investigation, the Plaintiff filed an application for early determination with respect to some of the grounds for disposition 1 through 3 and other grounds for disposition. Accordingly, on December 3, 2015, the Defendant issued a disposition to rectify and notify the Plaintiff of the increased corporate tax of 2010 business year 8, 306, 327, 9201, and to rectify and notify the increased corporate tax of 4,560, 193, and 230 won (hereinafter “instant disposition to rectify the increased corporate tax of 2011”).

D. On November 5, 2015, the Plaintiff filed a request for pre-assessment review with the National Tax Service on part of the grounds for disposition 4, 5, 6, and other grounds for disposition. Accordingly, on April 21, 2016, the Commissioner of the National Tax Service decided to partially adopt and re-examine the grounds for disposition 5, to adopt the adoption of the reasons for disposition 6, and to adopt the reasons for disposition 4.

E. According to the above pre-assessment review decision, the Defendant: (a) on May 2, 2016; (b) on 2010, 5, 189, 706, and 00 won [the amount of the royalty of KRW 8,621, 346, and 845 in the business year 2010 was included in the gross income; (c) on 2,245, 381, 306 won (the principal tax was 1,896, 306, 13, 173, 056; (c) the amount of the corporate tax was reduced to 30, 46, 306, 306, 306, 16, 305, 306, 306, 306, 306, 47, 606, 511, 644) were reduced due to the reduction of corporate tax for the business year; and (d) 36.

F. In accordance with the decision on pre-assessment review, the director of the Seoul Regional Tax Office conducted a reinvestigation on the remainder of five grounds for disposition from April 26, 2016 to May 25, 2016. As a result, on June 20, 2016, the Defendant issued a disposition to correct and notify the Plaintiff of the reduction of KRW 2,079,250,687 (hereinafter referred to as “the second corrective disposition”).

G. On February 26, 2016, the Plaintiff filed a petition with the Tax Tribunal for a trial seeking revocation of the instant disposition for rectification, and filed a petition for a trial seeking revocation of the instant disposition for rectification on July 22, 2016 (the instant two cases were consolidated and tried).

H. On November 8, 2018, the Tax Tribunal accepted the Plaintiff’s request on the portion related to the grounds of disposition Nos. 2 and 3, and rendered a decision to dismiss the instant request on the ground that the instant request for a correction of reduction was made at the same time on the grounds that “ insofar as the amount of tax has been reduced as the amount of tax has been reduced as a whole, it shall not be subject to appeal litigation” (hereinafter referred to as “instant administrative appeal”).

I. On September 20, 2018, while the instant administrative appeal was pending, the Defendant adjusted ex officio reduction of corporate tax of 446, 936, 704, and corporate tax of 610, 255, and 557 for the business year 2011 (hereinafter referred to as “ex officio reduction and correction”) with respect to one of the grounds for disposition (hereinafter referred to as “instant ex officio reduction and correction”).

(j) On November 15, 2018, the Defendant issued a disposition to reduce or correct corporate tax of KRW 1,988, 494, 079 for the business year 2010 in accordance with the result of the instant administrative appeal as to grounds 2, 3 of disposition on November 15, 2018, and to correct corporate tax of KRW 787, 154, 738 for the business year 201 (hereinafter “reduction due to administrative appeal”).

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 through 6 (including Serial Nos. 1) and the purport of the whole pleadings

2. The plaintiff's assertion

(a) The primary claim

1) In the case of corporate tax for the business year 2010, the increase in corporate tax pursuant to the grounds for disposition is illegal, and the amount of tax increased by the grounds for disposition 4 is remaining after ex officio reduction or correction and reduction or correction under the administrative appeal of this case among the amount of tax increased by the disposition of the instant increase or decrease. As such, the Plaintiff may seek revocation against the disposition of imposition of KRW 2,245, 381,006, which was increased by the grounds for the disposition of the instant increase or decrease, among the amount of tax increased by the disposition of the instant increase or decrease.

2) In the case of corporate tax for the business year 2011, the increase in corporate tax pursuant to the grounds for disposition is illegal and prior to the expiration of the period for filing a request for correction as to corporate tax, and thus, in the appeal litigation as to the instant increase in corporate tax, the appeal litigation as to the instant increase in corporate tax can contest not only the amount increased by the instant increase in corporate tax, but also the amount initially reported, as such, the Plaintiff may seek revocation against the disposition of imposition of KRW 2,19,415,584, which was increased by the grounds for the instant increase in corporate tax (hereinafter referred to as “the disposition of imposition of KRW 2,245,381,06, and KRW 11 corporate tax for the business year 2,19,415,584 for each of the instant increase in corporate tax for the business year 2010, which was increased by the grounds for disposition as to the instant increase in corporate tax.

(b) Preliminary claim.

Since an increase in corporate tax pursuant to the grounds for disposition among the instant reduction and correction disposition is illegal, and in the instant reduction and correction disposition, a separate means of litigation should be recognized. Thus, the original High Court may seek the revocation of each imposition disposition on the portion increased due to the grounds for disposition (2, 245, 381, 006 won among corporate tax for the business year 2010, 2, 119, 415, 584 won among corporate tax for the business year 2011).

3. Determination on the defense prior to the merits

A. The defendant's assertion

1) As to the primary claim

A) Since the instant disposition to rectify the corporate tax for the business year 2010 was already revoked with respect to the amount exceeding KRW 681, 191, and 140 due to the instant disposition to rectify the reduction, ex officio reduction, or the administrative appeal, the amount exceeding KRW 681, 191, and 140 due to the administrative appeal, the lawsuit seeking revocation of the disposition to impose corporate tax for the business year 2010, which exceeds KRW 681, 191, and 140, among the instant disposition to rectify the increase, is seeking revocation against the disposition to impose corporate tax for the business year 2010,

B) Since the instant disposition to revise corporate tax for the business year 201 was completely revoked due to the instant disposition to correct the reduction, the second disposition to correct the reduction, the ex officio reduction, or the administrative appeal, the revocation of the disposition to revoke the disposition to impose corporate tax for the business year 2, 119, 415, and 584, of the instant disposition to rectify the increase, the lawsuit seeking revocation of the disposition to impose corporate tax for the business year 201, 201, is unlawful as there is no interest in the lawsuit.

2) As to the conjunctive claim

A disposition of reduction and correction cannot be a subject of an appeal litigation due to a disposition that gives favorable effect to taxpayers, such as partial revocation of the amount of tax, and thus, the Plaintiff’s conjunctive claim is unlawful.

B. Judgment on the defense prior to the main claim

1) Relevant legal principles

In a case where an increase or decrease is taken, the original return or determination loses the original value of existence by absorbing the increase or decrease, and as a matter of principle, regardless of the lapse of the appeal period against the initial return or determination, etc., a taxpayer shall be subject to an appeal litigation; and a taxpayer may also assert unlawful grounds for the initial return or determination at the port of complaint (see Supreme Court Decision 2006Du17390, May 14, 2009). However, Article 22-2(1) of the former Framework Act on National Taxes (amended by Act No. 16097, Dec. 31, 2018; hereinafter referred to as the “former Framework Act on National Taxes”) provides that an increase in the amount of duty initially determined by tax laws shall not affect the rights and obligations provided for in this Act or other tax-related Acts concerning the amount of duty initially determined, regardless of the terms and conditions of the aforementioned provision and the purport of the tax return or determination, if any, subsequent to the final return or determination of tax amount.

2) Determination

A) As to the claim for revocation of the imposition of KRW 2,245, 381, 006 for the business year 2010, among the disposition of the instant increase or correction

In full view of the following facts and circumstances that can be acknowledged by adding the aforementioned facts and the purport of the entire arguments, the substance of the instant disposition of reduction or exemption is not to revoke part of the amount of tax increased due to the instant disposition of reduction or exemption, but to revoke part of the original return intentionally. The corporate tax increased due to the ground for disposition 4 is within the limit of KRW 5,870,897,897, and KRW 142, among the corporate tax increased due to the instant disposition of reduction or exemption under the ex officio reduction or administrative appeal of the amount of corporate tax for 2010 for the business year 8,306, 327, 925, the amount of tax remaining after the reduction or exemption due to the instant disposition of reduction or exemption is within the limit of KRW 5,870, 897, and 142. Thus, if the Plaintiff committed any violation of the grounds for disposition 4, the Plaintiff may seek revocation of the full amount of corporate tax for the business year 2010,245,381.

① The instant disposition was conducted on the basis of grounds of disposition No. 1, 2, 3, and other grounds for disposition, which are grounds for the instant disposition for the rectification of an increase, 4, 5, and 6.

② On May 2, 2016, the Defendant rendered the instant disposition for reduction or correction in accordance with the pre-assessment review ruling related to the grounds for disposition Nos. 1, 2, 3 and 4, 5 and 6, which are grounds for disposition, which are grounds for the instant disposition for increase or correction, and grounds for disposition, which are irrelevant to all other grounds for disposition.

③ Among the instant adjustment disposition, reduction pursuant to Articles 5 and 6 irrelevant to the grounds for the instant adjustment disposition, which were irrelevant to the grounds for the instant adjustment disposition, may be deemed to have been conducted irrespective of the procedure of litigation as to the instant adjustment disposition. Therefore, in light of the legal principles as seen earlier, it is difficult to view this as a reduction in part of the increased tax amount due to the portion of the instant adjustment disposition, and it is reasonable to view that the Plaintiff reduced part of the amount of the previously reported tax amount.

④ KRW 8, 306, 327, and 925 of the amount of duty increased due to the instant order of reduction ex officio is reduced to KRW 446,936,704 due to the instant order of reduction ex officio, and KRW 1,988, 494, 079 due to the reduction or correction in accordance with the administrative appeal and remaining KRW 5,870, 897, and 142 due to the reduction or correction. This is the amount exceeding KRW 2,245, 381, and 006 of corporate tax for the business year 2010, for which the Plaintiff seeks revocation in this case.

⑤ In an appeal litigation seeking revocation of a disposition of increase or decrease, whether the amount of tax exceeds a legitimate tax amount should be determined on the basis of whether the amount of tax exceeds a reasonable amount of tax, and the grounds for excessive reporting concerning the original return or for taxing the tax authority’s revocation of increase or decrease is merely an individual illegal ground supporting the illegality of the disposition of increase or decrease (see, e.g., Supreme Court Decision 2002Du9261, Aug. 16, 2004). A claim for revocation of part of the amount of tax increased due to the instant disposition of increase or decrease on the ground of the above law, which is not a ground for disposition of increase or decrease, 1, 2, 3, or 4, other grounds for disposition, not a ground for disposition

B) As to the claim for revocation of the imposition of KRW 2, 119, 415, and 584 for the business year 201 of the instant disposition of increase or correction

Inasmuch as a disposition to increase tax base and amount of tax is not a disposition to determine additionally the tax base and amount of tax previously reported by the original taxpayer or to determine the tax base and amount of tax previously determined by the tax authority, but to re-determine the tax base and amount below including the tax base and amount of tax initially determined in the initial return or determination, only the disposition to increase tax becomes subject to adjudication of appeal litigation regardless of the lapse of the objection period against the initial return or determination (see, e.g., Supreme Court Decisions 2006Du17390, May 14, 2009; 201Du4855, Mar. 29, 2012). In light of the fact that an appeal litigation seeking revocation of the increase tax base and amount of tax in an appeal litigation seeking revocation of the increase tax amount, the determination of illegality of the tax base and amount of tax should be based on whether the amount of tax initially reported exceeds the legitimate amount of tax, or that the grounds for rectification of the tax authority’s appeal for revocation of the increase tax base and amount of tax are more than 3 grounds for rectification.

Meanwhile, considering the language and text of Article 22-2(1) of the former Framework Act on National Taxes and the fact that even if a corrective disposition is taken to increase or decrease its main legislative purpose, there is an attempt to restrict any objection against the amount of tax initially declared or determined in the final return due to the lapse of the appeal period, etc., if the period for filing a claim for correction as to the amount of tax in the initial return or determination has not expired, it shall be deemed that not only the amount of tax increased by the corrective disposition but also

In light of the aforementioned legal principles, the Defendant, on April 30, 2012, before the filing deadline for the request for correction from April 30, 2012, which is the statutory due date of return of corporate tax for the business year 2011, increased the corporate tax base and tax amount for the business year 2011, prior to the Plaintiff’s request for correction from April 3, 2015, which is the statutory due date of return of corporate tax for the business year 2011, may seek revocation of the tax amount reported as corporate tax for the business year 2011 as well as the tax amount to be increased by the Plaintiff’s request for revocation as corporate tax for the first 4th 2,19, 415, 584 won in the instant case. However, if the Plaintiff sought revocation due to an unlawful act in the grounds of disposition 4, 2011, the Plaintiff’s disposition of reduction in the corporate tax for the business year 2011, ex officio reduction in KRW 354, 551,514

C) Sub-determination

Therefore, the plaintiff can seek the revocation of the full amount of corporate tax for the business year 2010 and 2011 increased due to the disposition ground 4, if there is an error in the disposition ground 4. Thus, the defendant's prior defense of the main claim concerning the primary claim is without merit (as long as the defendant's prior defense concerning the primary claim is not reasonable, the defendant's prior defense concerning the primary claim is not examined further as to the preliminary claim, and the decision on the main claim is made without examining the defendant's prior defense concerning the primary claim).

4. Whether the instant disposition is lawful

In addition to the purport of the entire argument in the above evidence, the following circumstances that can be recognized by the Tax Tribunal, namely, (1) recognized that the increase in the tax amount pursuant to the ground for disposition 4 was illegal in the administrative appeal decision of this case; (2) the defendant also does not dispute the case as to the illegality of the increase in the tax amount pursuant to the ground for disposition 4; (3) the defendant corrected the reduction in the portion included in the tax base of corporate tax for 2012, 2013, and 2014, under the premise that the increase in the tax amount pursuant to the ground for disposition 4 was illegal; and (4) the plaintiff paid the vessel owner support fee which includes the trademark right unpaid in the tax base of corporate tax for 2012, 2013, and 2014; and (3) the plaintiff considered to have received the vessel owner support fee which includes the trademark right unpaid from the Heavy Industries Co., Ltd., and thus, it is reasonable to deem that the increase in corporate tax pursuant to the ground for disposition in this case is unlawful.

Therefore, the instant disposition should be revoked in an unlawful manner.

5. Conclusion

Therefore, the plaintiff's primary claim is justified, and it is so decided as per Disposition by admitting it without any judgment as to the conjunctive claim.

Judges Lee Jae-py

Judge Lee Jong-soo

In calculating the amount of tax to be increased or decreased, such as 8, 306, 327, 920 won as stated in 1-1; hereinafter the same shall apply, in accordance with the allegations of the parties

8, 306, 327, 925 won shall be based.

2) On the same day, the Defendant issued a disposition to rectify and notify the Plaintiff of each increase in corporate tax for the business year 2012 and the business year 2013, but the instant disposition was rendered.

In the year of 2010, 2011, the revised disposition of corporate tax increase or decrease is a key issue, and this is not examined.

Relevant statutes

▣ 구 국세기본법 ( 2018 . 12 . 31 . 법률 제16097호로 개정되기 전의 것 )

Article 22-2 (Effect of Correction, etc.)

(1) Corrections made to increase the amount of tax initially determined under tax-related Acts shall not affect the rights and obligations provided for in this Act or other tax-related Acts with respect to the amount of tax initially determined.