In a case where a sale contract within a land transaction permission area under the Act on the Utilization and Management of the National Territory is invalid because it does not obtain a transaction permission, whether it constitutes a transfer of assets subject to capital gains or income from the transfer of assets can be determined (negative)

The transaction contract within the land transaction permission area under the Act on the Utilization and Management of the National Territory shall take effect only with the permission of the competent authority. The effect of the real right and the effect of the claim shall be null and void before the permission is obtained. Thus, if the transaction permission for the land is invalid because it is not obtained, the purchase price is paid first and the transferor shall keep it in custody, and it cannot be determined that the transferor has any income from the transfer of assets or that there is any income from the transfer of assets. According to Article 4(3) of the Income Tax Act, the transfer of assets in the transfer income refers to the actual transfer of assets at a cost. Therefore, only in economic aspect, it shall not be determined that the transfer income is a transfer income by identifying the transfer income and only in the position of controlling, managing,

Article 4 (3) of the Income Tax Act, Article 21-3 of the Act on the Utilization and Management of National Territory

Supreme Court en banc Decision 90Da12243 delivered on December 24, 1991 (Gong1992,642) 91Da33612 delivered on July 28, 1992 (Gong192,2544)

Plaintiff-Appellee et al., Counsel for the plaintiff-appellant

The Director of the Pacific District Office

Seoul High Court Decision 91Gu24252 delivered on April 28, 1992

The judgment below is reversed and the case is remanded to Seoul High Court.

As to the Plaintiff’s ground of appeal

The court below determined that the disposition of the transfer income tax of this case is legitimate, since the plaintiff received all the purchase money from the non-party company, since the land of this case belongs to the land transaction regulation area designated by the Minister of Construction and Transportation in accordance with the provisions of Article 21-2 of the Act on the Utilization and Management of the National Territory, and the plaintiff did not obtain the permission of the Act on the Utilization and Management of the National Territory in the sale contract, but the purchase price was paid in full at the date of the payment.

The contract for the transaction within the area of land transaction permission under the Act on the Utilization and Management of the National Territory shall take effect only with the permission of the competent authority, and it shall be null and void as well as with the effect of the real right before obtaining the permission (see Supreme Court Decision 90Da12243, Dec. 24, 191). If the transaction permission for the land of this case is not granted as determined by the court below and invalid as it is not obtained, it cannot be concluded that the transfer of assets subject to the transfer income or there is any income from the transfer of assets by first being paid the purchase price and being kept by the transferor. According to Article 4(3) of the Income Tax Act, the transfer of assets in the transfer income refers to the actual transfer of assets at the cost, and it shall not be determined that the transfer income is only in a position under which the profit is controlled, managed, or affected by the transfer of assets.

In the opposite view, the judgment of the court below supporting the disposition of this case is erroneous in the misapprehension of legal principles as to the transfer of assets under the Income Tax Act. The arguments are with merit.

It is so decided as per Disposition by the assent of all participating Justices on the bench that the judgment of the court below is reversed and the case is remanded to the court below.