Mobilization Securities Co., Ltd. (Attorney Lee Dong-soo, Counsel for defendant-appellee)

Yeongdeungpo Tax Office (Attorney Kim Yong-sik, Counsel for defendant-appellant)

may 25, 2005

Seoul Administrative Court Decision 2003Guhap28801 delivered on June 24, 2004

1. All appeals filed by the plaintiff and the defendant are dismissed.

2. The costs of appeal shall be borne by each party.

1. Purport of claim

The Defendant’s disposition of imposition of KRW 1,230,819,40 of corporate tax for the business year 1999 against the Plaintiff, KRW 338,246,360 of corporate tax for the business year 2000, KRW 408,685,830 of dividend income tax for the business year 200 shall be revoked.

2. Purport of appeal

Of the judgment of the court of first instance, the part against the plaintiff seeking revocation of addition shall be revoked. The defendant's imposition of corporate tax of 34,474,970 won against the plaintiff on February 1, 2002, corporate tax of 200, corporate tax of 21,994,230 won, and dividend income tax of 408,685,830 won for the year 200.

Defendant: The part against Defendant in the judgment of the first instance court shall be revoked, and the Plaintiff’s claim corresponding to the above revocation shall be dismissed.

1. Quotation of judgment of the first instance;

A. The reasoning for the court's explanation concerning this case is as follows: (a) the witness of the court of first instance shall be used as "a witness of the court of first instance"; (b) the 12th parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel with 5.20 and 11.; and (c) the 12th parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel to 6.00 parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel parallel, it shall be corrected as it is obvious that it is a clerical error of "cost"; and (d) the part of the 2-c. (3) and 2-D. (4) part (16 parallel parallel parallel parallel parallel to 16.4) of the judgment of the court of first instance (as stated in the reasoning for the judgment of the court of first instance) shall be cited

B. 2-c. (3) part

“(3) The amount claimed by the Plaintiff to be included in the sale price of securities, which is the basis for calculating the limit of entertainment expenses, as the sale price of the stock price index (the respective amount in the business year of 1999 and 2000 listed in the table 1. A.) is not the daily settlement balance on the date of the final transaction, but the above contract amount (the COS index x 500,000 x the number of contracts).

However, securities refer to securities representing rights with property value, such as lectures, bills, checks, cargo redemption rights, warehouse receipts, stocks, and bills of lading, and require possession of securities in the creation, exercise, or transfer of such rights. The stock price index subject to the stock price index futures trading is only the value indicating the price level, but does not constitute securities.

Meanwhile, Article 2-2 of the former Securities and Exchange Act (amended by Act No. 5041 of Dec. 29, 1995) provides that the Korea Stock Exchange shall designate securities as the stock price index and other securities index which comprehensively indicates the price levels of a large number of items according to the kinds of stock certificates and other securities, and that the securities index shall be deemed to be a transaction under which the parties agree to receive money calculated by the difference between the securities index values determined in advance and the securities index values appearing in reality at a certain time in the future in accordance with the standards and methods prescribed by the Korea Stock Exchange, i.e., the securities index futures trading, which is a transaction of securities, shall be deemed to be a transaction of securities. The above provision is deemed to have been established in order to facilitate and fairly protect investors, and to fully enforce the Securities and Exchange Act (amended by Presidential Decree No. 20140, Dec. 29, 1995; Presidential Decree No. 2010, Feb. 14, 1995).

As above, the purpose of the provisions of the former Securities and Exchange Act is derived from trading of securities with the purpose of applying the Securities and Exchange Act to the futures trading of the securities index for the purpose of fair and smooth transaction like securities. In light of the fact that the purpose of the provisions of the former Securities and Exchange Act is irrelevant to the scope of the proceeds from sale of securities which serve as the basis for calculating entertainment expense limit in relation to corporate tax taxation, the method of receiving and paying the proceeds from the futures trading is only settling only after payment of deposit money, and it does not receive and deliver the total amount of the contract amount, and it does not constitute purchase and sale of securities in compliance with corporate accounting standards, and it includes only the settlement balance, and the securities are not regarded as purchase and sale of securities, and the securities requires the possession of securities in connection with the creation, exercise or transfer of rights as securities which represent private rights (private rights) with strong property value. In full view of the fact that the stock price index subject to the stock price index is the value representing the price level, and does not constitute the securities as above interpretation of language and text, merely because there was a provision regarding the securities index as securities.

C. Paragraph 2-d. (4) part

“(4) Therefore, the amount of each of the investment advisory fees in this case consists of the actual investment advisory fees and the amount of this case, which is a sales incidental expense, etc., and it shall not be included in entertainment expenses. In addition, even if some of them cannot be viewed as a sales incidental expense incidental to a normal transaction because it was received through an unfair solicitation prohibited under the Securities and Exchange Act, as alleged by the Defendant, it cannot be specified separately from the actual investment advisory fees, and it is unlawful for the Defendant to regard the total amount of the above investment advisory fees as entertainment expenses, and to impose each of the corporate tax in this case. The Plaintiff’s assertion pointing this out

2. Conclusion

Therefore, the part of each of the disposition imposing corporate tax in this case exceeding the legitimate amount of tax in this case is unlawful, and the part of the plaintiff's claim in this case is justified, and the remaining part is dismissed as it is without merit. The judgment of the court of first instance is just and it is dismissed as it is without merit, and it is so decided as per Disposition.

Judges' profit-based (Presiding Judge) Lee Jae-won