[1] Criteria for determining the type of unfair act in the denial of wrongful calculation under the Corporate Tax Act

[2] In a case where an unfair merger takes place after the transfer of shares, whether the transfer of shares does not constitute a low-price transfer under Article 46 (2) 4 of the Enforcement Decree of the Corporate Tax Act, whether it shall be determined separately by deeming the transfer as an act of profit distribution under Article 46 (2) 9 (negative)

[3] Whether a corporate tax act can be assessed as an asset on the corporate balance sheet (negative)

[4] Whether the shares transferred to a person with a special relationship prior to the disclosure can be assessed on the basis of the subscription price (negative)

[5] In addition to the value based on the supplementary evaluation methods for unlisted stocks as indicated in the pleading, whether the court shall urge the verification of the appraisal value or investigate it ex officio (negative)

[6] Whether Article 9(4) and Article 5-2 of the Inheritance Tax Act apply to the valuation of net asset values for calculating the market price of unlisted stocks (negative)

[1] The meaning of Article 46 (2) 9 of the Enforcement Decree of the Corporate Tax Act refers to a case where a taxpayer’s transaction of assets, such as stocks, is recognized as an act corresponding to the act in addition to the transaction stipulated under Article 46 (2) 1 through 8 of the same Act, and thus, it is at issue as to whether a taxpayer’s transaction of assets, such as stocks, falls under any of subparagraphs 4 and 9 of Article 46 (2) of the Enforcement Decree of the Corporate Tax Act in relation to a wrongful act under Article 20 of the Corporate Tax Act. Thus, where the transaction does not constitute “the case where a taxpayer purchases assets from an investor, etc. in excess of the market price or transfers assets to an investor, etc.” under Article 46 (2) 4 of the Enforcement Decree of the Corporate Tax

[2] In light of the principle of no taxation without law, even if an unfair merger takes place immediately after the transfer of shares to a specially related person and economic benefits have been returned to the specially related person, if the transfer of shares does not constitute a low-price transfer under Article 46 (2) 4 of the Enforcement Decree of the Corporate Tax Act, if the said company’s transfer of shares to a specially related person does not constitute a separate transaction, it shall not be deemed as an act of profit sharing under subparagraph 9 of the said Article, by understanding it as one of the separate transaction acts, such as a merger and a merger after the transfer of shares, and thus, it does not constitute an act of profit sharing under subparagraph 9 of the said Article.

[3] In assessing unlisted stocks, whether certain assets are assets of the corporation that issued stocks should be determined depending on whether they belong to the pertinent corporation's ownership in substance. Thus, even if the pertinent corporation's inclusion of specific assets in the balance sheet is included in the assets, if they are merely formal ones, they may not be included in the assets.

[4] In cases where shares are transferred to a person with a special relationship before the disclosure of the company, it is difficult to view that the market price of the shares at the time of the transfer of the shares is objectively and reasonably reflected in consideration of the relative value at the time of the transfer of shares, the market price of the shares, etc. at the time of public offering of shares with a considerable difference

[5] The purport of Article 26 of the Administrative Litigation Act is that even if the parties have not clearly asserted, an ex officio investigation may be conducted and determined based on the facts shown in the records, and it shall also be conducted ex officio and determined within the scope of claims only when the court deems it necessary. In determining whether to transfer the price at a low price as referred to in Article 46 (2) 4 of the Enforcement Decree of the Corporate Tax Act, the burden of proving the market price of the transferred asset lies on the tax authority. Thus, the tax authority cannot find that the tax authority did not urge the court to prove the appraisal price of the stocks or investigate it ex officio.

[6] In assessing shares under the Inheritance Tax Act, a pledge is established or provided as a security for transfer, but the method of appraisal under Article 9(4) of the Inheritance Tax Act and Article 5-2 of the Enforcement Decree of the Inheritance Tax Act may be applied to the method of appraisal under Article 5(5)1(b) and (c) of the Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 12993, May 1, 1990) as it is difficult to understand the market price of shares. Thus, Article 9(4) of the Inheritance Tax Act and Article 5-2 of the Enforcement Decree of the Inheritance Tax Act shall not apply to the case of assessing the net asset value of the corporation in question to calculate the market price per share pursuant to

[1] Article 20 of the Corporate Tax Act, Article 46 (2) 4 and 9 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080 of Dec. 31, 1993) / [2] Article 20 of the Corporate Tax Act, Article 46 (2) 4 and 9 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080 of Dec. 31, 1993) / [3] Article 3 of the Corporate Tax Act / [4] Article 20 of the Corporate Tax Act, Article 46 (2) 4 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080 of Dec. 31, 1993), Article 16-2 of the Enforcement Rule of the Corporate Tax Act / [5] Article 26 of the Administrative Litigation Act, Article 46 (2) 4 and 9 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080 of Dec. 19, 294)

[1] [2] Supreme Court Decision 91Nu13571 delivered on September 2, 1992 (Gong1992, 3030) / [4/5] Supreme Court Decision 95Nu5271 delivered on May 10, 1996 (the same purport) / [4/5] Supreme Court Decision 95Nu5264 delivered on May 10, 1996 (the same purport), Supreme Court Decision 95Nu5295 delivered on May 10, 1996 (the same purport) / [4] Supreme Court Decision 92Nu1971 delivered on October 27, 1992 (Gong192, 3330) / [5] Supreme Court Decision 92Nu9379 delivered on September 14, 1982 (Gong9498 delivered on September 196, 194; Supreme Court Decision 93Nu949399 delivered on September 29, 1982)

Hyundai Heavy Industries Co., Ltd. (Attorneys Yoon Il-young et al., Counsel for the defendant-appellant)

Seoul District Court Decision 201Hun-Ga144 delivered on August 1, 201

Seoul High Court Decision 93Gu8025 delivered on February 28, 1995

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The defendant's attorney's grounds of appeal (including the grounds of appeal on the supplemental appellate brief that was not timely filed, to the extent of supplement in case of the supplemental appellate brief that was not timely filed) are examined.

1. As to the grounds of appeal concerning the imposition of corporate tax, etc. for the business year 1986

A. Facts acknowledged by the court below

On September 11, 1986, the Plaintiff calculated 542,00 won per share of the non-party 1 corporation Korea Construction Co., Ltd. (hereinafter referred to as "Korea Construction Co., Ltd.") and transferred 271,00,000 won per share to non-party 1 who had a special relationship. On September 12, 1986, Korea Construction Co., Ltd. concluded a contract to merge with non-party 1 Korea Development Co., Ltd. (hereinafter referred to as "Korea Urban Development Co., Ltd.") on September 12, 1986, and completed the merger procedure: 1:0 after absorbing the non-party 4’s net asset value per share of Korea Development Co., Ltd. to Hyundai Industrial Development Co., Ltd. (hereinafter referred to as "Korea Construction Co., Ltd."), and transferred 10:12:60 won per share to non-party 16:60 won per share of the above market value assessed by the Plaintiff’s transfer of shares to the above non-party 106.

B. Determination of party members

In order to deny the validity of a taxpayer's calculation in accordance with the economic observation method or the principle of substantial taxation notwithstanding its legal form with respect to the pertinent transaction, there must be individual and specific denial provisions under the law. As to the wrongful calculation panel under the Corporate Tax Act, Article 46 (2) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080 of Dec. 31, 1993) (amended by Presidential Decree No. 14080 of Dec. 31, 1993) provides an individual and specific type of act in subparagraphs 1 through 8 with respect to the case where it is deemed that a taxpayer's tax burden is unfairly reduced under the parent law under the delegation of Article 20 of the Corporate Tax Act, and subparagraph 9 provides an overall type of act under subparagraphs 9, but the meaning of the above subparagraph 9 means the case where a taxpayer is deemed to have distributed a corporation's interest to other investors, etc., in addition to the above legal principles and the unfair type of act under subparagraphs 1 through 8.

Therefore, in the instant case, where the issue is whether a taxpayer’s transaction of assets, such as stocks, falls under either subparagraphs 4 and 9 of Article 46(2) of the Enforcement Decree of the Corporate Tax Act with respect to the wrongful act under Article 20 of the Corporate Tax Act, such transaction does not constitute “the case where a taxpayer purchases assets in excess of the market price from an investor, etc. or transfers assets to an investor, etc. falling short of the market price” as provided in subparagraph 4 of the same Article, barring any special circumstance, the act type as provided in subparagraph 9 of the same Article shall not be deemed to fall under the case.

In this case, the defendant's assertion is that, immediately after the plaintiff transferred the shares to a specially related person, Kra Construction entered into an unfair merger contract with the Korea Urban Development Corporation, and again merges with the Korea Urban Development Corporation, the plaintiff's act of transferring the shares constitutes subparagraph 9 as distributing the profits of the non-party to the non-party by taking account of the transaction form with no economic rationality such as bypassing or multi-stage act. However, since the future expected profits that would be received due to the above transaction at the time of the transfer of the shares in this case were uncertain or uncertain, in light of the principle of no taxation without law, i.e., ensuring legal stability and predictability, if the plaintiff's act of transferring the shares to a specially related person does not constitute a low price transfer under subparagraph 4, it cannot be viewed as a separate transaction act such as a corporate merger after the transfer, and it cannot be viewed as an act of dividing profits under subparagraph 9 (in relation to this case, the provision was newly established as a donation by a specially related person under Article 34-4 of the Inheritance Tax Act.

Therefore, in this case, only the issue is whether it falls under the low-price transfer under Article 46 (2) 4 of the Enforcement Decree of the Corporate Tax Act, and the standard time for determining the market price should naturally be the stock transfer price. In the same purport, the judgment of the court below that the Plaintiff’s act of stock transfer to Nonparty 1 does not fall under Article 46 (2) 9 of the Enforcement Decree of the Corporate Tax Act, but also the low-price transfer should be based on the time of stock transfer is just and there is no error in the misapprehension of legal principles as to wrongful calculation or incomplete deliberation as to the time of stock appraisal.

On the other hand, in assessing unlisted stocks, whether certain assets are assets of the corporation that issued the stocks should be determined depending on whether they belong to the ownership of the corporation in substance. Thus, even if the corporation is included in the assets on the balance sheet, if they are merely formal ones, they may not be included in the assets.

The court below determined that the plaintiff's transfer of the shares of Han Construction was unfair since 00 ○○ Housing was registered as owned by the non-party Chinese Heavy Industries Corporation, and the above Korean Heavy Industries paid property tax, etc. for its possession and use of the above Korean Heavy Industries. The above ○○ Housing Corporation filed a lawsuit for the recovery of ownership against the Korean Heavy Industries, and the above lawsuit is pending in the court until now. Han Construction is registered as the assets in its balance sheet for the above lawsuit, but it was confirmed that ○○ Housing was registered as the assets in its balance sheet, but it was for the above lawsuit to support the above lawsuit and actually did not exercise ownership or depreciation as the owner, etc., and it was not reasonable that the defendant considered it as the assets of Han Construction. Accordingly, the judgment below is just and there is no ground for appeal on the premise that the above ○○ Housing is the assets of Han Construction Corporation.

2. With respect to the transfer of shares of Hyundai Marine Fire Insurance Co., Ltd. (hereinafter referred to as Hyundai Marine Fire Insurance Co., Ltd.) among the disposition of imposition, including corporate tax attributed to the business year of 1988, the grounds for appeal No. d. f.h.

A. Facts acknowledged by the court below

On May 25, 198, the Plaintiff respectively transferred 10,000 per share to Nonparty 2, who was scheduled to disclose each of the shares of the Hyundai Marine Fire Insurance Co., Ltd., which was owned by himself, to Nonparty 3 with a special relationship, KRW 170,000 per share, respectively, and KRW 10,000 per share to Nonparty 3 on June 25 of the same year.

Afterwards, the above modern marine fire insurance was conducted by the appraisal of assets according to the capitalization of revaluation reserve and was issued to the relevant shareholders with gratuitous shares equivalent to the shares held. On June 8, 1989, the above non-party 2 was paid out 120,000 shares, and the above non-party 3 received 101,250 shares free shares, and the above non-party 2 owned 440,00 shares of modern marine fire insurance, and the above non-party 3 owned 371,250 shares of the above shares. Meanwhile, the modern marine fire insurance was offered for the public offering on June 14, 1989, and was offered for the public offering of 26,000 shares per share on July 10, 1989.

Based on this, the Defendant deemed as KRW 26,00,00, which is the above public offering price assessed in accordance with the regulations on the acquisition of securities at the time of transfer of modern sea and fire insurance shares and the criteria for the analysis of securities. The Plaintiff’s transfer of shares of each of the above companies to Nonparty 2 and Nonparty 3 with a special relationship constitutes a low-price transfer under Article 46(2)4 of the Enforcement Decree of the Corporate Tax Act (In addition, the Defendant calculated the above free subscription price as the above free subscription price is deemed to have been realized, considering that the inherent value of the above free subscription price is realized, and the above free subscription price is included in calculating the total value of the share price) pursuant to Article 20(2)4 of the Corporate Tax Act, which denies the calculation of the above transfer price of shares on November 16, 1991, and the difference between the value of the shares transferred by the Plaintiff and the value of the shares transferred by the Plaintiff to Nonparty 4 and the difference between the appraisal price of the same shares related to the transfer of shares of Hyundai engine stock company.

B. Determination of party members

According to the facts established by the court below, there was no example that can be recognized that the market value of the above shares was properly reflected at the time of transfer, and 26,000 won per share at the market value of the above transferred shares is the value determined by the public offering of new shares at the time of sale on June 14, 1989. According to the records, the current marine fire insurance is the value determined by the public offering of new shares at the time of sale on June 2, 1989 at the time of sale on an average of 30,000 won per share to the representative director of the new securities company at the time of sale on June 2, 1989. However, according to Article 54 of the Securities and Exchange Act and Article 37 subparagraph 5 of the Enforcement Decree of the same Act, it is difficult to view the company’s common value at the time of sale on the market value of new shares at the time of sale on an average of 19,000 won per share.

Therefore, pursuant to the proviso of Article 16-2 of the Enforcement Rule of the Corporate Tax Act, the market price of the above transferred shares shall be the value assessed under Article 5 (5) 1 (b) of the Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 12993 of May 1, 190; hereinafter the same shall apply), and the method of appraisal shall not be different because the transferred shares were listed after one year after the transfer (However, under Article 5 (6) 1 (b) of the Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 1990, Dec. 31, 1990), as shares of a corporation that reported to the Securities Management Commission for the purpose of disclosure of the company, and shares from six months immediately before the report on the transfer of the shares were newly established to be assessed by the Ordinance of the Ministry of Finance and Economy).

In the same purport, the lower court’s conclusion that the instant shares were transferred at a price exceeding the appraised value under the provisions of the Enforcement Decree of the Inheritance Tax Act is justifiable and it does not constitute a transfer at a low price. In so doing, it cannot be accepted as it erred by misapprehending the legal principles as to the market price of the shares to be disclosed, by misapprehending the legal principles as to the market price of the shares to be disclosed, by violating the precedents of the Supreme Court

In addition, the court below stated that the standards for the regulations on the acquisition of securities and the standards for the analysis of securities set forth the standards necessary for securities companies to take over securities, and therefore, the evaluation based on the standards cannot be deemed as the market price which properly reflects the objective exchange value. However, the purport of this case is that in this case the appraised value under the above provisions cannot be deemed as the market price of the transferred stocks. Thus, the court below did not err by misapprehending the legal principles on objective and reasonable evaluation methods in the evaluation of stocks.

Next, since the appraisal of shares should be based on the time of transfer, there is no basis for adding up the value of gratuitous transfer received after the transfer to the value of the shares at the time of transfer, the grounds for appeal on this point cannot be accepted. The purport of Article 26 of the Administrative Litigation Act is that even if the parties did not clearly assert any facts, an ex officio investigation and a decision based on the facts indicated in the records may be made ex officio, and it shall be made ex officio and determined within the scope of the claim (see Supreme Court Decisions 82Nu77 delivered on September 14, 1982; 94Nu4820 delivered on October 11, 1994). In determining whether there is a low-price transfer under Article 46 (2) 4 of the Enforcement Decree of the Corporate Tax Act, the burden of proof on the market value of transferred shares lies with the tax authority, and therefore, the defendant shall not be justified.

Finally, the appellant’s argument that the ground of appeal is based on the principle of no taxation without law is that the acquisition of the shares in this case’s grounds of appeal that a person with a special relationship could not impose tax on the acquisition of the shares in this case even though he obtained a huge amount of capital gains from the acquisition of the shares in this case, is contrary to the tax justice, or that it cannot be used as the basis of taxation on the basis of the principle

3. As to the grounds of appeal regarding the transfer of shares of Hyundai Engine Co., Ltd. (hereinafter referred to as “Modern Engine”), among the disposition of imposition, including corporate tax attributed to the business year 19

A. Facts acknowledged by the court below

On May 31, 1988, the Plaintiff transferred 1,800,000 shares of Nonparty 4, a person with a special relationship, to Nonparty 4, who owns the shares of Nonparty 1’s modern engine.

The Defendant assessed the value at the time of transfer of modern engine stocks according to the method of appraisal under Article 5(5) of the Enforcement Decree of the Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990; hereinafter the same shall apply) and imposed an additional tax on the corporate tax for the business year of 1988, by applying Article 9(4) of the Inheritance Tax Act, and Article 5-2 of the Enforcement Decree of the Inheritance Tax Act to calculate the value per share as KRW 11,593 per share, and to transfer the share to KRW 8,500 per share as it constitutes a low-price transfer under Article 46(2)4 of the Enforcement Decree of the Corporate Tax Act, and imposed an additional tax on November 16, 1991, by denying the transfer of the share as above, and by adding the difference to the appraisal difference

B. Determination of party members

Article 9(4) of the Inheritance Tax Act and Article 5-2 of the Enforcement Decree of the Inheritance Tax Act shall apply only to cases where a pledge is established or provided as a security for transfer in the appraisal of shares in accordance with the Inheritance Tax Act, but there is no reason to interpret otherwise on the ground that the above valuation is a case where the market price of shares is difficult to identify, and Article 5(5)1(b) and (c) of the Enforcement Decree of the Inheritance Tax Act as well as Article 9(4) of the Inheritance Tax Act and Article 5-2 of the Enforcement Decree of the Inheritance Tax Act do not apply to cases where the net asset value of the relevant corporation is assessed in order to calculate the market price of shares. (See Supreme Court Decision 94Nu4783 delivered on August 23, 1994).

There is no reason to discuss this issue.

4. Therefore, the appeal shall be dismissed, and all costs of appeal shall be assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Cho Chang-tae (Presiding Justice)