Plaintiff (Attorney Kim Young-soo, Counsel for plaintiff-appellant)

head of Dongjak-gu Tax Office

May 31, 2017

Seoul Administrative Court Decision 2016Gudan57338 decided November 16, 2016

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s disposition rejecting correction of KRW 122,531,58 of the transfer income tax attributed to the year 2015 against the Plaintiff on August 7, 2015 is revoked.

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

The court's reasoning for this part is the same as the corresponding part of the judgment of the court of first instance. Thus, this part of the judgment is cited in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since the association member's relocation right of this case is deemed one house for one household, the transfer margin subject to the special deduction for long-term possession is not limited to the transfer margin prior to the approval of the management and disposition plan, but should be deemed as the whole transfer margin like the house. Therefore, the disposition of this case on a different premise

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) The purpose of the special long-term holding deduction system is to induce the sound investment or ownership of real estate through deduction of a certain amount in calculating the transfer income amount for long-term holding mountain, the holding period of which is at least three years, and to make a deduction of inflation in capital gains with strong nominal income due to price inflation. The purpose of applying the special holding deduction rate of up to 80/100 in cases where one house for one household owns one house for a long-term period is to resolve the burden of capital gains tax on the long-term holding of one house for one household, taking into account the fact that one house for one household is an essential requirement for stability in national residential life (see Supreme Court Decision 2014Du36921, Apr. 23, 2015).

Article 95(2) of the former Income Tax Act (amended by Act No. 11611, Jan. 1, 2013) (hereinafter “instant provision”) only provides for gains from the transfer of assets under Article 94(1)1, and the main text stipulates that assets which are not one house for one household, and the proviso was divided into one house for one household, and the deduction rate by holding period differently. In the past, the Supreme Court held that “where a member of a reconstruction association provides an existing house and land to a reconstruction association and transfers the status of being selected as an occupant through the association (right of sale) through the association pursuant to the approved business plan, the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 8705, Feb. 19, 2005) (amended by Presidential Decree No. 8705, Feb. 19, 2005) by deeming that the right to purchase real estate is subject to special deduction of 160 million won at the time of transfer to 206 million won (special deduction of transfer income tax).

The main text of Article 95(2) of the Income Tax Act, amended by Act No. 11611, Jan. 1, 2013, explicitly states that “the association member’s relocation right among the assets under Article 94(1)2(a) is subject to the special long-term holding deduction. Of the assets under Article 94(1)2(a), where the association member’s relocation right is transferred “the transfer margin of the association member’s relocation right, it shall be limited to the transfer margin prior to the approval of the management and disposition plan under Article 48 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents.” According to the purport of subparagraph 2(b) and arguments, the special long-term holding deduction under the Income Tax Act prior to the amendment does not apply to the right to acquire real estate only at the time of transfer of the land or building and the right to acquire real estate. However, even if a person who held the previous house loses a house due to redevelopment or reconstruction, it can be seen that the land or building was destroyed until the approval plan for the management and disposal.

2) Considering the developments and purport of the amendment of the instant provision as seen earlier, it is reasonable to deem that the special long-term possession deduction does not apply to gains from transfer after the date of approval of the management and disposition plan of the instant association member's relocation right. Therefore, the Defendant’s disposition of this case is lawful.

① In light of the language and text of the Act, if the same language concept is used within the same provision, the meaning should also be consistently interpreted, barring any special circumstance. Therefore, the term “transfer margin” and “transfer margin of its assets” under the proviso of the main text of the instant provision should be interpreted as the same meaning, and no special circumstance or reasonable ground exists to deem otherwise. However, it appears that the part on the overall title was omitted in order to avoid unnecessary repetition.

② The Plaintiff’s assertion is that the instant provision differently prescribes the scope of transfer margin and the deduction rate depending on whether the said provision is one house for one household. However, the instant provision, prior to the amendment, only prescribed the deduction rate by dividing it into the main text and proviso in order to apply a high rate in consideration of the impact of one house for one household on the stability of the residential life of the people, and did not separately distinguish the scope of transfer margin from the case of one house for one household and the case of land or buildings which are not one house for one household. The instant provision is the same as the instant provision prior to the amendment, and its structure only added the association member’s relocation right to the subject of the special deduction for long-term possession, and it is difficult to view that the proviso to the instant provision aims to separately define the scope of transfer margin of one association member’s relocation right for one household. Unlike the land or building, there is no ground to interpret otherwise not only the deduction rate deemed as one house for one household, but also the scope of transfer margin in addition to the scope of transfer margin.

③ In light of the fact that the special deduction system for long-term holding was established in the purport of deducting the inflation of capital gains with strong nominal income due to price increase, the legislative intent of the legislators that limited the scope of capital gains subject to the special deduction for long-term holding to the prior approval of the management and disposition plan is to exclude the development gains from those subject to the deduction, and it cannot be deemed that it differs from the association member's relocation rights regarded as one house for one household.

④ Under the principle of no taxation without representation, the interpretation of the tax law is interpreted as the statutory text, barring any special circumstance, and it is not permitted to expand or analogically interpret without reasonable grounds. As long as the provision of this case provides the main text and proviso to make the deduction rate different depending on whether it is one house for one household, the association member’s relocation right of this case is deemed as one house for one household under Articles 155(17) and 159-3 of the former Enforcement Decree of the Income Tax Act (amended by Act No. 26302, Jun. 1, 2015), even if it is deemed that the deduction rate under the proviso to the proviso to the provision of this case is only applicable, and the scope of transfer margin cannot be deemed as being regarded as being the same as “house”.

3. Conclusion

The plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance with different conclusions is unfair, and the plaintiff's claim is revoked and dismissed.

Judges Kim Yong-Ih (Presiding Judge)