A. Purpose of legislation under Article 6 (2) of the Income Tax Act

(b) Definition of “factory that has been continuously operated for not less than two years” under Article 6(2)2 of the Income Tax Act;

(c) The meaning of "national who operates a business with factory facilities in a large city" under Article 42 (2) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 3660 of Dec. 19, 1983);

(d) Whether the tax authority’s decision on tax abatement or exemption based on false application has been revoked and violated;

A. The purpose of Article 6(2) of the Income Tax Act is to support the relocation of a factory in order to continue the operation of the factory even after the relocation of the factory by giving the benefit of income tax reduction and exemption to the transferor of the site and building of the previous factory in order to relocate the factory while operating the factory, and to prevent the benefit of income tax reduction and exemption from abuse of the benefits of income tax reduction and exemption from real estate speculation.

B. In full view of the legislative intent of the above provision and the provisions on tax reduction and exemption should be strictly interpreted in accordance with the principle of tax equity, the term “factory continuously operated for two or more years” under Article 6(2)2 of the Income Tax Act means a factory continuously operated for two or more years retroactively from the date of transfer where the owner of the building and site at the time of transfer is the same person as the operator of the factory at the time of transfer, and the period of ownership and the actual operation of the owner is the same.

C. Article 42(2) and (3) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 3660, Dec. 19, 1983) intends to promote the relocation of factories in a large city to provincial areas, and to support the relocation of factory facilities so that they can continue to operate the factory even after the relocation of the factory facilities, and the provisions on tax reduction and exemption should be strictly interpreted in light of the principle of tax equity, the term “national who operates a business with factory facilities in a large city” under Article 42(2) of the said Regulation of Tax Reduction and Exemption Act refers to the owner of the relevant factory facilities who directly operates a business using the factory facilities under his own calculation, and even if the owner of the factory facilities is the owner of the factory facilities, the lessor of the factory facilities not directly engaged in a business using the factory facilities under his own calculation. The same applies even if a representative director of the leased company is the lessor of the factory facilities, and such a representative director of the company is the lessor, the lessor of the company.

D. If a person who is not entitled to receive tax reduction or exemption applies for a false tax reduction or exemption as if he/she were eligible to receive tax reduction or exemption benefits, and the believed taxing authority makes a decision of tax reduction or exemption by mistake, the tax authority may revoke the decision of tax reduction or exemption and impose a tax exemption by itself. In such a case, the applicant may not invoke the trust interest in the decision of tax reduction or exemption, and the tax imposition disposition is contrary to the principle of good faith or the legal doctrine.

A.B. Article 6(2)(c) of the Income Tax Act; Articles 42(2) and 42(3)(d) of the former Tax Reduction and Exemption Control Act (amended by Act No. 3660, Dec. 19, 1983). Article 15 of the Framework Act on National Taxes

[Judgment of the court below]

Head of the Cleanness Tax Office

Seoul High Court Decision 86Gu1472 delivered on June 22, 1987

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

We examine the grounds of appeal.

With respect to No. 1:

Article 6 (2) of the Income Tax Act provides that "where there exists any income falling under any of the following subparagraphs among the transferred income amount, the income tax shall be exempted by applying mutatis mutandis the provisions of paragraph (1)." Article 6 (2) 2 of the same Act provides that "income accruing from the transfer of land and buildings for the purpose of transferring a factory continuously operated for 2 years or more" as one of the income subject to exemption. This provision provides that "The owner of the building and site of the factory is identical to the owner of the building and site of the factory, so that he can continue the operation of the factory even after the relocation of the factory by granting the benefits of income tax reduction and exemption to the transferor of the building in order to relocate the factory, so this provision aims to provide support for the relocation of the factory, and to prevent the abuse of the income tax reduction and exemption benefits in real estate, so the legislative purpose and the provision of tax reduction and exemption are to be strictly interpreted in accordance with the principle of tax equity, and thus, the "factory continuously operated for 2 years or more" in this case is not a case where the owner of the owner of the building and site of the factory, and its actual operation.

With respect to the second ground:

Article 42(2) of the Regulation of Tax Reduction and Exemption Act (amended by Act No. 3660, Dec. 19, 1983) provides that capital gains tax or special surtax shall be exempted on any income accruing from the transfer of factory sites and buildings by a national who operates a business with factory facilities in a large city to relocate such factory to a provincial area under the conditions as prescribed by the Presidential Decree. Paragraph (3) of the same Article provides that where a national who is exempted from corporate tax, etc. under paragraphs (1) and (2) fails to start a business after acquiring a factory in a provincial area under the conditions as prescribed by the Presidential Decree, the exempted tax amount shall be collected without delay. This provision aims to promote the transfer of factory facilities to a provincial area in a large city, while carrying on a business with factory facilities and to support the transfer of factory facilities to a business owner who has operated the previous factory facilities, which is the owner of the building site and building, to relocate such factory facilities, even if so, such a representative director who directly uses such factory facilities in a large city under the purpose of legislation and the principle of tax reduction and exemption.

Under such view of the court below, the court below is just in holding that Article 42 (2) of the Regulation of Tax Reduction and Exemption Act does not apply to the income accruing from the transfer of the site and building of the above factory operated by the non-party company after leasing the factory facilities of this case owned by the plaintiff as the representative director to the non-party corporation, the non-party corporation holding office as the representative director, and there is no error in the misapprehension of legal principles, such as the theory of lawsuit.

With respect to the third point:

According to the reasoning of the judgment below, the court below acknowledged the facts that the plaintiff transferred the factory site and building of this case leased to the non-party corporation corporation, and concealed the fact of the lease, and that the transfer of the site and building was falsely exempted from the transfer income tax as if the transferor of the factory site and building operated by the plaintiff, who is the object of the exemption from the transfer income tax, made a false application for exemption from the transfer income tax, and confirmed that the above lease was cancelled by mistake and that the above tax disposition of this case was lawful. However, the court below did not find that there was an error of law of misconception of facts due to a violation of the rules of evidence such as the theory of lawsuit, and it did not err in the misapprehension of the legal principles as to the exemption from the transfer income tax, and it did not err in the misapprehension of the legal principles as well as in the misapprehension of the legal principles as to the exclusion from the transfer income tax.

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

Justices Yoon Il-young (Presiding Justice)