Busan District Court 2015Guhap20269 (2015.03)

The amount of issue can not be considered as entertainment expenses and constitutes sales incidental expenses.

(1) The purpose of the first instance court's decision is to further promote the smooth progress of transaction relations by enhancing friendship between business parties, and it cannot be deemed as entertainment expenses solely on the ground that the payment was made to the owner of a ship who is not the direct counter-party to the transaction, and thus, it cannot be deemed as entertainment expenses. Therefore, the key amount falls under sales incidental expenses.

Article 19 (Scope of Deductible Expenses)

2015Nu22035 Revocation of Disposition of Corporate Tax Imposition

AAA Corporation

○○ Head of tax office

Busan District Court Decision 2015Guhap20269 Decided July 3, 2015

September 25, 2015

January 15, 2016

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

Cheong-gu Office

1. Purport of claim

The Defendant’s imposition of corporate tax of 73,260,920 won against the Plaintiff on October 2, 2012, the imposition of corporate tax of 2007 year 73,260,920 won, corporate tax of 2008, corporate tax of 2009, corporate tax of 2009, corporate tax of 000, corporate tax of 2010, corporate tax of 000, and corporate tax of 2011 is revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. The issues of the instant case and the judgment of the court of first instance

A. The issues of the instant case

○○○ Director of the Regional Tax Office conducted a consolidated investigation of corporate tax against the Plaintiff, and paid the amount at a certain ratio of the supply price (hereinafter referred to as “market price”) to the pre-owner while supplying the product to the pre-owner with the pre-sale approval condition constitutes an honorarium for entertainment expenses. Accordingly, the Defendant notified the Plaintiff of the imposition of corporate tax by non-Inclusion of the limit of entertainment expenses in excess of deductible expenses. Accordingly, on October 2, 2012, the Defendant imposed ○○○○○ (hereinafter referred to as “instant disposition”).

The key issue of this case is whether the issue amount was paid in connection with the plaintiff's business and should be subject to inclusion in deductible expenses within the generally accepted range.

B. Judgment of the court of the first instance

In light of the following circumstances, the court of first instance determined that the key issue amount constituted losses as sales incidental expenses.

① The vessel owner entered into a vessel benefit contract between the vessel owner and the vessel manufacturer, depending on the need to hold the vessel owner responsible for the direct warranty against the vessel owner. However, the economic rationality exists when the vessel owner enters into such contract, and there is no reason to deny its validity. In addition, obtaining approval through negotiations with overseas vessel owners in order to supply vessel equipment and materials seems to be the practice of the vessel supply industry.

(2) The shipowner benefit contract is a contract that prescribes the details of warranty liability for defects in vessel equipment, and cash paid based on the shipowner benefit contract may be deemed the advance payment of defect repair expenses.

3. The main benefits, including the key amount, constitute commercial practice as seen earlier, and in the event of not paying the key amount to overseas ship owners, sales to ship owners are difficult, which constitutes the expenses directly related to the sales of goods or products.

④ The key issue amount is that a prior owner is not paid under the prior benefit contract between the Plaintiff and the prior owner, and thus, can demand the performance of the obligation. Therefore, it is reasonable to deem that the payment constitutes not merely a benefit or honorarium but a cost obligated to pay.

⑤ In light of the fact that corporate tax should be imposed on net income according to the tax-bearing capacity, regardless of whether it is prohibited under other Acts, it is reasonable to recognize the inclusion of expenses in deductible expenses even if the expenses or expenses per se paid to obtain illegal income are illegal, unless there are special circumstances such as extremely contrary to social order. It is difficult to view that the payment of cash or fees to the owner in accordance with the prior benefit contract is unlawful in its expenditure itself or that it is contrary to social order.

2. The judgment of this Court and the citing the judgment of the first instance court

The defendant asserts that the amount at issue also constitutes entertainment expenses as an honorarium paid to a specific owner. However, considering all the circumstances cited by the first instance court's ruling, the first instance court's decision is justifiable in its holding that the disposition at issue is unlawful on the following grounds: (a) prior benefit consists of items such as extension of the period of free guarantee, supply of spare parts, and payment of the amount of issues; (b) how to constitute an item; and (c) each item is determined in accordance with the prior preference of the owner; (d) the owner who does not receive the amount of issue receives the prior benefit from the plaintiff under his prior preference; (e) the owner receives the prior benefit consisting of items such as extension of the period of free guarantee, extension of the period of free guarantee, supply of spare parts, etc. which are alternative to the issue amount; and (e) the defendant recognizes the supply of spare parts as deductible expenses pursuant to the main sentence of Article 28(2) of the Civil Procedure Act, as stated in the judgment at the first instance court's judgment, except for the reasons stated in this case.

3. Conclusion

Therefore, the judgment of the first instance court is just, and the defendant's appeal is dismissed as it is groundless.