Cho High-2016-west-1137 (Law No. 28, 2016.09)

Since incorporation of non-self-employed farmland into an urban development zone does not fall under cases where the use is prohibited or restricted by statutes, it still constitutes land for non-business use.

Even if farmland which had not been self-fishered was incorporated into an urban development zone, there is no restriction on the use of farmland for its original purpose, and there is no evidence to prove that there was no attempt or effort to change the form and quality of land, so it cannot be viewed as cases where use or restriction is made pursuant to the statutes, and

Article 104-3 (2) of the Income Tax Act

2016Guhap8378 Revocation of Disposition of Imposing capital gains tax

EO

The Director of Gangnam District Office

June 16, 2017

July 14, 2017

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 1,061,383,370 (including additional tax) for the Plaintiff on December 1, 2015 shall be revoked.

1. Details of the disposition;

A. The Plaintiff acquired ownership on June 9, 1978 and sold to △△△△, an incorporated association (hereinafter “△△△△△”) for sale and purchase on the ground of ownership on November 28, 2014, 9.11 billion won.

B. On January 31, 2015, the Plaintiff reported and paid capital gains tax of KRW 2,253,893,649, and KRW 649 to the Defendant on January 31, 2015, on the ground that the pertinent land was not the land for non-business because it was not the land for which the use was prohibited or restricted pursuant to the law after acquiring the land under Article 104-3(2) of the Income Tax Act and Article 168-14(1)1 of the Enforcement Decree of the Income Tax Act.

C. However, the Defendant denied the special deduction for long-term possession on the ground that the pertinent land cannot be deemed limited to the use of the land as farmland for its original purpose, and that it does not constitute a non-business land due to unavoidable reasons, and subsequently corrected and notified the Plaintiff of the transfer income tax for the year 2014 (including the additional tax) in addition to the Plaintiff’s transfer income tax for the year 2014.

D. Accordingly, the Plaintiff filed an appeal with the Tax Tribunal on February 29, 2016, but was dismissed on September 28, 2016.

[Ground of recognition] Facts without dispute, Gap evidence 3 through 6, Eul evidence 1 and 2 (including each number), the purport of the whole pleadings

2. Determination on the lawfulness of the instant disposition

A. Summary of the plaintiff's assertion

Since the land at issue does not constitute non-business land for the following reasons, the disposition of this case denying the special deduction for long-term holding is unlawful even though it is subject to the special deduction for long-term holding.

1) Pursuant to the authorization of an implementation plan for an urban development project and public notice of detailed list of the pertinent land that occurred after the Plaintiff acquired the pertinent land, the pertinent land could not be used not only for farmland but also for other purposes. Thus, it constitutes “land, the use of which is prohibited or restricted pursuant to the law after acquiring the land” under Article 168-14(1)1 of

2) The Plaintiff sold the land at issue to △△△△△△, an agent for implementing an urban development project in the O district, and the land purchased by consultation or expropriated under the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects (hereinafter “Land Compensation Act”) and other Acts constitutes “land before two years prior to the date of public announcement of project approval.”

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) On February 10, 2009, the head of the OO Do designated a single unit of the land at issue as an urban development zone of the O zone and announced a topographic map. Therefore, pursuant to Article 9(2) of the Urban Development Act, the land at issue was deemed determined and publicly announced as an urban area and a district unit planning zone under the National Land Planning and Utilization Act.

2) On July 3, 2009, the O Do Governor formulated and announced a development plan for an urban development zone of the O Do, and the method of implementation was a replotting.

3) On December 21, 2009, anO district Urban Development Project Association (hereinafter “the instant association”) was authorized to establish a project on December 21, 2009, and on January 14, 2010, it was designated as a project implementer of anO district urban development project (hereinafter “instant project”). Meanwhile, the instant association selected △△△△ as a project agent.

4) On November 24, 2010, the CO Do Governor approved the instant project implementation plan by the project implementer of the instant association, and announced a topographic map. The key land was determined as Class II general residential areas.

[Ground of recognition] The entry of Gap evidence 1-1-6, 2-1 to 6, and the purport of the whole pleadings

D. Determination

1) According to Article 95(1) and (2) of the former Income Tax Act (amended by Act No. 13558, Dec. 15, 2015; hereinafter the same), where certain assets are transferred after holding them for at least three years, the amount of special deduction for long-term possession should be deducted from gains from transfer, and the amount of capital gains should be calculated by deducting the special deduction for long-term possession, while land for non-business under Article 104-3 of the former Income Tax Act is excluded from the subject of special deduction for long-term possession. Thus, we examine whether the pertinent land constitutes land for non

2) Whether the use is prohibited or restricted by law

A) According to Article 104-3(1)1 Item (a) and (b) of the former Income Tax Act and Article 168-8(2), (3), (4) and (5) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26067, Feb. 3, 2015; hereinafter the same), “farmland for which the owner of the farmland does not reside in the location of the farmland or is not cultivated by himself/herself” or “farmland in the urban area” falls under the non-business land in principle, but even in the case of farmland in the urban area, it shall not be deemed the non-business land for two years from the date of incorporation into the urban area.

In addition, according to Article 104-3(2) of the former Income Tax Act and Article 168-14(1)1 of the Enforcement Decree of the Income Tax Act, where the relevant land becomes a non-business land due to inevitable reasons for prohibiting or restricting the use of the land after acquiring the land, the relevant land may not be deemed a non-business land. Here, “land, the use of which is prohibited or restricted under the Act and subordinate statutes,” refers to land, the use of which is specially restricted beyond the ordinary limit according to its use. This includes not only the land directly prohibited or restricted by the Act and subordinate statutes, but also the land, the actual use of which is prohibited or restricted by an administrative agency as part of administrative action, etc. as a whole, as well as the land, the use of which is prohibited or restricted by the Act and subordinate statutes. In addition, the determination of whether it constitutes “where the use is specially restricted beyond the ordinary limit according to the use of the land” should be made on the basis of the principle of whether the use of the land is restricted according to its original use (Supreme Court Decision 2010Du18543

B) In light of the aforementioned legal principles, in full view of the following circumstances, where there is no dispute between the parties in light of the aforementioned legal principles, or the facts acknowledged earlier, and the following circumstances revealed by the respective entries and videos and the purport of the entire pleadings, including evidence Nos. 1, 3, 4, and 6 (including various numbers), the land at issue cannot be deemed as specially prohibited or restricted from use beyond the ordinary limit according to its use. Thus, the Plaintiff’s assertion on this part cannot be accepted.

① The Plaintiff owned farmland in 2009 for a long period of 31 years until the land was designated as an urban development zone and was incorporated into an urban area, and did not reside or cultivate it by himself/herself. The key land is land for non-business under Article 104-3(1)1(a) of the former Income Tax Act, and the key land is land for non-business use pursuant to Article 104-3(1)1(b) of the former Income Tax Act even after being incorporated into an urban area. Therefore, it does not constitute land for non-business use only when the key land was incorporated into an urban area. Nevertheless, deeming the key land as being designated as an urban development zone and incorporated into an urban area does not constitute land for non-business use on the ground that it was transferred after holding farmland as a means of property increase without an intention to actually cultivate, thereby violating the purpose of the system to restrain speculative demand for farmland.

② The land category of the key land is farmland in the field or the field, and the Plaintiff has cultivated the key land as farmland through other managers, and even according to the aerial photography, the original purpose of the surrounding land including the key land appears to be farmland. However, according to Article 19(1)8 of the Urban Development Act, even if the instant project implementation plan is deemed to have been authorized and publicly announced, permission for diversion of farmland under Article 34 of the Farmland Act, reporting on diversion of farmland under Article 35, and approval for alteration of use under Article 40 of the same Act, it is merely for the smooth promotion of an urban development project, and it cannot be deemed to have the effect of prohibiting or restricting the Plaintiff’s continuous use of the key land as farmland for its original purpose. Furthermore, according to Article 9(6)2 of the Urban Development Act and Article 16(3) of the Enforcement Decree of the Urban Development Act, development activities, such as construction of simple structures directly used in the production of agricultural and fishery products, and alteration of the form and quality of land for cultivation, etc. are also possible without permission.

③ The Plaintiff acquired the key land for the purpose of cultivating it as farmland through another manager, and used it for the actual purpose of farmland. There is no evidence to recognize that the Plaintiff owned the key land as farmland for a long time and sold it, and there is no attempt or effort to either change the form and quality of the land or to build a new building on that part. Therefore, it is difficult to recognize the possibility of changing the original purpose of use. On the other hand, pursuant to Article 9(5) of the Urban Development Act and Article 16(2) of the Enforcement Decree of the Urban Development Act, in order to engage in development activities exceeding the permissible scope without permission prior to the determination of whether to grant permission, a market permission is necessary for the implementation of development activities exceeding the permissible scope. In such a case, it cannot be deemed that the development activities on the key

2) Whether the land constitutes a land purchased by consultation or expropriated

A) According to Article 104-3(2) of the former Income Tax Act and Article 168-14(3) of the former Enforcement Decree of the Income Tax Act, land purchased by consultation or expropriated pursuant to the Land Compensation Act and other Acts and subordinate statutes shall not be deemed land for non-business use before the acquisition date of two years prior to the public announcement date of the project approval (hereinafter collectively referred to as “cover point clause”).

However, the principle of no taxation without law is a requirement for taxation, or a requirement for tax exemption or exemption, and the interpretation of tax laws should be interpreted in accordance with the text of the law, barring special circumstances, and it is not allowed to expand or analogically interpret the tax laws with favorable interests to taxpayers without reasonable grounds. In particular, it accords with the principle of fair taxation to strictly interpret the provisions that can be seen as clearly preferential among the requirements for tax exemption.

B) The facts acknowledged earlier in light of the aforementioned legal principles, comprehensively taking into account the following circumstances revealed by the entries in Gap evidence 1-2 through 6, Gap evidence 3, Eul evidence 5-1 through 5-5, and the purport of the whole pleadings, the Plaintiff’s selling of the pertinent land to △△△△△ is merely a sale between private persons, but cannot be deemed as a purchase by consultation or expropriation under the Land Compensation Act and other Acts, and the Plaintiff’s allegation in this part is rejected.

(1) The key issue clause provides special tax benefits to support the smooth promotion of public works, etc., which are land for non-business, which is not exceptionally deemed land for non-business use. Therefore, the subject of purchase by consultation or expropriation pursuant to the Land Compensation Act or the Urban Development Act is limited to a project operator, and Article 12(2) and (5) of the Urban Development Act limits the subject of entrustment of the implementation duties or the purchase of land to a public institution, etc. or a trust business operator approved by the designating authority. Therefore, even if the instant association selects a △△△△△△△ as an execution agent, the △△△△△△△△ shall not be deemed a trustee of the instant project, the project operator,

② The key point is that the land owner’s consent does not have any disadvantage being expropriated for the purpose of public works, etc., taking account of the fact that the land cannot be deemed non-business land. Since the project in this case is implemented through the replotting method under the Urban Development Act, the Plaintiff is merely the choice of selling the land at a price considerably higher than the officially announced land price, instead of receiving replotting or liquidation money, if the project is completed without the need to sell the land.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.