The legitimacy of the disposition that the transfer of shares to a person with a special relationship constitutes an illegal act through three persons;

It does not decide whether to pay the purchase price of shares, whether to exercise the substantial management right, but it does not constitute a normal transfer because the Plaintiff does not have any reason to indicate the external name of the shares even when the Plaintiff paid expenses.

Article 167 (Unfair Act and Calculation of Transfer Income Tax)

1. The Defendant’s imposition of capital gains tax of KRW 254,487,920 and securities transaction tax of KRW 8,155,400 against the Plaintiff on November 1, 2005 shall be revoked in entirety.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff, a KOSDAQ-registered company, transferred 2.5 million won (hereinafter “instant shares”) shares to ○○○○○○ (hereinafter “instant shares”) over three occasions on February 26, 2001, as the largest shareholder of ○○○○○ Co., Ltd. (hereinafter “○○○○”).

B. On May 31, 2001, Kim ○ transferred the instant shares to New ○○ on 2.5 billion won, and on September 13, 2001, new ○○○○○ established on September 13, 2001, the Plaintiff transferred the instant shares to 2.5 billion won (hereinafter “instant transfer”).

C. Accordingly, the Defendant determined that the Plaintiff transferred the instant shares directly to ○○○○○○○ in a special relationship after all of the instant shares transfer contracts concluded between the Plaintiff and ○○○○ was terminated and invalidated, and assessed the instant shares as KRW 3,98,280,000 per share [the average of the closing price of the Korea Stock Exchange published in two months before and after the base date of appraisal] based on the market price assessment method under Article 63(1)1 (a) of the Inheritance Tax and Gift Tax Act (the average of the closing price of the Korea Stock Exchange per day published in two months after the base date of appraisal).

D. On November 1, 2005, the Defendant imposed capital gains tax of KRW 254,487,920 on the Plaintiff on the ground that the part corresponding to the difference between the transfer value of this case and the above appraised value was based on the wrongful calculation and thus the Plaintiff obtained capital gains equivalent to the above difference (hereinafter “instant disposition”). Meanwhile, the Defendant imposed capital gains tax of KRW 8,15,400 on the transfer of this case (hereinafter “instant disposition”), and imposed capital gains tax of KRW 8,15,400 on the transfer of this case.

[Ground of recognition] Facts without dispute, Gap evidence 1-1-2, Gap evidence 5-1-5, Eul evidence 1-1-2 and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The defendant's assertion

Although the Plaintiff transferred the instant shares to ○○○ on the premise of a transfer of management right by ○○○○○, the Plaintiff transferred the instant shares to ○○○○○ for the same reason, even after each transfer took place, the Plaintiff exercised the substantial management right of ○○○○○○○○, and the Plaintiff did not have properly received the transfer price of the instant shares from ○○○○ or ○○○○○, and the Plaintiff did not directly transfer the instant shares to ○○○○○○○○, as ○○○ was transferred the instant shares from ○○○ or ○○○, stating the Plaintiff as ○○○○ as ○○○○ upon receipt of the instant shares from ○○○○, and the Plaintiff issued a promissorysory note to ○○○○ and ○○○○, including the Plaintiff’s issuance of a promissory note to ○○○

Even if there exists a substantial transactional relationship between the Plaintiff, Kim ○, Kim ○, and New ○○○, the Plaintiff and New ○○○○, such as the agreement between the Plaintiff and new ○○○ to have not concluded the instant transfer contract, and each of the said share transfer contracts, upon the cancellation of all of the instant shares by agreement between the parties, are re-transfered to ○○○○.

(2) The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons.

(A) The Plaintiff’s transfer of the instant shares to Kim○○, and the second transfer of the instant shares to Kim○○○ is a substantial transaction, and the instant transfer is a transfer of the instant shares to Ha○○○○○○○○○. As such, the provision on a wrongful calculation panel premised on the Plaintiff’s transfer of the instant shares to Ha○○○○○○○○○○, cannot be applied.

(B) Even if the Plaintiff transferred the instant shares to Do○○○○○○○, according to the wrongful calculation rules under the Corporate Tax Act, the market price per share of the instant shares is KRW 1,020,020, which is the final market price of the stock exchange on the date of the instant transfer, whereas the market price per share of the instant shares under the Income Tax Act is KRW 1,652, the average market price per two months before and after the base date of appraisal, respectively, is KRW 1,652, which is the average market price before and after the base date of appraisal. This would result in a difference between the acquisition price and the transfer price of the relevant shares in a stock transaction between Ha○○○○ (corporation) and an individual (Plaintiff), and thus, in violation of the substance over form principle, the corporate tax should be imposed on the Plaintiff by applying KRW 1,020 per share to Ha○○○○,

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

(1) The transfer of the instant shares between the Plaintiff and Kim○○○

(A) The Plaintiff transferred the instant shares to Kim○○, and received a promissory note with a face value of 2.5 billion won issued by Kim○○, and around April 2001, the Plaintiff reported and paid the transfer income tax of KRW 58,588,780 and securities transaction tax of KRW 12.5 million to the head of ○○ Tax Office with a face value of KRW 653,486,541.

(B) As the representative director of ○○○, a company, which is an intra-company venture company of KR○○, Kim○, the Plaintiff and the Plaintiff agreed to exercise the management right of ○○○○○ through the acquisition of the instant shares, and he was appointed to the position of ○○○ representative director following the acquisition of the instant shares.

(C) However, even after the transfer of the instant shares, the Plaintiff, while exercising the right of management of ○○○○○○, excluded Kim○○ from the management of ○○○○○○○, and offered capital increase regardless of the intention of ○○○○○.

(D) Around May 2001, Kim ○ notified the Plaintiff that the Plaintiff would take legal measures, such as filing a lawsuit seeking the cancellation of the issuance of new shares, by demanding the Plaintiff to clarify the unauthorized use of his certificate of seal impression and seal, and the issuance of new shares by issuing new shares, etc. In order to cope with the situation, the Plaintiff was only ○○ in the process of checking the other party to acquire the instant shares from Kim○○ in order to manage the situation, and introduced Kim ○○ to Kim○.

(2) Transfer of the instant shares between Kim○ and Shin○○.

(A) On May 31, 2001, the Plaintiff, Kim ○, and new ○○, transferred the instant shares to the new ○○○○○○. The payment was settled in a way that new ○○, which, in turn, delivers to the Plaintiff a promissory note with a face value of KRW 250 million in checks and face value of KRW 2250 million in face value and KRW 2250 million in face value, and that the said promissory note paid to the Plaintiff by Kim○○ was returned to the Plaintiff.

(B) As a result, ○○ was proposed to take over ○○○’s shares from a university post, which was working on ○○○○, while seeking for a business to produce a biological verification cellphone, ○○ became jointly with ○○ and Gab○, a university motive, and Gab○.

(C) On July 12, 2001, the Plaintiff prepared a written agreement containing the content that the monthly salary that ○○ received from March 2001 to June 2001 did not return, and around that time, 5 million won was paid to ○○○○○○○○ by paying 5 million won to ○○○○○○’s Plaintiff for the acquisition of the instant shares and the payment of the price therefor.

(D) On August 201, 2001, new ○○○, who was appointed as the representative director of ○○○○○○○○ upon the acquisition of the instant shares, was found to have discovered 13 billion won guaranteed by ○○○○○○○○○, which had not been verified at the time of acquiring the instant shares, and the Plaintiff raised an issue to the Plaintiff, and the Plaintiff was deemed to have no stock acquisition agreement and proposed to prepare a written agreement. Accordingly, on September 2001, the Plaintiff and new ○○ concluded an agreement with ○○○○○ to sell the instant shares from ○○○○○○○○○○ upon the initial purchase price. Accordingly, new ○○○ concluded a contract to transfer the instant shares to ○○○○○○○○○○ on September 13, 2001.

(E) After that, the Plaintiff, who is a representative director, has accepted the instant shares from the new ○○○○○○○, to KRW 2.5 billion, issued and delivered a promissory note with a face value of KRW 2.25 million with the Plaintiff as the addressee. The Plaintiff paid KRW 250 million to the new ○○○○○○○○○○○, and settled the amount by way of returning a promissory note with a face value of KRW 2.25 million with the face value received from the new ○○○○○○○○○○○.

[Ground of Recognition] A’s non-contentious facts, Gap’s evidence 5-1 to 5, Gap’s evidence 7, 15, 16, Gap’s evidence 17-1 to 3, Eul’s evidence 2, 3, Eul’s evidence 4-2, 3, witness Kim ○, witness Kim○’s testimony, part of witness Kim○’s testimony, and the purport of the whole pleadings

D. Determination

(1) Whether the transfer of the instant shares constitutes a real transaction

According to the above facts, it can be known that there was a transfer of the shares in this case between the Plaintiff, Kim○, Kim○, and Shin○, and whether the transaction price was paid, and whether the actual management right was exercised against Kim○○○○○, not whether the above transfer was the actual transaction. The Plaintiff paid capital gains tax and securities transaction tax on the transfer of the shares in this case to Kim○○, and paid 10 million won or more, including payment of 55 million won as compensation for Kim○○, and there is no specific reason to conclude the appearance of the shares in the order of the Plaintiff, Kim○, Kim○, New○, and Ha○○○○○○○, in order of the order of the Plaintiff, Kim○○, and Ha○○○○○○.

(2) Whether the Plaintiff transferred the instant shares to ○○○○○○○○○

Although the Plaintiff prepared a written agreement on August 2001 by deeming that there was no stock transfer contract at the time of raising an issue as to the guaranteed obligation from the new ○○○○○○○ upon receiving the issue of the guaranteed obligation from the new ○○○○○○○ around August 2001, it was suggested that the Plaintiff prepared the said agreement. However, in light of the fact that the Ha○○○○○○○○○○’s acquisition of the instant shares, the method of settlement of the price, the method of settlement of the purchase price between Kim○○ and the new ○○○○○○○○○○○○○, and the circumstances leading up to the fact that the payment of the purchase price was not performed properly, the Plaintiff, as the Plaintiff had a third party acquire the instant shares, thereby making the instant agreement to return the purchase price of the instant shares to the new ○○○○○○ for convenience, and the Plaintiff was not a party to the instant share transfer contract concluded between Kim○○○ and new ○○○○○○○, and thus, cannot be deemed to have been cancelled the above agreement between the Plaintiff and the Plaintiff.

Therefore, since new ○○○○ transferred the instant shares to ○○○○○○, the instant disposition based on the premise that the Plaintiff transferred the instant shares to ○○○○○○○○○○○○○, is unlawful (as long as the Plaintiff’s primary assertion is acknowledged, it shall not be determined as to the conjunctive assertion).

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is decided as per Disposition by admitting it.

[Attachment List]

Relevant statutes

The actual provisions of the Income Tax Act (amended by Act No. 7006 of Dec. 30, 2003) shall apply.

Article 88 Definition of Assignment

(1) "Transfer" in Article 4 (1) 3 and this Chapter means that assets are actually transferred for price due to sale, exchange, investment in kind in a corporation, etc., regardless of any registration or enrollment of such assets.

【Ex Post Facto Omission】

§ 101. Wrongful calculation of capital gains

(1) If it is deemed that any act or calculation of a resident having any transfer income has reduced unreasonably the tax burden on such income through any transaction with the resident concerned, the chief of the district tax office or the director of the regional tax office having jurisdiction over the place of tax payment may calculate the income amount in the current year regardless of

(4) The scope of persons in special relationship under paragraph (1) and other necessary matters concerning wrongful calculation shall be prescribed by the Presidential Decree.

The actual tax amount shall be the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003).

Article 98 Denial of Evaluation of Wrongful Acts

(2) The term "if it is deemed that any act makes the burden of tax reduced unreasonably" in Article 41 of the Act means cases falling under any of the following subparagraphs:

1. When a person purchases assets from a related party at a price higher than the market price or transfers assets to a related party at a price lower than the market price;

Article 167 (Calculation of Unfair Act of Transfer Income (amended on December 31, 199)

(3) "Where it is deemed that any act makes the burden of tax reduced unreasonably" in Article 101 (1) of the Act means cases falling under any of the following subparagraphs:

(4) In case of transactions with related parties under each subparagraph of Article 98 (1), if it is deemed that any tax burden has been unjustly reduced due to the acquisition of land, etc. in excess of the market price or the transfer of land, etc. in excess of the market price, such acquisition

(5) In the application of the provisions of paragraphs (3) and (4), the market price shall be the value appraised by applying mutatis mutandis the provisions of Articles 60 through 64 of the Inheritance Tax and Gift Tax Act and Articles 49 through 59 of the Enforcement Decree of the same Act. In such cases, the term "period within 6 months before or after the standard date of appraisal (3 months in cases of donated property)" in the main sentence of Article 49 (1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act shall be deemed "period

(6) Article 101 (1) of the Act shall not apply where property is acquired or transferred between an individual and a corporation and the price thereof falls under the value provided for in Article 89 of the Enforcement Decree of the Corporate Tax Act and Article 52 of the Corporate Tax Act is not applicable to transactions of the relevant corporation: Provided, That this shall not apply where it is deemed that capital gains tax has been reduced by fraud or other improper means.

Addenda (No. 18173, Dec. 30, 2003)

Article 1 (Enforcement Date) This Decree shall enter into force on January 1, 2004.

Article 2 (General Application) This Decree shall apply to the portion of income accruing after the enforcement of this Decree.

Article 3 (General Application of Transfer Income Tax) The amended provisions concerning transfer income tax in this Decree shall apply to the portion transferred after the enforcement of this Decree.

Actual Inheritance Tax and Gift Tax Act

Article 60 Principles, etc. of Appraisal

(1) The value of property on which an inheritance tax or gift tax is levied under this Act shall be the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the "date of appraisal"). In such cases, the value appraised by the method of appraisal stipulated in Article 63 (1) 1 (a) and (b) (excluding cases falling under the provisions of Article 63 (2))

(2) The market price under paragraph (1) shall be the price which is generally accepted in cases of free trade between many and unspecified persons and shall include the price which is recognized as the market price under conditions prescribed by Presidential Decree, such as the expropriation and public auction price and appraisal

Article 63 (Appraisal of Securities)

(1) The appraisal of securities, etc. shall be conducted by the following methods:

1. Appraisal of stocks and investment shares:

(a) The average amount of stocks and equity shares traded on the Korea Stock Exchange shall be the average daily market price ( regardless of whether there is any transaction record) of the Korea Stock Exchange every two months before or after the evaluation base date: Provided, That in the calculation of the average amount, in cases where it is inappropriate to be based on the average amount of the period calculated, as prescribed by Presidential Decree, during two months before or after the evaluation base date, or during or after two months respectively, respectively, the average amount of the period calculated as prescribed by Presidential Decree;

(b) The provisions of item (a) shall apply mutatis mutandis to the stocks and equity shares as prescribed by the Presidential Decree from among the stocks and equity shares of the Association-registered corporations as prescribed by the Presidential Decree. In this case, the “final market price”

The Corporate Tax Act

Article 52 Avoidance of Wrongful Calculation

(1) Where the head of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office deems that the tax burden of a domestic corporation has been unjustly reduced through transactions with persons with a special relationship prescribed by Presidential Decree (hereinafter referred to as "specially related persons"), he/she may calculate the amount of income for each business year of the relevant corporation regardless of the activities or calculation of the amount of income of the relevant corporation (hereinafter

(2) In the application of the provisions of paragraph (1), the standard for determination shall be the prices applied or to be applied in sound and generally accepted practices and normal transactions between persons without a special relationship (including rates, interest rates, rents, exchange rates and other corresponding rates; hereafter referred to as "market price" in this Article).

(4) In applying paragraphs (1) through (3), matters necessary for the types of wrongful calculation, assessment of market price, etc. shall be prescribed by Presidential Decree.

The actual contents of the Corporate Tax Act (amended by Presidential Decree No. 18706 of Feb. 19, 2005)

Article 89 (Scope, etc. of Market Price)

(1) In the application of the provisions of Article 52 (2) of the Act, if there is a price generally traded between many and unspecified persons other than a person with a special relationship or between a third party who is not a person with a special relationship, the price shall apply.

(2) In the application of Article 52 (2) of the Act, if the market price is unclear, the amount calculated by applying in sequence the following subparagraphs:

1. Where there is a value appraised by an appraisal corporation under the Public Notice of Values and Appraisal of Lands, etc. Act, that value: Provided, That stocks shall be excluded;

2. The amount appraised by the mutatis mutandis application of the provisions of Articles 38 through 39-2, and 61 through 64 of the Inheritance Tax and Gift Tax Act. In applying mutatis mutandis the provisions of Article 63 (2) 1 of the Inheritance Tax and Gift Tax Act and Article 57 (1) and (2) of the Enforcement Decree of the same Act, "immediately 6 months (three months for stocks, etc. upon which gift tax is levied)" shall be deemed "immediately 6 months", respectively.