The case holding that the transfer of a factory for the purpose of relocation does not constitute "land used directly for the factory concerned" under the former Income Tax Act.

The case holding that since the tax laws and regulations are strictly interpreted in light of the principle of no taxation without the law, since the taxpayer who has moved to a factory that has been operated for more than two consecutive years leases part of a new factory to another and the taxpayer does not use it, even if the taxpayer acquired a new factory for the purpose of expanding the original business, but used it in the new factory building because the business expansion has not been done, such circumstance alone alone is that the taxpayer directly uses the leased part, and it cannot be deemed that it is directly used for the new factory of the new factory under Article 18 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 12564 of Dec. 31, 1988) which is subject to the reduction or exemption of capital gains tax.

Article 6 (2) 2 of the former Income Tax Act (amended by Act No. 4019 of Dec. 26, 1988); Article 18 (1) 1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 12564 of Dec. 31, 1988)

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Gyeong, Attorneys Park Jae-soo et al., Counsel for plaintiff-appellant)

[Defendant-Appellant] Plaintiff (Attorney Yoon Tae-tae, Counsel for defendant-appellant)

Head of North Busan District Tax Office

Busan High Court Decision 93Gu7518 delivered on November 24, 1994

The judgment below is reversed, and the case is remanded to Busan High Court.

The grounds of appeal by the defendant litigant are examined.

Article 6 (2) 2 of the Income Tax Act (amended by Act No. 4019, Dec. 26, 198) provides that income accruing from the transfer of land and buildings within the extent prescribed by the Presidential Decree for the purpose of relocating a factory that has been operated for not less than two consecutive years under the conditions as prescribed by the Presidential Decree shall be exempted from capital gains tax. Accordingly, Article 18 (1) 2 of the Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 12564, Dec. 31, 198) provides that the provision that Article 6 (2) 2 of the Income Tax Act shall apply to the case where the Plaintiff used the land and buildings directly for the relevant factory to be used for the new factory, and only part of the building site area of the previous factory (hereinafter referred to as the "new factory") to be used for the new factory area prior to the relocation of the new factory area and the new factory area to be sold to the new factory area, and the lower court determined that the Plaintiff had to use it for not less than 7 new factory area among the above new factory area 15.

However, under the principle of no taxation without law, tax laws and regulations must be strictly interpreted in light of the principle of no taxation without law, or the requirements for tax exemption or reduction. As determined by the court below, even if the plaintiff leases part of a new factory to others, and as long as the plaintiff does not use it, the above leased part is directly used by the plaintiff and it cannot be deemed directly used for the factory of a new factory.

Nevertheless, the judgment of the court below that the Plaintiff used the entire new factory of this case directly for the new factory of this case and that the entire site area of the new factory was used directly for the factory of the new factory of this case is erroneous in the misapprehension of legal principles as to the scope of land, etc. directly used for the new factory of this case under the Enforcement Decree of the above Act.

Therefore, without examining the remaining grounds of appeal, the judgment below is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Jong-ho (Presiding Justice)