[1] In a case where the tax authority proves that a false tax invoice on a part of the expenses reported by a taxpayer has been prepared to a considerable extent, and it is disputed as to whether it is an actual cost and the taxpayer has proved to a considerable extent that the other party to the payment was false, the person who bears the burden of proving that such expenses have been actually paid (=taxpayer)

[2] The purport of the system to recognize and reward the representative from the disposition of income as stipulated in the proviso of Article 106 (1) 1 of the former Enforcement Decree of the Corporate Tax Act, and the purpose of the system to recognize and reward the representative from the disposition of income, and whether a person who fails to meet the requirements as an executive officer, such as a shareholder within the overall title under Article 106 (1) 1 of the former Enforcement Decree of the Corporate Tax Act, can be deemed as

[1] Article 26 of the Administrative Litigation Act and Article 27 of the Income Tax Act / [2] Article 67 of the former Corporate Tax Act (amended by Act No. 8831 of Dec. 31, 2007), Article 106 (1) 1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619 of Feb. 22, 2008), Article 17 of the Value-Added Tax Act

[1] Supreme Court Decision 2005Du16406 Decided April 14, 2006 (Gong2009Ha, 1561) Decided August 20, 2009 / [2] Supreme Court Decision 92Nu3120 Decided July 14, 1992

Plaintiff 1 Incorporated Company

Plaintiff 2 (Law Firm Rate, Attorneys Shin Sung-si et al., Counsel for the plaintiff-appellant)

The director of the tax office

Seoul High Court Decision 2009Nu12480 decided May 12, 2010

All appeals are dismissed. The costs of appeal between Plaintiff 1 and Defendant are assessed against each party, while the costs of appeal between Plaintiff 2 and Defendant are assessed against the same Plaintiff.

The grounds of appeal are examined.

1. Regarding the plaintiffs' grounds of appeal

A. The part concerning the violation of the rules of evidence regarding the issuance of false tax invoices

The gist of the Plaintiff 1’s allegation in this part of the grounds of appeal is that, although each tax invoice issued by Plaintiff 1 Co., Ltd. by Nonparty 1 Co., Ltd., Nonparty 2 Co., Ltd. does not constitute a false tax invoice different from the fact, the lower court’s determination otherwise deemed unlawful. However, this is ultimately erroneous in the selection of evidence or fact-finding which belongs to the exclusive authority of the lower court, which is a fact-finding court, and thus,

B. The part concerning the assertion against the rules of evidence regarding the appropriation of processing labor costs

In the event that a tax invoice on a part of the expenses reported by a taxpayer has been prepared in a false manner without a real transaction, which is proved to a considerable extent by the tax authority as to whether it is an actual cost, and the purpose of the expenses claimed by the taxpayer and the other party to the payment thereof have been proved to a considerable extent, a taxpayer who is easy to present data such as books and evidence as to the fact that such expenses have been actually paid, need to prove it (see, e.g., Supreme Court Decisions 2005Du16406, Apr. 14, 2006; 2007Du1439, Aug. 20, 2009).

The court below acknowledged that the plaintiffs included each processing labor cost in the manner as stated in its reasoning, and determined that the plaintiffs should be excluded from deductible expenses for the calculation of the corporate tax base as stated in its holding on the grounds as stated in its reasoning. In light of the above legal principles and records, the court below's recognition and determination is just and there is no error of law such as the probative value of a criminal judgment, the principle of base taxation, the burden of proof in a lawsuit seeking revocation of a tax

2. As to the Defendant’s ground of appeal

Article 106 (1) 1 (proviso) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619, Feb. 22, 2008) provides that the upper limit on the disposal of income to the representative from such disposal of income shall not be based on the fact that such income has accrued to the representative, but shall be based on a certain fact which can be recognized as an act in order to prevent any unlawful act under tax law by the corporation without any relation to its substance. In such a case, the representative of the corporation which is subject to the disposal of bonus shall be strictly interpreted in accordance with the language and text (see Supreme Court Decision 92Nu3120, Jul. 14, 192). Since the proviso to Article 106 (1) 1 (proviso) of the above Enforcement Decree does not stipulate that the representative shall be the representative if the ownership of the amount out of the corporation is unclear, the representative shall be deemed to be vested in the representative, and it shall not be limited to the cases where the person actually holds more than 30/10 of the total issued stocks or total investment amount of the corporation concerned.

The court below held that the non-party 4 cannot be deemed the representative of the plaintiff 1 agricultural company under the above provision since there is no evidence to support that the non-party 4 was registered as the representative director on the corporate register of the plaintiff 1 agricultural company or the shareholder in the above general title met the requirements. In light of the above legal principles and records, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the representative who is the party to the disposition for recognition

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal between Plaintiff 1 and Defendant are assessed against each party. The costs of appeal between Plaintiff 2 and Defendant are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Cha Han-sung (Presiding Justice)