Cho Jae-2016-China-3222 ( December 12, 2016)

An input tax amount for the expenses paid for the sale of land shall be subject to the non-deduction of input tax amount.

The input tax amount of this case related to the cost of land sale is merely for realization pursuant to the bankruptcy procedure, and it is not related to the plaintiff's taxable business, so it is reasonable to deduct the input tax amount.

Article 39 of the Value-Added Tax Act

Incheon District Court 2017Guhap51017 Revocation of Disposition of Imposition of Value-Added Tax

DaeOOO Co., Ltd.

OO Head of the tax office

2017.09.29

October 27, 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 imposition of value-added tax of KRW 230,322,780 and penalty tax of KRW 23,033,50 for the second term of 2015 against OOO Co., Ltd. on May 12, 2016 is revoked.

1. Circumstances and basic facts of the disposition;

A. The status of the plaintiff and the bankrupt debtor OOO corporation

1) Korea OO Co., Ltd. was established on March 25, 1966, and changed its trade name to Korea OO on February 27, 1979. Around March 1996, OOO sales company merged with OOO sales company and changed its trade name to OOO sales company, and later on March 4, 1997, the trade name was changed to OOO sales company.

2) On July 29, 2011, an application for commencement of rehabilitation procedures was filed on August 10, 201, and the rehabilitation procedure was commenced on August 10, 201 by the Seoul Central District Court 2011, and the rehabilitation plan was decided on December 9, 2011. According to the above rehabilitation plan, on December 10, 201, the automobile business sector and construction business sector were separated, and the company was established by dividing the vehicle business sector and construction business sector, and the trade name of the surviving company after the division was referred to as the "alternativeOOOO corporation" (hereinafter referred to as the "division for convenience. The purpose of this merger is housing construction and sales lease business, amusement park, parking lot operation business, real estate rental business, etc. under the corporate register.

3) On August 7, 2014, the Seoul Central District Court (former Seoul Rehabilitation Court; hereinafter the same shall apply) appointed the Plaintiff as the trustee in bankruptcy of OOOO, who declared bankruptcy against OOOO as an OOOO.

(b) Circumstances leading up to the acquisition and disposal of each land listed in the separate sheet 1;

1) On Nov. 8, 1982, Apr. 4, 1983, May 6, 1983, 1983, after obtaining a license from the Minister of Construction and Transportation for reclamation of public waters for the purpose of creating a tourism site for amusement facilities, and buried in front of the Incheon Songdo. On June 30, 1989, the Seoul Regional Construction and Management Administration obtained the authorization for completion of reclamation of public waters from the head of the Seoul Regional Construction and Management Administration and acquired each land listed in the attached Table 1. On Nov. 13, 1989, each of the above land was determined and publicly announced as "the amusement park, which is an urban planning facility under the former Urban Planning Act."

2) After December 27, 1993, 1 OOO has created a citizen resting space on each land listed in the table Nos. 1 through 6 attached hereto from the head of the Seoul Special Metropolitan City of Incheon, the head of the Gu of Incheon, and obtained permission to change the form and quality of the land to create a motor vehicle storage unit on each land listed in the table Nos. 1, Nos. 7 through 16 attached hereto. ② pursuant to the Joint Development Convention concluded between OOO and BOO TW Br International Epic and EO TO TO TI TI TI T TI TI TI TI TI TI TI TI TI TI TI TI TI TI TI TI TI TI TI TI TI TI TI TO and EO TI TI TI T TI TI TI TO TI TO TI TO TI TI T, 208 to 208-OO, respectively, public notice of the implementation plan was announced No. 201 to 2008O-18.

3) On July 13, 2015, the Plaintiff was appointed as a trustee in bankruptcy of OOOO, and sold each parcel of land listed in the separate sheet No. 1 as KRW 315,000,000,000 for OOO C&T development. Under the above sales contract, the purchaser was changed from OOO C&T development to OOO as of October 20, 2015. On October 27, 2015, the Plaintiff completed the registration of ownership transfer to OOO, a corporation that acquired the buyer’s status.

(c) Imposition of value-added tax and decision by the Tax Tribunal;

1) From February 22, 2016 to February 26, 2016, the Defendant confirmed the Plaintiff’s on-site refund of value-added tax, and notified the Plaintiff of the amount of each input tax stated in attached Table 2, without deducting the amount from the amount of output tax, and on May 18, 2016, the Defendant notified the Plaintiff of KRW 232,587,212 for the second period of value-added tax for the second period of 2015 and additional tax for the excess refund return amounting to KRW 23,259,960.

(2) On August 3, 2016, the Plaintiff filed a request for adjudication with the Tax Tribunal on August 3, 2016. On December 22, 2016, the Plaintiff received a decision from the Tax Tribunal to deduct each input tax amount listed in [Attachment 2] Nos. 1 through 6 from the output tax amount. Accordingly, the Defendant corrected the value-added tax and additional tax imposed as described in the above paragraph (1) as KRW 230,322,780 and KRW 23,03,50, respectively (hereinafter referred to as the “instant disposition”), and [the grounds for recognition], [the grounds for recognition], Gap’s 1 through 9, 12 through 21, and Eul’s 1 through 5 (including the serial number), and the purport of the entire pleadings and arguments.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff sold each of the lands listed in the separate sheet No. 7 through 11 in the separate sheet No. 2015 in order to arrange its business after using each of the lands listed in the separate sheet No. 1 as an amusement park development business, automobile storage facility, or real estate rental business, which was declared bankrupt. Thus, each of the input tax amounts listed in the separate sheet No. 7 through No. 11 in the separate sheet No. 2 list No. 7 and No. 11 (hereinafter referred to as the “instant input tax amount”) generated in the process was a value-added tax amount on the goods or services supplied for use or for the amusement park development business or real estate rental business, but the Defendant issued the instant disposition without deducting the instant input tax amount from the output tax amount for the year

Therefore, the instant disposition should be revoked.

B. Relevant statutes

Attached Table 3.

C. Determination

1) Whether the instant input tax amount is related to the business of OO

A) Relevant legal principles

Article 38 of the former Value-Added Tax Act (amended by Act No. 13474, Aug. 11, 2015; hereinafter the same) provides that an input tax amount shall be deducted from the output tax amount to be collected, as a matter of principle, in order to ensure that only an entrepreneur’s self-production added tax is imposed. Article 38 of the former Value-Added Tax Act (amended by Act No. 13474, Aug. 11, 2015; hereinafter the same) provides that an input tax amount shall be deducted from the output tax amount under Article 39(1)4 of the former Value-Added Tax Act (amended by Act No. 13475, Feb. 19, 201; hereinafter the same). Thus, it is understood that an input tax amount related to an input tax amount cannot be deducted from the output tax amount under Article 39(1)4 of the former Value-Added Tax Act (see, e.g., Supreme Court Decision 2016Du194.

B) Specific determination

(1) On November 8, 1982, April 4, 1983, May 6, 1983, 1983, oOOO for housing construction and sale, lease business, amusement park development business, parking lot operation business, real estate lease and supply business, etc. on the corporate register, each land listed in the separate sheet No. 1 through No. 16 of the separate sheet was reclaimed before Incheon City with a license for reclamation of public waters for the purpose of building a site for tourist amusement facilities, and acquired each land listed in the separate sheet No. 1 for the purpose of building a site for tourist amusement facilities. On December 27, 1993, OOO was created a citizen resting space on each land listed in the separate sheet No. 7 through No. 16 of the separate sheet No. 1, 2008, and the implementation plan was publicly announced to create a large unit of urban planning facilities on each land listed in the separate sheet No. 7 through No. 16 of November 16, 2008.

(2) However, in full view of the following facts and circumstances revealed by adding up the aforementioned evidence Nos. 10, 6, and 7’s evidence Nos. 10, and 6, and 7’s overall purport of the pleadings, it is reasonable to view that the instant input tax amount is merely for realization pursuant to the bankruptcy procedure, and is not related to the Plaintiff’s taxable business, i.e., amusement park development business, or real estate leasing business.

(A) On August 7, 2014, which was declared bankrupt by the Seoul Central District Court, on November 5, 2014, the Plaintiff entered into a legal consultation agreement between the law firm Gwangju District Court on the establishment and review of the transaction structure related to the sale of each land listed in the separate sheet No. 1, the purchaser’s response to the legal survey, the review of the related contract such as a real estate sales contract, and the support for conclusion of a contract and a negotiation. On November 201, 2014, the Plaintiff entered into a legal consultation agreement on the “the identification of the status of the site subject to sale, the inspection related to the sale, the bidding for the sale, etc.”

(B) The Plaintiff leased part of each of the lands listed in the separate sheet No. 1 to a third party as listed below. However, since August 7, 2014, which was declared bankrupt by the Seoul Central District Court, the Plaintiff did not enter into a new lease agreement on each of the lands listed in the separate sheet No. 1, and it appears that the existing lease agreement was not concluded even after the termination of the lease agreement on December 2014.

(C) A real estate sales contract prepared between the Plaintiff and SongOO Development

(A) In the main sentence of subparagraph 5 of Article 5 of the Act, "for the refund price of each land listed in the separate sheet No. 1, which belongs to the bankrupt estate, the plaintiff, who is the trustee in bankruptcy of OOOOO, sells it to OOOO development corporation, subject to the consent of the mortgagee and the permission of the Seoul Central District Court." However, it is more likely that the plaintiff was declared bankrupt by the Seoul Central District Court, and the plaintiff did not enter into a legal consultation contract or advisory service contract for three months or longer, and did not form any more lease relationship with each land listed in the separate sheet No. 1 from 2015, all of the land listed in the separate sheet No. 1 is a prior

(D) The trustee in bankruptcy commences the possession of the property belonging to the bankrupt estate immediately after the assumption of office and performs all acts for the management and realization of the property (see Articles 479 and 482 of the Debtor Rehabilitation and Bankruptcy Act). With respect to the realization of the active property (see Article 492 subparag. 1 of the Debtor Rehabilitation and Bankruptcy Act), the trustee in bankruptcy may sell the real right to the real estate voluntarily with the permission of the court (see Article 492 subparag. 1 of the Debtor Rehabilitation and Bankruptcy Act). In light of the fact that the Plaintiff, as the trustee in bankruptcy of the substituteOOOOO, has not run the business of the substituteOOOO prior to the declaration of bankruptcy, rather than continuing the business of the substituteOOOOO under Article 486 of the Debtor Rehabilitation and Bankruptcy Act, it appears that the Plaintiff entered into a sales contract to sell each of the above land to the company, subject to legal advice or other prior preparation for the realization of each of the land listed in attached Table 1.

(E) ① The Plaintiff continued the procedures for realization of each land listed in the separate sheet No. 1 instead of continuing OO's business, and as seen below 2). The input tax amount listed in the separate sheet No. 7 of the separate sheet No. 2 of the separate sheet No. 1 (the cost of issuing vehicle entry permit) was supplied on November 4, 2015 and the purchase tax amount listed in the separate sheet No. 8 of the same list No. 9 (the rent for new fences) was supplied on October 26, 2015. The above list No. 9 of the separate list No. 10 of the Value-Added Tax Act was supplied on October 12, 2015 to each of the above corporations (the cost of building rent No. 2 of the separate sheet No. 1 of the separate sheet No. 2 of the separate sheet No. 97 of the Value-Added Tax Act, and each of the above corporations transferred the ownership of each land to O No. 2017 of the separate list No. 27 of the above land.

(f) Even if selling each land listed in the separate sheet No. 2 subparag. 7 and Article 26 subparag. 14 of the former Value-Added Tax Act constitutes a tax-free business, as long as the sale of each land listed in the separate sheet No. 1 falls under a taxable business pursuant to Article 14(2) subparag. 1 of the former Value-Added Tax Act, it constitutes a taxable business pursuant to Article 14(2) subparag. 1 of the former Value-Added Tax Act, and in light of the legal principles as stated in the aforementioned paragraph(a), each input tax amount listed in the separate sheet No. 2 subparag. 10, 11 related to the sale of each land listed in the separate sheet No. 1 list constitutes an input tax amount to be deducted. However, Article 14(2)1 of the former Value-Added Tax Act provides that "goods or services supplied by chance or temporarily related to the main business shall be subject to the taxation of the main business." Since selling each land listed in the separate sheet No. 1 does not relate to the main business of OO.

2) Article 39(1)4 of the former Value-Added Tax Act and enforcement of the Value-Added Tax Act by the instant input tax amount

Article 77 of the Decree and Article 49(3) of the Enforcement Decree of the Corporate Tax Act

Article 39(1)4 of the former Value-Added Tax Act provides for the acquisition of real estate not directly used for the business of a corporation under Article 77 of the Enforcement Decree of the Value-Added Tax Act and Article 49(3) of the Enforcement Decree of the Corporate Tax Act in relation to the input tax amount not deducted from the output tax amount as well as related to the business. Since Article 39(1)4 of the former Value-Added Tax Act provides for the expenses, maintenance

In light of the following circumstances, i.e., the approval for changing the form and quality of land listed in the separate sheet No. 1, which is recognized by the Ministry of Land, Infrastructure and Transport based on the overall purport of the pleadings: (a) the approval for the use of part of each land listed in the separate sheet No. 1, which is temporarily permitted under the premise that the amusement park development project will proceed in order; (b) the provision of a citizen resting space was not a condition for the use of a motor vehicle storage; and (c) the addition of the condition that a citizen resting space should be created at the time of the notification of the approval for the use of a storage space of a motor vehicle should first be built before the temporary use of the storage space of a motor vehicle; and (c) it is difficult to see that the remainder of each land listed in the separate sheet No. 1, other than the parking space of a motor vehicle storage facility, was not installed at all or before the temporary use of the storage space of a motor vehicle; and (d) the remaining portion of the land listed in the separate sheet No. 1, other than the list No. O used. excluding the remaining parts. O.

Furthermore, according to the above facts, the attached table 7 to 9 of the input tax amount of this case is for the management or repair of each of the lands listed in the attached table 1.

Since the separate list Nos. 10 and 11 are considered to correspond to the management of each land listed in the separate list Nos. 2 and 11 or to the expenses related thereto, the instant input tax amount is stipulated in Article 39(1)4 of the former Value-Added Tax Act, Article 77 of the Enforcement Decree of the Value-Added Tax Act, and Article 49(3) of the Enforcement Decree of the Corporate Tax Act, and ultimately, it constitutes an input tax amount not deductible from the output tax amount under Article 39(1)4

D. Sub-committee

Therefore, the instant disposition based on the premise that the instant input tax amount cannot be deducted from the output tax amount for 2015 pursuant to Article 39(1)4 of the former Value-Added Tax Act is legitimate. Therefore, the Plaintiff’s assertion is without merit.

3. Conclusion

Therefore, all of the plaintiff's claims are dismissed as it is without merit. It is so decided as per Disposition.