The meaning of "exclusive contract deposit", which is other income provided for in Article 21 (1) 18 of the former Income Tax Act, and the criteria for its determination

Articles 20 and 21 (1) 18 of the former Income Tax Act (amended by Act No. 8144 of Dec. 30, 2006)

Plaintiff 1 and one other (Law Firm Hye, Attorneys Jeong Sung-sung et al., Counsel for the plaintiff-appellant)

The Director of Gangnam District Office

Seoul High Court Decision 2006Nu14522 decided January 25, 2007

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

The wage and salary income under Article 20 of the former Income Tax Act (amended by Act No. 8144 of Dec. 30, 2006; hereinafter the "former Income Tax Act") shall be included in the wage and salary if the payment of the amount is not only when it is paid for work but also when it is paid in the process of achieving the contents of the working conditions closely related to a certain work on the premise of a work (see Supreme Court Decision 2003Du4089, Apr. 15, 2005, etc.). Meanwhile, the "exclusive contract deposit", which is other income under Article 21 (1) 18 of the former Income Tax Act, refers to a temporary and preferential income received in return for the execution of an exclusive contract. Even if the name of the income is "exclusive contract deposit", whether it constitutes other income shall not be attributable to the form, name and appearance of the contract, but shall be evaluated according to the substance of the contract between the parties, and then the decision shall be made in accordance with social norms.

After compiling the adopted evidence and recognizing the facts as stated in its holding, the court below determined that the down payment of this case is temporary and preferential income paid by the plaintiffs to the meaning of compensation for profits that they can enjoy during the above period of ten years in order to prevent competition with the non-party company regardless of work, in order to prevent the plaintiffs with outstanding ability and know-how in selling cosmetics, separate from the employment contract of this case. In light of the above legal principles and related Acts and subordinate statutes and records, the judgment of the court below is just and acceptable, and there is no error in the misapprehension of legal principles as to earned income and other income under the former Income Tax Act, as argued in the Grounds for Appeal.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Nung-hwan (Presiding Justice)