Seoul High Court-2015-Nu-41526 ( October 08, 2015)

Whether the acquisition of real estate for profit-making business shall be deemed to have been used for proper purpose business purposes

Since the acquisition of real estate for profit-making business with the reserve fund for proper purpose business cannot be deemed to have been used for the proper purpose business, the disposition of non-deductible of losses is legitimate.

Article 29 of the Corporate Tax Act

2015du52784 Revocation of Disposition of Corporate Tax Imposition

School FoundationAAA

BB Director of the Tax Office

Seoul High Court Decision 2015Nu41526 Decided September 8, 2015

April 15, 2016

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The grounds of appeal (the supplemental appellate brief is not timely filed)

The grounds of appeal are examined to the extent of supplement in case of grounds for appeal.

1. As to the grounds of appeal Nos. 1 and 2 by Law Firm (hereinafter referred to as "the grounds of appeal No. 1") and No. 2, 3, and 4 by Law Firm LLC (hereinafter referred to as "the grounds of appeal No. 2")

A. In light of the purport of the entire pleadings and the result of the examination of evidence, the court shall determine whether the assertion of facts is true in accordance with logical and empirical rules on the basis of the ideology of social justice and equity by free evaluation of evidence. The court below’s determination that the court below lawfully confirmed the facts that the court of final appeal did not go beyond the bounds of the principle of free evaluation of evidence (Article 8(2) of the Administrative Litigation Act, Articles 202 and

In addition, Article 29(1) of the former Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009; hereinafter the same) provides that where a non-profit domestic corporation appropriates its reserve funds for proper purpose business as deductible expenses in each business year for the proper purpose business of the corporation, it shall be included in deductible expenses within a certain limit.

B. For the reasons indicated in its holding, the lower court determined that (1) the Plaintiff’s disposal of the instant substitute assets, a method of using compensation for losses, was lawful if the Plaintiff’s disposal of the instant substitute assets, was 2009, based on the following circumstances: (a) the purchase price received by the Plaintiff, a private school corporation, by selling the previous assets, which are fundamental property for profit-making business, in the assets of a non-profit business account; and (b) the corporate accounting for the business year 2009, transferred the purchase price to a non-profit business account, the difference between the acquisition price and the acquisition price of the previous assets; (c) but the Plaintiff already knew the possibility of selling the previous assets before receiving a request for consultation on compensation for losses from the Korea Water Resources Corporation, and was naturally deemed to have planned to purchase the instant substitute assets, a method of using compensation for losses, in the future, before the lapse of the 2009 business year; and (d) the Plaintiff’s disposal of the instant substitute assets for profit-making business year from the date of deposit to the profit-making business year to 2000.

C. Of the grounds of appeal, the argument disputing the fact-finding by the court below is merely an error in the selection of evidence belonging to the free evaluation certificate of the fact-finding court and the determination of the value of evidence. In addition, in light of the aforementioned circumstances and the aforementioned legal principles as seen earlier, the transfer funds are expected to be used for profit-making business as well as the circumstances that were actually used for profit-making business immediately after the transfer, etc., it can be seen that the transfer funds to the account of non-profit business are appropriated and disposed of as reserve funds for non-profit business in the business year 2009, which are transferred to the account of non-profit business in the name, and it is not for the purpose of using them as the proper purpose business. Thus, it cannot be treated as losses pursuant to Article 29 (1) of the former Corporate Tax Act only with the fact that they are transferred to the account of non-profit business or appropriated funds for the proper purpose business (see Supreme Court Decision 2012Du690, Mar. 28, 2013).

2. As to the second and sixth grounds of appeal

For the reasons indicated in its holding, the lower court determined that, in principle, Article 29 of the former Corporate Tax Act imposes corporate tax on profits accrued from the disposal of fixed assets for profit-making business by a non-profit domestic corporation, but, unlike allowing inclusion in deductible expenses where the reserves for the proper purpose business are appropriated in accordance with certain requirements, the object of taxation under Article 48(2)4 of the Inheritance Tax and Gift Tax Act and Article 38(4) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, which stipulate that gift tax shall not be imposed even if the proceeds from the sale of the property contributed by the public-profit corporation, etc. and the proceeds from the sale of the property for profit-making business are donated, and thus, the provisions on gift tax do not differ in taxable objects, taxation stages and legislative purposes

Examining the reasoning of the judgment below in light of the contents of the above statutory provisions, the judgment of the court below is acceptable. Contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the legislative intent, relationship, scope of application and necessity of uniform interpretation of Article 29 of the former Corporate Tax Act and the Inheritance Tax

3. As to the first and second grounds of appeal Nos. 3 and 8

The lower court, on the grounds indicated in its reasoning, determined that it is difficult to deem that the Plaintiff was a legitimate ground for failing to perform the obligation to report and pay the corporate tax of this case, and rejected the Plaintiff’s assertion that the imposition of additional tax was unlawful during the disposition of this case

Examining the reasoning of the lower judgment in light of the relevant legal doctrine as well as the evidence duly admitted, the lower court did not err in its judgment by misapprehending the legal doctrine on justifiable grounds for exempting from imposing penalty tax, contrary to what is alleged in the grounds

4. As to the second ground of appeal Nos. 1 and 7

This part of the grounds of appeal is without merit, as it first asserted in the final appeal.

5. Conclusion

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 on the bench.