Suwon District Court-2017-Gu Partnership-64034 (1.09, 2018)

It is reasonable that the development gains of the housing site development project constitute the plaintiff's gross income under the Corporate Tax Act, and all kinds of charges paid by the plaintiff shall not be considered in calculation

Considering the role of the Plaintiff in the instant development project, it is difficult to see the Plaintiff as a simple trustee or business agent of the instant development project, development gains constitute gross income under the Plaintiff’s Corporate Tax Act, and various charges paid by the Plaintiff are included in the construction cost, but it is reasonable to not consider the calculation of the work progress rate.

Article 69 of the Enforcement Decree of Corporate Tax Act; Article 34 of the Enforcement Rule of Corporate Tax Act

2018Nu35300 Revocation of Disposition of Imposing corporate tax

AA Corporation

*The Director of the Tax Office

Suwon District Court Decision 2017Guhap64034 Decided January 9, 2018

December 12, 2018

January 23, 2019

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The defendant's disposition of imposing corporate tax of KRW 4,173,615,340 (including additional tax of KRW 894,00,916) against the plaintiff on February 3, 2014 shall be revoked.

1. Quotation of judgment of the first instance;

The reasons for this Court concerning this case are as stated in the reasoning of the judgment of the court of first instance except for adding the judgment as to the plaintiff's new argument at the court of first instance as stated in the following Paragraph (2). Thus, the meaning of the language used in this case is identical to the judgment of the court of first instance pursuant to Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act (hereinafter

2. Additional determination

A. The plaintiff's assertion

1) Development gains calculated by deducting the total sales cost from the total sales revenue of the instant development project (hereinafter “development gains of this case”) shall belong to all the local governments of this case, which are the co-project implementers of the instant development project, and, in substance, they shall belong to the co-project implementers, but no profit, other than the settlement of the project cost, shall accrue to the Plaintiff, who is the trustee of the instant development project or the project agent. Therefore, the development gains of this case cannot be deemed the Plaintiff’s gross income under the Corporate Tax Act. Therefore, the instant disposition taken on the premise that the development gains of this case are the Plaintiff’s gross income under the Corporate Tax Act is legitimate, and is unlawful without the need to further examine whether

2) Even if it is necessary to set the rate of work progress in the same way as the Defendant, the Plaintiff spent approximately KRW 1.66,45.8 billion (based on the National Tax Service’s investigation amount) in total with various charges in the business year 2010 regarding the instant development project. Since the aforementioned charges fall under construction cost directly related to the instant development project, it should be calculated on the basis of the total estimated construction cost reflecting the said charges. In this case, the instant disposition is unlawful.

B. Determination

1) Whether the development gains of this case constitute the Plaintiff’s gross income under the Corporate Tax Act

A) Facts of recognition

(1) AAdo, BB Si, AA local public corporation (hereinafter referred to as "Plaintiff, regardless of whether the name was changed; hereinafter referred to as "the plaintiff, regardless of whether the name was changed; hereinafter referred to as "the name was changed) entered into an agreement with the plaintiff on December 2003 to jointly implement housing site development projects developed and supplied with housing site development projects for administrative transportation, convention centers, tourism amusement facilities, etc., and the implementation of the project is to be entrusted to the plaintiff (hereinafter referred to as "203 Convention"). The main contents of the agreement are as follows.

(2) After that, around November 2004, the AADo Governor, BB Mayor,CC Mayor, and the Plaintiff added theCC market as a co-project implementer, and entered into an agreement (hereinafter referred to as the “2004 Convention”) with a view to adding the members of the BB Si/Gu Y to the project implementation zone, and the main contents are as follows.

(3) However, Article 71(1) of the former Local Public Enterprises Act (amended by Act No. 10990, Aug. 4, 201) and Article 63(2) of the Enforcement Decree of the same Act, and Articles 20 and 26 of the Ordinance on the Establishment and Operation of Local Public Enterprises provide that the Plaintiff shall bear the expenses incurred in the event that the Plaintiff vicariously carries out the instant development project, and thus, the Plaintiff’s direct procurement of the instant development project costs constitutes a violation of the former Local Public Enterprises Act, etc. As such, the Plaintiff and the instant local government entered into an agreement on the change of the Plaintiff to the joint project operator of the instant development project (hereinafter “instant agreement”). The main contents are as follows.

(4) On November 4, 2007, the Plaintiff and the instant local governments made a statement to the effect that the terms of the instant agreement are unfair, thus guaranteeing appropriate benefits to the Plaintiff. After which the amendment was made in the direction of ensuring adequate benefits corresponding to the agency business fees, services were rendered for calculating the enforcement fees on April 2010. On September 2010, the joint implementer’s actual implementer’s management fee (1% of the compensation, 4.5% of the construction cost, and 3.5% of the sales amount) was provisionally agreed upon at the working-level meeting of the director general of the bureau and bureau at the time of the provisional agreement. On November 4, 2010, 2010, the Plaintiff and the instant local governments agreed to pay the Plaintiff KRW 10% of the compensation fees, construction cost, 4.5% of the sales cost, and 3.5% of the sales amount (excluding the number of Plaintiff’s own business sales fees) of the instant agreement at the time of settlement of development gains and 100 billion won of the settlement amount of the accounts.

(5) Of the development gains in this case, the amount to be subsidized as the financial requirements project cost of the instant local government is KRW 6,24.4 billion as of November 2017 (AA also KRW 30 billion (4.8%) 5,22.7 billion (8.7%) andCC’s KRW 71.5% (1.5%).

(6) Meanwhile, the Plaintiff recognized the same amount as the development gains of this case as the Plaintiff’s sales cost and long-term unpaid expenses on the financial statements, but filed a tax return for non-execution amount. However, with respect to some housing sites that are completed first following the progress of the development project of this case, the Plaintiff recognized sales profit in the business year to which the date of approval for use belongs and deducted the sales cost estimate and deducted the sales cost corresponding thereto, and then added the non-execution amount to deductible expenses for each pertinent business year. The Defendant rejected the Plaintiff’s claim for the cancellation of disposition of corporate tax for the business year 2008 and 279 billion won for the pertinent business year 2012, excluding the remaining development profit amount of the Plaintiff’s sales cost, which is sufficiently mature and confirmed to be included in deductible expenses for the pertinent business year 2012, on the ground that it is difficult to see that the sales cost was sufficiently mature and confirmed to be included in deductible expenses as the final debt, and notified the correction and notification of corporate tax for each pertinent business year.

(7) On June 10, 2012, Kim○, the plaintiff's DD management team leader, stated that "development gains under Article 8 of the Convention shall be used in the project district in principle, but if necessary, may be used in consultation with the public projects, etc. in the region concerned, and "AA may reasonably coordinate the project area in consideration of the project area, etc." should be executed with the local government's own budget by bearing the project cost from "BB Si/CC," and the local government of this case stated that "the concept of development gains shall be established as the basis of the agreement or the joint project consultative body decision of the above Suwon District 2016Gu****** in the case, the meaning of Article 8 of the Convention is whether the plaintiff would have agreed to re-investment in the total amount of the development gains of this case, or whether the plaintiff would have agreed to have reached an agreement on the development gains of this case with the local government * the local government * the Seoul High Court * the local government * the local government * the project area of this case from 208.

(8) Meanwhile, in addition to the instant development project, the Plaintiff entrusted part of the “EE Internationalization District Housing Site Development Project” to the Plaintiff, and performed all affairs related to the development plan and construction works, the supply of the created site, and compensation-related affairs. According to the above and entrusted agreement concluded at the time, AA, a truster, has raised project funds and provided them first prior to the execution of the Plaintiff’s project expenses. However, if inevitable due to the circumstances of AA, the Plaintiff has first procured and executed the funds under mutual agreement. AA has made payment to the Plaintiff for 1% of the cost of the project, 4% of the cost of the creation, 3.5% of the cost of the land, and 3.5% of the cost of the entrusted project, and the title of the purchase of the land and the title of the transfer of ownership due to the execution of the entrusted project shall be made in the Plaintiff’s name, and the supply price distributed to AA according to the supply of the land for the entrusted project shall be received in the Plaintiff’s name and shall be returned to AA also.

In addition, according to the joint implementation agreement concluded between the plaintiff and HH Corporation as a joint project operator, the business shares of the plaintiff and HH Corporation are set at 20% and 80%, respectively. The plaintiff and HH Corporation independently take charge of the land compensation, cultural heritage investigation, design, construction work, sale of formation sites, etc. for the zone in charge, and the cost of the project shall be borne and executed by the plaintiff and HH Corporation respectively, and the plaintiff and HH Corporation share part of the cost of the project according to the business share ratio. The registration, registration, service, construction, and sale of formation sites shall be made in the sole name of the plaintiff and HH Corporation, and the purchase price for the supply of the created site shall have their shares in accordance with the business share ratio.

[Reasons for Recognition] Each entry of Gap evidence Nos. 7, 8, 12 through 18, 28, 38 through 40 (including branch numbers), and the purport of the whole pleadings

B) Determination

In full view of the following circumstances revealed by adding up the aforementioned facts and the purport of the entire arguments, it is reasonable to view that the development gains of this case belong to the Plaintiff’s gross income under the Corporate Tax Act. Therefore, the Plaintiff’s prior assertion on a different premise is without merit.

① In the 2003 Convention and the 2004 Convention, the Plaintiff and the instant local governments designated the Plaintiff as a trustee or a business agent of the instant development project, but the Plaintiff, who is in the position of the trustee or the business agent, was in violation of the relevant statutes, concluded the instant agreement with the purport that the provision on the designation of the trustee was deleted and the Plaintiff was changed to the joint project executor of the instant development project. Accordingly, the Plaintiff determined the policy matters of the instant development project in addition to the existing business activities, such as the establishment of various plans, compensation, implementation of the project, and raising funds for the project, and became entitled to acquire the land necessary for the instant development project in the name of the Plaintiff. Considering the process and language of the conclusion of the instant agreement, and the role the Plaintiff entrusted in the instant development project, it is difficult to regard the Plaintiff as a mere trustee or business agent of the instant development project.

② After calculating and calculating the development gains of this case, the Plaintiff recognized the same amount as the development gains as the Plaintiff’s sales cost and long-term unpaid expenses in the financial statements. In the relevant litigation, the Plaintiff asserted that the use of the development gains of this case, i.e., the amount of re-investment, was included in the deductible expenses, which shows that the Plaintiff recognized the development gains of this case as the Plaintiff

③ The Plaintiff asserts that the instant development gains shall not be deemed to have accrued to the Plaintiff, since the Plaintiff re-invested the entire development gains of the instant case in the public project at BB orCC pursuant to Article 8(1) of the Convention. However, even until the closing date of the instant argument, the instant development gains cannot be deemed to have accrued to the Plaintiff. However, even if the instant development gains have not been specifically and specifically determined for all of the instant development gains until the closing date of the argument, and the instant provisions set the approximate standards for the use of the instant development gains, which ultimately result in the instant local governments, which ultimately belong to the instant local governments. However, such circumstance alone is difficult to deem that the instant development gains directly accrue to the instant local governments other than the Plaintiff.

④ 원고는 이 사건 개발사업은 원고와 이 사건 지방자치단체들의 공동사업에 해당하므로 이 사건 개발이익은 그 발생과 동시에 손익분배비율에 따라 공동사업자별로 귀속되는데, 원고의 손익분배비율은 0%이므로 결국 이 사건 개발이익 중 원고에게 귀속되는 것은 없다고도 주장한다. 그러나 이 사건 개발사업에 관한 원고와 이 사건 지방자치단체들의 지분 또는 손익분배비율에 관한 구체적인 약정을 인정할 증거가 없고, 이에 대하여 원고는 다시 이 사건 협약 제8조의 '사업지구 내 사용', '당해 시 지역', '사업면적 등 감안' 등의 문구 및 이 사건 개발이익 중 일부를 지자체 사업소요비용으로 지원한 내역 등에 비추어 보면 이 사건 개발이익의 실제 분배는 원고를 제외하고 이 사건 지방자치단체들 사이에서 사업부지 내 관할 면적비율을 주된 기준으로 하였으므로 손익분배약정을 인정할 수 있다고 주장하나, 이 사건 개발이익을 이 사건 지방자치단체들의 면적 비율로 귀속시키기로 하는 합의의 존재를 인정할 증거가 없을뿐더러, 이 사건 지방자치단체들 사이에서도 이 사건 개발이익으로 지원할 재정소요사업에 관한 이견이 있어 공동사업시행자들 사이의 협의로 그 대상을 정하였던 점 등에 비추어 보면, 원고의 위 주장은 받아들이기 어렵다(원고도 이 사건 협약 당시 공동사업시행자 간 지분이 불분명하여 토지 취득에 따른 소유권이전등기를 지분별로 하는 것은 불가능하였다는 점을 인정한 바 있다).

2) Whether the work progress rate should be calculated on the basis of the total estimated construction cost reflecting various charges

Comprehensively taking account of the overall purport of the arguments in Gap evidence No. 46, the plaintiff paid approximately KRW 1.6,45.8 billion in the business year 2010 as charges, such as bicycle lanes, transmission cable conduits, urban gas removal construction, waste charges, etc., and the plaintiff and the defendant calculated the work progress rate based on the total estimated construction cost excluded from various charges.

In order to ensure that the total estimated cost of construction based on the estimated cost of construction at the time of the contract meets the total estimated cost of construction, as much as possible, the total estimated cost of construction is calculated based on the actual cost of construction at the time of the contract. In cases of construction with a contract period of not less than one year, the total cumulative cost of construction for each business year from the beginning date of the contract to the ending date of delivery of the object shall be calculated by dividing the total accumulated cost of construction from the commencement date of the contract to the total cost of construction at the end of the relevant business year by the total cost of construction, i.e., the calculation of earnings and expenses according to the rate of work progress. Considering the legislative intent and language of the above provision, even if the cost of construction cost is included in the cost of construction work, it is reasonable not to consider in calculating the rate of work progress. However, even if various charges paid by the Plaintiff are included in the cost of construction work at the cost of construction work at the time of the construction project at the time of the contract, the payment period of construction cost shall not be determined differently by the Plaintiff’s 1 to 5 or 36.

3. Conclusion

Therefore, the judgment of the first instance court is legitimate, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.