The scope of contribution and inclusion of earnings from operating revaluation reserves of a life insurance company in deductible expenses;

In principle, the allocation of revaluation reserves to policyholders by a corporation engaging in life insurance business may be deemed to be the settlement and refund of premiums ex post to contractors. Therefore, it is reasonable to include in deductible expenses in the calculation of deductible expenses. However, profits from the operation of assets accounted as funds for public-service funding in the past out of revaluation reserves in accordance with the Guidelines for Disposal of Life Insurance Companies' Surplus and Revaluation Reserves, even if they contributed to public-service projects in accordance with the "Guidelines for Disposal of Revaluation Reserves" of the Minister of Finance and Economy, they are paid dividends or dividends, or past contractors cannot be deemed as trust assets held by an unspecified person or life insurance company's own trust assets, and they cannot be deemed as having a relationship with premiums received from policyholders, and they cannot be deemed as a compulsory contribution under the law. Thus, the above contributions constitute designated donations under Article 18 (1) of the former Corporate Tax Act (amended by Act No. 4282, Dec. 31, 1993).

Article 16 subparag. 10 and Article 18(1) of the former Corporate Tax Act (Amended by Act No. 4282, Dec. 31, 1993); Article 32 and Article 42 subparag. 1 of the former Enforcement Decree of the Corporate Tax Act (Amended by Presidential Decree No. 15192, Dec. 31, 1996);

Supreme Court Decision 87Nu108 Decided July 21, 198 (Gong1987, 1410) Supreme Court Decision 91Nu11285 Decided July 14, 1992 (Gong1992, 2446) Supreme Court Decision 96Nu9164 Decided April 11, 1997 (Gong197Sang, 1490)

Samsung Life Insurance Co., Ltd. (Attorney Hy Chang-soo et al., Counsel for the defendant-appellant)

The director of the Southern District Tax Office (Attorney Lee In-bok, Counsel for defendant-appellee)

Seoul High Court Decision 95Gu28313 delivered on June 11, 1996

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

We examine the grounds of appeal.

Article 97 (3) of the former Insurance Business Act (amended by Act No. 4831 of Dec. 31, 1994, Article 4 of the Addenda of the amended Government Organization Act (amended by the Minister of Finance and Economy, Act No. 4831 of Dec. 31, 1994, hereinafter the same) provides that where an insurer conducts revaluation pursuant to the Assets Revaluation Act, revaluation reserves arising from revaluation may be disposed of for dividends to policyholders with the permission of the Minister of Finance and Economy in addition to disposal pursuant to Article 28 (2) of the Assets Revaluation Act. Accordingly, it can be deemed that the allocation of revaluation reserves arising from revaluation of assets to policyholders by a life insurance company shall be made after the settlement and refund of premiums to policyholders after the settlement of premiums. However, even if the revaluation reserves were contributed to public service projects in the past, it shall not be made dividends or dividends, nor shall it be made free of charge to policyholders or policyholders who received premiums under the Act, 194.

In the same purport, the court below erred in the misapprehension of legal principles as to the payment of the amount of KRW 117,30,000,00, out of the revaluation reserve 292,65,845,186, which was generated by the plaintiff operating a financial and insurance business on February 1, 1990 as the base date, as policyholders' shares under Article 97 (3) of the Insurance Business Act, and one-third of each of the public-service contribution funds, special dividends to policyholders, and the contractor's dividends stabilization reserve funds, and the payment of KRW 39,100,000,000 for the business year of 1990, and the amount of KRW 5,509,000,000 for the business year of 191 as the amount of KRW 5,176,00,000 for the public-service business year of Samsung Foundation as the financial resources for the public-service business in the calculation of deductible expenses.

Therefore, the appeal is dismissed and all 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.

Justices Kim Jong-sik (Presiding Justice)