Article 45 (1) 2 of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990) the scope of installation or improvement expenses under Article 45 (1) 2 of the former Income Tax Act

Article 94 (5) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 12767 of Aug. 1, 1989) does not apply to the installation cost or improvement cost under Article 45 (1) 2 of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990), even if it is based on the standard market price since the contents or scope of the necessary expense deduction is not delegated to the Enforcement Decree, the scope of the provision does not apply to the installation cost or improvement cost. However, in light of the purport of the above provision, the above installation cost or improvement cost refers only to the cost significantly increasing the objective value of fixed assets to the extent that it could affect the determination of the standard market price

Article 45 (1) of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990); Article 94 (5) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 12767 of Aug. 1, 1989)

Supreme Court en banc Decision 90Nu9360 Decided October 22, 1991 (Gong1991, 2855)

[Defendant-Appellee] Plaintiff 1

The Director of Gangnam District Office

Seoul High Court Decision 90Gu12177 delivered on June 13, 1991

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

The Plaintiff’s grounds of appeal are examined (the supplementary appellate brief was submitted after the expiration of the submission period, and it is determined to the extent of supplement in case of supplemental appellate brief).

Article 45 (1) of the Income Tax Act (amended by Presidential Decree No. 4281 of Dec. 31, 1990) provides that necessary expenses to be deducted from the transfer value in calculating gains on transfer (Article 1, in principle, the amount calculated by adding the amount calculated by multiplying the standard market price at the time of acquisition of the relevant asset by 7/100 to the standard market price at the time of acquisition of the relevant asset, in cases prescribed by Presidential Decree), other than the acquisition value (Article 2), equipment expenses and improvement expenses (Article 2), capital expenses prescribed by Presidential Decree (Article 3) and transfer expenses prescribed by Presidential Decree (Article 94 (5) 1 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 12767 of Aug. 1, 1989). However, in calculating gains on transfer of land, building, etc. based on the standard market price, Article 94 (5) 1 of the same Act (amended by Presidential Decree No. 12767 of Aug. 1, 1, 1989) provides that the construction expenses shall be excluded from the standard market price.

However, Article 94(5) of the Enforcement Decree of the above Act does not apply to cases where the scope of the content or scope of the necessary expenses deduction is not delegated by the Enforcement Decree with respect to the facility cost or improvement cost under Article 45(1)2 of the above Act, and the scope thereof is limited to cases where the standard market price is applied (see Supreme Court Decision 90Nu9360, Oct. 22, 1991). However, the above facility cost or improvement cost means only the cost that significantly increases the objective value of fixed assets to the extent that it may affect the determination of the standard market price of the land or building in light of the purport of the above provision. Thus, even after examining the record, there is no evidence to recognize that the construction executed by the Plaintiff is to significantly increase the objective value of the building as above, and such facility cost does not constitute improvement cost, but is merely capital expenditure.

The judgment below to the same purport is just and there is no error in the misapprehension of legal principles by misapprehending the interpretation of the above statutes.

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 Song Man-man (Presiding Justice)