If the apartment sale contract is cancelled, the disposition based on the cancellation contract shall be illegal.

- In the event of cancellation of the apartment sale contract, the imposition disposition based on the cancellation contract is illegal - the fact that the sales contract is cancelled should be judged.

2015Guhap63869 Revocation of Disposition of Corporate Tax Imposition

△ corporation

O Head of tax office

on October 19, 2017

November 2018

1. Each disposition of KRW 00,000,000 (including additional taxes) corporate tax for the business year of 0000 to the Plaintiff on October 0, 2012, and KRW 00,000,000 (including additional taxes) of corporate tax for the business year of 0000, shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff, a company established for the purpose of real estate sale and sale business, etc., newly constructed and sold 00 households out of the instant apartment from around October 200 to around 00,000 to about 00 dong 00,000 (hereinafter “the instant apartment”). From October 200 to October 20, 200, the Plaintiff sold 00 households out of the instant apartment.

B. However, around October 200, some of the buyers of the apartment of this case claimed against the Plaintiff that the sales contract was revoked on the grounds of the Plaintiff’s failure to notify the existence of 00 neighboring apartment units or active deception, and filed a civil lawsuit claiming the return of the pre-sale price or seeking damages, and subsequently, the same lawsuit was filed until October 2000. The Plaintiff calculated the sales rate excluding the pre-sale price of the households anticipated to be revoked, and reported corporate tax for the business year 200 and 2000 by calculating the sales proceeds (sales proceeds) and the sales cost (sales rate shall be calculated by dividing the total sales price of the households sold in lots by the estimated sales price of 00 households, and the total sales proceeds shall be calculated by multiplying the pre-sale price of 00 households by the sale rate and the construction progress rate).

C. On October 0, 200, the defendant calculated the sale rate and the profit from the sale on the basis of the price of 000 households actually sold, and on the ground that the cancellation of the sale contract is predicted, the sale rate and the profit from the sale cannot be calculated except for the sale price for the relevant households." The defendant calculated the sale price and the profit from the sale at the sale price again and notified the correction and notification of the corporate tax of 2000,000,000,000 (including additional tax) for the business year of 2000, and the corporate tax of 00,000,000 (including additional tax) for the business year of 200 (hereinafter referred to as "each disposition of this case").

D. The Plaintiff filed a tax appeal with the Tax Tribunal on October 0, 200 after filing an objection on October 00, 200, but was dismissed on October 0, 2010.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence No. 1 (including numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

The plaintiff is expected to cancel the sales contract upon reporting corporate tax for the business year 200, 200.

The sales contract for 00 households was cancelled by the Plaintiff’s loss in the civil procedure instituted by the buyer, and the sales contract for 000 households was cancelled by the Plaintiff’s declaration of cancellation due to the buyer’s default, etc., and the sales contract for 000 households was cancelled or cancelled in the aggregate by 2000 households until 2000. As such, if the effect of the sales contract for 200 households retroactively terminates, the corporate tax amount reported by the Plaintiff exceeds the corporate tax amount legally calculated, even though the corporate tax amount for 200, 2000 business year exceeds the corporate tax amount legally calculated, the Defendant did not recognize the retroactive effect of cancellation or cancellation, and instead, the change in profit or loss due to the cancellation or cancellation of the sales contract should be attributed to the business year so cancelled or cancelled. Accordingly, each of the dispositions of this case was unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Relevant legal principles

Article 40(1) of the Corporate Tax Act provides that “The business year to which gains and losses of a domestic corporation accrue shall be the business year which includes the date on which the initial taxable income and losses are determined.” This shall be deemed realizing the income if the right which is the cause of such income has not yet been realized, and adopts the so-called principle of confirmation of right to taxable income. Such principle of confirmation of right shall be deemed as the time when the right which is the cause of income is determined and the time when the income is realized comes to an interval of time between the time when the right which is the cause of income and the time when the income is realized, and shall be deemed as the time when the right which is not the time when the income is realized, and shall be deemed as the time when the income is calculated based on the premise that the actual uncertain income is to be realized. Therefore, even if the right which becomes the cause of income comes into existence and the tax liability becomes final by the occurrence of a certain subsequent cause, if it is determined that the initial tax liability becomes final and conclusive due to the occurrence of a certain cause or event subsequent to the declaration of corporate accounting cannot be imposed in accordance with the principle of two preceding business years.

In addition, in cases where a tax authority imposes a tax return on a taxpayer due to his/her failure to file a tax base return, there is a system for filing a request for correction based on the following reasons, such as rescission of a contract that occurred thereafter, and thus, it does not interfere with the filing of a lawsuit on the disposition itself, and thus, it is possible to dispute the above disposition separate from the application for correction. In cases where the tax liability established upon the occurrence of a subsequent cause that arises after the establishment of the tax liability becomes final and conclusive as the income is not realized, if the tax authority imposed a tax disposition on the ground that the initial cause for filing a subsequent request for correction exists, even though the tax authority had the reason for filing the subsequent request for correction, such taxation is unlawful, and thus the taxpayer may seek revocation through an appeal litigation (see Supreme Court en banc Decision 2001Du5989, Sept. 27, 2002; 2014Du514, Jul. 16, 2015).

2) As to the defendant's argument

A) Prior to determining the Plaintiff’s assertion, the Defendant asserted that the change in profit or loss due to the cancellation or cancellation of the sales contract cannot be reflected in the gross income and deductible expenses for the business year during which the sales contract had already been completed, and thus, it should be determined first.

B) The Defendant asserts that the subsequent request for correction cannot be made even when the sale contract was cancelled or cancelled after the Plaintiff’s arbitrary calculation of the sale rate at the time of the business year 2000, 2000 and omitted the gross income and deductible expenses. Thus, if the subsequent request for correction cannot be made, it shall not affect the gross income and deductible expenses for the business year prior to the cancellation or cancellation of the sale contract. However, in light of the legal principles as seen earlier, even if the Plaintiff was able to impose tax by omitting the gross income and deductible expenses at the time of the declaration of the business year 200, 2000, and even if it was possible for the Plaintiff to impose tax by omitting the gross income and deductible expenses, if the subsequent reasons such as the cancellation or cancellation of the sale contract have occurred, it is unlawful to reflect it, and the taxpayer may dispute the illegality of the taxation

C) The defendant argues to the effect that each of the dispositions of this case in order to correct the omission of corporate tax by intentionally omitting the gross income and deductible expenses for the business year 2000 and 2000 is legitimate. However, the legality of each of the dispositions of this case in this case is determined according to whether it is within the legitimate scope of corporate tax at the time of the imposition of the corporate tax imposed on the defendant's correction and notification at the time of the imposition of the corporate tax or at the time of the occurrence of the subsequent cause, and it is not determined according to the determination within the legitimate scope of corporate

D) Although the Defendant asserts that it is reasonable to vest in the business year to which the cancellation date belongs the change in profit and loss arising from the cancellation of the sales contract (see Article 69(3) of the Enforcement Decree of the Corporate Tax Act amended by Presidential Decree No. 23589, Feb. 2, 2012). According to Article 2 of the Addenda of the Enforcement Decree of the Corporate Tax Act, the above provision applies from the first beginning business year after January 1, 2012. Thus, as seen below, the sales contract is cancelled or cancelled before the enforcement date of the above provision, and it cannot be applied to this case where the issue of corporate tax for 200,200 business year prior to the enforcement date of the above provision (see Supreme Court Decision 2013Du12829, Mar. 13, 2014). Therefore, the Defendant’s above assertion is without merit.

E) The Defendant asserts that the Plaintiff calculated the 2010 business year’s financial statements as sales expense, and that the 2010 business year’s financial statements constituted ’special circumstances in which the taxpayer reported corporate tax in a manner that deducts the amount of income for the business year in which such a cause occurred in accordance with corporate accounting standards or practices.’ As such, the Defendant asserts that the 2010 business year’s financial statements can not affect the profits and losses arising from the cancellation or cancellation of the sales contract.

According to the evidence No. 30, it is recognized that the Plaintiff appropriated approximately KRW 0 billion for non-business expenses, which was incurred by the contract for sale in lots in the income statement for the business year 2000. The business accounting standards and practices that reflect the current and repeated reasons for the latter shall normally arise in terms of a certain scale every fiscal year, and they refer to the fact that even if the profits and losses of the current term are adjusted without the need for adjustment of the profits and losses, they shall not be at a point of view of the importance of business accounting even if the profits and losses of the current term are adjusted without the need for adjustment of the profits and losses. However, in light of the Plaintiff’s sales amount, the decrease in the sale price exceeding KRW 00,000 in this case is difficult to be considered as a subsequent cause arising in ordinary and repeated manner. Accordingly, the Defendant’s above assertion is without merit.

(iii) the facts of recognition

The following facts are acknowledged according to the respective entries and arguments of Gap's 6 through 12, 15, 18, 20 through 22, Eul's 1, 3, 18, 21 through 23.

A) The Plaintiff reported corporate tax for the business year of 2000 and 2000, and excluded the sales price of 000 households, which is anticipated to be cancelled, from the calculation of the sales price, and did not include the sales price and the sales price according thereto in the gross income and deductible expenses. On the other hand, the Defendant deemed that the sales price of 000 households should be included in the calculation of the sales price for the business year of 2000, the sales price of 000,000, the sales price of 000,000, and the sales price of 00,000,000,000, and the sales price of 00,000,000,000 each of the instant dispositions in gross income and deductible expenses for the business year of 200, respectively.

B) From October 200 to October 2000, the number of apartment buyers of this case filed a lawsuit seeking cancellation of the sales contract and return of unjust enrichment against the plaintiff from around 000 to around 000, and seeking compensation for damages due to the price decline of apartment. The above lawsuit was rendered at the first instance judgment around October 2000 and the appellate judgment became final and conclusive around October 200. According to the first instance judgment and the appellate court judgment of the above lawsuit, the cancellation of the sales contract of 00 households was recognized on the ground of the non-performance of the duty of disclosure. According to the above lawsuit, 00 households among the above 00 households revoked after the above lawsuit, ownership was transferred to the previous buyer, and 00 households were transferred to the third party who is not the previous buyer (hereinafter referred to as 'the above 00 households' and 'the above 100 households' type 126 households' type 26.

C) On October 00, 200, the Plaintiff did not pay the sales price under the apartment sales contract to the buyer of the instant apartment, and the Plaintiff informed whether or not to consent to the sale price at a discount of 25% by taking into account the real estate market erosion, etc. If the Plaintiff did not submit a written consent, it would cancel the sales contract. On October 00, 200, the Plaintiff notified the buyer of the sales contract that he did not pay the sales price under the apartment sales contract to the buyer of the sales contract, and that the contract was terminated pursuant to Article 2 of the apartment sales contract because there was no answer to the request for the written consent of the contract performance. (The text of the notification is referred to as "the contract is terminated" but under Articles 2 and 3 of the apartment sales contract with the buyer, the Plaintiff bears the duty to restore the pre-paid sales price, and can confiscate the penalty, and the legal nature of the above notification can be seen as an agreement to cancel the sales contract with the buyer for 20 years and 30 years of exercise of the right to cancel (the above notification).

Article 1 of the Agreement provides that "for the purpose of the agreement, to solve the problem related to the sale contract", and Article 4 provides that the down payment and intermediate payment other than penalty shall be returned to the buyer or repaid the money borrowed in the name of the buyer, so the agreement can be seen as "cancellation of the contract due to unavoidable reasons" recognized as the ground for filing a subsequent claim for correction. After the above 00 households, 00 households among the above 00 households have transferred ownership in the future of the previous buyer despite the notification of cancellation, and 00 households have transferred ownership in the future of the third party who is not the previous buyer (hereinafter the above 00 households are referred to as "type 3", and 00 households and 0 households which have written the agreement together with the above 00 households and the third party who are not the previous buyer (hereinafter the above 00 households are referred to as "type 4").

D) If the above-mentioned 1 or 4 forms are arranged as the table, as follows: “Contract succession” refers to a case where a contract is concluded in the form of succeeding to the status of the previous buyer, and ownership is transferred to a third party; “Separate contract” refers to a case where a contract is concluded in the form of a separate contract with a third party, regardless of the previous buyer’s sales contract, and ownership is transferred to a third party.

4) Determination

A) In the case of Category 1:

As seen earlier, it is recognized that the contract for sale in lots between the Plaintiff and the Type 1 buyer has been cancelled. However, despite the result of the above lawsuit, the Type 1 buyer acquired ownership of the apartment of this case. If the Plaintiff proposed to reduce the sale price to the buyer of the apartment of this case, and the Type 1 buyer maintained the contract for sale in lots even though he won in the lawsuit, it seems that the Type 1 buyer agreed to adjust the sale price in part with the Plaintiff before the transfer of ownership and continue the effect of the contract for sale in lots. Therefore, the part of the contract for sale in lots between the Plaintiff and the Type 1 buyer should be changed retroactively to the gross income and deductible expenses for the business year of 200, 2000, because this part of the Plaintiff’s claim is justified to the extent that the price is reduced as above and the remainder of the claim is without merit.

B) In the case of Category 2:

As seen earlier, the fact that the contract for sale in lots between the Plaintiff and the Type 2 buyer was cancelled, and the ownership of the apartment sold in lots between the Plaintiff and the Type 2 buyer is recognized to have been transferred to another third party. From the standpoint of the third party, if the Plaintiff and the buyer intend to purchase the apartment house in progress, there is any disadvantage for the third party to participate in the dispute unnecessary. From the standpoint of the Plaintiff, it is unclear who is the result of the lawsuit and the third party, and it is possible for the buyer to sell the apartment to the third party and maintain the lawsuit with the Plaintiff even though the buyer sells it to the third party, it does not seem that the Type 2 buyer entered into a contract with the third party to acquire the status of the buyer directly after the cancellation of the contract at around 201, namely, after the cancellation of the contract, the Plaintiff’s new 20-year sales contract was confirmed to have been cancelled, the Plaintiff’s new 20-year sales contract was concluded or succeeded to the status of the purchaser after the 20-year buyer and the 20-year.

C)in the case of Category 3:

The plaintiff's notification of cancellation of the sales contract to the third-class buyer is recognized. However, as seen in the first-class buyer, despite the above cancellation notification, the third-class buyer acquired the ownership of the apartment of this case. It seems that the plaintiff and the third-class buyer agreed to continue the effect of the sales contract by reducing part of the sales price as proposed by the plaintiff. Therefore, the plaintiff's assertion is reasonable to the extent that the sales price should be reduced and the gross income and deductible expenses for the business year 2000 and 2000 should be changed retroactively, and the remaining arguments are without merit.

d)in the case of Category 4:

The Plaintiff’s notification of cancellation of the sales contract or agreed on the cancellation of the sales contract to the purchaser of the 4th type, and the ownership of the 4th type apartment to the purchaser of the 4th type was transferred to another third party. In light of the fact that the Plaintiff agreed on the cancellation of the sales contract to the purchaser who did not pay the purchase price before the above cancellation notification and the cancellation agreement and proposed that the sale price should be reduced by 25%, but the purchaser of the 4th type can be notified of the cancellation and the cancellation agreement, and if the above apartment house transferred its ownership to the other third party, the sales contract was cancelled in accordance with the above cancellation notification and cancellation agreement. In addition, the Plaintiff’s new form of cancellation of the sales contract and the 20th type of the 20th type of the 20th type of the 20th type of the 4th type of the 20th type of the 20th type of the 20th type of the 20th type of the 20th type of the 20th type of the 3th type of the 20th type of the e-sale.

E) In the case of 00 households asserted by the Plaintiff

In addition to the above types 1 through 4, the Plaintiff asserts that since the ownership of 00 households is transferred in the name of a third party, not the initial buyer, the above 30 households should also be deemed to have cancelled or cancelled the sales contract. However, the above 30-household sales contract may be cancelled or cancelled.

There is no objective material to acknowledge that retroactive effect has ceased to exist, such as cancellation by the buyer’s default. The reason why ownership is transferred in the name of a third party other than the buyer is different from the case where the sales contract is cancelled or cancelled. Thus, such circumstance alone cannot be deemed to have retroactively extinguished the effect of the sales contract for 30 households. Therefore, the Plaintiff’s assertion on this part is

F) Scope of revocation

Whether a disposition is lawful is determined depending on whether it exceeds a legitimate amount of tax. The parties concerned may submit objective tax bases and materials supporting the tax amount until the closing of arguments in the fact-finding court. When computing the legitimate amount of tax to be imposed lawfully based on such materials, only the portion exceeding the reasonable amount of tax should be revoked. However, if not, the entire amount of the taxation disposition should be revoked, and in such a case, the court does not have the duty to calculate the reasonable amount of tax to be imposed actively by its authority (see Supreme Court Decision 2015Du622, Sept. 10, 2015).

As seen earlier, the Plaintiff’s assertion regarding Types 1 and 3 is with reason to the extent that the sale price has been reduced to the extent that it affects the gross income and deductible expenses for the business year 200 and 200, as seen earlier, and Types 2 and 4.

The Plaintiff’s argument regarding the Plaintiff’s assertion is with merit. However, when accepting the part of the Plaintiff’s argument, the materials submitted up to now cannot be seen as much as corporate tax for the business year 200 and 2000. Therefore, the entire disposition of this case is to be revoked.

3. Conclusion

The plaintiff's claim is justified and the costs of lawsuit are assessed against the losing defendant. It is so decided as per Disposition.

Judge Cho Tae-hoon

Judges Park Jong-dae

Judge Lee Jong-hoon