Plaintiff (Law Firm Young-soo, Attorneys Kim Jae-young et al., Counsel for the plaintiff-appellant)

Head of Yeongdeungpo Tax Office

September 19, 2006

1. All of the plaintiff's claims are dismissed.

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

The Defendant’s revocation of the part of the amount exceeding KRW 1,205,015,440, which exceeds KRW 1,202,902,861 of the corporate tax for the business year 2000 against the Plaintiff on August 2, 200, exceeding KRW 3,836,740,80 of the corporate tax for the business year 3,889,054,570, exceeding KRW 3,836,740,808 of the amount, and exceeding KRW 26,942,434,942 of the corporate tax for the business year 2002, exceeding KRW 26,86,087,561 of the amount exceeding KRW 26,86,561 of the amount.

1. Details of the imposition;

The following facts are not disputed between the parties, or can be acknowledged in full view of the purport of the whole pleadings in each entry of Gap evidence 4-1 through 13, Gap evidence 5, 6-1, 2, Eul evidence 1-1 through 9, Eul evidence 2-1 through 10, Eul evidence 2-2, and Eul evidence 3-2:

A. The Plaintiff Company was a corporation engaged in the issuance and management of credit cards; Nonparty 2; Nonparty 3; Nonparty 4; Nonparty 5; Nonparty 5; and Nonparty 6, together with Nonparty 6 (hereinafter “Nonindicted Company”); and (i) was a shareholder of Nonparty 1 Bank. (ii) At the time of August 9, 199, the current status of Plaintiff Company, Nonparty 1 and Nonparty 6’s stockholding status of Nonparty 1 Bank and the shareholding ratio between the parties are as follows).

Plaintiff Company 35,892,129, 15.91% of the number of voting shares included in the main sentence, and 11.18% of the number of voting shares in Nonparty 2 Company 15,89,542, 51.38% of the non-party 3 Company 25,226,545, 11.18% of the non-party 4 Company 24,890,281, 11.03% of the non-party 5 Company 11,238,083, 4.98% of the non-party 612,48,037, 5.52% of the total of 225,594,617 shares

B. On February 11, 1999, the non-party 8 was merged with the non-party 1 bank, and accordingly, the non-party 1 bank, a corporation surviving the merger, was imposed special rural development tax amounting to KRW 78,860,60,603,601 on liquidation income of the non-party 8 corporation (hereinafter “special rural development tax of this case”).

Then, on September 15, 1999, the non-party 1 bank was merged with the non-party 7 bank corporation (the non-party 9 bank corporation was merged with the non-party 9 bank corporation on April 1, 2006; hereinafter "non-party 7 bank corporation").

C. The Plaintiff Company and the Nonparty Company paid KRW 100,669,136,749 to Nonparty 7 Bank Co., Ltd. the total amount of the instant special rural development tax and the interest thereon paid by Nonparty 7 Bank Co., Ltd. on November 1, 1999.

D. On August 10, 199, the defendant agreed that the plaintiff company, the non-party company and the non-party 6 paid the special rural development tax of this case to the non-party 7 Bank Co., Ltd. according to the share ownership ratio of the non-party 1 Bank Co., Ltd. on August 10, 199, but the plaintiff company and the non-party company paid the total amount of the special rural development tax of this case and interest thereon to the non-party 7 Bank Co., Ltd. with the non-party 6 excluding the non-party 6 excluding the non-party 6 excluding the non-party 6 excluding the non-party 6 excluding the special rural development tax of this case as provisional payment, regardless of their business affairs, the part of the contract made by the non-party 6 - who is related to the non-party 6 was paid as provisional payment, and the interest thereon was added to the income tax of 1,205,015,40 won for the business year 2000,364.

E. On November 1, 2004, the Plaintiff Company dissatisfied with the instant disposition, filed an appeal with the National Tax Tribunal. On December 1, 2005, the National Tax Tribunal dismissed the Plaintiff Company’s appeal.

2. Whether the instant disposition is lawful

A. The plaintiff company's assertion

(1) The plaintiff company and the non-party company put their seals on the agreement dated August 10, 199, which agreed that they be responsible for the amount of the special rural development tax of this case, as the party liable for the payment of the tax amount. However, at the time of the merger of the non-party 1 bank and the non-party 6's seal kept in custody by the non-party 6 without the non-party 6's consent. Since the non-party 6 ratified the contents of the above agreement, the agreement dated August 10, 199 as of August 10, 199 is not effective against the non-party 6.

(2) Even if the above agreement was made on August 10, 199 by Nonparty 6, the above agreement was merely an agreement that the Plaintiff, the shareholders of the non-party 1 bank, the non-party company, and the non-party 6 agreed to jointly and severally liable for the special rural development tax of this case. They did not set a specific ratio among the parties. After that agreement, the Plaintiff and the non-party company, the shareholders of the non-party 1 bank, agreed to share the special rural development tax of this case in proportion to shares held against the non-party 1 bank corporation on August 16, 1999. Accordingly, the liability of the non-party 6 pursuant to the agreement on August 10, 199 should be deemed extinguished.

(3) Therefore, the instant disposition, based on the premise that Nonparty 6 is liable to share shares to Nonparty 1 Bank out of the special rural development tax of this case under the agreement of August 10, 1999, is unlawful.

(b) Related statutes;

[Corporate Tax]

Article 28 (Non-Inclusion of Interest Paid in Calculation of Losses)

(1) The interest on loans falling under any of the following subparagraphs shall not be included in deductible expenses in calculating the income amount of a domestic corporation for each business year:

4. Of interest on loans paid during each business year by a domestic corporation which acquires or holds assets falling under one of the following items, the amount calculated under the conditions as prescribed by the Presidential Decree (limited to interest on loans equivalent to the value of the relevant assets):

(b) Provisional payments, etc. prescribed by the Presidential Decree to a person with a special relationship under the provisions of Article 52 (1) without connection with the business of the relevant corporation; and

Article 52 (Dispudiation of Wrongful Acts)

(1) Where the head of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office deems that the tax burden of a domestic corporation has been unjustly reduced through transactions with persons with a special relationship prescribed by Presidential Decree (hereinafter referred to as "specially related persons"), he/she may calculate the amount of income for each business year of the relevant corporation regardless of the activities or calculation of the amount of income of the relevant corporation (hereinafter

[Enforcement Decree of the Corporate Tax Act]

Article 53 (Non-Inclusion of Interest Paid on Non-Business Assets, etc. in Calculation of Losses)

(1) The term “those as prescribed by the Presidential Decree” in Article 28 (1) 4 (b) of the Act means the lending amount of funds unrelated to the business of the relevant corporation (including the lending amount of funds which cannot be deemed the principal profit-making business in case of financial institutions, etc. falling under any subparagraph of Article 61 (2) 4 (b)): Provided, That the amount prescribed by the Ordinance of the Ministry of Finance

Article 87 (Scope of Person with Special Relationship)

(1) For the purpose of Article 52 (1) of the Act, the term “person with a special relationship as prescribed by the Presidential Decree” means a person with a relationship falling under any of the following subparagraphs with a corporation (hereinafter referred to as “person with a special relationship”):

1. Persons recognized as exercising real influence over the operations of the concerned corporation, such as exercising the right to appoint officers or determining the course of business (including persons to be treated as directors under Article 401-2 (1) of the Commercial Act) and their relatives;

2. Stockholders, etc. (excluding minority shareholders; hereafter the same shall apply in this Sub-section) and their relatives;

(c) Fact of recognition;

Each evidence mentioned above, Gap evidence 1, Eul evidence 2 (the same as Eul evidence 3-1), Eul evidence 3-1 through 6, part of non-party 10's testimony (excluding the part not trusted in the front and rear) and the whole purport of the arguments as to non-party 9's fact inquiry with respect to non-party 9's non-party 1 corporation can be acknowledged as follows.

(1) When the plaintiff company, the non-party company and the non-party 6 knew that the special rural development tax of this case was imposed on the liquidation income of the non-party 8 company, without knowing that the special rural development tax of this case was imposed, the non-party 7 bank and the non-party 1 bank company were to take the procedure of merger and that the special rural development tax of this case was imposed only on June 199, the non-party 7 bank and the non-party 1 bank and the non-party 1 bank were to reduce the time and procedural costs incurred by the merger process due to the special rural development tax of this case and maintain the previous merger ratio. The non-party 1 bank and the non-party 6 company were jointly and severally liable to pay the amount of the special rural development tax of this case to the non-party 7 bank and the non-party 6 company to whom the non-party 1 company and the non-party 6 company agreed to pay the amount of interest to the plaintiff company and the non-party 7 company to the non-party 6 company.

On the other hand, at the end of the first agreement of this case, Nonparty 7 Bank Co., Ltd., Nonparty 1 Bank, Plaintiff Company, Nonparty Company and Nonparty 6 affixed seals.

(2) Under the title "Agreement" on August 16, 1999, the Plaintiff Company and the non-party Company agreed to pay the special rural development tax of this case jointly and severally borne by the parties under the first agreement of this case. The special rural development tax of this case, which was finalized or until December 31, 200, possessed by the Plaintiff Company and the non-party Company as of August 9, 199, pursuant to the share ratio of the non-party 1 Bank Co., Ltd. (16.8% of the Plaintiff Company, 54.4% of the non-party 2 Co., Ltd., 31.8%, 41.7% of the non-party 4 Co., Ltd., and 5.3% of the non-party 5 Co., Ltd. (hereinafter "the second agreement of this case").

(3) On December 29, 200 and December 29, 2001, the Plaintiff Company paid 16,761,851,111 won (tax amount + 2,188,41,546 won + prepaid interest 2,18,41,55 won) out of the amount of the instant special rural development tax and the advance interest paid by the said Bank to Nonparty 7 Bank (the following table is the details of shares paid by the Nonparty 7 Bank to Nonparty 7 Company).

Non-party 2 Co., Ltd. 47,190,185,185,194,11 won, aggregate of the interest on advance payment in the table included in the main sentence of this paragraph, shall be 10,236,106,347,347,537,537,598,598,116 won, non-party 3 Co., Ltd. 11,73,204,945 won, non-party 4 Co., Ltd. 10,149,359,639,6832,205 won, 285,814 won, 125,645,257,279,797,947,9639,747,9639,57,9639,75,97,967,97,964,97,97,57,9639,637,967,97

(4) After receiving the aforementioned special rural development tax and the advance payment interest thereon from the Plaintiff Company and the Nonparty Company, Nonparty 7 Company did not transfer the rights to the Plaintiff Company, Nonparty 1 Company, and Nonparty 6 to other shareholders of the Plaintiff Company.

D. Determination

(1) Whether the first agreement of this case was effective as against Nonparty 6

The plaintiff company asserts that since the non-party 6 was involved in or ratified the first agreement of this case, the first agreement of this case does not have any effect against the non-party 6.

The testimony of the non-party 10, consistent with the plaintiff company's assertion, is extremely unusual that ① the amount of tax equivalent to KRW 78.8 billion is jointly and severally borne by the parties, and the seal is affixed at will to the first agreement providing security of KRW 104.6 billion without the parties' prior consent or authority. Furthermore, the parties involved in the first agreement of this case were a large-scale corporation or controlling shareholder constituting a domestic largest enterprise group. ② If the special rural development tax of this case is processed separately from the merger procedure of the non-party 1 bank corporation and the non-party 7 bank corporation, the net assets of the non-party 1 bank were excessive in the amount of the special rural development tax of this case and the non-party 6, a stockholder of the non-party 1 bank corporation, also were received more than the new stocks of the non-party 7 bank corporation surviving the merger. ③ In fact, it is difficult to recognize the authority of the non-party 1 corporation and the non-party 1 corporation to the merger agreement of this case, including the plaintiff 1 corporation.

We cannot accept this part of the Plaintiff Company’s argument.

(2) The scope of the first agreement of this case

The Plaintiff Company asserted that the instant first agreement merely limited to the joint and several payment of the instant special rural development tax to the Plaintiff Company, Nonparty Company, and Nonparty 6, the external joint and several payment of the instant special rural development tax, and that each party did not agreed to the share sharing ratio as the shares held by Nonparty 1 Bank, and that only the instant second agreement was determined by the specific share sharing ratio among the parties.

According to the first agreement of this case, it is true that the plaintiff company, the non-party company and the non-party 6 jointly and severally agreed to pay the special rural development tax of this case, and their respective shares are not specified. However, the first agreement of this case is concluded with the non-party 1 bank and the non-party 7 bank merger procedure, and there is a risk of delaying the merger procedure, so that the controlling shareholders of the non-party 1 bank entered into a contract to solve this problem. The total tax amount to be borne by them is 78.8 billion won, and the security to be provided is 104.6 billion won, it is difficult to view that the plaintiff company, the non-party 1 company and the non-party 6 agreed to hold the special rural development tax of this case externally to be jointly and severally liable to the non-party 6 company's shares, and it is presumed that the non-party 1 corporation and the non-party 6 company share share share ownership ratio of the non-party 1 corporation are relatively different from the other bank's share ownership ratio.

Therefore, inasmuch as the share of the Special Rural Development Tax of the Plaintiff Company, the non-party company, and the non-party 6 was determined by the first agreement of this case, the second agreement of this case is merely an agreement to allocate profits to the non-party 6 by having the Plaintiff Company and the non-party company share the special rural development tax of this case with the exception of the non-party 6.

This part of the Plaintiff Company’s assertion is without merit.

(3) Therefore, unlike the first agreement of this case, the fact that the Plaintiff Company paid the special rural development tax of this case and its advance interest to the non-party company with the exception of the non-party 6 pursuant to the second agreement of this case is that the special rural development tax of this case and its advance interest were paid to the non-party 6, who is a related party regardless of its business, regardless of its economic rationality. Thus, the disposition of this case in which the corporate tax was calculated by adding the recognized interest to

On the other hand, the plaintiff company asserted that the duty to share the special rural development tax of this case should be taken into account in calculating the share ratio of other shareholders of the non-party 1 bank in the non-party 6's calculation of the share ratio on the premise that the plaintiff company, the non-party 6 company and the non-party 6 other shareholders of the non-party 1 bank. Thus, with respect to the special rural development tax of this case imposed on the non-party 1 bank, it is obvious that other shareholders of the non-party 1 bank are not liable to pay it. As seen above, the disposition of this case was imposed on the non-party 6 with the non-party company except the non-party 6 who agreed to share the special rural development tax of this case under the first agreement of this case. Thus, the plaintiff company's above assertion cannot be

3. Conclusion

If so, the plaintiff's claim of this case is without merit, and it is dismissed. It is so decided as per Disposition.

Judges Lee Tae-tae (Presiding Judge)