Whether a corporation may consider a claim for indemnity as a provisional payment without office even after the waiver of the claim for indemnity against a person with a special relationship as an "non-Inclusion of interest in deductible expenses" or "recognitiond interest and gross income" (negative)

In full view of the language and purport of the provisions of Articles 28(1)4(b) and 52(1) of the Corporate Tax Act, Articles 53(1), 88(1)6, and 89(3) of the Enforcement Decree of the Corporate Tax Act, provisional payment, etc., which is subject to non-deductible expenses of paid interest, include not only purely meaningful loans, but also loans corresponding to the nature of bonds such as indemnity bonds, etc., such as indemnity bonds. Furthermore, where delay in collection of indemnity bonds is deemed to reduce tax burden unfairly due to lack of economic rationality in light of sound social norms and commercial practice, it falls under the scope of recognition interest and inclusion in the calculation of earnings. However, in order to recognize the non-deductible expenses or inclusion in the calculation of earnings in the calculation of earnings, if the relevant corporation renounced its claim for indemnity against a specially related person, it should be assumed that the act of waiver is separate and unfair, and the gift tax can be imposed on the specially related person, etc., should no longer be deemed as inclusion in the calculation of earnings.

Article 28(1)4(b) and Article 52(1) of the Corporate Tax Act, Article 53(1), Article 88(1)6, and Article 89(3) of the Enforcement Decree of the Corporate Tax Act

Supreme Court Decision 91Nu8302 delivered on November 10, 1992 (Gong1993Sang, 141) Supreme Court Decision 2005Du1558 Delivered on October 26, 2006

Plaintiff (Law Firm Rate, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Head of Yeongdeungpo Tax Office

Seoul High Court Decision 2006Nu27320 decided July 10, 2007

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

Article 28 (1) 4 (b) of the Corporate Tax Act and Article 53 (1) of the Enforcement Decree of the Corporate Tax Act provide that interest paid on loans equivalent to the amount of loans unrelated to the business of the relevant corporation shall not be included in the calculation of losses, regardless of the title, such as the provisional payment for the related parties held by the corporation, and Articles 52 (1) of the Corporate Tax Act and Articles 88 (1) 6 and 89 (3) of the Enforcement Decree of the Corporate Tax Act provide that where it is deemed that the tax burden on the corporation's income has been unjustly reduced by lending money to the related parties without compensation, the tax authority shall regard it as the wrongful calculation and the recognition interest thereon may be included in the calculation of profits.

In full view of the language and purport of the above provisions, in case where the provisional payment, etc., which is the object of non-Inclusion of interest in deductible expenses, includes not only purely meaningful loans, but also similar loans, such as claims for indemnity, and in case where it is deemed that the delay in collection of claims for indemnity has reduced tax burden unfairly due to the lack of economic rationality in light of sound social norms and commercial practices, it shall be subject to inclusion in the calculation of earnings (see Supreme Court Decisions 91Nu8302 delivered on November 10, 1992, Supreme Court Decisions 2005Du158 delivered on October 26, 2006, etc.). Thus, in order to make such claims for indemnity in deductible expenses or inclusion in the calculation of earnings, if the relevant corporation renounced its claims for indemnity against a specially related person, it shall be subject to avoidance of wrongful calculation, and it shall be subject to inclusion in the calculation of losses, regardless of the amount of interest paid or the amount of gift tax imposed on the specially related person.

According to the reasoning of the judgment below, the court below found that the plaintiff, the majority shareholder of the non-party 1 bank, the non-party 2 corporation, the non-party 3 corporation, the non-party 4 corporation, the non-party 5 corporation (hereinafter "non-party 6"), and the non-party 6 knew that the special rural development tax of this case was imposed on the non-party 1 bank during the process of merger with the non-party 7 banks, the non-party 1 bank corporation and the non-party 7 bank corporation on August 10, 199. The non-party 7 bank corporation paid the special rural development tax of this case on behalf of the non-party 1 bank company, and the plaintiff and the non-party 6 shared the special rural development tax of this case to the non-party 7 bank in accordance with the share ownership ratio of the non-party 1 bank shares, and determined that the non-party 2 and the non-party 6 corporation still paid the special rural development tax of this case on August 16, 1999.

However, in light of the above legal principles, if the plaintiff did not hold the claim for reimbursement against the non-party 6 by waiver of the claim for reimbursement, the interest paid in relation to the non-party 6 shall not be included in the calculation of losses or the recognized interest shall not be included in the calculation of losses, and the judgment of the court below which determined otherwise is erroneous in the misunderstanding of legal principles as to the provisional payment in office and the wrongful calculation omission

Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Young-chul (Presiding Justice)