Seoul High Court 2012Nu36479 (Seoul High Court 2013.05.29)

Cho High Court Decision 201J 5085 ( October 13, 2012)

Because the appraised value per share has increased, the existing shareholders' profits have been acquired.

(2) Since the parent company as a shareholder of the parent company and the representative director are exercising de facto influence on the management, it constitutes a person with a special relationship and the value of new shares increases per share after acquiring the value of the capital increase, it cannot be deemed that the plaintiff, the existing shareholder, did not gain any profit.

2013Du127444 Revocation of Disposition of Imposition of Gift Tax

BAA

the director of the tax office of Western

Seoul High Court Decision 2012Nu36479 Decided May 29, 2013

January 23, 2014

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

The court below held that the actual shareholders holding BB and CCC’s entire shares at the time of each capital increase by BB (hereinafter “B”) and CCC (hereinafter “CCC”) based on its adopted evidence were the Plaintiff. The Plaintiff’s allegation in this part of the grounds of appeal is that the Plaintiff purchased all shares of BB and CCC from the Plaintiff before each capital increase was made in the name of DD, and its actual shareholders were deemed DD before the above capital increase was made. However, the judgment of the court below is unlawful. However, this is nothing more than an error in the selection of evidence or fact-finding which belongs to the exclusive authority of the court below, which is the fact-finding court, and thus, it cannot be a legitimate ground of appeal. Furthermore, even in light of the fact-finding and judgment of the court below, it did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules.

Article 39(1)2 (c) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 916, Jan. 1, 2010; hereinafter referred to as “HB”) provides that if a corporation issues new shares at a price higher than the market price, a person who is not a shareholder of the relevant corporation obtains an allocation of new shares directly from the relevant corporation in proportion to the number of shares held, the lower court determined that the amount equivalent to the profits earned by the shareholder of the relevant corporation is the value of donated shares; Article 39(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act; Article 29(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 2042, Feb. 18, 2010; hereinafter referred to as “Enforcement Decree”) is legitimate; Article 9(2)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the Plaintiff’s new shares issued at a price higher than that of the company.

3. Regarding ground of appeal No. 3

The court below rejected the plaintiff's assertion that the plaintiff did not have any profit from capital increase issued by BB and CCC, in light of the fact that the purpose of legislation under Article 39 (1) 2 of the Inheritance Tax and Gift Tax Act is to allocate new shares to a third party and the economic profit equivalent to the difference between the issued value and the appraised value is to be transferred to the previous shareholders without compensation from the third purchaser of new shares, and that even if the BB and CCC acquired DNA shares with the purchase price of new shares paid, it is nothing more than the situation after the issuance of new shares, and that it is nothing more than the situation after the issuance of new shares.

In light of relevant provisions, legal principles, and records, such determination by the court below is just, and contrary to the allegations in the grounds of appeal, there is no error of law by misapprehending the legal principles as to the substance over form principle under Article 14 of

4. Conclusion

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.