[1] The distinction between entertainment expenses and advertising expenses under the Corporate Tax Act

[2] The case holding that, where a department store operator has publicized in advance that he/she presented gifts to unspecified customers with excellent transaction performance as part of promotional activities and has paid gift products, expenses incurred in purchasing them constitute advertising and publicity expenses

[1] If the other party is a business-related person and the purpose of expenditure is to promote friendship among business-related persons through entertainment activities, etc. to facilitate smooth progress of transaction relations, among the expenses paid by a corporation for a business, it shall be deemed entertainment expenses. However, if the other party to the expenditure is many and unspecified persons and the purpose of expenditure is to stimulate the desire for purchase, it shall be deemed entertainment expenses.

[2] The case holding that, where a department store operator publicizeds in advance that he gives gift to unspecified customers with excellent transaction performance as part of promotional activities, and provides gift items, this is aimed at promoting sales by stimulating consumers' desire to purchase, and thus, the purchase cost constitutes advertising expenses paid to many and unspecified persons for the purpose of advertising and publicity for the sale of goods

[1] Articles 18-2 (see current Article 25), 18-4 (see current Article 25), and 44 (4) (see current Article 42 (5)) of the former Corporate Tax Act (amended by Act No. 4804, Dec. 22, 1994); Article 44 (4) (see current Article 42 (5)) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14468, Dec. 31, 1994) / [2] Articles 18-2 (see current Article 25), 18-4 (Omission) of the former Corporate Tax Act (amended by Act No. 4804, Dec. 22, 1994); Article 44 (5) (see current Article 42 (5)) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1468, Dec. 31, 1994)

[1] Supreme Court Decision 86Nu378 delivered on April 14, 1987 (Gong1987, 823), Supreme Court Decision 88Nu933 delivered on December 6, 198 (Gong1989, 107), Supreme Court Decision 92Nu16249 delivered on September 14, 1993 (Gong193Ha, 2823)

Desired department store (Law Firm Gwangju, Attorney Kim Tae-ho, Counsel for the plaintiff-appellant)

The director of the Southern Incheon District Office

Seoul High Court Decision 99Nu8864 delivered on April 6, 2000

The appeal is dismissed. The costs of appeal are assessed against the defendant.

If the other party is a person related to a business among the expenses paid by a corporation for a business and the purpose of expenditure is to promote friendship among business persons through entertainment, etc. to facilitate transactional relations, it shall be deemed entertainment expenses. However, if the other party to the expenditure is many and unspecified persons and the purpose of expenditure is to stimulate the desire for purchase, it shall be deemed entertainment expenses (see, e.g., Supreme Court Decision 92Nu16249, Sept. 14, 1993).

According to the reasoning of the judgment below, the court below determined that the Plaintiff’s advertising and publicity expenses incurred in the Plaintiff’s sales of the Plaintiff’s department stores constitute an advertisement and publicity expenses incurred in the Plaintiff’s sales of the goods to customers by offering various gifts to the members with excellent transaction performance without disclosing the specific standards, and by sending them to the Plaintiff’s credit card holders at one’s own will at one time in exchange with the above futures, and by offering them to customers with an outstanding sales performance at two times every year during the 1992 Gu administration on February 17, 192, the Plaintiff paid them as part of the last half of 1991, at least 80,000 won, among the members who purchased the goods of the Plaintiff’s department store and deposited the proceeds, which constitute an advertisement and publicity expenses incurred in the Plaintiff’s sales of the goods to customers, and that the Plaintiff’s sales of the goods constitutes an advertisement and publicity expenses incurred in the Plaintiff’s sales of the goods to customers as part of the advertisement and publicity expenses.

In light of the above legal principles and records, the above recognition and judgment of the court below is just, and there is no error in the misapprehension of legal principles as to entertainment expenses and advertising expenses as otherwise alleged in the ground of appeal.

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 on the bench.

Justices Song Jin-hun (Presiding Justice)