Cho High-depth 201Gu3137 ( November 03, 2011)

Since a loan contract for a loan is an ancillary commercial activity conducted for business, the five-year extinctive prescription is applied.

Since lending contracts for loans are ancillary commercial activities conducted for business purposes pursuant to the provisions of the Commercial Act, it should be included in deductible expenses for 2003 business years after five years have elapsed since the date following the last day of redemption of the principal bonds of loans to which the five-year commercial extinctive prescription of the Commercial Act applies, and thus, it is legitimate for the tax authority to deny the inclusion of the interest bonds of this case in deductible expenses for 2008

2012Guhap272 Revocation of Disposition of Corporate Tax Imposition

XX Co., Ltd

Head of the Tax Office

July 4, 2012

August 17, 2012

1. The plaintiff's claim is dismissed.

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

On June 1, 2011, the Defendant revoked the disposition imposing corporate tax of KRW 000 for the Plaintiff in 2008.

1. Details of the disposition;

A. At the time of incorporation on September 28, 1959, the Plaintiff, as a company manufacturing the joint gold metal, was XX Co., Ltd., but around October 198, 2006, changed its trade name into YY, around July 2006, and around March 201 (hereinafter collectively referred to as the “Plaintiff”). Nonparty west A was employed as the Plaintiff’s director from March 31, 1995 to January 10, 198.

B. From December 4, 1993 to January 10, 1998, the Plaintiff agreed that the interest amount of KRW 000 on a loan of KRW 400 on about 40 occasions to the west and the west (hereinafter “the above loan”) was paid by the end of December of the next year. The Plaintiff was paid KRW 00 out of the above loan from February 7, 1994 to December 31, 197. The obligation of KRW 00 to the Plaintiff was succeeded to the west-B as the SeoB died on December 11, 2004 by December 11, 2004.

C. Upon filing a corporate tax return for the business year 2008, the Plaintiff disposed of the interest claim accrued from 1999 to 2001 with respect to the above loan as bad debt (=100 won for the interest claim accrued from 1999 to 2001 +00 won for the interest claim accrued from 2000 and 000 won for the interest claim accrued from 2000 and hereinafter collectively referred to as "the interest claim of this case") as bad debt and included it in deductible expenses.

D. Around November 2010, the Board of Audit and Inspection directed the Defendant to impose corporate tax for the year 2008 on the ground that the instant interest claim should have been included in the deductible expenses for the business year 2003, not for the business year 2008, which includes the date the statute of limitations expired under the Civil Act, and accordingly, the Defendant corrected and notified the Plaintiff on June 1, 201, KRW 420,526,170 for corporate tax for the year 2008.

E. On August 29, 2011, the Plaintiff filed an appeal with the Tax Tribunal, which was dismissed on November 3, 2011.

[Basis] Facts without dispute, Gap evidence 1, Gap evidence 2-I, Gap evidence 3-1, 2-2, Gap evidence 5, and 6, the purport of the whole pleadings

2. The parties' assertion

A. The plaintiff's assertion is as follows.

(1) Since the interest claim of this case does not provide for a regular payment of interest within one year, the short-term extinctive prescription of three years under Article 163 subparag. 1 of the Civil Act does not apply. Even if the short-term extinctive prescription of three years is applied to the interest claim of this case, the “loan for which the extinctive prescription of three years has been completed under the Civil Act” under Article 62(1)4 of the Enforcement Decree of the Corporate Tax Act cannot be deemed as including the interest claim

(2) The loan contract does not constitute a fundamental commercial activity, and does not constitute an auxiliary commercial activity, and thus, the five-year extinctive prescription under Article 64 of the Commercial Act does not apply. If the extinctive prescription is applied by recognizing the commercial claim as a commercial claim, part of the principal claim of the loan is deemed to have expired after the extinctive prescription period, and thus, there is no room for causing interest claim on this part. The instant disposition is unlawful.

B. The defendant's assertion is as follows.

(1) In light of the Plaintiff’s accounting of the instant interest claim as the M&L claim in each of the years of occurrence, the instant interest claim is agreed to pay interest at a fixed period of not more than one year. As such, the short-term extinctive prescription of three years under Article 163 subparag. 1 of the Civil Act is applied, and the interest claim against the loan is dependent on the loan claim, and thus, the “loan” under Article 62(1)4 of the Enforcement Decree of the Corporate Tax Act, which sets the scope of bad debt,

(2) Even though the short-term statute of limitations of three years under Article 163 subparag. 1 of the Civil Act is not applied to the interest claim of this case, it is legitimate to deny that the instant interest claim of this case for which the statute of limitations of five years under Article 64 of the Commercial Act has expired is deemed to be a commercial claim and is subject to deductible expenses for the business year 2005 to 2007, and accordingly, included in deductible expenses for the business year 2008

3. Related statutes;

Attachment 'Related Acts and subordinate statutes' shall be as shown.

4. Determination

A. According to Article 34(2) of the former Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008), and Article 62(1)1 and 4 of the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 21302 of Feb. 4, 2009; hereinafter “former Enforcement Decree of Corporate Tax Act”), the amount of claims which cannot be recovered due to the reasons such as account receivable and accounts receivable for which the extinctive prescription under the Commercial Act has expired among the claims held by a domestic corporation, loans for which the extinctive prescription under the Civil Act has expired, and advance payments, etc., shall be included in deductible expenses in calculating the income amount for the pertinent

B. Determination as to the Plaintiff’s assertion No. 2. A. (1)

According to Article 163 subparagraph 1 of the Civil Act, a claim for the payment of money or goods within a period of not more than one year, such as interest, shall be extinguished if it is not exercised for three years. The term "claim for the payment of money or goods within a period of not more than one year" under Article 163 subparagraph 1 of the Civil Act refers to a claim for a fixed period of not more than one year, and since the maturity for payment does not mean a claim for a period of not more than one year. Thus, even if a interest claim is a claim for payment, it does not require a fixed period of not more than one year, not a short-term extinctive prescription for three years under the above provision (see, e.g., Supreme Court Decision 96Da25302, Sept.

Inasmuch as there is no evidence to deem that there was an agreement to pay interest on the above loan within a period of one year, it cannot be deemed that the short-term extinctive prescription under Article 163 subparag. 1 of the Civil Act applies to the interest claim in this case, but as seen thereafter, the interest claim in this case expired in the year 2003 where the commercial extinctive prescription has expired, the Plaintiff’s assertion is therefore groundless

C. Determination on the Plaintiff’s assertion No. 2. A. (2)

(1) According to Article 64 of the Commercial Act, if a claim arising from a commercial activity is not otherwise provided in this Act, the extinctive prescription expires unless it is exercised for five years. According to Article 47(1) and (2) of the Commercial Act, a merchant’s act for business purposes shall be deemed to be a commercial activity; and a merchant’s act shall be presumed to be for business purposes. In both parties, claims arising from not only a claim arising from a commercial activity, but also a commercial activity, for which the five-year extinctive prescription period under Article 64 of the Commercial Act applies. Such commercial activity includes not only the basic commercial activity falling under any of the subparagraphs of Article 46 of the Commercial Act, but also ancillary commercial activity performed by a merchant for business purposes. A merchant’s act for commercial activities shall be deemed presumed to be an act for commercial activities (see Supreme Court Decision 2002Da6760,67777, Sept. 24, 2002).

Since the Plaintiff does not have a dispute between the parties, the loan agreement is presumed as an auxiliary commercial activity for business pursuant to Article 47(2) of the Commercial Act, and there is no assertion or evidence to reverse such presumption, so the interest claim of this case shall be subject to the five-year commercial extinctive prescription as stipulated in Article 64 of the Commercial Act.

(2) The repayment of KRW 00 out of the above loan to the Plaintiff from February 7, 1994 to December 31, 1997 constitutes an approval of the obligation under Article 168 subparag. 3 of the Civil Act. Thus, the original claim of the above loan is extinguished on January 1, 2003 after five years have elapsed from January 1, 1998, which is the date following the date on which the above repayment was made last, and when the extinctive prescription of the original claim has expired retroactively to the initial date, the extinctive prescription of the principal claim has expired (such as the principal claim, interest, delay damages, etc.) and thus, it has expired on the subordinate right (see Supreme Court Decision 2001Da76045, Oct. 11, 202).

According to Article 62(1)1 and (3)1 of the former Enforcement Decree of the Corporate Tax Act, the outstanding amount for which the statute of limitations has expired under the Commercial Act shall be included in deductible expenses for the business year in which the relevant cause occurs. Therefore, it is legitimate for the Defendant to deny the inclusion of the interest claim in deductible expenses for the business year 2008, for which the statute of limitations has expired. The Plaintiff’s assertion is without merit.

5. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.