Cheong-song (Attorney Seo-hee, Counsel for the defendant-appellant)

Agu Gun (Attorney Lee Jong-soo, Counsel for the defendant-appellant)

April 29, 2008

1. Of the instant lawsuit, the part of the Plaintiff’s claim for partial revocation of acquisition tax of KRW 5,413,908,684 and special rural development tax of KRW 541,390,867, which the Plaintiff reported and paid to the Defendant on July 31, 2004, is dismissed.

2. The Defendant’s disposition of imposition of acquisition tax of KRW 934,423,770, and special rural development tax of KRW 79,457,790, which the Plaintiff rendered on June 10, 2005, shall be revoked.

3. Of the costs of lawsuit, 2/3 shall be borne by the Plaintiff, and the remainder shall be borne by the Defendant.

The Defendant’s imposition of acquisition tax of KRW 934,423,770 against the Plaintiff on June 10, 2005 and the imposition of acquisition tax of KRW 79,457,790 on July 31, 2004 that the Plaintiff returned to the Defendant on July 31, 2004, and the acquisition tax of KRW 5,413,908,684, and special rural development tax of KRW 541,390,867, exceeds KRW 3,564,273,724, and special rural development tax of KRW 356,427,377, respectively.

1. Details of the disposition;

A. On December 25, 1989, the film development Co., Ltd. (hereinafter referred to as “exploit development”) decided to conduct a golf course development project with the size of 27 holes from the 1, 2 (the representative director of the film development) and the 3-owned sports from the 1, 3-owned sports from the 1,000 Gyeong-gun, and obtained approval of the business plan under the Installation and Utilization of Sports Facilities Act from the Governor of Gyeonggi-do around December 25, 1989, with the name of the 00 ○○○○○○○ consortium, and recruited golf course members from 1989 to 194.

B. The creditors of screening development filed an application for voluntary auction on August 23, 1993 with the right to collateral security established in the area of 90-2 forest 1,715,293 square meters (1,69,327 square meters in the area incorporated into a de facto golf course; 726,096 square meters in the area changed; hereinafter “1 land”) and filed an application for voluntary auction on July 24, 1995, when the auction procedure started with the government branch of Seoul District Court around 93,22176, and the above land (including buildings and ancillary facilities during the construction of a golf course) was awarded to the company for the development of Bangladesh industry. On May 13, 1996, the ownership transfer registration was awarded to the company for the development of Bangladesh industry.

C. At the time of voluntary auction, the degree of the construction progress of the golf course site was completed, the civil engineering works completed the 27 holes and the string of stone for auxiliary facilities, and the 2-story softs and glars of the second floor, which are construction works, were completed. The Hadar Corporation completed the 19 extension of the 27 holes, and completed the madaration work in the 19 hole and the remaining 8 holes. The Water Supply System was installed with water supply pipe work and the 27 holes of water supply facilities. The lighting facilities were constructed in the 18 holes of the ageline, and the 70% of the total process was completed.

D. After that, the Giro Industry Development, Inc., Ltd., was merged into Yayoung Co., Ltd. on March 31, 1998, and Ya Young Co., Ltd, commenced on May 19, 197 and obtained a decision to authorize the reorganization of the company on March 31, 1998, and Non-party 4, the administrator of Ya Young-young Co., Ltd, was established on August 20, 199, and transferred the land of this case to the plaintiff on January 13, 200, and the transfer registration under the name of the plaintiff was completed on December 30, 199.

E. On December 28, 199, the Plaintiff acquired all business rights related to the golf course business with screening development (including superficies, and the above business rights refer to the approval plan on the golf course business in the name of screening development), a total of 125,809 square meters in total (113,202 square meters in total, 809 square meters in Gyeonggi-do, the site for the remaining golf course owned by Nonparty 2, the representative director of screening development, for the golf course, 40% in total, and 125,809 square meters in total (hereinafter “the area included in the actual golf course”), and 81,661 square meters in total; hereinafter “2 land”). In response, the Plaintiff provided the screening development with the Plaintiff’s stocks at 40% in total; the Plaintiff’s obligation to return membership payments to the existing golf course members; the Plaintiff will succeed to the obligation related to the construction of the golf course; the Plaintiff entered into a loan agreement with Nonparty 2, the representative director of screening development; the Plaintiff’s obligation 2013081,284,2081.

F. The Plaintiff changed the name of the ○○○○ Convention club to △○ Convention, and recruited its members from August 200, and operated it.

G. On July 31, 2004, the Plaintiff reported and paid 62,462,381,137 won, acquisition tax amount of 5,413,908,684 won, and special rural development tax amount of 541,390,867 won (hereinafter “the first disposition week”) with respect to the acquisition of land and goodwill 27,523,61,387 won, excluding 1,808,202,960 won, which is the standard market price of the second land of this case, and the remaining amount of acquisition tax calculated by applying the tax rate of 16,69,427 won (hereinafter “the first disposition”), and the remaining amount of acquisition tax of 25,715,458,427 won, 2005, 208, 2008, 2005, 2008, 2005, 2008, 2005, 2008, 1000.

H. As to this, the Defendant respectively imposed an amount of KRW 934,423,770, acquisition tax on June 10, 2005 and KRW 79,457,790 (including additional tax) on the key amount on the ground that the total amount at issue constitutes the cost of land category change (hereinafter “amount increase disposition”).

A. On September 6, 2005, the Plaintiff filed a request for review with the Board of Audit and Inspection on September 6, 2005, but was dismissed on March 13, 2007, and filed the instant lawsuit on June 8 of the same year.

[Reasons for Recognition] Facts without dispute, Gap 2 to 7 evidence, Gap 9 and 10 evidence

2. The assertion and judgment

A. The plaintiff's assertion

Of KRW 27,523,661,387, the key amount exceeding the officially announced value (1,80,822,960) of the land No. 2 in return for the instant contract for the transfer and acquisition of business, all of which are considered as consideration for business rights related to the approval of a golf course business plan and various permits and permits, and thus, is not subject to taxation of acquisition tax. However, the Defendant’s imposition of acquisition tax by applying the heavy taxation rate to the cost of land category change is in fact illegal as double taxation. Therefore, the portion exceeding KRW 3,564,273,724, special rural development tax, and special rural development tax exceeding KRW 356,427,377, which is a legitimate tax amount (i.e., tax amount

B. Defendant’s assertion

1) Inasmuch as the initial disposition became final and conclusive in the interpretation of Article 22-2 of the Framework Act on National Taxes, the part seeking the cancellation of the initial disposition among the instant lawsuits must be dismissed.

2) Considering the Supreme Court precedents (Supreme Court Decision 2004Da10213 Decided October 28, 2004) that approval of a business plan under Article 12 of the Installation and Utilization of Sports Facilities Act is merely a qualification for the lawful establishment of a sports facility and that approval of a business plan beyond the physical organization, such as land to complete a sports facility, is not meaningful, and thus, it is not allowed to transfer the business plan separately from the sports facility, the approval of a business plan for a golf club that the Plaintiff acquired from the development of the screening, is not a property value.

3) 27,523,61,387 won paid by the Plaintiff to screening and development in relation to the purchase of the second land in this case is the acquisition of the installation cost for the facilities incurred from screening and development, which constitutes the cost of land category change. Thus, it cannot be viewed as the consideration for the acquisition of goodwill, including the legal status of the golf course business right.

4) On the Plaintiff’s balance sheet, KRW 27,523,61,387 are accounts in the “OSS” subject of tangible assets. As of December 31, 2005, the standard balance sheet does not state matters pertaining to the goodwill. It recognizes that the Plaintiff himself is a cost spent for the change of land category.

C. Relevant statutes

It is as shown in the attached Form.

D. Determination on this safety defense

1) Article 22-2(1) of the Framework Act on National Taxes provides that "an amendment that increases the amount of tax initially determined under the provisions of tax-related Acts shall not affect the rights and obligations under this Act or the tax-related Acts with respect to the amount of tax initially determined," and under the interpretation of the above provision, where an increase disposition is made after the original disposition becomes final and conclusive due to the lapse of the time limit for filing a lawsuit, only the increased amount of tax may be contested, not against the total amount of tax, and the initial disposition shall be determined as of the date of the initial disposition, and

Furthermore, Article 22-2(1) of the Framework Act on National Taxes provides that “Except as otherwise provided for in this Act and other Acts and subordinate statutes, the Framework Act on National Taxes and the National Tax Collection Act shall apply mutatis mutandis to the imposition and collection of local taxes.” Section 1 of Chapter III of the Framework Act on National Taxes provides for the establishment of liability for tax payment (Article 21), the determination of liability for tax payment (Article 22-2), the determination of liability for tax payment (Article 22-2), the determination of liability for tax payment (Article 22-2), and the determination of liability for tax payment) are specifically determined by the method of automatic determination, the method of filing a return, and the method of imposition. Article 82 of the Local Tax Act provides that “The provision on imposition of local taxes under Article 82 of the Framework Act on National Taxes and the Local Tax Act shall apply mutatis mutandis to the case where the provisions on imposition and payment of local taxes, which are deemed to be applied mutatis mutandis by the Plaintiff’s request for correction within the scope of Article 27 of the Local Tax Act, regardless of the method of determination.”

2) Therefore, in this case, since the plaintiff filed a lawsuit within 90 days from July 31, 2004, which was the date of the original disposition, or did not go through the procedure of filing an objection, request for examination, etc. under the Local Tax Act, and it is apparent in the record that the defendant issued a decision of increase on June 10, 2005, which was then the date of the original disposition, the part against which the defendant's revocation of the original disposition on July 31, 2004 among the lawsuit in this case can be asserted as the illegal cause of the original disposition on June 10, 2005 is unlawful (However, it is still about the total amount of tax, and it is limited to the scope of the increase that can be claimed for revocation in the lawsuit, and thereafter, it is considered that the whole tax amount is illegal).

E. Determination on the merits

1) Whether a legal status, such as approval of a business plan, has property value

According to the provisions of Articles 10(1)1, 11, 12, and 30 (amended by Act No. 6907 of May 29, 2003) of the Installation and Utilization of Sports Facilities Act, any person who intends to operate a registered sports facilities business such as a golf club business shall prepare a business plan with certain facility standards and obtain approval from the competent Mayor/Do Governor. When he/she changes the business plan, he/she shall also obtain approval, except for minor changes, and shall succeed to the business plan with respect to the sports facilities before the completion of the sports facilities business or the business plan by transfer, death, or merger. According to the provisions of Article 11 of the Enforcement Decree of the same Act, the succession to the business plan is not a minor change, and if the business plan is succeeded to the business plan, he/she shall obtain approval for the change of the competent authority.

On the other hand, the approval of a business plan under Article 12 of the above Act, as a qualification for legitimate installation of a sports facility, may commence construction by submitting a plan to commence construction of a business facility within the specified period, and according to Article 19 of the above Act, a person who has obtained approval of a business plan is entitled to recruit members, and thus, the person who has obtained the approval of a business plan is in the position of bearing various rights and obligations by investing the construction fund and selling membership, and thus, it cannot be denied its property value.

Furthermore, Article 30 of the Installation and Utilization of Sports Facilities Act (amended by Act No. 5636, Jan. 18, 1999; Act No. 6907, May 29, 2003) provides that "if a sports facility business operator transfers his/her business or dies, or a corporation is merged with another corporation, the transferee, heir, or the corporation surviving the merger or established by the merger shall succeed to the rights and obligations arising from the registration or report of the sports facility business (including the matters agreed upon between the sports facility business operator and its members where members are recruited under Article 19)," and Paragraph (3) provides that "the provisions of paragraph (1) shall apply mutatis mutandis to succession of the business plan under the Act on the Establishment and Utilization of Sports Facilities after the conclusion of the business plan under the provisions of Article 12, and the provisions of Paragraph (2) shall apply mutatis mutandis to the person who acquires the essential sports facility business under the provisions of Paragraph (1) of the above Article 2 as a matter of course for the enforcement of approval of the business plan concerning the sports facility business plan."

In addition, when comparing the price of the land No. 1 and the land No. 2 (1,715,293 square meters: 125,809 square meters) and the price of the land No. 1 and the price of the contract for the transfer of business (27,523,61,387 won: 27,523,61,387 won) of this case, it is reasonable to deem that the Plaintiff and the film development entered into a contract for the transfer of business of this case with the Plaintiff to have determined the total price by recognizing the considerable value of the business rights, such as the land No. 2 and the approval of the business plan. Thus, the Defendant’s assertion to deny the property value of the above business rights is without merit (Supreme Court Decision 2004Da10213, Oct. 28, 2004). Thus, in a case where the Plaintiff seeks confirmation that there is a right of the Plaintiff as a golf club member through an auction procedure under the Civil Execution Act to acquire essential facilities prior to completion of the business plan, and the Plaintiff did not have any property rights.

2) Whether the issue amount is whether the acquisition price of business right is the cost of land category change

Article 111(1) of the Local Tax Act provides that “The tax base of acquisition tax shall be the value at the time of acquisition, and Article 82-3(1) of the Enforcement Decree of the same Act provides that “The acquisition price which is the tax base of acquisition tax shall include all direct and indirect expenses (excluding value added tax) paid or to be paid to the other party or a third party to the transaction in order to acquire the relevant object prior to the date of acquisition of the object subject to taxation (including subscription fees, design fees, late fees, interest on installments, and interest on the amount appropriated for construction funds, but excluding late fees and interest on installments if acquired by any person other than a corporation).” The “acquisition price” provided in the above provision refers to not only the price (direct expenses) of the relevant object itself but also the cost (such as acquisition interest, design expenses, etc.) which is actually paid or to be paid at the price of the object subject to taxation, but also the acquisition price of the object cannot be deemed as an acquisition price of the object subject to taxation or its right before the declaration of acquisition.

In light of the above legal principles, it is reasonable to view the issue amount as compensation for business right acquisition for the following reasons, and it cannot be viewed as the cost of land category change as alleged by the Defendant.

A) The Plaintiff acquired the instant land Nos. 1 and 2 with the completion of 70% of the land category change work. It is reasonable to deem that the acquisition value of the instant land No. 2 paid by the Plaintiff to the film development includes the increase in land value following the progress of the aforementioned process. The acquisition tax paid by the Plaintiff according to the object of acquisition of the instant land No. 2 shall be deemed to include the increase in land value, i.e., the increase in land value, and 70% of the acquisition value due to land category change.

Furthermore, the Plaintiff, based on the acquisition tax base of KRW 22,842,904,351, which was newly invested after the purchase of the instant land Nos. 1 and 2, imposed taxes by applying the heavy taxation rate (Evidence A6, 7, and 18) even though the Plaintiff reported and paid acquisition tax (Evidence A6, 7, and 18) by applying the heavy taxation rate to the purchase cost of land category change, constitutes double taxation.

B) The Defendant asserted that each taxation disposition was lawful on the ground that the Plaintiff paid the price for the instant contract for the transfer of business by acquiring the obligation for the transfer of business, etc. of the show development. However, the Plaintiff, the contracting party, and the show development can determine the specific method of payment according to individual agreements, and it does not seem to be in essence different from the Plaintiff’s repayment of the price in cash. Thus, the legal nature of the key amount does not change solely on the ground that the Plaintiff’s repayment of the obligation for the change of the land category that was made

C) However, although the cost of authorization and permission is not specified in the agreement on the transfer of business, the change of land category for the land Nos. 1 and 2 of this case had been completed at least 70% since the auction procedure for the land No. 1 of this case was in progress around 1995, and the officially announced land price of January 1, 1999 reflects the increase in land value due to the change of land category. As long as it is practically impossible to distinguish between the price of land No. 2 of this case and the price of the business right such as the approval of the business plan for golf courses, it is inevitable to regard the remainder exceeding the officially announced land price as the price

D) According to the statement in Eul evidence No. 1, while the plaintiff filed a report on the tax base and amount of corporate tax on March 2002 with the Namyang Tax Office, it is recognized that the plaintiff appropriated the total amount of KRW 27,523,61,387 of the acquisition price of land and business rights of this case in the balance sheet by classifying it into the KOS account. However, the nature of the key amount cannot be viewed as the cost of land category change solely on the above circumstances.

3) Sub-decisions

Therefore, it is illegal that the defendant imposed acquisition tax by applying the heavy taxation rate by considering the issue amount in full as the cost of land category change.

(iv)the calculation of a legitimate tax amount;

The amount of a political party's tax calculated by deducting the key amount from the tax base of acquisition tax is 3,564,273,711 won and 356,427,370 won for special rural development tax, as shown in the calculation table of the attached sheet. The main state 6 of this case is the disposal tax amount (acquisition 6,348,348,332,454, special rural development tax 620,848,657) which exceeds the above justifiable amount should be revoked in principle in principle. However, as seen earlier, since the initial disposition became final and conclusive as the period of filing a lawsuit becomes final and conclusive, the scope of seeking revocation by lawsuit is limited to

Furthermore, regarding the scope of revocation, the disposition of increase in excess of the legitimate tax amount (acquisition tax 2,784,058,743 note 7), and the disposition of increase in excess of the acquisition tax amount (acquisition tax 934,423,70, and special tax in agricultural and fishing villages 79,457,790) should be revoked in its entirety.

3. Conclusion

Therefore, the part of the lawsuit of this case which the defendant filed a claim against the plaintiff on July 31, 2004 for partial revocation of the disposition of imposition of acquisition tax of KRW 5,413,908,684 and special rural development tax of KRW 541,390,867 is unlawful, and thus, it is dismissed. The defendant's claim for revocation of the disposition of imposition of acquisition tax of KRW 934,423,770 against the plaintiff on June 10, 2005 is accepted. It is so decided as per Disposition by the assent of all participating Justices.

[Attachment]

Judges Choi Young-young (Presiding Judge)

1) Article 72(1) of the Local Tax Act provides that where a taxpayer files a return and payment, the disposition shall be deemed to have been taken when the taxpayer files such return and payment.

2) 25,715,458,427 】 Area for land category change 81,661 square meters / Total area of 125,809 square meters

In the case of national taxes in which a return is filed, a request for correction can be filed within three years after the statutory due date of return expires (Article 45-2 of the Framework Act on National Taxes). However, in the case of local taxes in which a return is filed, the application of a request for correction is denied (see Supreme Court Decision 98Du9608, Jul. 23, 199).

Note 4) An increase in land value due to land category change construction works seems to be reflected in each annual officially assessed individual land price (Evidence A 13, 14).

Note 5) The remaining 30% of the acquisition value due to a land category change

Note6) The instant disposition tax amount = the initial disposition tax amount + the increased disposition tax amount.

Note 7) 6,348,332,454 - Amount of legitimate tax 3,564,273,711 won

Note 8) 620,757,657 - Amount of legitimate tax 356,427,370 won