Whether the calculation is subject to the avoidance of wrongful calculation

The act of leasing an office free of charge to a person with a special relationship is an act which lacks economic rationality and is subject to the avoidance of unfair calculation, but the case of leasing an office with different economic utility value is difficult to be considered as an actual case conducted in a situation similar to the transaction in question.

Article 52 of the Corporate Tax Act

Article 89 of the Enforcement Decree

1. The Defendant’s disposition of imposition of corporate tax of KRW 34,736,240 for the business year 1999 against the Plaintiff on January 31, 2005, including KRW 41,350,90 for the business year 200, and KRW 646,676,580 for the business year 201, shall be revoked.

2. Of the litigation costs, 95% is borne by the Plaintiff, and 5% is borne by the Defendant.

1. Details of the disposition;

A. On April 10, 1984, the Plaintiff is a public corporation established by investment of 100% in ○○○ Wholesale Market for the purpose of managing and operating ○○ Wholesale Market established by ○○○ City on April 10, 1984, and is managing and operating ○○○ Wholesale Market.

B. The ○○ regional tax office conducted a tax investigation on November 1, 2004 to November 26, 2004 on the Plaintiff’s 1999 to 2003, and notified the Defendant, who is the head of the competent tax office.

C. Accordingly, the Defendant adjusted deductible expenses and gross income for the business year from 1999 to 2002 as follows. On February 1, 2005, the Defendant additionally imposed and notified the Plaintiff of KRW 34,736,240 of the corporate tax for the business year 1999, KRW 41,350,90 of the corporate tax for the business year 2000, KRW 646,676,580 of the corporate tax for the business year 2001 (hereinafter the instant disposition) and refunded KRW 364,85,050 of the corporate tax for the business year 2002.

① From March 12, 1999 to March 11, 2002, the Plaintiff’s gratuitous lease of part of the building at the headquarters to the service company of ○○○○, etc. (hereinafter “service company of this case”) established by the Plaintiff’s retired officers and employees constitutes a wrongful act and thus, the amount equivalent to the reasonable rent should be included in the gross income for the pertinent business year.

② On September 17, 2001, the Plaintiff appropriated the amount of KRW 1,351,315,000 as deductible expenses for the business year 2001 on the ground that the Plaintiff paid KRW 1,351,315,000 for the damage compensation to ○○ Freezing Co., Ltd. (hereinafter referred to as “○○ Freezing”), but the damage compensation liability is deemed to have been finalized as deductible expenses on July 25, 2002, which is the date the judgment became final and conclusive. As such, the amount shall be excluded from deductible expenses included in the business year 2001

③ The Plaintiff: (a) deemed that the claim for the refund of rents erroneously paid or overpaid by the occupant merchants ceases to exist at the expiration of ten (10) years, a period of extinctive prescription under the Civil Act; (b) however, the Plaintiff appropriated the relevant amount as earnings; (c) as such, it is a debt arising from transactions between merchants, the period of extinctive prescription under the Commercial Act should include KRW 13,034,470, which was five (5) years after the lapse of the period of extinctive prescription

[Grounds for Recognition] Facts without dispute, Gap evidence 1, Eul evidence 1-4 (including each number)

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) The wrongful calculation panel of the parts

(A) As to the requirements for denial of wrongful calculation

The Plaintiff established a "private service promotion plan for the restructuring of construction work" upon the recommendation of the labor restructuring of the Plaintiff, and made some retired officers and employees establish a service company through a labor-management agreement, and paid the service price by adding 10% profit to the service company while the Plaintiff’s work is outsourced to the service company. For this reason, even if the Plaintiff is paid for the leased part of the building from the above service company, the service price increases as much as the amount equivalent thereto. Therefore, the Plaintiff leased it free of charge to lower the service price. In addition, in full view of the fact that the Plaintiff paid retirement consolation benefits separately to the officers and employees subject to restructuring but did not pay retirement consolation benefits to the retirement officers and employees who established the service company, the Plaintiff’s gratuitous lease of the office’s income cannot be deemed to unreasonably reduce the tax burden on the corporate income due to the lack of economic rationality.

(B) As to the amount subject to wrongful calculation

Even if a household office's gratuitous lease constitutes a wrongful calculation, it is unreasonable to evaluate the rent of the above leased part as the rent of the above leased part, although the leased part is located at the center of the center of the first floor, although it is located on the same floor, it is unreasonable to evaluate the rent of the above leased part as the rent of the office of ○○, which is a financial

(2) As to the period of determining the amount of damages

The plaintiff lost the plaintiff in the first and second instances of the lawsuit claiming compensation for damages filed by ○○ Freezing, but it was inevitable to file a final appeal due to its nature as the plaintiff's public law, and the court below judged that there is little possibility of reversal at the court of final appeal. Accordingly, the plaintiff paid 1,351,315,000 won in total to ○○ Freezing until September 17, 2001, as agreed to pay damages and its delay damages acknowledged by the second instance judgment between ○○ Freezing and the second instance court. Accordingly, the plaintiff's damages liability for ○ Freezing was finalized on September 17, 2001. Nevertheless, it is unlawful that the defendant included the above damages liability for the reason that the judgment of the court of final appeal became final and conclusive on July 25, 2002.

(3) As to the period of extinctive prescription of erroneous payments

The rent, management fee, etc. that are paid by tenant merchants to the Plaintiff constitutes a claim arising from commercial activities. However, since the erroneous payment in this case constitutes the amount that the tenant paid to the Plaintiff without any legal cause, it cannot be deemed as a claim for return of unjust enrichment from the lessee’s standpoint. Thus, this cannot be deemed as a claim for return of unjust enrichment from the lessee’s standpoint. Thus, even if the ten-year period, which is the period of extinctive prescription under the civil law, should be appropriated

B. Relevant statutes

Corporate Tax Act

Article 40 (Business Year of accrual of Profits and Losses) (1) The business year of accrual of earnings and losses of a domestic corporation shall be the business year which includes the date on which the concerned earnings and losses are settled.

(2) Matters necessary for the scope of the fiscal year of accrual of earnings and losses under paragraph (1) shall be prescribed by the Presidential Decree.

(1) Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office deems that the tax burden of a domestic corporation has been unjustly reduced through the transactions with a person with a special relationship as prescribed by the Presidential Decree (hereinafter referred to as a "person with a special relationship"), he/she may calculate the amount of income for each business year of the relevant corporation without regard to the act or calculation of the amount of income of the corporation (hereinafter referred to as "

(2) In the application of the provisions of paragraph (1), the standard for determination shall be the prices applied or to be applied in sound and generally accepted practices and normal transactions between persons without a special relationship (including rates, interest rates, rents, exchange rates and other corresponding rates; hereafter in this Article referred to as "market prices").

(3) A domestic corporation shall submit a statement stating the details of transactions with a specially related person for each business year as prescribed by the Presidential Decree.

(4) In applying the provisions of paragraphs (1) through (3), matters necessary for the types of wrongful calculation and the assessment of market price shall be prescribed by the Presidential Decree.

Enforcement Decree of Corporate Tax Act

(4) In the application of Article 40 (1) and (2) of the Act, the business year of accrual of earnings and losses other than those prescribed by the Act (excluding Article 43), the Restriction of Special Taxation Act and this Decree shall be prescribed by the Ordinance of the Ministry of Finance and Economy.

Article 88 (Calculation Type of Wrongful Acts) (1) “Where it is deemed that the tax burden has been unjustly reduced” in Article 52 (1) of the Act shall mean cases falling under any one of the following subparagraphs:

6. Where money and other assets or services are provided with no compensation or at an interest rate, rate, or rental rate lower than the market price: Provided, That this shall not apply where company housing is provided to officers who are not stockholders or contributors (including officers who are minority shareholders under Article 87 (2)) and employees;

Article 89 (Scope of Market Price, etc.) (1) In the application of Article 52 (2) of the Act, if the relevant corporation has a generally traded price continuously with many and unspecified persons other than a person with a special relationship or a third party who is not a person with a special relationship, the price shall be determined.

(2) In applying Article 52 (2) of the Act, if the market price is unclear, the amount calculated by applying in sequence the following subparagraphs:

1. Where there is a value appraised by the appraisal evaluation corporation under the Public Notice of Values and Appraisal of Real Estate Act, the value thereof (in case there are not less than two appraised values, the average amount of the appraised values): Provided, That this shall not include stocks, etc.;

2. The amount appraised by the mutatis mutandis application of the provisions of Articles 38 through 39-2, and 61 through 64 of the Inheritance Tax and Gift Tax Act. In applying mutatis mutandis the provisions of Article 63 (2) 1 of the Inheritance Tax and Gift Tax Act and Article 57 (1) and (2) of the Enforcement Decree of the same Act, "the immediately preceding six months (three months for stocks, etc. upon which gift tax is levied)" shall be deemed "the immediately preceding six months", respectively.

(4) In the provision of assets (not including money) or services under the provisions of Article 88 (1) 6 and 7, where the provisions of paragraphs (1) and (2) cannot be applied, the amount calculated pursuant to the provisions of each of the following subparagraphs shall be the market value:

1. Where tangible or intangible assets are provided or received, the amounts calculated by multiplying the fixed deposit interest rate by the amount of 50/100 of the market value of the relevant assets less the amount of rental key money or deposits received in connection with such assets; and

(5) In cases falling under wrongful calculation under the provisions of Article 88, the market price and the margin under the provisions of paragraphs (1) through (4) of this Article shall be included in the calculation of earnings under the provisions of Article 52 (1) of the Act, and the income amount of the concerned corporation for each business year shall be calculated accordingly: Provided, That this shall not

Enforcement Rule of Corporate Tax Act

In the application of the provisions of Article 71 (4) of the Decree, the fiscal year of accrual of earnings and losses other than those otherwise provided in these Rules shall be the fiscal year which includes the date on which the concerned earnings and losses are determined.

Common Provisions of Corporate Tax Act

40-71, 40-71, 20 (the timing of reverting losses, such as damages to be paid by a court ruling) The amount of damages paid or paid by a court ruling shall be included in the gross income or deductible expenses for the taxable year including the day on which the court ruling becomes final and conclusive. In such cases, "the day on which the court ruling becomes final and conclusive" shall be the day following the day on which the deadline for filing an appeal expires,

C. The portion of the wrongful calculation panel

(1) Facts of recognition

(A) On February 1, 1999, the ○○○○○○○○○ Committee prepared a recommendation for restructuring of invested institutions at ○○○○○○○○○○○○○○○○○○○○○○ on the basis of this, and based on this, on February 3, 1999, issued a recommendation to the Plaintiff that included the goal of restructuring and implementation measures. Among the contents, the measures for coordinating the private sector and the private sector by entrusting the management of the parking lot and the cleaning sector to the private sector, ② the temporary adjustment of the private sector, ② the reduction of the executives by the decision-making stage, ③ the sum of the departments based

(B) Accordingly, the Plaintiff requested the ○○○○○○ Research Institute to conduct a management diagnosis to seek a restructuring plan, and around February 199, the said Research Institute presented a plan to implement a voluntary retirement system for employees with at least 10 years in continuous service, ② a plan to have employees in the company take over the business department (private service promotion plan). The specific details of the private service promotion include ① parking, cleaning, vehicles, and restaurant business, ② the employees of the employees in the relevant business selected as the business subject to parking, cleaning, and succession to the employment of the employees in the following business, ② the employees in the relevant business newly established as the corporation, ③ the Plaintiff shall provide the relevant services through free lease of offices, equipment, and materials for three years so that the newly established corporation may request the corporation to establish the relevant business and secure the basis for self-reliance, and the employees participating in the newly established corporation shall not be paid any separate compensation, such as honorary retirement allowances.

(C) On April 9, 199, the Plaintiff prepared a plan to conduct private services based on the results of the above management diagnosis, and prepared a plan to conduct private services on the basis of the agreement with the trade union and the approval of the board of directors.

(D) Around that time, the Plaintiff entered into a service contract with the service company, ○○○○ (Representative ○○), ○○○○○○ (Representative ○○○○, etc.) and the service company, etc. (hereinafter “instant service company”) and succeeded to the employment of relevant employees by means of a private contract, and leased the instant service company a portion of 173.58 square meters, which is part of the building’s headquarters on March 12, 1999 to March 11, 2002, to the instant service company without compensation.

(E) The contract amount of parking management services is KRW 7,719,205,760 for the instant service company from May 1, 1999 to KRW 3,631,360 for three years from June 1, 2002 to KRW 3,631,360,000 for the instant service company that received payment through a tender thereafter, and in the latter case, the rent assessed by the Plaintiff in accordance with relevant provisions for the leased office has been paid.

(F) In calculating the market price of the leased portion from March 12, 1999 to March 11, 2002, the Defendant calculated the rental deposit for the leased portion of this case as 112,965,874 won (i.e., 650,800 square meters) and the rent as 62,131,231 won (=357,940,948 square meters) and 62,231 won (=357,940,173.58 square meters) for one year, on the ground that the Plaintiff deemed 357,940 won and the rent for the leased portion of this case, as the leased portion of this case was in actual order, and applied it to the rent for the leased portion of this case.

(G) The above ○○ office is a 1,029.55 square meters of the 1st floor of the building in this Sub-section and is used as a financial institution that adjoins to the road. On the other hand, the leased part of this case is located near the road in the vicinity of the center of the building and is used as an office to manage the commuting inspection of the parking manager and the settlement of the revenue from parking fees.

[Grounds for Recognition] Facts without dispute, Gap 2-10, Eul 5-8 (including each number), the purport of the whole pleadings

(2) Determination

(A) Whether the calculation is subject to the avoidance of wrongful calculation

Wrongful calculation under the Corporate Tax Act refers to the calculation of a taxpayer’s act of reducing or excluding the tax burden that arises when a taxpayer takes the ordinary rational transaction form by taking the bypassing act, the multi-stage act and other abnormal transaction form, rather than based on the normal economic person’s rational transaction form. Determination of whether such economic rationality exists or not shall be based on whether the transaction is abnormal in light of sound social norms or commercial practices (see, e.g., Supreme Court Decision 2002Du11479, Feb. 13, 2004).

We look back to the instant case in accordance with these legal principles.

As acknowledged earlier, although a negotiated contract with the service company of this case and free lease of the office of this case was conducted at the level of external management diagnosis, restructuring and personnel adjustment, the contract amount of parking management service is more than twice compared to the service company selected through the bidding in the case of the service company of this case. Nevertheless, in the case of the latter, the office rent has been paid in accordance with the relevant provisions and the case where the lease of the assets is made free of charge under Article 88 (1) 6 of the Enforcement Decree of the Corporate Tax Act as well as the case where it is deemed that the tax burden has been unjustly reduced even if the assets are leased at a rent lower than the market price as well as the case where the rental is made at a rent below the market price. In light of the above, it is reasonable to view that the act of the retirement staff of this case established by the service company of this case, which is a person with a special relationship, is an act lacking economic rationality

Therefore, the plaintiff's assertion on this is without merit.

(B) As to the amount subject to wrongful calculation

In calculating the market price of the leased portion of this case, the Defendant deemed the rent of the office leased by the Plaintiff to ○○○ as falling under the “price continuously traded with many and unspecified persons other than specially related persons” under Article 89(1) of the Enforcement Decree of the Corporate Tax Act and deemed the market price. However, as acknowledged earlier, the location of ○○○, a financial institution, is a building on the same floor and is in the vicinity of the center part of the building, and the leased portion used as the service office is located in the vicinity of the center part of the building. However, it is difficult to view that the lease of ○○○ office was made in a situation similar to that of the leased portion because its location, area, and current use is different and economic utility value is different.

Therefore, in such a case, the defendant does not adopt a method of calculating the rent by adding the expenses necessary to continue to lease the leased part of this case to the price calculated by multiplying the annual rate of return by the arm's length price of the leased part of this case, which is calculated based on the annual rate of return of the leased part of this case, and instead, it is illegal to include the rent in the gross income for the business year from 1999 to 2001 to the extent that it exceeds the reasonable rate of rent.

The plaintiff's assertion on this part is justified within the scope of the above recognition.

D. As to the time of determining the amount of damages as deductible expenses

(i)a fact;

(A) On November 26, 1995, when a fire occurred during the Plaintiff’s freezing repair work, the Plaintiff filed a lawsuit claiming damages against the Plaintiff by ○○ District Court ○○○○○○○○○○○○○○○○○○○○○○○. On June 29, 2000, the Plaintiff filed a lawsuit claiming damages against the Plaintiff. On June 8, 2001, the appellate court (○○ High Court 2000Na○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○) rendered a judgment ordering the Plaintiff to pay 683,80,458 won and delay damages to ○○○○○○○○○○○○○○○○○○○○○○. Each of the above appeals became final and conclusive on July 25, 2002 (Supreme Court Decision 200Da320100).

(B) Meanwhile, on July 24, 2001, the competent tax office attached the damage claim against the Plaintiff of ○ Freezing on the ground that the ○○○ Free Trade did not pay national taxes, and on September 6, 2001, notified the Plaintiff of the collection of the above seized claim.

(C) Upon the judgment of the appellate court as above, on September 201, 201, the Plaintiff and ○○ Freezing agreed to refund the difference to the Plaintiff when the judgment of the appellate court changed the judgment of the appellate court and the judgment of the appellate court becomes final and conclusive below the amount cited by the appellate court.

(D) On September 17, 2001, the Plaintiff paid 286,829,040 won of the national tax in arrears for ○○ Freezing to the Plaintiff himself and paid ○○ Freezing the remainder of KRW 463,141,767 of the damages, thereby paying a total of KRW 1,351,315,000 as damages and damages for delay, and paid corporate tax by including it in deductible expenses for the business year 2001.

[Reasons for Recognition] Unsatisfy, Gap 11-14, and Eul 9 and 10

(2) Determination

In full view of Article 40 of the Corporate Tax Act, Article 71(4) of the Enforcement Decree of the same Act, and Article 36 of the Enforcement Rule of the same Act, the fiscal year of accrual of earnings and losses of a domestic corporation for each fiscal year shall be the fiscal year which includes the date on which the concerned earnings and losses are determined, and the fiscal year of accrual of earnings and losses other than those prescribed separately by the Enforcement Rule shall be the fiscal year which includes the date on which the concerned earnings and losses are determined. Meanwhile, according to the General Rules of the Corporate Tax Act, the amount of damages paid or paid by the court's decision shall be included in the gross income or losses for the fiscal year

As seen earlier, when the appellate court rendered a judgment on a provisional execution in a damages claim case between ○○ Freezing, the Plaintiff paid the cited amount to ○○ Freezing in accordance with the purport of the provisional execution. There is no evidence to deem otherwise that there was an agreement between the Plaintiff and ○ Freezing to confirm the liability for damages prior to the confirmation of a lawsuit claiming damages.

Therefore, the plaintiff's damage compensation liability against ○ Freezing is determined as losses on July 25, 2002 by the court's ruling on the damages of this case, and it belongs to the 2002 business year to which the date belongs. Thus, the plaintiff's assertion on this part is without merit.

E. As to the extinctive prescription period of erroneous payments

A claim arising from not only a claim arising from an act that has been engaged in a commercial activity but also a claim arising from an act that constitutes a commercial activity is subject to the period of five years under Article 64 of the Commercial Act. Such a 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 for a business by a merchant (see Supreme Court Decision 2006Da1381, Apr. 27, 2006).

On the other hand, since the lease contract between the plaintiff and the tenant and the tenant constitutes an auxiliary commercial activity, the lease contract between the plaintiff and the tenant constitutes not only the rent and management expenses that the tenant pays to the plaintiff, but also the overpaid or erroneously paid amount constitutes a claim arising from commercial activity. Therefore, the claim is subject to the five-year extinctive prescription period for commercial activity. Thus, the disposition of this case appropriated as earnings when five years have passed since the erroneous

Therefore, this part of the plaintiff's assertion is without merit.

3. Conclusion

As seen earlier, the Plaintiff’s assertion is with merit only to dispute the amount subject to the avoidance of wrongful calculation among the Plaintiff’s assertion, and the remainder is without merit. However, since the materials recorded on the records of this case alone cannot determine the legitimate rent for the leased portion, each tax amount of corporate tax can not be calculated accordingly. Accordingly, the decision to revoke the entire disposition imposing corporate tax of this case is delivered with the assent of all.