[1] Requirements to deem that a golf club business is operated under Article 6 of the Addenda of the former Enforcement Rule of the Corporate Tax Act

[2] Requirements for separate accounting required to regard a golf club business as a main business pursuant to Article 6 of the Addenda to the former Enforcement Rule of the Corporate Tax Act

[3] The case holding that Article 6 of the Addenda to the former Enforcement Rule of the Corporate Tax Act cannot be applied to the main business because it does not meet the requirements for separate accounting necessary to regard the golf club business as a main business

[4] In a case where the minimum standard area holding under Article 18 (4) 14 of the former Enforcement Rule of the Corporate Tax Act was a condition for permission for a golf course business, but the minimum area restriction provision was deleted due to the amendment of the Enforcement Rule of the former Installation and Utilization of Sports Facilities Act, whether the land acquired for construction of a golf course constitutes real estate

[1] Article 18 (3) 6 (d) of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1818 of Apr. 4, 1990 and amended by Ordinance of the Prime Minister No. 675 of Dec. 31, 1997) provides that real estate owned by a corporation which runs a golf club business shall be excluded from real estate for which annual income is not less than 7/100 of real estate value, and Article 10 of the former Enforcement Rule provides that real estate shall be excluded from real estate for non-business use. Article 6 of the latter Enforcement Rule (amended by Ordinance of the Prime Minister of Finance and Economy No. 1818 of Apr. 4, 1990) provides that "Where a corporation which runs a golf club business and other business concurrently accounts for it separately, it shall be deemed a corporation that runs a golf club business as its main business in the application of the provisions of Article 18 (3) 6 (d) of the former Enforcement Rule of the Corporate Tax Act."

[2] According to Article 6 of the Addenda of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1818 of Apr. 4, 1990), in order to see the golf club business as a main business, the separate accounting is required for each business at the time of the enforcement of the above Addenda. The separate accounting refers to the separate accounting of assets, liabilities, and profits and losses for each business. In order to see that the separate accounting is made by dividing assets into separate accounts for each business, assets, liabilities, and losses, the pertinent business to which the assets, liabilities, and profits and losses belong depending on their use, source, etc., are clearly identified, and the method of keeping the assets, liabilities, and profits and losses related to the golf club business in separate accounts

[3] The case holding that Article 6 of the Addenda of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1818 of Apr. 4, 1990) cannot be applied to the principal business as the principal business because it did not meet the requirements of separate accounting necessary to regard the golf club business as

[4] Article 18 (4) 14 of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1835 of Oct. 22, 1990) provides that "real estate within 1.1 times the minimum size of the real estate area which is mandatory under the provisions of the Acts and subordinate statutes on the authorization, permission, license, etc. of a business shall not be deemed non-business real estate, notwithstanding paragraph (3)." Article 5 [Attachment 1] of the former Enforcement Rule of the Installation and Utilization of Sports Facilities Act (amended by Ordinance of the Ministry of Culture and Sports No. 12 of Jun. 17, 1994) provides that "the area of the membership golf club business shall not exceed 1.8,00 square meters in the case of 18 holes, and it shall not be limited to the area of the land area to be held at least, and Article 18 (4) 14 of the Enforcement Rule of the same Act (amended by Ordinance of the Ministry of Culture and Sports and Sports Act No. 48 of Jan. 14, 19974).

[1] 구 법인세법(1998. 12. 28. 법률 제5581호로 전문 개정되기 전의 것) 제18조의3 제1항 (현행 제27조 제1호 참조) , 구 법인세법시행령(1998. 12. 31. 대통령령 제15970호로 전문 개정되기 전의 것) 제43조의2 제1항 (현행 제49조 제1항 제1호 참조) , 제3항 (현행 제49조 제2항 참조) , 구 법인세법시행규칙(1990. 4. 4. 재무부령 제1818호로 개정되어 1997. 12. 31. 총리령 제675호로 개정되기 전의 것) 제18조 제3항 제6호 (라)목 (현행 삭제) , 제6항 (현행 삭제) , 제10항 (현행 삭제) , 부칙(1990. 4. 4.) 제6조 [2] 구 법인세법(1998. 12. 28. 법률 제5581호로 전문 개정되기 전의 것) 제18조의3 제1항 (현행 제27조 제1호 참조) , 구 법인세법시행령(1998. 12. 31. 대통령령 제15970호로 전문 개정되기 전의 것) 제43조의2 제1항 (현행 제49조 제1항 제1호 참조) , 제3항 (현행 제49조 제2항 참조) , 구 법인세법시행규칙(1990. 4. 4. 재무부령 제1818호로 개정되어 1997. 12. 31. 총리령 제675호로 개정되기 전의 것) 제18조 제3항 제6호 (라)목 (현행 삭제) , 제6항 (현행 삭제) , 제10항 (현행 삭제) , 부칙(1990. 4. 4.) 제6조 [3] 구 법인세법(1998. 12. 28. 법률 제5581호로 전문 개정되기 전의 것) 제18조의3 제1항 (현행 제27조 제1호 참조) , 구 법인세법시행령(1998. 12. 31. 대통령령 제15970호로 전문 개정되기 전의 것) 제43조의2 제1항 (현행 제49조 제1항 제1호 참조) , 제3항 (현행 제49조 제2항 참조) , 구 법인세법시행규칙(1990. 4. 4. 재무부령 제1818호로 개정되어 1997. 12. 31. 총리령 제675호로 개정되기 전의 것) 제18조 제3항 제6호 (라)목 (현행 삭제) , 제6항 (현행 삭제) , 제10항 (현행 삭제) , 부칙(1990. 4. 4.) 제6조 [4] 구 법인세법(1998. 12. 28. 법률 제5581호로 전문 개정되기 전의 것) 제18조의3 제1항 (현행 제27조 제1호 참조) , 구 법인세법시행령(1998. 12. 31. 대통령령 제15970호로 전문 개정되기 전의 것) 제43조의2 제1항 (현행 제49조 제1항 제1호 참조) , 제3항 (현행 제49조 제2항 참조) , 구 법인세법시행규칙(1990. 4. 4. 재무부령 제1818호로 개정되어 1997. 12. 31. 총리령 제675호로 개정되기 전의 것) 제18조 제3항 제6호 (라)목 (현행 삭제) , 구 법인세법시행규칙(1990. 10. 22. 재무부령 제1835호로 개정된 것) 제18조 제4항 제14호 (현행 삭제) , 구 체육시설의설치·이용에관한법률시행령(1994. 6. 17. 대통령령 제14284호로 전문 개정된 것) 제9조 [별표 3] , 구 체육시설의설치·이용에관한법률시행규칙(1994. 6. 17. 문화체육부령 제12호로 전문 개정되기 전의 것) 제5조 [별표 1]{현행 제8조 [별표 4] 참조} , 구 체육시설의설치·이용에관한법률시행규칙(1994. 6. 17. 문화체육부령 제12호로 전문 개정된 것) 제8조 [별표 4]

Culul Co., Ltd. (Law Firm Sejong, Attorney Lee Dog-ro, Counsel for the plaintiff-appellant)

Head of Ansan Tax Office

Seoul High Court Decision 97Gu26908 delivered on June 22, 2000

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

We examine the grounds of appeal.

1. On the first ground for appeal

Article 18 (3) 6 (d) of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1818 of Apr. 4, 1990, and amended by Ordinance of the Prime Minister No. 675 of Dec. 31, 1997) provides that real estate owned by a juristic person operating a golf club business as its main business shall be excluded from real estate for non-business use for which the annual amount of income is not less than 7/100 of the real estate price, and the criteria for judging the main business shall be specified in Article 18 (10).

However, Article 6 of the Addenda of the above Enforcement Rule (amended by Ordinance of the Ministry of Finance and Economy No. 1818 of Apr. 4, 1990, the enforcement date) (hereinafter referred to as the "Additional Rule") provides that "If a corporation operating a golf club business and other businesses concurrently accounts separately, it shall be deemed a corporation operating a golf club business in the application of the provisions of Article 18 (3) 6 (d)."

According to the reasoning of the judgment below, the court below found that the plaintiff's corporation engaged in the manufacturing, processing, and sales of chemical fiber and acquired 1,035,437m2 from September 1989 to December 23, 1989 the land of 1,035,437m2 in Yan-si ( Address omitted) and filed a report on the commencement of the business on September 22, 1990 and filed a report on the commencement of the golf course construction on May 9, 193 after starting the golf course construction at around that time, the court below held that if the plaintiff seems to concurrently operate the golf course business, the provisions of the above supplementary provisions on the deemed as the main owner of the golf course cannot be applied on the ground that the above supplementary provisions concerning the main owner of the golf course had not yet commenced the construction of the golf course at the time of the enforcement of the supplementary provisions.

However, in light of the fact that the golf course business takes a long period from the preparation of the business to the actual commencement of the business, if the land to be used for the purpose is acquired, and if the business is continuously promoted with the approval of the business plan from the competent authorities, it can be deemed that the golf course business has already been operated. Therefore, it is reasonable to view that the plaintiff acquired the land for the construction of the golf course in this case at the time of the enforcement of the above Addenda, and has already been promoting the business with the approval of the business plan from the competent authorities, so long as the plaintiff had been continuously promoting the business, it is reasonable to view that the court below'

However, according to the provisions of Article 6 of the Addenda, in order to regard the golf club business as a main business, the separate accounting should be made by dividing the assets, liabilities, and profits and losses into separate accounts for each business at the time of the enforcement of the Addenda. In this context, in order to view that the separate accounting is made by dividing the assets, liabilities, and profits and losses into separate accounts for each business, the assets, liabilities, and profits and losses should be clearly identified and clearly distinguished from the assets, liabilities, and profits and losses related to the golf club business by the method of keeping the assets, liabilities, and profits and losses in separate accounts for each business.

According to the records, the plaintiff established a single account of assets under construction relating to the golf course business from the commencement of the construction of the golf course of this case to the time of the enforcement of the above Addenda, and included various items that are difficult to be included in the account of assets under construction by entering all of the above accounts in the account without regard to the nature, use, generation cost, etc. of expenses. The account of payment bills, etc. was managed en bloc at the head office without distinction from other business, and the loan was not classified according to the purpose of the business. Thus, if the accounts for the golf course business have been accounts for the golf course business at the time of the enforcement of the Addenda, it is difficult to see that the assets, liabilities, and profits and losses related to the business have been clearly distinguished from other businesses, and there is a circumstance that there was no special income during the construction period of the golf course of this case.

Therefore, since the plaintiff did not meet the requirements for separate accounting necessary to regard the golf club business as a main business, the above supplementary provision on deeming the main business cannot be applied, and therefore, the judgment of the court below did not affect the conclusion of the judgment.

The ground of appeal on this issue is rejected.

2. On the second ground for appeal

Article 18 (4) 14 of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1835 of Oct. 22, 1990) provides that "real estate within 1.1 times the minimum area of real estate (5) that is mandatory under the provisions of the Act on the Authorization, Permission, License, etc. of Business shall not be deemed non-business real estate, notwithstanding the provisions of paragraph (3)."

According to the reasoning of the judgment below, the court below determined that Article 9 [Attachment 3] of the Enforcement Decree of the Installation and Utilization of Sports Facilities Act (amended by the Ordinance of the Ministry of Culture and Sports No. 12 of Jun. 17, 1994) and Article 8 [Attachment 1] of the Enforcement Rule of the same Act (amended by the Ordinance of the Ministry of Culture and Sports No. 12 of Jun. 17, 1994), which provide for the standards for the size of the site for the registration of the membership golf business, does not limit the area of the site that should be held at least by stipulating that the size of the membership golf business shall not exceed 1,80,00 square meters in the case of 18 holes, and that Article 18(4) of the same Act (amended by the Presidential Decree No. 14284 of Jun. 17, 1994), which provides for the restriction of the area of the site by revising the same Act as of Jan. 7, 1994, which does not constitute real property.

In light of the relevant laws and regulations, the above determination by the court below is just, and there is no error in the misapprehension of legal principles as to the provisions of Article 18 (4) 14 of the Enforcement Rule.

The argument in the grounds of appeal as to this cannot be accepted.

3. 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 on the bench.

Justices Lee Jin-hun (Presiding Justice)