Seoul Administrative Court 2008Guhap20376 ( October 17, 2008)

early 208west 4079

Whether it is subject to unfair practices when a person with a special relationship receives shares for subscription and redeems debts with a specially related party with the subscription money.

Even if all of the non-party companies acquired shares issued by the Plaintiff in excess of their face value, it is not reasonable to deem that the non-party company gave any benefit to the non-party company, and the act of repaying the loan with the paid share price also extinguished the Plaintiff's obligation. Therefore, the provision of wrongful calculation

The contents of the decision shall be the same as attached.

1. Revocation of a judgment of the first instance;

2. The Defendant’s imposition of KRW 4,331.150 (including additional taxes) of corporate tax for the business year 2004 as of July 11, 2007 against the Plaintiff and the disposition of refusal to refund or correct KRW 594,380,784 of corporate tax for the business year 2005, respectively, shall be revoked.

3. All costs of lawsuit in the first and second instances shall be borne by the Plaintiff.

The same shall apply to the order.

1. Quotation of judgment of the first instance;

The reasoning for this Court’s reasoning is as follows: (a) below the 2-C. of the No. 2-C. of the judgment of the court of the first instance, except for the use of the No. 2-C. of the reasoning for the judgment of the court of the first instance as follows; and (b) it is cited as it is in accordance with Article 8(2) of the Administrative Litigation Act and

2. Parts to be dried;

(a) First, we consider the application of the unfair act and calculation denial provision.

(1) In the case of a transaction with a specially related person of a corporation for the denial of unfair calculation under the Corporate Tax Act, where the tax burden is deemed to have been unjustly avoided or reduced without using a method which is a normal-scale economic person’s joint interest in the transaction with a specially related person of a corporation for the denial of unfair calculation, the legal effect of the calculation of the act itself, which is effective and lawful between the parties, is not denied. Therefore, the effect of the denial is limited to the calculation of the special amount of taxation of the relevant corporation, and the calculation of the taxable income of the trading partner does not affect other legal relations, but does not have the effect of the denial (see, e.g., Supreme Court Decision 97Nu8960, Sept. 18, 1998; 95Nu3589, Dec. 26, 1995). The burden of proof that the transaction between a corporation and a specially related person constitutes the grounds for the rejection of unfair calculation under the Corporate Tax Act is imposed upon the tax authority (see, e.g., Supreme Court Decision).

(2) However, according to the defendant's disposition grounds or the defendant's argument that recognized earlier, up to the trial court, the defendant should include the above amount in the gross income for the plaintiff who received the excess amount of 2.677 billion won issued stocks on the ground that Article 52 of the Corporate Tax Act should apply to the non-party company's act of distributing profits to the plaintiff by giving up its claim between the plaintiff and the related party for the purpose of treating the non-performing debt against the plaintiff through a series of transactions of capital increase with stocks and debt redemption for the purpose of treating the non-performing debt against the plaintiff. The non-party company's act of distributing profits to the plaintiff who is a related party, as above, should naturally be viewed as an unfair act and thus, it does not affect the above avoidance, or it does not constitute an unfair act, and whether the plaintiff's act constitutes a ground for rejection of unfair calculation under the Corporate Tax

Therefore, it is not reasonable to view that the monthly act constitutes any of the subparagraphs of Article 88(1) of the Enforcement Decree of the Corporate Tax Act, which provides for a specific transaction type of unfair acts, even if all the non-party company acquired the shares issued above par value, and therefore, it is nothing more than giving any benefit to the non-party company, and the act of borrowing funds from the non-party company with paid share money and repayment of the plaintiff's obligation also extinguished the plaintiff's obligation. Thus, even if the circumstances that the above two acts are abnormal acts with no economic rationality asserted by the defendant are acknowledged when observing the above two acts as a series of transactions, it cannot be deemed that the plaintiff unfairly reduced the tax burden due to the transaction with the non-party company due to the same transaction with the non-party company as provided for in subparagraphs 1 through 9. Thus, the provision against the plaintiff cannot be applied

B. Next, we examine Article 17 subparagraph 1 of the former Corporate Tax Act (amended by Act No. 7005 of Dec. 30, 2003) as to the application of Article 17 subparagraph 1 of the same Act;

The defendant appears to have included 2.673 billion won in gross income from the transaction between the plaintiff and the non-party company on the ground that the transaction between the plaintiff and the non-party company constitutes a debt-equity swap (except for this, there is no ground for hululule as a profit from debt-equity swap). Even if the transaction between the plaintiff and the non-party company constitutes a debt-equity swap, Article 17 subparagraph 1 of the former Corporate Tax Act, which was enforced on December 4, 2003 when the plaintiff issued the shares, provides that the amount in excess of the face value of issued shares shall not be added to gross income in calculating the income amount of each business year of the domestic corporation, and since the revised Regulation of the Ministry of Finance and Economy (amended by Act No. 46012-147, Sep. 5, 2003) No. 1 of the former Corporate Tax Act (amended by Act No. 1060, Jan. 1, 2004) provides that the defendant shall be deemed to have violated the market value of the above 17.

3. Conclusion

Therefore, the plaintiff's claim of this case is accepted, and the judgment of the court of first instance is unfair with different conclusions, so the judgment of the court of first instance is revoked, and it is so decided as per Disposition by cancelling the disposition of this case.