The business year of accrual of earnings and losses from consignment sales of the company's assets (=the business year in which the trustee buys and sells the consigned assets)

Article 17(1) and (4) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) (see current Article 40(1) and (2) of the Corporate Tax Act), Article 36(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998) (see current Article 68(1)4 of the Enforcement Decree of the Corporate Tax Act)

[Defendant-Appellant] Plaintiff 1 and 3 others

Head of Chungcheong Tax Office

Daejeon High Court Decision 2005Nu10 decided Oct. 12, 2006

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

We examine the grounds of appeal.

1. Regarding ground of appeal No. 1

According to the reasoning of the judgment below, the court below accepted the plaintiff's assertion that the plaintiff company did not have appropriated the above amount as payment for the work price in the year 1997, on the ground that it was not sufficient to recognize the remaining evidence alone, even though the plaintiff company did not have spent the construction cost equivalent to the total of KRW 3,077,665,040 on the account books for Tae Tae-sung and Geum-Ang Engineering in the year 197. The court below accepted the plaintiff's assertion that it was not a processed appropriation of the above amount as payment for the work price in the year 197. In light of the records, the judgment of the court below and the determination of the above facts are justified.

The court below did not err in violating the rules of evidence as alleged in the ground of appeal.

2. Regarding ground of appeal No. 2

Article 17 (1) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) provides that "the business year of accrual of earnings and losses of a domestic corporation for each business year shall be the business year which includes the date on which the concerned earnings and losses are settled," and Paragraph (4) of the same Article provides that "necessary matters concerning the business year of accrual of profits and losses under paragraph (1) shall be prescribed by Presidential Decree," and accordingly Article 36 (1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998) provides that "the business year which includes the date on which the earnings and losses under the provisions of Article 17 (1) and (4) of the former Enforcement Decree of the Corporate Tax Act are finalized shall be the business year which includes the date of sale, purchase, transfer, or acquisition of assets entrusted to another person in each business year" and subparagraph 3 of the same Article provides that "the business year of accrual of earnings and losses shall be the entrusted assets shall be the business year of accrual of earnings and losses."

According to the facts duly established by the court below, the non-party corporation sold membership of the plaintiff company as commission agent of the plaintiff company, and decided to deposit only the remaining amount after deducting 900,000,000 won and sales commission for promotional travel from sales proceeds of KRW 9,90,000,000, from sales proceeds of KRW 9,000. The amount of this case which was investigated as being omitted from sales at the time of the tax investigation of corporate tax in 1997 on the plaintiff company's business year. It can be known that the non-party corporation's sales revenue was part of the sales proceeds which was deducted from the amount to be paid to the plaintiff company from the amount to be paid to the non-party company during the year 197. Thus, the court below's determination that the amount of this case constitutes deductible expenses for the business year 1997 of the plaintiff company as expenses to be borne by the plaintiff company under

The court below did not err in the misapprehension of legal principles as to the time of attribution of losses as alleged in the ground of appeal.

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 Cha Han-sung (Presiding Justice)