Cho High-2015-Seoul Government-505 (2016.05.02)

Whether land designated and publicly notified as a planned road site is subject to special long-term holding deduction as land, the use of which is restricted pursuant to statutes.

Notwithstanding the decision on urban planning, if it can be used as farmland or forest for its original purpose, it shall not be deemed land restricted pursuant to statutes.

Article 104-3 (Scope of Land for Non-business)

2016Gudan56540

AA

BB Director of the Tax Office

March 8, 2017

March 29, 2017

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

Defendant’s imposition of KRW 273,130,010 on the Plaintiff on July 31, 2015, as capital gains tax for the year 2014.

The disposition shall be revoked.

1. Details of the disposition;

A. The Plaintiff, based on sales, purchased ① 122-1, 387 square meters prior to Busan-dong 122-2, 896 square meters prior to the same 122-2, and ③ 2,743 square meters, ④ the same 459-3 square meters and 4,467 square meters, ⑤ the same 459-6 forest and 268 square meters, ⑤ the same 459-6 forest and 268 square meters prior to November 4, 1987, and transferred the same on April 4, 2014.

B. The Plaintiff filed a transfer income tax base with the Defendant on June 30, 2014, on the premise that each land is the land, the use of which is restricted under the Protection of Military Installations Act and which is not deemed the land for non-business use. However, on May 19, 2015, the Plaintiff filed a transfer income tax base by deducting the special deduction for long-term possession from gains on transfer of each land under the premise that the land is not deemed the land for non-business use. On the ground that ① 380 square meters out of land, ② 34 square meters out of land, ③ 1,908 square meters out of land, ④ 1,306 square meters out of land, ④ 1,306 square meters out of land, ⑤ 4,053 square meters out of land (hereinafter “instant land”) was designated as the land for non-business use use under the Act on the Protection of Military Installations, on November 24, 2003, on the premise that the land was not deemed the land from the date of transfer.

C. However, on the premise that the instant land still constitutes non-business land, the Defendant denied the deduction of special deduction for long-term possession from each transfer margin, and rendered a disposition imposing capital gains tax of KRW 273,130,010 on the Plaintiff in July 31, 2015 (hereinafter “instant disposition”).

D. On September 1, 2015, the Plaintiff filed an objection with the director of the Seoul Regional Tax Office on November 5, 2015, and filed a request for a trial with the Tax Tribunal. However, the Tax Tribunal rendered a decision to dismiss the Plaintiff’s request on May 2, 2016.

[Reasons for Recognition] There is no dispute, and the purport of Gap's evidence 1 to 4 as well as the whole argument.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

Since the instant land was designated as the site for urban planning facilities on November 24, 2003, the construction of buildings or the installation of structures has been prohibited. Accordingly, the instant land constitutes “land which is not used for business due to justifiable reasons, such as alteration of urban planning” under Article 104-3(2) of the former Income Tax Act (amended by Act No. 12852, Dec. 23, 2014; hereinafter “former Income Tax Act”) and Article 168-14(1)1 of the Enforcement Decree of the same Act, or “land the use of which is prohibited or restricted pursuant to the relevant Acts and subordinate statutes after acquiring the land” under Article 104-3(2) of the former Income Tax Act, Article 168-14(1)4 of the Enforcement Decree of the same Act, Article 83-5(1)12 of the Enforcement Decree of the same Act. Accordingly, the instant land does not constitute “land the special deductions for non-business use of which from November 24, 2003 to 14.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination premised on the premise

Comprehensively taking account of the evidence evidence and the overall purport of argument as to Gap's evidence, theCC market determines the part of the land in this case amounting to 3,705 square meters as "road for urban planning facilities" under Article 30 of the National Land Planning and Utilization Act (wholly amended by Act No. 8250, Jan. 19, 2007); and recognizes the fact that it promulgated as "urban planning facilities" under Article 203-43 of the Public Notice atCC. Thus, with respect to the part of the land in this case, the land in this case does not appear to have been subject to the prohibition of construction of a temporary building or installation of a new urban planning facility within the scope of "construction or installation of a new building within the scope of no permission under Article 94 of the National Land Planning and Utilization Act (wholly amended by Act No. 8250, Apr. 4, 2014; Act No. 942, Feb. 6, 2009; Act No. 10688, Apr. 14, 2015).

As such, if the use of land is prohibited or restricted by the urban planning decision under the National Land Planning and Utilization Act, the interpretation of the language and text can be seen as "land which is prohibited or restricted by the laws and regulations after acquiring the land as stipulated by Article 104-3 (2) of the former Income Tax Act and Article 168-14 (1) 1 of the Enforcement Decree of the same Act, or "land which is not used for the business due to justifiable reasons, such as the alteration of the urban planning after acquiring the land," as alleged by the plaintiff.

However, considering the purpose and purpose of denying deduction for long-term possession of land for non-business use, and the fact that Article 168-14 (1) 4 of the former Enforcement Decree of the Income Tax Act is stipulated in the comprehensive form of subparagraph 1, it is difficult to see that there is a significant difference in the interpretation of the two provisions in this case, and the two provisions are concurrently applied, but it will be examined mainly on the electronic part

2) Whether part of the instant land constitutes “land, the use of which is prohibited or restricted under the statutes after acquiring such land” as provided by Article 104-3(2) of the former Income Tax Act and Article 168-14(1)1 of the Enforcement Decree of the same Act

Article 168-14(1)1 of the former Enforcement Decree of the Income Tax Act refers to “land, the use of which is specially restricted beyond the ordinary limit according to the use of land” and “land, the use of which is prohibited or restricted pursuant to the relevant Act and subordinate statutes” means “land, the use of which is restricted beyond the ordinary limit according to its original purpose.” This is based on the principle of whether the use of the land is restricted according to its original purpose. However, the purpose of acquiring the land, the actual use of the land, and the possibility of changing its original purpose, etc. shall also be determined separately (see Supreme Court Decisions 2010Du18543, Oct. 24, 2013; 201Du1425, Oct. 31, 2013; 2014Du7886, Jul. 14, 2016).

The following circumstances, which are acknowledged as comprehensively considering Gap evidence 3, Eul evidence 1, Eul evidence 1, 6, 8, and 9 (including virtual numbers) and the overall purport of oral arguments, namely, the land category of this case is farmland and forest land, and appears to have been used as farmland and forest land even around the time of the transfer date of the land in this case. The plaintiff transferred the land to OOOO-gun OCC Eup 492 on October 17, 1987, but transferred to OOOO-gun 492 on August 5, 198. The sales contract which caused the plaintiff to acquire the land in this case was concluded on October 28, 1987, and the plaintiff appears to have never been actually used for the land in this case or to have never been actually used for the land in this case since from around April 1, 1981 to June 1, 2001, considering the fact that the plaintiff had never been actually used for the land in this case's form and quality as the land in this case.

However, there is no dispute between the parties that the land in this case can be used as farmland or forest for its original purpose, notwithstanding the urban planning decision of theCC market. Thus, the land in this case cannot be viewed as "land prohibited or restricted from being used in accordance with the laws and regulations" under Article 168-14 (1) 1 of the former Enforcement Decree of the Income Tax Act.

3) Other determination

The Plaintiff asserts to the effect that it is unfair to consider the Plaintiff’s efforts to develop the instant land, namely, the Plaintiff’s efforts to construct a building on the instant land or to implement authorization and permission procedures for changing the form and quality of the land, based on objective circumstances, based on the content of the relevant statutes.

However, subparagraph 4 of Article 168-14 (1) of the former Enforcement Decree of the Income Tax Act requires that the land should be used in consideration of not only the legal restrictions on the relevant land, but also the current status, reason for the acquisition, or current use of the land. The reason for the acquisition or use of the land must inevitably include the subjective intention of the land owner. If an urban planning decision was made on the relevant land even though the land owner did not make any effort to utilize the original land, if the relevant land is not deemed a non-business land from that time, the said land should be deemed a non-business land, solely on the ground that the land owner made no effort to utilize the land, the profit from the market price of the land would bring about the result of completely eliminating the intention of not allowing the deduction of the amount of special deduction for long-term possession of the land. Rather, the Plaintiff’s above assertion cannot be accepted, and in particular, the Plaintiff’s efforts should be taken into account in determining the possibility of change of the original use of the land of this case.

4) Sub-committee

Therefore, the plaintiff's above assertion is rejected, and the disposition of this case is legitimate.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.