(a) The meaning of donations that can be included in the deductible expenses of a corporation under Article 18 (1) and (2) of the Corporate Tax Act; or whether the land donated in accordance with the license conditions where part of the land reclaimed after obtaining a license for reclamation of public waters for the construction of a factory falls under the category of donations under the provisions of the said Act;

A. The term "donations that can be included in the loss of a corporation under Article 18 (1) and (2) of the Corporate Tax Act" refers to the value of the donation of property that is made free of charge to another person, regardless of whether it is directly related to the business of the corporation, if it is directly related to the business of the corporation, it shall not be included in the loss.

B. If a company donates part of the land reclaimed by obtaining a license from the Minister of Construction and Transportation for the construction of a new factory in the form of donation in accordance with the condition of the reclamation license, the construction cost shall be the capital expenditure disbursed to acquire the factory site of the company, i.e., the cost directly related to the business of the company included in the cost for acquisition of the factory site, which is not the donation that can be included in the

Articles 18(1) and 18(2) of the Corporate Tax Act; Article 40(1)1 of the Enforcement Decree of the Corporate Tax Act

Attorney Kim Jong-hee, et al., Counsel for the defendant-appellant

Head of Ulsan District Office

Daegu High Court Decision 85Gu309 delivered on January 19, 1987

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

The Plaintiff’s attorney’s grounds of appeal are examined.

1. The term “donations that may be included in the corporation’s deductible expenses” under Article 18(1) and (2) of the Corporate Tax Act refers to the value of property donations that are disbursed to another person without any direct connection with the corporation’s business. Thus, even if a donation is made to another person without compensation, if it is directly related to the corporation’s business, it may not be included in the calculation of deductible expenses. Article 40(1)1 of the Enforcement Decree of the Corporate Tax Act merely provides for a reasonable apology as above. Thus, it cannot be said that there is a violation of Article 18(2)1 of the Corporate Tax

2. Therefore, the court below held that since the plaintiff company's donation of facilities and drainage facilities, such as 18,323 square meters of port sites, coast roads, vacant land and shore high-tech land 67,320 square meters of land reclaimed by the Minister of Construction and Transportation for new construction of the factory, such as 18,323 square meters of inside walls, 225, 315 meters of inner walls, 12 mooring poles, 23 square meters of shocks, etc. to the State is reverted to the State in the form of donation according to the terms and conditions of the reclamation license, since the construction expenses are directly related to the capital expenses spent for acquiring the factory site of the plaintiff company, namely, acquisition cost of factory site, and the business of the plaintiff company, it cannot be deemed that the construction expenses are directly related to the plaintiff company's business without direct connection with the plaintiff company's business, and it cannot be deemed that the defendant's taxation of earnings was legitimate, regardless of the fact that the plaintiff company's business and the construction expenses of the second 200 square meters of donations are not related to the plaintiff company.

3. Therefore, the appeal shall be dismissed, and all costs of appeal shall be assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Jong-dong (Presiding Justice)