If land annexed to an unauthorized house is within the scope of Article 10 of the Enforcement Decree of the Land Excess Profit Tax Act, whether it can be subject to special deduction for long-term possession under the Income Tax Act because it is excluded from idle land.

Article 23 (2) 2 of the Income Tax Act provides for special long-term holding deduction in calculating capital gains and excludes land prescribed by the Presidential Decree from special long-term holding deduction. Accordingly, Article 46-3 of the Enforcement Decree of the same Act provides that sites (including land on which unauthorized buildings prescribed by the Ordinance of the Ministry of Finance and Economy are constructed) and land attached to a building shall be excluded from special long-term holding deduction: Provided, That this provision does not apply to land which does not fall under idle land, etc. under Article 8 of the Land Excess Profit Tax Act as of the date of transfer date in the proviso, and Article 8 (1) 4 of the former Land Excess Profit Tax Act (amended by Act No. 4807 of Dec. 22, 1994) provides that land on which a building is built, and falling under any of the following items shall be excluded from such special long-term holding deduction, and Article 10 of the same Enforcement Decree of the same Act provides that the land attached to an apartment house shall be excluded from the scope of land attached to the same house without permission under the same Act.

Article 23 (2) 2 of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994); Article 46-3 of the Enforcement Decree of the Income Tax Act; Article 8 (1) 4 of the former Land Excess Profit Tax Act (amended by Act No. 4807 of Dec. 22, 1994); Article 10 of the Enforcement Decree of the Land Excess Profit Tax Act

Plaintiff

Head of Namgu Tax Office

Daegu High Court Decision 93Gu3418 delivered on September 8, 1994

The judgment below is reversed, and the case is remanded to the Daegu High Court.

We examine the grounds of appeal.

According to the reasoning of the judgment below, the court below acknowledged that the Plaintiff calculated the transfer income tax by taking the amount of the non-special deduction for long-term holding on the ground that part of the land acquired by the Plaintiff on May 5, 1970 and the remaining land remaining after being expropriated on two occasions on October 13, 1989 and January 9, 190 were sold to others and paid the transfer income tax by voluntary payment. The Defendant did not make the special deduction for long-term holding on the ground that the land constitutes a site excluded from the special deduction for long-term holding, and determined that the transfer income tax should not be calculated on the land without permission under the proviso of Article 8(3) of the Income Tax Act and Article 23 subparag. 2 of the Enforcement Decree of the Income Tax Act, since the land of this case was occupied on the land of this case, which was expropriated on the land of this case, and it did not constitute the special deduction for long-term holding without permission, the court below rejected the Plaintiff’s assertion that the transfer income tax exemption for the land of this case was not included in the transfer income tax without permission.

Article 23 (2) 2 of the Income Tax Act provides for special long-term holding deduction for the calculation of capital gains and excludes land prescribed by the Presidential Decree from special long-term holding deduction. Accordingly, Article 46-3 of the Enforcement Decree provides that sites (including land on which unauthorized buildings prescribed by the Ordinance of the Ministry of Finance and Economy are built) and land attached to a building shall be excluded from special long-term holding deduction: Provided, That the same shall not apply to land which does not fall under idle land, etc. under Article 8 of the Land Excess Profit Tax Act as of the transfer date under the proviso of the same Act. Article 8 (1) 4 of the Land Excess Profit Tax Act (amended by Act No. 4807 of Dec. 22, 1994; hereinafter the same shall apply) provides that land on which buildings such as factories are built and falling under any of the following items shall be excluded from the scope of land attached to apartment houses, and Article 10 of the Enforcement Decree of the same Act provides that the land attached to apartment houses shall be excluded from the scope of land attached to apartment houses, etc.

Meanwhile, Article 8(3) of the Land Excess Profit Tax Act provides that if a building on land falls under idle land for a certain reason after acquiring the land, it shall not be deemed idle land for a period prescribed by the Presidential Decree, and stipulates that it shall not be deemed idle land for the reason prescribed by the Presidential Decree, such as loss, collapse, and other reasons as prescribed by the Presidential Decree. Accordingly, Article 23(2) of the Enforcement Decree of the same Act, which is the Presidential Decree, provides that "in case of loss, collapse, or removal of a building on land after acquiring the land, it shall be two years (one year in case of voluntary removal) from the date of the loss, collapse, or removal, if the land on land which is a house is removed within the scope prescribed by Article 10 of the Enforcement Decree, if the land on land is within the period prescribed by Article 23(2) of the same Decree, it shall not be deemed that it is idle land for two

Therefore, in this case where the Plaintiff asserted that an unauthorized building removed is a house, the lower court should have deliberated on what extent the land is within the scope stipulated in Article 10 of the Enforcement Decree of the said Act as the land annexed to the house, and if the land goes beyond the scope of the said provision, the portion falling within the said provision should be considered as idle land only within the extent that goes beyond the said provision.

Nevertheless, the lower court, without such deliberation, determined that an unauthorized building cannot be deemed a ground building under Article 8(3) of the Act and Article 23 subparag. 2 of the Enforcement Decree of the Act, for the purpose of calculating the transfer income amount from the transfer of the instant land. In so doing, the lower court erred by misapprehending the legal doctrine on idle land under the Land Excess Acquisition Tax Act, which is not subject to the special long-term holding deduction under the Income Tax Act, thereby failing to exhaust all necessary deliberations. The grounds for the argument are as follows.

Therefore, the judgment of the court below is reversed and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Yong-hun (Presiding Justice)