Cho High Court Decision 2008Da0825 (Law No. 28, 2008)

Whether it falls under non-business land

In light of the fact that the land belongs to a general residential area which is an urban area under the National Land Planning and Utilization Act within the possession period, there is no light, and that two years have already elapsed since the date of incorporation into an urban area at the time of its acquisition, it constitutes

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

Article 104 (Tax Rate of Transfer Income)

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

1. The plaintiff's claim is dismissed.

2. The plaintiff shall bear the costs of lawsuit.

The Defendant’s disposition of imposition of capital gains tax of KRW 79,836,550 against the Plaintiff on February 5, 2008 shall be revoked.

1. Details of the disposition of this case

The following facts are acknowledged in each of the statements in Gap 1, 5, 6, and Eul 1 and 3, or in combination with the purport of the whole pleadings.

A. On March 20, 2002, the Plaintiff purchased 1/10 of co-ownership shares of 375-2, 249 square meters in ○○-si, ○○-si (hereinafter “instant land”) and completed the registration of transfer of shares on May 18, 2002.

B. On May 7, 2007, the Plaintiff sold the above co-ownership share on the instant land to the largest ○, Kim○, Kim○-ho, Yellow-ho, Yellow-gu, and the flag ○○○. On June 22, 2007, the Plaintiff completed the registration of transfer of shares in the name of the above persons on June 22, 2007, and reported and voluntarily paid KRW 53,047,90 for the transfer income tax for the year 2007, calculated by applying the general cumulative tax rate to the Defendant on July 31, 2007.

C. The Defendant: (a) deemed that the instant land constitutes a non-business land under Article 104-3 of the Income Tax Act (amended by Act No. 8911 of Mar. 21, 2008); and (b) calculated capital gains tax again by applying 60% of the heavy tax rate; and (c) on February 5, 2008, the Defendant imposed capital gains tax on the Plaintiff for the year 2007, KRW 79,836,550 (hereinafter “instant disposition”).

D. The Plaintiff dissatisfied with the instant disposition and filed a tax appeal with the Tax Tribunal on February 25, 2008, but was dismissed on August 28, 2008.

2. Whether the instant disposition is lawful

A. The gist of the plaintiff and defendant's assertion

(1) The purport of the Plaintiff’s assertion is that the instant land was cultivated by the Plaintiff himself at the time of its acquisition. The instant land was farmland which had been cultivated by the Plaintiff at the time of its acquisition, and that it was impossible to cultivate by being prohibited by law from being used since it was acquired as a reserved land for replotting. This constitutes a case where inevitable reasons exist under Article 104-3(2) of the Income Tax Act and Article 168-14(1)1 of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20618, Feb. 22, 2008) and Article 168-14(1)1 of the Enforcement Decree of the Income Tax Act, and thus, the instant disposition

(2) The gist of the defendant's assertion is that (i) the plaintiff did not own interest in the land of this case; (ii) the land of this case is not prohibited from being used due to the legal provisions after the plaintiff's acquisition; (iii) the land of this case is prohibited from being used pursuant to Article 39 of the Land Readjustment and Rearrangement Projects Act (repealed by Law No. 6252 of July 1, 2000); (iv) the land of this case constitutes non-business land under Article 104-3 (1) 1 (a) of the Income Tax Act; and (v) the land of this case belongs to the general residential area from December 21, 199 to the land of this case; and (iv) the land of this case falls under the land of this case as a non-business land within the urban area under the Act No. 104-3 (1) 1 (b) of the Income Tax Act, and the land of this case constitutes a non-business land under Article 104-3 (1) 1 (b) of the Income Tax Act.

B. Relevant statutes

Article 104 (Tax Rate of Transfer Income)

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

(c) Fact of recognition;

The following facts are recognized as having no dispute between the parties, or as having taken into account the purpose of the argument in the testimony of Kim △△△△△, which is described in the evidence Nos. 6 and 4-1, 2, 5, 8, 9, and 11 of the evidence Nos. 4.

(1) Since 1968, Kim △△△ has been cultivated on the instant land.

(2) On December 21, 199, the Gyeongnam-do announced a new city planning (public finance) partial decision (public finance) in accordance with Article 199-3126 of the Gyeongnam-do’s notification. Accordingly, the land in this case was changed to a general residential area.

(3) In order to enhance the utility of land and install public facilities on July 18, 2001, the Gyeongnam-do governor authorized the implementation of the land readjustment project in the Changwon-dong, ○○ Dong, ○○ Dong, ○○ Dong, ○○ Dong, ○○ Dong, ○○ Dong, ○○ Dong, ○○ Dong, ○○ Dong, ○○ Dong, 396,076 square meters, and publicly announced it.

(4) On March 20, 2002, the Plaintiff purchased 1/10 of the co-ownership shares of the instant land, which is the land subject to the land readjustment project, and completed the registration of share transfer on May 18, 2002. At the time, Kim △△△△ was taking a border in the instant land.

(5) On September 19, 2002, the Gyeongnam Do governor approved the instant land readjustment project (designation of land scheduled for the land readjustment project).

(6) When Kim △△△ was no longer able to cultivate Biuri in the instant land due to the designation of planned land substitution for the instant land, Kim △△△ received the actual farming compensation amounting to KRW 45,867,950 from the Changwon-si on July 29, 2003 as compensation for losses incurred therefrom.

(7) The Plaintiff completed the transfer, etc. of shares in the name of the largest ○ road, Kim○-do, Kim○-ho, Yellow-gu, and Ma○○○-si, which was sold on the instant land on June 22, 2007, five years after acquiring 1/10 of the shares in co-ownership in the instant land. However, there was no public notice of a replotting disposition for the instant land at the time.

D. Determination

(1) Whether this case's land is land for non-business use or not.

(A) According to the main text of Article 104-3(1) and subparagraph 1 (b) of the same Article, each item of Article 168-6(1) of the Enforcement Decree of the Income Tax Act, and Article 168-8(4), (5)1 and (6) of the Enforcement Decree of the same Act, where farmland ownership period is not less than five years, farmland in an urban area (excluding green areas, green areas, and open dry sea areas) under the National Land Planning and Utilization Act among urban areas during the period exceeding the period equivalent to 20/100 of the ownership period of more than one year between the five years immediately preceding the transfer date and the three years immediately preceding the transfer date, and farmland in an urban area (excluding green areas, green areas, and open sea areas) under the National Land Planning and Utilization Act for more than one year retroactively from the date of incorporation into an urban area shall be excluded from non-business land.

(B) In other words, the land of this case was within a general residential area, which is an urban area under the National Land Planning and Utilization Act, within its possession period, from the time the Plaintiff acquired a co-ownership share of the land of this case on May 18, 2002 to the time it reaches the largest route, etc., as follows. The land of this case was within a general residential area, which is an urban area under the National Land Planning and Utilization Act within its possession period, and Kim △△△△ was engaged in the land of this case for more than one year retroactively from December 21, 1999, which is the date on which the land of this case was incorporated into the urban area. The land of this case was within its possession period, without any self-fluence, and two years have passed since its incorporation into the urban area at the time of the Plaintiff’s acquisition. In light of the above, the land of this case constitutes the land for non-business use under Article 104-3(1)1 (b) of the Income Tax Act.

(2) This case's land is a non-business land exception ground.

(A) According to Article 104-3 (2) of the Income Tax Act, in applying Article 104-3 (1) of the same Act, in cases where land falls under non-business land due to the prohibition of use due to the provisions of laws after its acquisition or other inevitable reasons prescribed by the Presidential Decree, it may not be deemed land for non-business as prescribed by the Presidential Decree. According to Article 168-14 (1) 1 and 3 of the Enforcement Decree of the Income Tax Act, land, the use of which is prohibited or restricted pursuant to the Acts and subordinate statutes after its acquisition, shall be limited for a period of time when its use is prohibited or restricted by other Acts and subordinate statutes due to public interest or inevitable reasons, and land falling under inevitable reasons prescribed by the Ordinance of the Ministry of Finance and Economy shall be deemed land not falling under any of the subparagraphs of Article 104-3 (1) of the Income Tax Act for a period of time prescribed by the Ordinance of the Ministry of Finance and Economy, and it shall be determined whether it falls under non-business land under the provisions of the salary Act.

(B) In light of the following circumstances, the land of this case constitutes a non-business land pursuant to Article 104-3 (1) 1 (b) of the Income Tax Act after two years from the date of the Plaintiff’s acquisition, and in such a case, the prohibition of use due to the Plaintiff’s designation of a land scheduled for replotting after the acquisition of the land does not fall under any of the grounds prescribed in Article 168-14 (1) 3 of the Enforcement Decree of the Income Tax Act and Article 83-5 (1) 1 (b) of the Enforcement Rule of the Income Tax Act, the land of this case cannot be deemed as not falling under the non-business land due to the Plaintiff’s own initiative under Article 104-3 (2) of the Income Tax Act, and there is no reason to view otherwise.

(3) Comprehensively taking account of the above circumstances, it is clear that the land of this case constitutes non-business land pursuant to Article 104-3 (1) 1 (a) of the Income Tax Act without considering the application of Article 104-3 (1) 1 (a) of the Income Tax Act. Although the land of this case, as alleged by the plaintiff, is not legally prohibited and restricted due to the authorization and public announcement of the project implementation of land rearrangement before the acquisition of the plaintiff, and even if the land of this case was legally banned from using due to the designation of reserved land after the acquisition of the plaintiff, such circumstance does not affect the above conclusion, and thus, the disposition of this case

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.