Cho High Court Decision 2015No4545 (O6.21)

It cannot be deemed that a temporary depreciation was made due to acquisition of a goodwill or closure of business.

It cannot be deemed that a business right has been acquired as an intangible asset value, such as excess profit-making, because there was tradition in the business place of this case at the time of receiving the right to operate the business place, or there is no special credit, location condition, or transactional relation.

Article 33 (Non-Inclusion in Necessary Expenses)

2016Guhap7460 global income and revocation of such disposition

○ ○

○ Head of tax office

April 21, 2017

June 2, 2017

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the Plaintiff

Cheong-gu Office

The defendant 20 x. 】. 】. 】 20 】 】 The disposition of imposition of global income tax (including additional tax) on the plaintiff 】 The disposition of imposition of global income tax on which the year reverts shall be revoked.

1. Details of the disposition;

A. Jeong and LeeB (hereinafter referred to as "Ma, etc.") newly constructed a building of three stories above ground and the size of the first floor above ground (hereinafter referred to as "the building in this case") on three parcels outside the ○○○○○-dong, ○○○○○-dong, and completed registration of the preservation of ownership on May 4, 201. Since July 201, the building in this case was operated under the trade name of "○○○" from July 201 to "○○."

B. On August 12, 201, the Plaintiff lent the loan amount of KRW 500,000,000 to Jung, etc. until February 12, 2012 (hereinafter referred to as “the loan amount of KRW 00,000,00,000), and each of the repayment period was determined by the Plaintiff as of February 12, 201 (hereinafter referred to as “the loan amount of KRW 0,000,000,00,000,000,000) (the loan amount of KRW 2,000,000,000,000,000,000,000,000,000,0000,000,000,000,000,000,000,000,000,000,000,000,000).

C. From September 7, 2011, the day following the preparation of the instant letter, the Plaintiff operated the instant store after completing business registration with the trade name of “main market”. However, the Plaintiff filed a lawsuit against the Plaintiff seeking the transfer of the instant store, etc., and the Plaintiff was rendered a final and conclusive judgment against the Plaintiff on February 7, 2013. Accordingly, on December 6, 2013, the Plaintiff’s business registration under the name of the Plaintiff was revoked and led to the closure of business.

D. On December 16, 2014, the Plaintiff asserted that “A”, etc. at the time of filing a global income tax return for the global income tax for the fiscal year 2013, failed to repay the instant loan even after the maturity date for the instant loan claims, thereby succeeding to the right to operate the instant store.” At the same time, the Plaintiff appropriated KRW 00 billion in total as business rights and included in necessary expenses after paying the total amount of the instant loan as business rights 】 global income 】 was reported as sources 】 but the Defendant denied the necessary expenses on the ground that the acquisition of the instant business rights appropriated by the Plaintiff is unclear, thereby denying the necessary expenses 】 global income tax for the fiscal year 2013 】 (including additional taxes) 】 (hereinafter referred to as “instant disposition”).

E. On March 20, 2015, the Plaintiff appealed to the Tax Tribunal on August 25, 2015, but was dismissed on June 21, 2016.

2. Whether the instant disposition is lawful

A. The assertion

(i) the first argument;

In lieu of the repayment of the instant loan claims, the Plaintiff acquired the business rights, etc. on the instant store from the regular AA, etc., and thereafter, the Plaintiff was unable to operate the instant store any longer from around December 2013 due to the compulsory execution of the Gan Real Estate Trust Co., Ltd., thereby making the said business rights included in the deductible expenses in the year 2013.

Therefore, the Plaintiff’s return and payment of global income tax for 2013 is justifiable after deducting ○○ billion won, which is equivalent to the cost of acquisition of business rights, from the Plaintiff’s income in 2013, and the instant disposition made on a different premise is unlawful.

(ii) the second argument;

Even if the above business right is not acknowledged, since the Plaintiff received the payment in kind of the instant loan claim, the instant store falls under the Plaintiff’s business property. Since the Plaintiff closed down (Loss) the instant store in 2013, the value of the instant store, which is the value of the instant store, should be deemed as the amount corresponding to the business income, or (2) the instant loan claim constitutes a non-collectionable claim within the taxable period to which the closure date of the instant store belongs, and may be included in the necessary expenses as necessary expenses. Accordingly, the instant disposition made on a different premise is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes shall be as follows.

C. Determination

1) As to the first argument

A) First, we examine whether the instant business rights exist with respect to the business issues.

(1) The term “business right” refers to an intangible asset value, such as the company’s tradition, social credibility, location conditions, existence of a special manufacturing technology or special trading relationship, etc., which means the excess profit-making capacity capable of raising profits from other companies operating the same kind of business through the monopoly of the manufacturing and sale (see, e.g., Supreme Court Decision 2003Du7804, Apr. 9, 2004). Meanwhile, such business right does not constitute a civil right or a claim, and the difference between the property acquired and the consideration paid in accordance with a corporate merger, etc., in consideration of the assets subject to depreciation under the tax law, is ultimately intended to make the successor’s asset value and book value coincide with the actual value. If the business right is appropriated as assets and it is subject to depreciation, it would cause distortion in accounting, and thus, the Corporate Tax Act or the Income Tax Act does not recognize a person’s own business right, and thus, it is not subject to depreciation under Article 14(1)4(1) of the Income Tax Act.

(2) According to the statement in Gap evidence No. 4, the plaintiff filed an application for provisional injunction against interference with business (U.S. District Court 2012Kahap44), which seeks that the plaintiff would not obstruct the plaintiff's business at the stores of this case against Jeong et al., and the above court rendered a provisional injunction against interference with business on March 19, 2012, referring to the "business right" subject to depreciation under the Income Tax Act, which is an intangible value of excess profit under the above legal principles, because Jung et al. failed to pay the loan claim of this case.

(3) Rather, according to the facts as seen earlier, it can be seen that: (a) A et al. commenced operation of the instant store from July 201 to the part of the building newly constructed by A et al.; and (b) around August 2011, on September 7, 201, before the loan of this case was borrowed from the Plaintiff and the maturity date was due; (c) the Plaintiff was transferred the right to operate the instant store on September 7, 201; (d) the Plaintiff was granted the right to operate the instant store; and (e) the Plaintiff did not pay any consideration to the Plaintiff; and (e) at the time, the Plaintiff did not receive the right to operate the instant store from the Plaintiff; and (e) there was no objective evaluation of the inventory assets of the instant store or the right to operate the instant store at all at the time of obtaining the right to operate the instant store; (e) there was no tradition, special credit location conditions, or transaction relationship with the instant store. Therefore, the existence of the instant business right cannot be recognized.

B) Even if the right to operate the loan of this case exists even if the right to operate the loan of this case was transferred to the Plaintiff before the maturity date of the loan of this case, and the loan of this case remains effective notwithstanding the lease of this case, and the actual right to the loan of this case exists between the Plaintiff on September 201, and on February 12, 2012, the Plaintiff continued to operate the loan of this case until February 12, 2012. However, in the case where the regularA et al. fails to repay the loan of this case by the above time, the Plaintiff continued to operate the loan of this case without bearing the rent of this case and management expenses from the time of the loan of this case until the completion of the repayment of the loan of this case until 00,000,000,000,0000,000,0000,000,0000,000,0000,000,000,000,000 won.

C) Meanwhile, according to Article 33(1) of the Income Tax Act and Article 62(1) and 62(2)2(a) of the Enforcement Decree of the Income Tax Act, where the depreciation amount of fixed assets for business, such as goodwill, is appropriated as the necessary expenses, depreciation costs (hereinafter referred to as "Depreciation amount") shall be appropriated as the necessary expenses in calculating the income amount within the limit of the amount calculated by the method reported to the head of the competent tax office for each taxable period for each taxable period (hereinafter referred to as "the scope of depreciation amount"). In this case, where the business is commenced or discontinued during the pertinent taxable period or where the depreciable assets are acquired or transferred during the pertinent taxable period, the scope of depreciation amount shall be calculated by dividing the amount calculated by the number of months used for the business during the pertinent taxable period by 12. Thus, even according to the Plaintiff's assertion, the date of acquisition of the business right of the Plaintiff's sales store in this case shall have been appropriated as the necessary expenses each taxable period after 2011, and it shall not be evaluated as depreciation due to the date of business closure in this case.

D) Therefore, the Plaintiff’s above assertion cannot be accepted as multiple mothers.

2) Judgment on the second argument

A) As seen earlier, the Plaintiff merely decided to operate the instant store on its own account in order to secure the repayment of the instant loan claims until the repayment is made, and thus, the instant store does not constitute the Plaintiff’s business assets.

B) Also, even if the Plaintiff’s assertion was impossible to repay the instant loan claims in 2013, as seen earlier, the instant loan claims were incurred by the Plaintiff, who was not engaged in the business of paying the price, from lending money to Jung et al. before running the instant store. As such, in imposing interest income, the instant loan claims were imposed on the interest income.

Along with the fact that it can be seen that the entire principal of the non-business loan can not be recovered, it cannot be viewed that the loan credit in this case is a claim for business, such as credit account receivable, which is the subject of bad debt treatment.

C) Therefore, we cannot accept the Plaintiff’s above assertion on a different premise.

3. Conclusion

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