Seoul High Court Decision 201Na1448 delivered on August 1, 201

The Head of the District Tax Office (Court of Law, Attorney Kim Jong-soo, Counsel for defendant-appellant)

April 8, 2009

1. The defendant revoked the disposition of imposition of KRW 4,608,544,746 of the corporate tax for the business year 1997 against the plaintiff on March 2, 2001, and the part exceeding KRW 5,587,089,341 of the disposition of imposition of KRW 7,717,81 of the corporate tax for the business year 1998 is revoked.

2. The plaintiff's remaining claims are dismissed.

3. The costs of lawsuit shall be borne by the defendant.

The Defendant’s imposition of KRW 4,608,544,746 of corporate tax for the business year 1997 against the Plaintiff on March 2, 2001 and the imposition of KRW 5,507,287,67,675 of corporate tax for the business year 1998 and the imposition of KRW 7,717,81 of corporate tax for the business year 1998 shall be revoked.

1. Details of the disposition;

A. On March 27, 1997, the Plaintiff was incorporated under the trade name of “edon sate Co., Ltd.” with the main business of engaging in manufacturing, wholesale, general trade, general trade, general trade agency, etc. of high quality polygraphs, special compounds, plastic products, fibers, etc. for construction and industrial use, and the Plaintiff was merged with the NAC Co., Ltd. (hereinafter “the instant merger”). On October 5, 2000, the Plaintiff established the NAC Co., Ltd. (hereinafter “instant merger”). After completing the merger registration (hereinafter “instant merger registration”) on March 27, 1997, registered its trade name as “CY” (hereinafter “instant merger registration”). On the same day, the Plaintiff was dissolved as a producer with a limited liability company on October 5, 200.

B. At the time of the merger of this case, the U.S.E. owned 30/10 or more of the total shares of the Plaintiff Company and Korea Researchphone, and there was no loss carried forward of Korea Researchphone, which is an extinguished corporation, while the Plaintiff’s loss carried forward was KRW 17,060,242,483.

C. The Plaintiff, a corporation which continues to exist in the merger of this case, filed and paid corporate tax for the pertinent business year from the amount of 197 and 1998 to the above amount of income for each of the pertinent business years. However, the Defendant was a merger for the purpose of unfairly reducing the amount of corporate tax under the proviso of Article 8 of the former Corporate Tax Act (amended by Act No. 5581, Dec. 28, 1998; hereinafter the same shall apply) and for the purpose of 30 years of 7 years of 197 and 1998, 30 years of 4 years of 7 years of 40, 197 of 198, 197, 36 years of 194 of 20, 305 of 197, 36 years of 4 years of 196, 197, 30 years of 196, 36 years of 205, 1963 of 197.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Although there is no dispute as to the fact that the merger of this case constitutes the requirements of Article 8-3 (1) 1 and 2 of the Enforcement Decree of the Corporate Tax Act, the requirement of Article 8-3 (1) 3 of the same Act, i.e., the requirement of "the trade name of the merged corporation shall be changed within two years after the registration of the merger to the trade name of the merged corporation," it does not constitute the following reasons, the disposition

1) Since the registration of change in this case was submitted along with the registration of merger in this case and the application document was completed on March 27, 1997 with the same seal, it does not constitute “where the registration of change was completed within two years after the registration of merger.”

2) The Plaintiff’s previous trade name, which is the merged corporation, was registered as “edon Spophone corporation,” and the name of the merged corporation was registered as “Korea Researchphone corporation,” but it is obvious that the name of the merged corporation was changed as “edon corporation,” and the trade name of the merged corporation changed in corporate register was different from the trade name of the merged corporation. Thus, it does not constitute “the case where the trade name of the merged corporation was changed to the trade name of the merged corporation as the trade

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Issues of the instant case

Article 8 subparagraph 1 of the former Corporate Tax Act provides that the tax base of corporate tax on income for each business year of a domestic corporation shall be calculated by deducting losses incurred in the business year that began within five years before the beginning date of each business year within the scope of income for each business year, but the proviso of the same Article provides that the merged corporation shall not deduct losses carried forward of the merged corporation in the case of a merger deemed to be a merger for the purpose of unjustly reducing tax, which is prescribed by the Presidential Decree, and accordingly Article 8-3 (1) of the former Enforcement Decree

However, there is no dispute between the parties to the merger meeting the requirements of Article 8-3(1)1 and 2 of the former Enforcement Decree of the Corporate Tax Act, but there is a dispute as to whether the requirements of Article 8-3(1)3 of the former Enforcement Decree are satisfied, i.e., the requirements of subparagraph 3 of the same paragraph, namely, whether the name of the merged corporation should be changed into the trade name of the merged corporation within two years after the registration of merger, and whether the issue of this case constitutes “where the registration of change was made within two years after the registration of merger” and whether the merged corporation changed the trade name of the merged corporation to a trade name which is deemed similar or substantially identical to the trade name of the merged corporation constitutes “where the registration of change was

2) Principles in interpreting tax laws and regulations

Under the principle of no taxation without law, or the requirements for tax exemption or tax exemption, and the interpretation of tax laws is not allowed to be interpreted in accordance with the text of the law unless there are special circumstances (Supreme Court Decision 2003Du7392 Decided May 28, 2004). According to the principle of no taxation without law, the law or its delegation, which provides the requirements for taxation and the procedures for imposition and collection, must be clear and clear, and the rules of the law or its delegation, which provides the procedures for imposition and collection, should not be used in a clear concept and general clause. Therefore, in order to exclude the taxation authority's person and guarantee legal stability and predictability, it is necessary to clearly define the requirements for taxation without law, and if so, it is not possible to punish the principle of no taxation without law.

In light of the purpose of the principle of clarity of taxation requirements and the principle of strict interpretation, the requirement of “the trade name of the merged corporation shall be changed to the trade name of the merged corporation within two years after the registration of the merger” under Article 8-3(1)3 of the former Enforcement Decree of the Corporate Tax Act shall be interpreted.

3) Interpretation of Article 8-3(1)3 of the former Enforcement Decree of the Corporate Tax Act

A) First of all, Article 4 of the Framework Act on National Taxes provides that "within two years after the registration of merger" shall be calculated based on the Civil Act except as otherwise provided for in this Act or any other tax-related Act. Article 157 of the Civil Act provides that "when the period is determined by the day, week, month or year, the first day of the period shall not be included in the calculation." However, this provision does not apply where the period begins at midnight. However, there is no special provision on the starting day of the period under the Framework Act on National Taxes or the Corporate Tax Act, so it is reasonable to calculate the period within two years after the registration of merger as the first day under the main sentence of Article 8-3 (1) 3 of the Enforcement Decree of the Corporate Tax Act in order to calculate the "period within two years after the registration of merger" without including the date of the registration of merger as the first day of the day following the day following the day of the registration of merger, but Article 157 of the Civil Act provides that the period shall be calculated based on the premise that the starting date of the entire period, i.

However, although the registration of change in this case was made on the same day as the registration of merger in this case, the registration of change in this case was made on the premise of the registration of merger in this case (the purpose of the registration of change in trade name applied by the plaintiff is "registration of change due to merger"). Thus, if the registration of change in trade name applied by the plaintiff does not fall under the "after the registration of merger" in this case, it cannot be an obstacle to interpret that the registration of change in this case was made after the registration of merger (the receipt number of two registrations can not be the same). There is no reasonable reason to exclude the registration of change in trade name at the time of the registration of merger from the requirement of the limitation of deduction of losses carried forward even after the registration of merger was made within the time after the registration of change in this case (the registration was made within the time that it was made to reduce taxes unfairly and the requirement of limitation of deduction is more satisfied, it is reasonable to view that the registration of change in trade name does not fall under the "registration of change within two years after the registration of merger" under Article 8-3(1)3(2) of the former Enforcement Decree.

In this case, the plaintiff completed the registration of merger on March 27, 1997 and completed the registration of change of this case on that date, as seen earlier. Therefore, the registration of change of this case constitutes registration of change made within two years after the registration of merger, so the plaintiff's allegation in this part is without merit.

B) Next, interpreting Article 8-3 (1) 3 of the former Enforcement Decree of the Corporate Tax Act that "the trade name of the merged corporation shall be changed in the name of the merged corporation with the trade name of the extinguished corporation" refers to the change of the trade name identical to that of the extinguished corporation, is a natural literal interpretation. It is not allowed to extend the above legal text to interpret the interpretation that it includes the change of the trade name in substance on the basis of whether the actual meaning and value of the trade name in question are maintained continuously (the provision of Article 42 of the Commercial Act on the mutual use of the trade name claimed by the defendant is to recognize the liability for repayment to the third party's claims arising from the transferee's business in the course of the transfer of business for the protection of creditors where the transferee continues to use the transferor's trade name, and its purport is completely different from the above provision of the Enforcement Decree that requires the strict interpretation principle, so such legal principle cannot be invoked in this case

In particular, in light of Article 81(5)1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 19328, Feb. 9, 2006; Presidential Decree No. 19328, supra, Article 81(5)1 of the former Enforcement Decree of the Corporate Tax Act provides that the trade name of the merged corporation is changed in a manner that includes only the trade name of the merged corporation and any other trade name of the extinguished corporation among the names of the extinguished corporation, the same regulation as changing the trade name of the extinguished corporation shall be applied to the same trade name as that of the extinguished corporation, without such express provision, to extend the interpretation of the meaning

C) However, in a case where there are special circumstances that result in extremely unreasonable results in light of the principle of substantial taxation or the principle of fair taxation, which is the same guiding principle of our tax law system, it is required to interpret the principle of strict interpretation as a combined purpose rather than bound by the literal interpretation of the language and text. In a case where a deficit corporation merges with a black corporation into a company in order to reduce corporate tax by using the deficit brought forward of the deficit corporation, it may be considered that it goes against business ethics and goes against tax justice, and thus, it is necessary to regulate such acts.

Therefore, for the purpose of regulating this, the provisions of the Corporate Tax Act and the Enforcement Decree as seen earlier are denying the deduction of losses carried forward in the case of unfair reverse mergers as stipulated in the above provisions, and as a result, as a result of the enforcement of the above provisions, a variety of problems have been exposed in the business reality relationship, it continued to maintain the width and contents of the reverse mergers regulations through several amendments to the Acts and subordinate statutes for more rational and fair regulation, and even though there is no possibility of intentionally avoiding the regulatory requirements as stipulated in the above provisions by the corporate merger with a black corporation in order to reduce corporate tax burden, it is difficult to conclude that the principle that the surviving corporation after the merger is entitled to deduction of losses carried forward from its business income and the denial of deduction of losses carried forward is exceptionally applied under the provisions of the law. Therefore, in light of the fact that the plaintiff corporation at the time of the merger in this case appears to have carried out business activities with trust in such regulatory environment, it is difficult to conclude that the above strict interpretation principle as seen above is a special circumstance that significantly unreasonable result in light of the principle of substantial taxation or the principle of fair taxation.

Therefore, the plaintiff's assertion that the registered merged corporation's trade name is not the same as the trade name of the merged corporation is reasonable.

4) Sub-committee

Ultimately, the disposition of this case, which did not deduct the Plaintiff’s loss without deducting the Plaintiff’s loss brought forward under the proviso of Article 8 of the former Corporate Tax Act and each subparagraph of Article 8-3(1) of the former Enforcement Decree of the Corporate Tax Act, is unlawful. Thus, if the corporate tax for the business year 1997 and 198 is calculated by deducting the Plaintiff’s loss brought forward, the amount of corporate tax for the business year 1997 and 1998, as stated in the attached Form of the corporate tax calculation, shall be assessed without the amount of corporate tax for the business year 1997 imposed by the Defendant, and the corporate tax for the business year 7,717,812,081 won for the business year 198 shall be deemed to have no amount of tax, and only the amount of corporate tax for the business year 5,587,089,341 won shall be a legitimate amount of tax. Therefore

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Tae Tae-tae (Presiding Judge)