Korean Western Development Co., Ltd.

Korea Telecommunication Co., Ltd. (Law Firm Daegu General Law Office, Attorney Park Jin-jin, Counsel for the defendant-appellant)

Cheongong-gun

Daegu District Court Decision 2010Guhap3215 Decided July 6, 2011

November 1, 2011

1. Revocation of a judgment of the first instance;

2. The Defendant’s imposition of acquisition tax of KRW 307,981,290 against the Plaintiff on July 10, 2009 and special rural development tax of KRW 22,562,720 is revoked.

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

The same shall apply to the order.

1. The details of the disposition (cite the judgment of the court of first instance);

This Court's reasoning is the same as the reasoning of the judgment of the court of first instance. Thus, this Court's reasoning is accepted by Article 8 (2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

The instant tunnel does not constitute a building subject to acquisition tax under subparagraphs 4 and 10 of Article 104 of the former Local Tax Act (amended by Act No. 8974 of March 21, 2008; hereinafter “former Local Tax Act”) or a building or facility attached to a building similar thereto, and thus, it does not constitute a legal basis for imposing acquisition tax on the instant tunnel. Thus, the instant disposition is unlawful.

(2) The defendant's assertion

Among those subject to acquisition tax under subparagraphs 4 and 10 of Article 104 of the former Local Tax Act, the tunnels in this case fall under “power facilities with at least 20 kilowatts” under Article 76 subparag. 2 of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 22395, Sept. 20, 2010; hereinafter “former Enforcement Decree of the Local Tax Act”) or fall under “water supply and drainage facilities installed underground” under Article 75-2 subparag. 5 of the former Enforcement Decree of the Local Tax Act, or (3) fall under buildings similar to buildings under Article 2(1)2 of the former Building Act (wholly amended by Act No. 8934, Mar. 21, 2008; hereinafter “former Building Act”) or are subject to taxation of acquisition tax.

B. Relevant statutes

Attached Form "Related Acts and subordinate statutes" shall be as stated.

C. Determination

(1) Whether the tunnel of this case constitutes power generation facilities with a capacity of at least 20 kilowatts under Article 76 subparag. 2 of the former Enforcement Decree of the Local Tax Act

(A) According to Articles 105(1), 104 subparag. 8 and 10 of the former Local Tax Act, and Article 76 subparag. 2 of the former Enforcement Decree of the Local Tax Act, acquisition tax shall be imposed in the event of repair, such as installation or repair of at least one type of facility prescribed by the Presidential Decree, among facilities attached to a building, and facilities prescribed by the Presidential Decree are prescribed as power generating facilities of at least 20 kilowatts.

(B) In the event that power generation facilities are installed additionally in a major building for the purpose of maintaining and managing the main building and increasing the utility value of the main building subject to acquisition tax, they shall be deemed attached to the building in question and shall be deemed subject to taxation. In constructing a new building, the foregoing power generation facilities shall not be deemed installed along with the above power generation facilities or installed power generation facilities subject to the sale of power, which contribute to the production of products.

(C) In the instant case, the tunnel of this case is installed concurrently at the time of constructing a water supply plant that produces and sells electricity, and thus, it is difficult to deem that the tunnel of this case is a power plant with electricity generation capacity exceeding 20 kilowatts as stipulated

(2) Whether the instant tunnel constitutes water supply and drainage facilities under Article 75-2 subparag. 5 of the former Enforcement Decree of the Local Tax Act

(A) According to Articles 105(1) and 104 subparag. 4 of the former Local Tax Act, and Article 75-2 subparag. 5 of the former Enforcement Decree of the Local Tax Act, among buildings subject to acquisition tax, there are water supply and drainage facilities fixed on land, or installed on underground or other structures, and the scope of water supply and drainage facilities prescribed by Presidential Decree has water pipes (including connecting facilities), water supply and drainage facilities, and cover facilities. In such a case, water supply and drainage facilities ought to be deemed facilities that perform water supply and drainage functions by taking into account the structure, form, function, etc.

(B) In the instant case, the instant tunnel is used in the entry for the maintenance and repair of power generation facilities, or in the course of the blocking the water pressure of the flood control channel, is used as a means of transportation in a similar situation, or is used as an electric cable with a high voltage cable installed, and thus cannot be deemed as a water supply and drainage facility, and there is no data to deem that it was in line with the water supply and drainage facility.

(3) Whether it is a building similar to a building under Article 2(1)2 of the former Building Act

(A) According to Article 104 Subparag. 4 of the former Local Tax Act, buildings subject to acquisition tax include buildings similar to buildings under Article 2(1)2 of the Building Act. According to Article 2(1)2 of the former Building Act, buildings have a roof and columns or walls among structures settled on land, and offices, performance halls, shops, garages, warehouses, and other structures installed on underground or high-priced structures, and there are no Enforcement Decree thereof.

(B) Here, a building similar to a building under the Building Act does not meet all the requirements stipulated under the Building Act, but it means a structure used for the same purpose as the building in terms of functions and structural aspects, which has the roof and columns or walls.

(C) In the instant case, the instant tunnel cannot be deemed as having a roof and ground-bed or wall, and it is difficult to view it as a building similar to a building under the former Building Act, since it is installed underground and used as a passage, water pressure absorption function, or electric wire, and it is not used for the purpose of an office, a performance hall, a shop, a shop, a garage, or a warehouse.

(4) Whether it constitutes a building under the Building Act or a facility attached thereto

(A) According to Article 256 of the Civil Act, the owner of a real estate acquires the ownership of an article attached to the real estate, and according to Article 105(4) of the former Local Tax Act, with respect to the construction of a building, which constitutes utility value of the building by combining the parts belonging to manipulation and other accessory facilities among the buildings in question with the main structure of the building, even if a person other than the acquisitor of the main structure actually installed the building, the acquirer of the main structure shall be deemed to have acquired it together

(B) The above provisions merely stipulate an owner or a person liable to pay acquisition tax in the case of a part belonging to an article attached to a real estate or a building, which is integrated with a major structure of a building, and it is difficult to view that the above provisions include an article attached to a real estate or a facility other than a building or an accessory facility under Articles 104 subparag. 4 and 10 of the former Local Tax Act, and Articles 75-2 and 76 of the former Enforcement Decree of the Local Tax Act as an object of taxation of acquisition tax.

(B) In the instant case, the instant tunnel cannot be deemed as a building, water supply and drainage facility, or power generation facility with at least 20 kilowatt under Article 104 subparag. 4 and subparag. 10 of the former Local Tax Act, and Articles 75-2 and 76 of the former Enforcement Decree of the Local Tax Act, and there are no other materials to regard the instant tunnel as another building or auxiliary facility under the said Article. Thus, the instant tunnel cannot be deemed as being subject to acquisition tax due to its conform to the underground power plant, which is a building.

(5) Sub-decisions

Therefore, the tunnel of this case cannot be seen as a building or a facility attached to a building under Articles 104 subparag. 4 and 10 of the former Local Tax Act, which is subject to acquisition tax, and thus, it is difficult to view the tunnel of this case as a building or a facility attached to a building. Accordingly, the dispositions of this case

3. Conclusion

The plaintiff's claim of this case is accepted on the grounds of its reasoning, and the judgment of the court of first instance is unfair on the grounds of its conclusion, and thus, it is decided to cancel this and accept the plaintiff

[Attachment Form 5]

Judges Kim Chang-sung (Presiding Judge) Kim Jong-sung free of charge