Jeonju World Development Co., Ltd. (Attorney Il-il, Counsel for the plaintiff-appellant)

The Head of the North Korean District Tax Office (Law Firm Cheong, Attorney Park Jae-ki, Counsel for the plaintiff-appellant)

July 27, 2007

Jeonju District Court Decision 2006Guhap696 Decided January 11, 2007

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

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

1. Purport of claim

The Defendant’s imposition of value-added tax of KRW 1,848,90 for the second term portion in 2003 against the Plaintiff on April 12, 2005, and KRW 29,194,370 for the first term portion in 2004, and value-added tax of KRW 166,289,590 for the second term portion in the same year shall be revoked.

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. On July 18, 2003, the Plaintiff, a juristic person operating the World Cup consortium (hereinafter “the instant golf club”), obtained a loan from the Jeonju-si, Seoul Special Metropolitan City, to use approximately KRW 163,943 square meters of land (hereinafter “instant land”) located in the Jeonjin-gu, Seoul Special Metropolitan City and approximately 163,943 square meters of land owned by the Jeonju-si, Seoul Special Metropolitan City (hereinafter “the instant land”), but entered into a loan agreement with Jeonju-si, Seoul Special Metropolitan City for the purpose of creating a public golf course and using it for 20 years from April 1, 2005 to March 31, 2025.

B. Upon reporting value-added tax to the Defendant, the Plaintiff declared each of the input tax amount of KRW 2,573,152,00 as the input tax amount deducted from the Plaintiff’s output tax amount for the second period of 2003, the second period of 31,447,00 won, and KRW 734,704,00 in the first period of 204, and KRW 2,573,152,00 in the second period of 204.

C. However, on April 12, 2005, the Defendant: (a) deemed that the Plaintiff’s input tax amount as stated below, among the above input tax amount reported, constituted KRW 15,000,00, KRW 247,830,000, and KRW 1,481,025, February 1, 2004, and KRW 1,481,025, and each of the above input tax amount as stipulated in Article 17(2)4 of the Value-Added Tax Act and Article 60(6) of the Enforcement Decree of the same Act, “the tax amount related to capital expenditures for the creation, etc. of land” subject to non-deduction of input tax amount; and (b) deemed that the Plaintiff’s input tax amount was not deducted from the output tax amount; and (c) on January 12, 2005, imposed the non-taxation tax amount as stated in the following items including the additional tax amount on KRW 1,848,90,00 for value-added tax for January 29, 2004.

Costs of creating land-related creation

(unit:,000 won)

본문내 포함된 표 상호 공사내용 공급가액 2003. 2.기 2004. 1.기 2004. 2기 합계 소외 1 주식회사 토목공사 ？ ？ 500,000 500,160 소외 2 주식회사 토목공사 ？ ？ 378,567 378,567 소외 3 주식회사 정지작업 ？ ？ 363,636 363,636 소외 4 주식회사 토사매입 ？ 85,522 150,772 236,294 소외 5 주식회사 폐기물처리 ？ 97,100 ？ 97,100 소외 6 주식회사 교통영향평가 ？ 18,000 32,000 50,000 소외 7 주식회사 토사매입 ？ 19,272 21,217 40,489 소외 8 주식회사 토사매입 ？ 25,956 ？ 25,956 소외 9 주식회사 코스설계 ？ ？ 25,000 25,000 소외 10 주식회사 도시계획변경 15,000 ？ ？ 15,000 소외 11 주식회사 도자작업 ？ 1,980 3,474 5,454 소외 12 주식회사 토사매입 ？ ？ 6,360 6,360 합 계 15,160 247,830 1,481,026 1,744,016

D. On May 18, 2005, the Plaintiff filed a request for review with the National Tax Tribunal on May 18, 2005, but was dismissed on January 19, 2006 and filed the instant lawsuit on April 17, 2006.

【Ground of recognition” without any dispute, Gap evidence 1, Gap evidence 2-1 through 3, Gap evidence 3-5, Eul evidence 1-1 through 3, the purport of whole pleadings and arguments

2. The plaintiff's assertion

The plaintiff asserts to the effect that the disposition of this case is unlawful as follows.

Upon the expiration of the lease period for the instant land, the Plaintiff entered into an agreement with the Jeonju City to contribute all the golf course facilities installed on the instant land to the Jeonju City. The act of increasing the value of the instant land through the creation of the instant land constitutes the act of supplying the Plaintiff’s services in relation to the Jeonju City. The Plaintiff’s provision of services to the Jeonju City constitutes the Plaintiff’s business-related cost, and eventually, the non-deductible input tax amount constitutes the input tax amount to be deducted from the

3. Judgment on the plaintiff's assertion

As seen earlier, it is difficult to conclude that the creation of the instant land constitutes the supply of services to the Plaintiff on the entire owner of the instant land in the relationship between the Plaintiff and the former owner. However, as seen earlier, if the Plaintiff terminates a loan agreement with the former owner on the instant land, it is difficult to deem that the instant land constitutes the supply of services to the Plaintiff on the entire owner of the instant golf course (the subject matter of donation to the former owner is the facilities established in the instant golf course, and the capital expenses for the instant land are not incurred). Therefore, the Plaintiff’s assertion is without merit (On the other hand, the first instance court construed that Article 17(2)4 of the Value-Added Tax Act provides that input tax deduction for the Plaintiff, who is not the owner of the relevant land, should be applied only to the owner of the relevant land, and that the imposition disposition of the instant land, which was made against the owner of the said land, should be unlawful in light of the basic principles of the Enforcement Decree of the Value-Added Tax Act’s imposition of input tax on the said land (referring to the capital expenditure for the land).

4. Conclusion

Therefore, since the defendant's disposition of imposition of this case is justified, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is unfair as it is concluded differently, and it is so decided as per Disposition.

Judges Donsung (Presiding Judge) Lee Ho-ho