Cho High Court Decision 2010Da3598 (Law No. 15, 2011)

Where a building acquired is removed and a new building is constructed on the site, the input tax amount of the building shall not be deducted.

In the case of acquiring land on which a building is located and removing the building and using only the land, which is subject to the non-deduction of the input tax amount, it includes not only the case of using the land as a site for a new building but also the case of using

Article 17 of the Value-Added Tax Act and Article 60 of the Enforcement Decree thereof.

2011Revocation of disposition of imposing value-added tax, etc.

XX Co., Ltd

Head of North Busan District Tax Office

September 20, 2012

October 25, 2012

1. All of the plaintiff's claims are dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s imposition of value-added tax for the second period of August 5, 2010 against the Plaintiff, KRW 000, value-added tax for the second period of 2007, KRW 000, value-added tax for the first period of 2008, the amount exceeding KRW 000, out of the imposition of corporate tax for the year 2007, August 6, 2010, and the amount exceeding KRW 00,000, out of the imposition of corporate tax for the year 2007, shall be revoked.

1. Details of the disposition;

A. From September 10, 2007 to December 3, 2007, the Plaintiff received a purchase tax invoice of KRW 000,000 in total with respect to the removal of above-mentioned ground buildings and construction of factory buildings (hereinafter “construction of this case”) from the Muto-dong of Busan City from the Muto-dong, 279-3, 279-21, 269-14, 269-15, and 269-15, from the Muto-dong of Busan City. The Plaintiff deducted the above input tax amount of KRW 000 from the above input tax amount to the second scheduled and the same value-added tax for the year 2007.

B. On May 28, 2008, the Plaintiff purchased 2,241.65 square meters of the land factory building 2,241.65 square meters in Busan Dong-dong 389-3 (hereinafter “instant building”) from the head of Dong on 2008, and deducted 000 won of the said purchase tax amount, and filed a final value-added tax return for the first period of 2008.

C. On January 28, 2010, the Plaintiff submitted a revised tax base return to the Defendant and voluntarily paid the revised value-added tax on the following grounds: (a) amounting to KRW 000 for the second period of 2007, KRW 000 for the second period of 2007, and KRW 000 for the second period of 2007; and (b) amounting to the total amount of KRW 000 for the processing purchase.

D. The Defendant conducted an integrated corporate tax investigation against the Plaintiff. As a result, the Defendant imposed each input tax amount on the Plaintiff on August 5, 2010 on the following grounds: (a) each of the above input tax amount was not deducted on the ground that the Plaintiff’s acquisition of the instant building constitutes a case where the building was removed and the land was used; (b) on August 5, 2010, each of the said input tax amount was imposed on the Plaintiff KRW 00,000, the value-added tax for the second half year of 2007, the value-added tax for the first year of 2008, and the corporate tax for the business year of 207, which was August 6, 2010, as bonus for the Plaintiff on August 8, 2010. In addition, the Defendant notified the Plaintiff that the income amount for the second year of 207 has changed to 00,000 won as bonus.

E. On September 15, 2011, the Tax Tribunal filed an appeal on November 8, 201, against each of the above dispositions and notice of change in the amount of income. The Tribunal rendered a decision on the imposition of value-added tax of KRW 000 for the second period of value-added tax of KRW 000 for the second year of 2008, corporate tax of KRW 000 for the business year of 2007, and the notice of change in the amount of income for the business year of 2007 to the Plaintiff, respectively, to re-examine the building area of the instant construction, thereby correcting the tax base and tax amount according to the results. The remaining claims are dismissed.

F. In accordance with the above decision, the Defendant re-examineed the building area of the instant construction, and recognized the construction cost by calculating the construction cost in XX Dong as KRW 000 per square meter, and the construction cost in XX Dong as KRW 000 per square meter. Accordingly, the Defendant, who was deemed to have been processed, additionally recognized KRW 00 out of the total planned and finalized amount of KRW 200 in 207, which was deemed to have been processed, as normal purchase.

Considering 00 won as a processing purchase, the Defendant’s imposition of the value-added tax for the second period of 2007 was KRW 000,000, and the corporate tax for the business year of 2007 was 000,000, respectively (hereinafter “instant disposition of imposition of value-added tax and corporate tax”). The Defendant’s notice of change in income amount for the year 2007, which was notified to the Plaintiff, was corrected to KRW 000,00, and notified (hereinafter “the notice of change in income amount”).

[Ground of Recognition] Facts without dispute, Gap evidence 1-1, Eul evidence 1-2, Eul evidence 1-5, Eul evidence 2-1 through 4, Eul evidence 4-1, 2-5, Eul evidence 5-1 through 4, Eul evidence 6, Eul evidence 7-1, 2, 3, Eul evidence 8-1, 2, Eul evidence 8-1, 14, and Eul evidence 14, the purport of the previous argument

2. Whether each of the dispositions in this case and the notice of change in income amount is legitimate.

A. The plaintiff's assertion

1) The Plaintiff’s tax invoice received from XX case is substantially traded except for the amount voluntarily reported by the Plaintiff. Therefore, deeming that the Plaintiff processed and purchased KRW 000, the Defendant’s imposition of value-added tax for the second period in 2007, which was imposed on the Plaintiff without deducting the input tax amount for the said portion, and imposition of corporate tax for the business year 2007 is unlawful.

2) The Plaintiff purchased the instant building for the purpose of selling it to another person, and it was inevitable for the purchaser to appear and inevitably removed the instant building and constructed a new factory building, and it was not purchased for the purpose of constructing a new building after the said removal. Therefore, the Defendant’s imposition of value-added tax for the first period of 2008, which was imposed on the Plaintiff without deducting the input tax amount by deeming the instant building as the land-related input tax amount under Article 17(2)4 of the Value-Adde

3) As above, each of the instant dispositions is unlawful, and thus, the Defendant’s notice of change in the income amount of this case against the Plaintiff is also unlawful.

B. Relevant statutes

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

C. Determination

1) Determination on the first argument

The following circumstances, i.e., evidence Nos. 11, 13, and 14, comprehensively considering the overall purport of the pleadings, i.e., (i) HongB, during the National Tax Service’s investigation process, stated that the HongB, among the instant construction works, the amount of each construction cost of 00 won per usual average, and XXB would have been borne by each construction cost of 00 won; (ii) HongB, in the recording recording recording between the Plaintiff and the above HongB, was the construction cost of 00 won to 00 won to 00 won and stated that the construction cost of 00 won was legitimate between 00 won and 00 won; and (iii) the Plaintiff filed a false statement on the purchase cost of 00 won to the Plaintiff, without considering the Plaintiff’s purchase cost of 20 years from 00 to 00 won; and (iv) the Plaintiff’s statement on the imposition of 1B from 20 years from 200 to 20 years from 20 years from .

2) Judgment on the second argument

As a result of the fact-finding inquiry conducted on June 27, 2012 to the head of the Busan Metropolitan City Office of 16, 17, Eul evidence Nos. 18, 19-1, 2, and Eul evidence Nos. 20, respectively, and the fact-finding conducted on June 27, 2012, the following facts can be acknowledged in full view of the whole purport of the pleadings as a result of the fact-finding inquiry conducted on the head of the Busan Metropolitan City Office of Government BPR support in this Court, and the testimony of Eul evidence No. 12 and the testimony of the witness Ha

① The Plaintiff purchased the instant building on May 28, 2008, and thereafter, on September 9, 2008, 2008, the Plaintiff filed a building report for the construction of a new factory building with the office of Seo-gu Busan Metropolitan City on September 9, 2008, removed the instant building on October 9, 2008, and began construction of a new factory building on the instant building site on October 10, 2008 following the following date. On March 19, 2009, the Plaintiff completed a new factory on the instant factory site, and sold the said factory to the ParkCC on July 10, 2009.

② Although the Plaintiff subscribed to fire insurance as to the instant building, it appears that it would normally be due to the requisite demand for fire insurance to obtain a loan from a bank as a collateral. Since the insurance coverage period was short from August 29, 2008 to October 29, 2008, it is difficult to view that the instant building was acquired for the purpose of continuously using or selling the said building solely based on the fact that it was purchased.

③ The Plaintiff purchased the instant building and received the instant loan from the Busan Bank as a joint collateral. The loan period is less than four months, and the term of the original fire insurance is less than two months, and it is difficult to deem that the Plaintiff continued to use or sell the instant building to have purchased the instant building.

In light of the above facts, not only cases where land is used as a site but also cases where only the land is used as a site for a new building (see, e.g., Supreme Court Decision 2007Du2524, Feb. 1, 2008) but also cases where the Plaintiff demolished the instant building and newly constructed a new factory on the said site constitutes a case where the Plaintiff acquired the land where the building is located and demolished the building and only the land is used.

Therefore, pursuant to Article 17(2)4 of the former Value-Added Tax Act (amended by Act No. 9268 of Dec. 26, 2008) and Article 60(6)2 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 21304 of Feb. 4, 2009), the first imposition of value-added tax for the year 2008, where the Defendant did not deduct the Plaintiff’s input tax amount related to the acquisition of the building of this case from the output tax amount, is lawful, and the Plaintiff’s second argument cannot be accepted.

3) Judgment on the third argument

Since each disposition of this case is lawful as seen earlier, the disposition to change the amount of income in accordance with the relevant provisions is legitimate by reflecting the purchase tax invoice portion entered differently from the facts and the value added tax portion on the building of this case. The disposition to change the amount of income is lawful, and the plaintiff's third argument is not acceptable.

3. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.