[1] Whether Article 2 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises is invalid beyond the scope of delegation by mother law (negative)

[2] The case affirming the judgment below which held that even if a corporation that runs a comprehensive construction business of a building employing 387.2 full-time employee should make a determination only in accordance with the standard under Article 2 of the former Framework Act on Small and Medium Enterprises based on the determination of whether it constitutes a small and medium enterprise, it is not allowed to determine whether it constitutes a small and medium enterprise beyond the above legal standard, even though Article 2 of the former Framework Act on Small and Medium Enterprises provides that a corporation whose main business is a construction business is a small and medium enterprise without considering its capital and sales

[3] Legal nature of penalty tax and its requirements for imposing penalty tax

[1] Article 2 (1) of the former Framework Act on Small and Medium Enterprises (amended by Act No. 8360 of Apr. 11, 2007), Article 2 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 17026 of Dec. 27, 2000) / [2] Article 104 (1) 4 (b) of the former Income Tax Act (amended by Act No. 6557 of Dec. 31, 2001) (see current Article 104 (1) 11 (b) of the former Income Tax Act), Article 167-2 (1) (see current Article 167-2 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17825 of Dec. 30, 202), Article 2 of the former Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 17026 of Apr. 11, 2007)

[3] Supreme Court Decision 95Nu14602 delivered on May 16, 1997 (Gong1997Sang, 1784) Supreme Court Decision 2006Du11750 Delivered on October 23, 2008 (Gong2008Ha, 1612)

Plaintiff (Law Firm Barun, Attorneys Park Tae-tae et al., Counsel for the plaintiff-appellant)

Director of the District Office

Seoul High Court Decision 2009Nu18105 decided December 1, 2009

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1 and 2

Article 104 (1) 4 (b) of the former Income Tax Act (amended by Act No. 6557 of Dec. 31, 2001; hereinafter the same) provides that the transfer income tax rate for stocks, etc. of a small or medium enterprise as prescribed by the Presidential Decree shall be 10/100 of the transfer income tax base, and Article 167-2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17825 of Dec. 30, 2002; hereinafter the same) provides that the above small or medium enterprise refers to an enterprise under Article 2 of the Framework Act on Small and Medium Enterprises as of the end of the business year immediately preceding the business year in which the transfer date of stocks, etc.

Meanwhile, Article 2(1) of the former Framework Act on Small and Medium Enterprises (amended by Act No. 8360 of Apr. 11, 2007; hereinafter the same) provides that "small and medium enterprises subject to the policy for fostering small and medium enterprises shall be those whose scale does not meet the standards prescribed by the Presidential Decree in consideration of their characteristics of business type and the number of regular workers, size of assets, sales, etc., and whose substantial independence of their ownership and management falls under the standards prescribed by the Presidential Decree," and Article 2 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 17026 of Dec. 27, 2000; hereinafter the same) provides that "small and medium enterprises under Article 2(1) of the former Framework Act on Small and Medium Enterprises (amended by Act No. 8360 of Apr. 11, 200; hereinafter the same shall apply) shall be those whose main business type falls short of the standards prescribed in [Attachment 1]. 4].

In addition, according to the Korean Standard Industrial Classification No. 2000-1 ( January 7, 2000), construction businesses falling under the large classification among the Korean Standard Industrial Classification includes building construction businesses falling under the mid-classification. Here, “building construction business” means industrial activities for constructing, enlarging, reconstructing, and reconstructing a building by a contractor or a self-managed constructor, and includes activities for constructing a prefabricated-type building.

Article 2(1) of the former Framework Act on Small and Medium Enterprises only delegates the Presidential Decree to determine the standards for whether small and medium enterprises are small and medium enterprises taking into account the characteristics of each type of business and the number of regular workers, the size of assets, and the amount of sales. Article 2 [Attachment 1 and 2] of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises stipulates the standards for total assets for manufacturing business, etc. in consideration of the characteristics of each type of business, and only the standards for the number of regular workers for construction business under the determination that the standards for total assets are not satisfied, which can be deemed to take into account the characteristics of construction business. In light of the above, Article 2 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises cannot be deemed as

According to the reasoning of the judgment below, the court below determined that it is not allowed to determine whether a small or medium enterprise constitutes a small or medium enterprise beyond the above legal standards, even if Article 2 of the former Framework Act on Small and Medium Enterprises is somewhat inappropriate in determining whether it constitutes a small or medium enterprise whose main business is construction business under Article 2 of the former Framework Act on Small and Medium Enterprises in accordance with the principle of strict interpretation of tax-related Acts and subordinate statutes, and it is not allowed to determine whether it is a small or medium enterprise beyond the above legal standards, in determining whether it is a small or medium enterprise that is a small or medium enterprise whose main business is construction business under Article 2 of the former Framework Act on Small and Medium Enterprises, without considering its capital or sales, if it is somewhat inappropriate to determine whether it is a small or medium enterprise that is a small or medium enterprise that is a small or medium enterprise that is engaged in the business as a main business without considering its capital or sales.

In light of the above provisions and the above legal principles and records, the circumstance that the vice governor reported and paid as a general enterprise at the time of reporting corporate tax since 1995 or that there was no reduction or exemption from a small or medium enterprise does not affect in determining whether the vice governor is a small or medium enterprise, and there is no ground to regard the standard of judgment of the former Restriction of Special Taxation Act (amended by Act No. 6297 of Dec. 29, 2000) which provides special taxation for small or medium enterprises at a tax policy level as applicable to the former Income Tax Act, and there is no ground to regard that the standard of judgment of the former Restriction of Special Taxation Act (amended by Act No. 6297 of Dec. 29, 200) which provides that "if the sales amount executed from January 1, 200, exceeds KRW 100,000, it shall not be deemed a small or medium enterprise." The above fact-finding and judgment of the court below is justified, and there is no violation of the rules of evidence as alleged in the grounds for appeal.

2. Regarding ground of appeal No. 3

Under the tax law, in cases where a taxpayer violates various obligations, such as a return and tax payment, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, the taxpayer’s intention and negligence are not considered as administrative sanctions imposed as prescribed by the individual tax law. Provided, That in cases where a taxpayer is not negligent in performing his/her duties and there is a justifiable reason not to impose taxes (see Supreme Court Decisions 95Nu14602, May 16, 1997; 2006Du11750, Oct. 23, 2008, etc.).

According to the reasoning of the judgment below, the court below acknowledged the facts as stated in its holding. The transfer of the shares of this case was done on December 27, 2001, and all of the disposition of this case after the defendant's initial disposition and its cancellation were subject to transfer of the above shares. The plaintiff faithfully fulfilled his tax liability within the payment period specified in each above disposition. The defendant, on October 4, 2005, deemed January 9, 2002 as the transfer date of the shares of this case as the date of the original disposition of this case for the year 202 and decided to dispose of the transfer income tax newly calculated as of October 20, 206, and the National Tax Tribunal determined that the above disposition of this case had been made separately from the original disposition of this case for the period of 2001 to the original disposition of this case for which the plaintiff had failed to pay the refund money of this case for 10 percent after considering the above disposition of this case as the year 201 to the original disposition of this case.

In light of the above legal principles and records, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the imposition of penalty tax, as otherwise alleged in the ground of appeal.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Min Il-young (Presiding Justice)