[1] In a case where the actual transaction price is confirmed after the period of the final return of capital gains tax final return expires, whether the decision on capital gains can be made (negative)

[2] Where the person liable for the payment of development charges and the transferor are different due to the transfer of land before the completion of the development project, the part of the development charges that the transferor may deduct from the transfer value

[3] The Constitutional Court's decision of inconsistency with Article 60 of the former Income Tax Act

[1] In filing a preliminary return on gains from transfer of assets or a final return on the tax base, if documentary evidence verifying the actual transaction value is submitted, gains from transfer shall be calculated based on the actual transfer and acquisition value. However, if there is no such report or there is no documentary evidence submitted despite such report, or if it is confirmed that only one of the acquisition value or transfer value submitted by documentary evidence is verified by such report, gains from transfer shall be determined based on the standard market price, and even if the actual transaction value is confirmed after the period for filing the final

[2] Where the status of a project implementer, etc. is succeeded due to the land transfer before completion of the development project and the person liable for the payment of the development charges and the transferor are different, the former owner’s portion of the development charges imposed at the time of completion of the project concerning the land price increase after the transfer shall not be considered as the development charges to be deducted from the transfer value due to the nature of the former owner, and therefore, only the amount of

[3] The Constitutional Court's ruling of inconsistency with the Constitution as to Article 60 of the former Income Tax Act (amended by Act No. 4803, Dec. 22, 1994) shall be deemed to allow provisional application of Article 60 of the former Income Tax Act as it is until the amended Act, which is unconstitutional, is enforced.

[1] Articles 23(4) (see current Article 96), 45(1) (see current Article 97(1)), and 170(4)3 (see current Article 166(4)3) of the former Income Tax Act (amended by Presidential Decree No. 14083, Dec. 31, 1993) / [2] Article 45(1) (see current Article 97(1)) of the former Income Tax Act (amended by Act No. 4661, Dec. 31, 1993); Article 94(2)3 (see current Article 166(4)3 (see current Article 166(4)3) of the former Income Tax Act (amended by Presidential Decree No. 14083, Dec. 31, 1993); Article 94(3) (1) (see current Article 97(4)) of the former Income Tax Act (amended by Presidential Decree No. 14083, Dec. 31, 1993) of the Income Tax Act);

[1] Supreme Court Decision 95Nu580 delivered on June 13, 1995 (Gong1995Ha, 2425) Supreme Court Decision 95Nu13807 delivered on May 10, 1996 (Gong1996Ha, 1922) Supreme Court Decision 95Nu8201 delivered on December 23, 1996 (Gong1997Sang, 549) / [2] Supreme Court en banc Decision 90Nu9360 Delivered on October 22, 1991 (Gong1991, 285) 91Nu7149 delivered on April 14, 1992 (Gong192, 19631) / [3] Constitutional Court Decision 90Nu971949 delivered on April 14, 1995; Supreme Court Decision 91Nu71979 delivered on April 31, 297

Plaintiff (Attorney Kim Jae-chul, Counsel for plaintiff-appellant)

Head of Mapo Tax Office

Seoul High Court Decision 95Gu31715 delivered on January 14, 1997

The part of the judgment below against the defendant is reversed, and that part of the case is remanded to the Seoul High Court. The plaintiff's appeal is dismissed and the costs of appeal are assessed against the plaintiff

1. Judgment on the Plaintiff’s grounds of appeal

A. The provisions of Articles 23(4) and 45(1)1 of the former Income Tax Act (amended by Act No. 4661, Dec. 31, 1993; hereinafter the same) and Article 170(4)3 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 14083, Dec. 31, 1993; hereinafter the same shall apply) shall be interpreted to recognize exceptions to the principle of substantial taxation by adopting the principle of taxation in determining transfer margin in case of transfer of assets. Thus, in the preliminary return of transfer margin or final return of tax base, if evidentiary documents confirming the actual transaction value are submitted, it shall be calculated based on the actual transfer and acquisition value; if there is no such report or if there is no documentary evidence, or if only one of the acquisition value or transfer value is confirmed by documentary evidence submitted, the transfer margin shall be determined based on the standard market value; and if the final return period is confirmed after the expiration of the period, it shall not be established by the court’s determination of transfer margin.

In the same purport, according to the documentary evidence submitted at the time of the final return on the tax base of the transfer of the land in this case, it is proper that the defendant's measures to calculate the transfer difference based on the standard market price are lawful, and there is no error in the misapprehension of legal principles as to the application of the standard market price as otherwise alleged in the grounds of appeal. The court's precedents cited in the grounds of appeal are related to the former Income Tax Act (amended by Act No. 3576 of Dec. 21, 1982) which has taken the principle of the actual market price, and it is not appropriate to

B. Article 45 (1) of the Income Tax Act, which provides for calculation of necessary expenses of capital gains, delegates the contents and scope of the capital expenditure and transfer expenses to the Presidential Decree. However, Article 45 (2) of the same Act provides that "facility expenses and improvement expenses" shall not apply to those cases where gains from transfer are calculated based on the actual transaction prices and where calculated based on the standard market price, and it does not distinguish the transfer gains from those cases where calculated based on the standard market price, and thus, Article 94 (5) of the Enforcement Decree of the same Act, which provides necessary expenses, provides that the necessary expenses shall be restricted without any ground delegated by the Income Tax Act, and shall be deemed null and void as it violates the Income Tax Act with respect to equipment expenses and improvement expenses, barring any other circumstances (see Supreme Court en banc Decision 90Nu9360, Oct. 22, 191). However, as otherwise alleged in the grounds of appeal, if a person succeeds to the status of a project operator due to the transfer of land from the time of completion of the development project until the development project is completed, the transfer price shall be deducted.

According to the reasoning of the judgment below, in calculating the development charges for the land of this case, 186,911,868 won was deducted from the starting point of imposition to the time of transfer among the transfer income tax amount already paid in relation to the transfer of the land of this case as development costs. Thus, the development charges for which the plaintiff seeks deduction as necessary expenses for the transfer income of the land of this case shall be deemed to be related to the increase in land price after the transfer of land, and therefore, the development charges shall not be deemed to constitute facility costs and improvement costs, which significantly increases the objective value of the land at the time of the transfer of the land of this case.

The judgment of the court below to the same purport is correct, and there is no error in the misapprehension of legal principles as to the necessary expenses of capital gains tax, as otherwise alleged in the grounds of appeal. We cannot accept the grounds of appeal

C. The Constitutional Court rendered a ruling of inconsistency with the Constitution as to Article 60 of the former Income Tax Act (amended by Act No. 3098, Dec. 5, 1978; Act No. 4803, Dec. 22, 1994; Act No. 4803, Dec. 22, 1994) in a consolidation case, including 91Hun-Ba1, Nov. 30, 1995, should be deemed as allowing the provisional application of Article 60 of the former Income Tax Act until the unconstitutionality is enforced (see Supreme Court Decision 96Nu15602, Mar. 28, 1997). Under the premise of the contrary opinion, the acquisition value of the land of this case cannot be calculated based on the standard market price by the Constitutional Court’s ruling of inconsistency with the Constitution, and the grounds for appeal on this issue cannot be accepted. The grounds for appeal as to this point cannot be accepted.

2. Judgment on the Defendant’s grounds of appeal

According to the reasoning of the judgment of the court below, the court below determined that the defendant's decision of inconsistency with the Constitution as to Article 60 of the former Income Tax Act and Article 115 of the Enforcement Decree of the same Act and Article 115 of the Addenda Paragraph (3) of the same Act based on the above provision cannot be applied since the plaintiff's land acquired on January 15, 1985 was transferred on October 2, 1992 and the final return on the tax base of May 31, 1993 that the contents of the sales contract submitted as documentary evidence for the acquisition value are different from the facts. Thus, the defendant's decision of inconsistency with the Constitution as to Article 60 of the former Income Tax Act and Article 115 of the Enforcement Decree of the same Act and Article 3 of the Addenda of the same Act should be made unlawful by the Presidential Decree as the revised standard market price under Article 5031 of the Income Tax Act as of December 29, 195 and the revised amount exceeding the standard market price as of December 13, 196, 1994.

However, as seen earlier, the purport of the Constitutional Court's ruling of inconsistency with the Constitution should be deemed to allow provisional application of Article 60 of the former Income Tax Act until the amendment is implemented. However, the court below erred by misapprehending the legal principles as to the calculation of the standard market price, and thereby affecting the conclusion of the judgment. Therefore, the grounds of appeal pointing this out are with merit.

3. Therefore, the part of the judgment of the court below against the defendant is reversed and that part of the case is remanded to the court below for a new trial and determination. The plaintiff's appeal is dismissed and the costs of appeal against this part are assessed against the losing party. It is so decided as per Disposition.

Justices Lee Don-hee (Presiding Justice)