Trisa Co., Ltd. (Law Firm Squa, Attorneys Kim Tae-tae et al., Counsel for the plaintiff-appellant)

Seoul Regional Tax Office

Head of the District Tax Office

June 17, 2015

Seoul Administrative Court Decision 2013Guhap58627 decided July 18, 2014

1. Each appeal by the Plaintiff and the Defendant’s chief of the tax office is dismissed.

2. Of the costs of appeal by the Plaintiff, the costs of appeal by the Plaintiff and the costs of appeal by the director of the regional tax office are borne by the said Defendant.

1. Purport of claim

A. On January 16, 2012, the director of the Seoul Regional Tax Office issued a notice of the change of income amount of 26,035,334,768 won against the Plaintiff and the notice of the change of income amount of 185,363,984 won for the year 2009 shall be revoked.

B. On January 16, 2012, the head of the regional tax office’s disposition of collecting withholding tax amounting to KRW 1,372,535,720 from the Plaintiff for the year 2008 and disposition of imposing corporate tax amounting to KRW 99,820,780 from the business year 2009 is revoked.

2. Purport of appeal

A. The plaintiff

Of the judgment of the first instance court, the part against the defendant director of the Seoul Regional Tax Office is revoked. On January 16, 2012, the notification by the director of the Seoul Regional Tax Office of the change of the income amount of 26,035,334,768 won, which was made against the plaintiff on January 16, 2008, and the notification of the change of the income amount of 185,363,984 won, which

B. The director of the regional tax office

The part of the judgment of the court of first instance against the defendant is revoked, and the plaintiff's claim against the above defendant is dismissed.

1. Partial citement of judgment of the first instance;

The reasons for this court's ruling are as follows: Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act are as follows, except that the corresponding part of the judgment of the court of first instance is dismissed as provided in paragraph (2).

2. Parts to be dried;

○ Under the title “(5)(5)(3)(5)(3)(3)(5)(10), the following shall be added.

Article 8(1)8(b) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009; hereinafter “Enforcement Decree”) applies to cases where the existing shareholders have forfeited stocks as a consequence of the waiver of the preemptive right, and where they have acquired new stocks at a price higher than the market price. Nonparty 1 or Nonparty 3 did not waive the preemptive right to new stocks, and the forfeited stocks did not occur. Nonparty 1 or Nonparty 3 did not have renounced the preemptive right to new stocks, and the Hong Kong corporation, Hong Kong corporation, Ltd. (hereinafter “Dmrea Investment Limited”) and the Svivel Investment Limited (hereinafter “HS”) acquired stocks through a direct allocation from the Plaintiff pursuant to Article 418(2) of the Commercial Act. Thus, the instant disposition on the ground of the issuance of new stocks is unlawful.

○ The 10th 19th 10th am the “2012No13705” of the 19th am the “2012Do13705.”

○ Each "2012." in the 17th 17th 10th 11th am the "2013."

○ In the first instance court’s 17 pages 17-18 of the 17th instance court’s decision, the following is added to paragraph 6 of the 19th court’s decision, and the 19th court’s 19th “(6)” is added to “7).”

【6) The Plaintiff appealed to the Seoul High Court (Seoul High Court 2014Na6420). The appellate court dismissed the Plaintiff’s primary claim by accepting the judgment of the first instance court, and accepted the Plaintiff’s claim against KRW 1 billion and its delay damages from the damages, which were embezzled jointly with Nonparty 1, etc. with Nonparty 1, less the recovered amount of KRW 25.98 billion, which was embezzled. The said judgment became final and conclusive on March 26, 2015.

○ In six pages 18 of the first instance judgment (based on recognition), “No. 31 and 32 of the A” shall be added to the ground for recognition.

○ 제1심 판결문 19면 ②의 ㉡항을 다음과 같이 고치고, ㉣항에 이어 ㉤, ㉥항을 다음과 같이 추가한다.

『㉡ 원고의 2008. 11. 4.자 신주발행은 소외 1의 자녀에게 원고의 주식을 증여하면서 증여세를 줄이려는 의도로 이루어진 것이어서 소외 1의 처이자 원고의 주주인 소외 3도 이해관계를 갖고 있어 소외 1이 소외 3에게 이 사건 신주발행에 관하여 은폐할 이유가 없으므로, 소외 3도 상증세플랜과 이 사건 신주발행 사실을 잘 알고 있었다고 보이는 점(을 제10호증의 기재에 의하면, 원고의 2008. 11. 4.자 유상증자에 대한 이사회회의록에는 2008. 10. 27. 이사총수 3명 중 대표이사 소외 1과 이사 소외 3 등 2명이 출석하여 외국인투자자인 드림과 세븐에게 신주 90,000주를 발행하는 데에 찬성한 것으로 기재되어 있고 소외 3의 인영도 날인되어 있으며, 위 이사회회의록은 2008. 11. 4. 홍익법무법인에서 공증이 이루어진 사실을 인정할 수 있으므로, 소외 3의 명시적· 묵시적 양해 없이 위와 같은 절차를 거쳐 이 사건 신주발행이 이루어졌다고 볼 수 없는 사정도 이를 뒷받침 한다)

The non-party 3 did not raise any objection to the issuance of the new shares of this case until the time of the disposition of this case.

According to the statement of evidence No. 12 No. 12, the non-party 1 presented his opinion that "the restoration of new shares will be made by means of free retirement" in the vindication submitted around January 2012 at the time of the tax investigation. After the commencement of the tax investigation, the non-party 1 appears to have known the fact that the low-price issue of the issuance of new shares in this case may occur due to the share swap among shareholders, and the fact that the non-party 1 considered the plan for free retirement, etc. to solve the above problem."

○ The part “B” of the first instance court Decision 21 pages 21 (2) (1 to 5) shall be used as follows:

In a lawsuit filed by the Plaintiff against Nonparty 2, “B” was rendered a favorable judgment of KRW 1 billion due to the joint embezzlement of Nonparty 2 and its delay damages, and the judgment became final and conclusive. However, the above claim for damages is not made against Nonparty 1, the representative director of the Plaintiff, but it is difficult to deem the Plaintiff to hold the damage claim amounting to KRW 7.2 billion against Nonparty 2. It is difficult to deem that the Plaintiff had the damage claim amounting to KRW 7.2 billion due to Nonparty 1’s negligence as the Plaintiff’s manager at the time of the embezzlement of this case. ③ Since Nonparty 1 and Nonparty 1 were in fact controlled by holding the Plaintiff’s share together with his wife at the time of the embezzlement of this case, it can be deemed that Nonparty 1 and the Plaintiff were identical with Nonparty 1, while being aware of the embezzlement of this case, the Plaintiff cannot be deemed as having actually implieded or ratified it, and it is reasonable to deem that the Plaintiff’s act of embezzlement of this case against Nonparty 2, the Plaintiff did not immediately belong to Nonparty 1 and Nonparty 2.

○ Parts 21 through 22, 9, 22, 10 of the first instance judgment shall be followed as follows:

Article 93 subparag. 11(i) of the former Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009; hereinafter the same) provides that one of the domestic source incomes of a foreign corporation owned by a “person having a special relationship as prescribed by the Presidential Decree” shall be “income accruing from an increase of value due to capital transactions as prescribed by the Presidential Decree.” Accordingly, Article 132(14) of the Enforcement Decree provides that “The income accruing from an increase of value due to such capital transactions as prescribed by the Presidential Decree” shall be deemed as “income accruing from a distribution of profits from a foreign corporation by another stockholder, etc. who has a special relationship under the provisions of each subparagraph of Article 88(1)8,” and Article 88(1)8(b) of the Enforcement Decree of the Corporate Tax Act provides that “Where a person renounces all or part of the right to new stocks allocated to the foreign corporation or acquires part of the right at a higher price than the market price” under Article 88(1)9(2)9)1 of the same Act.

B) In addition to the statement in Eul evidence No. 10, the issuance of new shares in this case can be acknowledged that the plaintiff directly allocated new shares to the dlim and 3 development range, a third party, other than the shareholder, to the third party. Therefore, since the low-price acquisition of new shares in the dlim and 3 development range is not based on the waiver of the Plaintiff’s existing shareholders’ preemptive rights and the disposal of forfeited rights, but is based on the direct allocation of new shares to a third party, other than the shareholder under Article 418(2) of the Commercial Act, even if there is a benefit received by distribution from the existing shareholders in a special relationship, it does not constitute the domestic source income of a foreign corporation under Article 93 subparag. 11 of the Corporate Tax Act and Article 132(14) of the Enforcement Decree of the same Act

3. Conclusion

The judgment of the first instance is justifiable. Each appeal filed by the Plaintiff and the Defendant, by the chief of the regional tax office, is dismissed.

Judges Ansan-chul (Presiding Justice)