Roba Co., Ltd. (Law Firm Roba, Attorneys Kim Yong-il et al., Counsel for the plaintiff-appellant)

The director of the North Incheon National Tax Office

August 26, 2016

1. The Defendant’s disposition of imposing corporate tax of KRW 1,188,270,230 (including additional tax of KRW 483,014,853) for the business year of 2008 against the Plaintiff on March 13, 2014 is revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff (hereinafter “Stock Company”) is a KOSDAQ-listed corporation that engages in manufacturing and selling parts, such as electronic equipment, and engages in manufacturing and selling parts, such as electronic equipment, and entered into a merger contract on June 24, 2008 by the resolution of the board of directors for a merger on the same day, and entered into a merger agreement on August 13, 2008, following a general meeting of shareholders on September 16, 2008 (hereinafter “instant merger”). The merger was completed on September 16, 2008 (hereinafter “instant merger”) and completed the registration of the merger.

B. Under Article 84-7(1) of the former Enforcement Decree of the Securities and Exchange Act (amended by Presidential Decree No. 20947, Jul. 29, 2008; hereinafter “former Enforcement Decree of the Securities and Exchange Act”) and Article 36-12(1) and (3) of the former Enforcement Rule of the Securities and Exchange Act (amended by Ordinance of the Prime Minister No. 885, Aug. 4, 2008; hereinafter “former Enforcement Rule of the Securities and Exchange Act”), the Plaintiff calculated the merger ratio between the Plaintiff and the merged corporation based on the intrinsic value of the Plaintiff’s share price and the extinguished corporation as of June 23, 2008 as of the base date of appraisal (before the date of resolution of the board of directors for merger and the date of conclusion of merger contract) and Article 36-12(1) and (3) of the former Enforcement Rule of the Securities and Exchange Act (amended by Ordinance of the Prime Minister No. 885, Feb. 29, 2007>

C. The issue value of new shares issued in return for a merger (as of September 16, 2008, the merger date) was the total of 20,061,906,800 common shares, and the total face value was 4,950,228,000 won (i.e., the number of issued shares 9,90,456 x 500 won).

D. Meanwhile, the Plaintiff and the merged corporation drafted the merger contract on June 24, 2008, and its main contents are as follows.

(2) The funds to be increased by Gap due to a merger shall be the amount determined in accordance with the relevant Acts and subordinate statutes and corporate accounting standards as of the date of merger as of the date of merger as of the common date of merger as of the date of merger as of Article 7, and the amount determined in accordance with Article 1 (Method of Merger). The number of shares to be issued under the articles of incorporation as of Article 2 (Total Number of Stocks to be Issued) shall not be changed due to a merger. Article 3 (Total Amount of Capital and Reserves to be Issued) ① The capital of Gap shall be increased by 4,950,228,00 won and shall be 12,91,246,50 won. (2) The new shares to be issued by Gap shall be the amount determined in accordance with Article 7 as of the common date of merger as of the date of merger as of the date of new shares to be issued by the new shares to be distributed to shareholders of less than 50,000 won.

E. The Plaintiff and the merged corporation drafted a merger report on June 23, 2008, and its main contents are as follows:

1. The summary of the merger; 3. The acquisition of 2. The acquisition of 2. The acquisition of 2. The acquisition of 0. The acquisition of 2. The acquisition of 2. The acquisition of 2. The acquisition of 0. The acquisition of 2. The acquisition of 3. The acquisition of 3. The acquisition of 2.0 shares of 10. the acquisition of 2.0 shares of 2. The acquisition of 2.0 shares of 3. the acquisition of 2.0 shares of 2. the acquisition of 2.0 shares of 1.0,000 shares before the merger (unit : 1.00,000 shares of 1.0,000 shares of 1.92,037,822.493 preferential shares . 0. The acquisition of 2. The total amount of 1.6. The acquisition of 2. The acquisition of 2.08 shares of the merged corporation shall be issued to the shareholders of the merged corporation under the relevant Acts and subordinate statutes and accounting principles;

F. The book value of net assets (which is 4,086,245,403, and the fair value of 4,270,678,000, and the fair value of 4,270,678,000, while the Plaintiff succeeded to the net assets of the merged corporation from the merged corporation as fair value, the Plaintiff included KRW 15,791,228,80,00 as sales rights, and the difference between the issue value of new shares for the merger and the issue value of the new shares for the merger and KRW 20,270,61,90,06,80, while succeeding to the fair value of the net assets of the merged corporation (which is excluding liabilities from the total assets in the balance sheet) (hereinafter referred to as “instant sales rights”).

G. However, the Plaintiff: (a) deemed that the instant goodwill does not constitute a goodwill under Article 24(4) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22184, Jun. 8, 2010; hereinafter “former Enforcement Decree of the Corporate Tax Act”); and (b) made a tax adjustment with respect to cost settlement at the cost of depreciating goodwill, and filed a corporate tax return.

H. However, the tax authority determined that “The instant goodwill 15,791,228,80 won constitutes depreciable assets under the tax law and shall be included in the deductible expenses each year after the said amount was included in the gross income for the business year 2008 under Article 12(1)1 of the former Enforcement Decree of the Corporate Tax Act as a result of the merger evaluation under Article 12(1)1 of the former Enforcement Decree of the Corporate Tax Act. Accordingly, the Defendant shall include KRW 15,791,228,800 as the Plaintiff’s merger evaluation for the business year 2008 and the relevant goodwill depreciation expenses for the business year 2008 equally equal for five years after the business year 2008, thereby revising and notifying the Plaintiff of corporate tax 1,18,270,230 won for the business year 208 (including additional tax 483,014,853 won) (hereinafter “instant disposition”).

I. On June 11, 2014, the Plaintiff filed an appeal with the Tax Tribunal on the instant disposition, but the Tax Tribunal rendered a decision to dismiss the appeal on April 13, 2015.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1 through 5, 7, 9, Eul evidence No. 1, Eul evidence No. 3-1, the purport of the whole pleadings

2. The parties' assertion

A. The plaintiff's assertion

The instant disposition that the Defendant deemed KRW 15,791,228,80 as assets and included in gross income as a merger evaluation marginal profit, and confirmed as losses for depreciable assets shall be revoked on the following grounds.

1) In the instant merger, the merger marginal profit in the instant merger is KRW 4,270,50,000 (i.e., the net asset value of the extinguished corporation’s net asset value of KRW 4,270,678,00 - the total par value of the stocks issued to the stockholders of the extinguished corporation - The Plaintiff does not have any merger marginal profit and only the merger marginal profit exists, and thus, there is no merger marginal profit in the Plaintiff, and there is no merger marginal profit and only the merger marginal profit

2) Only if the operating right satisfies the requirements prescribed in Article 24(4) of the former Enforcement Decree of the Corporate Tax Act, it is recognized as a business right under tax law. In other words, the operating right is recognized as a business right with assets only in cases where (i) the operating right has a business value due to the trade name, transaction relation, and other trade secrets, etc. of the merged corporation, and (ii) the business

However, the instant goodwill does not reflect intangible property value, but rather is an accounting and technical loss in order to adjust the difference in financial loans in the process of calculating the merger ratio by the method prescribed by the law, and does not have business value, and the Plaintiff does not succeed to the evaluation of the trade name, transaction relationship, and other business secrets of the extinguished corporation. Therefore, the instant goodwill is not subject to depreciation under the Corporate Tax Act.

3) In a case where a merged corporation appropriates the difference between the net asset value of the merged corporation and the value of new stocks issued by the merged corporation, there was a non-taxation practice by the tax authorities that does not impose tax on the business rights. Thus, the instant disposition is contrary to the principle of non-taxation or prohibition of retroactive taxation under Article 18(3) of the Framework

4) Even if viewed otherwise, the Plaintiff’s failure to perform its duty to report and pay corporate tax, and thus, there is a justifiable reason not to charge the Plaintiff’s failure to perform its duty. Therefore, imposing tax on the Plaintiff up to KRW 100,484,332 for additional tax on negligent tax returns and KRW 382,530,521 for additional tax on negligent tax returns is unreasonable.

B. Defendant’s assertion

For the following reasons, the instant disposition is lawful.

1) The net asset value of the extinguished corporation includes 15.79 billion won, business license, 15.1 billion won. Thus, the Plaintiff’s merger marginal profit is 15,111,450,000 won (i.e., the fair value of net assets of the extinguished corporation + KRW 4,270,678,000 + the fair value of net assets of the extinguished corporation + KRW 15.79 billion - the total face value of the stocks issued to the stockholders - KRW 4,950,228,000).

2) Even if there is no merger marginal profit, Article 12(1) of the former Enforcement Decree of the Corporate Tax Act stipulating that “the amount until the merger marginal profit reaches the merger marginal profit” is applicable only to the existence of “merger marginal profit”, and where there is no merger marginal profit, there is no legal ceiling on the merger marginal profit.

3) The plaintiff entered into a merger contract with payment of the price exceeding the net asset value of the merged corporation at the time of the merger. The business right calculated by the difference between the price of the merger and the net asset value of the merged corporation constitutes assets subject to merger evaluation and depreciation. As a result, in calculating the merger ratio in the process of the merger in this case, the evaluation of intangible assets in accordance with the intrinsic value evaluation method under the former Securities and Exchange Act was conducted, and as a result, the evaluation evaluation of intangible assets (property without any deficit included in the account book of the merged corporation) has occurred, the evaluation value must be included in the calculation of the merger evaluation marginal profits under the Corporate Tax Act. In other words, the plaintiff shall evaluate the actual value of the merged corporation as 20,061,90,900 won, which corresponds to the issue value of the new stocks issued by the merged corporation and shall be included in the calculation of the profits as the evaluation marginal profits under the purchase Act.

4) Even if the Plaintiff, at the time of the merger in this case, did not separately evaluate the business rights of the extinguished corporation itself, such business rights consist of the license, transactional relationship, and other trade secrets of the extinguished corporation. Since there is no individual evaluation method that can objectively evaluate the business rights, assessing the business rights at the cost of merger issued to the extinguished corporation less the net asset value of the extinguished corporation under the market economy is the most objective evaluation of the business rights under the market economy. Thus, the Plaintiff’s inclusion of the business rights succeeded to from the extinguished corporation in the account book constitutes “the case where the Plaintiff

3. Relevant statutes;

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

4. Determination

A. First, we examine whether there exists "merger evaluation marginal profit to be included in gross income in calculating the income amount for the business year 2008 of the Plaintiff" due to the instant merger.

1) Article 15(1) of the former Corporate Tax Act (amended by Act No. 9267, Dec. 26, 2008; hereinafter “former Corporate Tax Act”) provides that “The amount of profit shall be the amount of profit generated from transactions which increase the net assets of the relevant corporation, except as otherwise provided for in capital or financing and this Act.” As follows, the following: (a) the main sentence of Article 17(1)3 of the former Corporate Tax Act provides that “Merger gains shall be deemed profit from capital transactions and shall not be included in the calculation of earnings in calculating the income amount of the merged corporation for each business year; (b) Article 15(1) of the former Enforcement Decree of the Corporate Tax Act; (c) Article 459(1)3 of the former Commercial Act (amended by Act No. 10600, Apr. 14, 201; hereinafter “former Commercial Act”) provides that the amount exceeding the value of the company’s assets succeeded from the merger gains should be included in the calculation of earnings.”

Article 17 (1) 3 of the former Corporate Tax Act provides that “Merger marginal profits as prescribed by the Presidential Decree shall be excluded from gross income.” Article 15 (2) of the former Enforcement Decree of the Corporate Tax Act provides that “Merger marginal profits as prescribed by the Presidential Decree” shall mean the amount calculated in accordance with the provisions of Article 12 (1) 1 and (3)”. Meanwhile, Article 12 (1) 2 (a) of the former Enforcement Decree of the Corporate Tax Act provides that “Merger marginal profits as prescribed by the Presidential Decree” shall mean the amount calculated in accordance with the provisions of subparagraphs 1 and 3 (limited to surplus funds falling under the provisions of the main sentence of Article 16 (1) 2 of the Act) and Article 15 (2) of the former Enforcement Decree of the Corporate Tax Act shall apply mutatis mutandis to the case of corporations succeeding to the book value of assets of the extinguished corporation under the provisions of Article 16 (1) 1 and 4 (referring to the amount calculated by subtracting the balance from the book value of the extinguished corporation under the provisions of subparagraph 16 (c).

2) Considering the language, purport, system, etc. of the above provisions as well as the following circumstances, the merger evaluation marginal profit included in gross income pursuant to Article 17(1)3 of the former Corporate Tax Act shall be limited to the merger marginal profit, and where there is no merger marginal profit, the merger marginal profit included in gross income shall not be deemed to exist.

A) Article 15(2) of the former Enforcement Decree of the Corporate Tax Act does not stipulate “merger evaluation marginal profit as prescribed by the Presidential Decree” under the proviso of Article 17(1)3 of the former Corporate Tax Act as “value under Article 12(1)1 of the former Enforcement Decree of the Corporate Tax Act” but provides “amount calculated under the provisions of Article 12(1)1 of the former Enforcement Decree of the Corporate Tax Act”. Thus, “merger evaluation marginal profit as prescribed by the Presidential Decree” means the amount under subparagraph 1 calculated until the merger marginal profit is reached, namely, where assets are succeeded from a merged corporation, the amount calculated within the scope of the merger marginal profit as the value exceeding the book value of the extinguished corporation among the values that exceed the book value of the extinguished corporation, is interpreted in accordance with the language

B) Since the gross income is “the amount of profits generated from transactions which increase corporate net assets,” if the net assets of the merged corporation are not increased due to the merger, it shall not be deemed as transactions which increase corporate net assets, and it shall not be recognized as the amount of profits to be included in the gross income. Even in cases where there is a merger evaluation upon succession of the merged corporation’s assets, if the value of assets succeeded from the merged corporation, including the value of assets succeeded from the extinguished corporation, the amount of the extinguished corporation’s debt succeeded from the extinguished corporation, the amount paid to the stockholders of the merged corporation, and the amount of the merged corporation’s capital increase, if the merger losses occur due to the merger, it shall not be deemed that the net assets of the merged corporation were increased as a result of the merger, and it shall not be deemed that the merger evaluation marginal profits which did not contribute to the increase of corporate net assets of the merged corporation are included in the gross income.

C) General Rule 17-152 of the Corporate Tax Act provides that “Merger Evaluation Marginal Profit” under Article 17(3) of the former Corporate Tax Act shall not exceed “Merger Marginal Profit” under Article 459(1)3 of the former Commercial Act.

3) In the instant case, the Plaintiff recognized that there was no merger marginal profit exceeding KRW 4,270,678,00 of the net asset value of which the Plaintiff succeeded from the merged corporation as the price for the merger and paid to the shareholders of the extinguished corporation.

In this regard, the defendant asserts that there exists a merger marginal profit since the value of the business rights stated in the plaintiff's account book is also included in the net asset value in the calculation of the merger marginal profit. However, in the calculation of the merger marginal profit, the net asset value is calculated by deducting the amount of the debt succeeded from the value of the property succeeded from the extinguished corporation (see Article 459 (1) 3 of the former Commercial Act). As seen below (b) the business rights stated in the plaintiff's account book are merely the amount arising from the technical process of accounting, and thus the above business rights cannot be deemed as the property succeeded from the extinguished corporation, and thus, the defendant's above assertion based on a different premise

4) Therefore, since there was no merger marginal profit in the Plaintiff, the “merger marginal profit within the scope of the merger marginal profit” subject to the inclusion in the calculation of earnings cannot be deemed to exist, and the instant disposition included in the calculation of earnings should be revoked as it is unlawful, regardless of whether the business rights stated in the Plaintiff’s account book can be deemed as depreciable assets under the Corporate Tax Act.

B. Furthermore, we examine whether the instant goodwill constitutes a merger evaluation marginal profit under the Corporate Tax Act.

1) Facts of recognition

A) The details of the report (unit: 1 million won) of the corporate tax of the plaintiff and the merged corporation before and after the merger of this case are as follows.

The amount of income of the Plaintiff’s merged corporation for the business year included in the main sentence of the Table 2006 5,503-3,383 7,445 1,004 5,346-3,2649, 331,693 1,693 208 13,415-4,197 11,659-38,908-8, 475 2010 13,382-11,814, 2014, 343-14, 201239,132,132,136

B) The part concerning the calculation of the cost of the merger in the report of the merger is as follows:

4. Merger ratio and calculation basis of the Table contained in the main text 4. The plaintiff (the plaintiff) calculated the merger value (the value of assets if the base value falls short of the value of assets) and the merged corporation as the merged value; 5. Evaluation Institute: C. Evaluation Method: The plaintiff's base value, which is the method of analysis and KOSDAQ-listed corporation, was calculated as the average net asset value of the previous one week before the initial date of the merger resolution and merger contract pursuant to Article 36-12 (1) of the Enforcement Rule of the Securities and Exchange Act; the average trading volume weighted average of the last one week trading volume; the closing value of the last one week; the closing value of the stock of the non-listed corporation, which falls short of the average trading value of the stock (the total value of the stock-listed corporation) and the net asset value of the stock-listed corporation, which falls under the real value of the stock-listed corporation, calculated as the average net asset value of the immediately preceding business year and the net asset value of the stock-listed corporation under Article 15 through 7 of the Enforcement Rule of the Securities and Exchange Regulation (15).

Note 1) Detailed Regulations on Issuance and Public Notice of Securities

[Ground of recognition] Unsatisfy, Gap evidence Nos. 3 and 5, the purport of the whole pleadings

2) Relevant legal principles and relevant provisions

A) Merger marginal profits and merger marginal losses

(1) Article 17(1)3 of the former Corporate Tax Act, Article 12(1)3 of the former Enforcement Decree of the Corporate Tax Act, and Article 459(1)3 of the former Commercial Act defines the amount of debt succeeded from the extinguished company, the amount paid to its shareholders, and the excess amount in cases where the amount of capital increase or the amount of capital increase of the company surviving the merger exceeds the amount of the company incorporated by the merger as a result of the merger marginal profit, and stipulate that such excess amount shall not be included in gross income as profits from capital transactions. In other words, the merger marginal profit refers to the balance not included in the capital among the net asset value of the merged corporation, and the essence of the merger marginal profit refers to the amount exceeding the amount of issued stocks.

The actual value of the shares included in the text = The net asset value of the extinguished corporation (total value of succeeded assets - total value of succeeded liabilities) - (total par value of the shares issued to the stockholders + total amount of merger subsidies)

(2) Although the loss from merger is not stipulated in the law, it is generally opposed to the merger marginal profit, it is explained that the net asset value of the merged corporation succeeded from the merged corporation to the stockholders of the extinguished corporation is less than the total sum of the merger grant and the face value of the new stocks issued by the merger issued by the merged corporation (i.e., the cost of the merger). In other words, the following formula is the following formula, and the essence thereof is the amount that is exempted from the issuance

The actual loss from merger = The price of merger (the merger subsidy + the total par value of new stocks after merger) - the net asset value succeeded from the merged corporation.

B) Merger loss and goodwill

Prior to the amendment as of August 28, 2009, the Rules on Accounting of Corporate Merger, etc. (hereinafter “Rules on Combined Accounting”) provides that the purchaser refers to the fair value of cash, cash, etc., goods, or other purchases paid to control the net assets and business activities of another company. The fair value of the stocks issued as part of the purchase price shall be the closing price of the issue date (§6-3). Of the purchase cost, there was a provision that the purchaser knows the portion exceeding the fair value of the assets and liabilities acquired by the purchasing company as of the date of purchase as the purchase as its goodwill (Article 19(A) of the former Enforcement Decree of the Corporate Tax Act that recognizes the acquisition price as the goodwill of the purchasing company in excess of the fair value of the distinctive assets and liabilities acquired by the purchasing company as of the date of the purchase (hereinafter “net assets”) (hereinafter “the former Enforcement Decree of the Corporate Tax Act”). In addition, there is a difference between the business rules on combined accounting and the total value of the new stocks after merger and the net assets acquired by the merged company as of the merged company.

C) Taxation on merger evaluation marginal profit on a merged corporation under the former Corporate Tax Act

Article 12(1) of the former Enforcement Decree of the Corporate Tax Act provides that where assets are evaluated and succeeded from a merged corporation until the amount under the provisions of Article 459(1)3 of the former Commercial Act reaches the amount (merger marginal profit) and the amount exceeding the book value of the extinguished corporation is determined as a merger marginal profit. The merger marginal profit is a concept separate from the merger marginal profit, which is the amount calculated by deducting the capital increase from the appraised value of net assets succeeded from the merged corporation as seen earlier.

Merger evaluation marginal profit included in the main sentence = Evaluation value of assets succeeded to - Book value of assets succeeded to.

Article 17 (1) 5 of the former Corporate Tax Act does not include the merger marginal profits as profits from capital transactions in the calculation of earnings, but it is included in the calculation of earnings pursuant to the provisions of the proviso. This is the case where the merged corporation conducts the evaluation of the assets of the merged corporation and succeeds to the disposal of depreciation costs or the disposal of assets after succession, and thus, the income amount is reduced at the time of the merger.

D) Provisions on goodwill

(1) According to the combined accounting rules, a business right is recognized only for a combination of enterprises under the Act on the Purchase of Bonds. Of the purchaser price (referred to the fair value of cash or cash, etc. paid to control the net assets and business activities of another company) the purchaser exceeds the share of the purchasing company in the fair value of the net assets recognizable from the purchasing company as of the date of purchase. Such a business right is counted by the fixed period during which the period is expected to bring economic benefits into the future into the future and does not exceed 20 years (Article 9 of the combined accounting rules). In other words, a business right under the combined accounting rules is recognized by stipulating the difference between the issue date of new stocks issued for merger or the market value (including the case of a merger grant) of the merger date that the merged corporation succeeds from the merged corporation as the price for the merger to the shareholders of the merged corporation at the time of the merger.

According to the statement contained in the main sentence = The purchase cost - the share of the purchasing company on the fair value of assets and liabilities (net assets) acquired from the purchasing company as of the date of purchase.

On the other hand, if the share of the purchasing company exceeds the purchase cost out of the fair value of the identifiable assets and liabilities acquired from the purchasing company on the date of purchase, the excess amount shall be appropriated as the business right of the division (§ 10 of combined accounting rules).

(2) Meanwhile, Article 24(1) of the former Enforcement Decree of the Corporate Tax Act provides for depreciable assets and lists business rights under subparagraph 2(a). Article 24(4) provides that “In the case of a merger or division among business rights under paragraph (1)2(a), the business rights appropriated by the merged corporation shall be deemed as depreciable assets only where the merged corporation evaluated and succeeded to the assets of the merged corporation, and paid compensation for business value due to trade name, transaction relationship, and other trade secrets of the extinguished corporation.”

(3) Comprehensively taking account of the foregoing relevant provisions, the recognition of business rights under the former Corporate Tax Act in corporate mergers is limited to the case where the merged corporation evaluates and succeeds to the assets of the merged corporation and pays for business value due to trade name, transaction relations, trade secrets, etc. of the merged corporation, and is deemed as depreciable assets only for such asset-value business rights. In this context, in order to be evaluated as business rights having business value, a certain company must have intangible property value that can make it possible to obtain more profits than the ordinary profits of the other company operating the same kind of business due to its special skills, social credit and transactional relations, etc., and in case where a company acquires more profits than the ordinary profits prior to the merger by absorbing its business functions or characteristics through the merger of another company, the intangible value of the absorption company, which may cause a higher return after the merger, shall be deemed as business rights (see Supreme Court Decision 85Nu592, Feb. 11, 1986, etc.).

(4) On the other hand, the merger evaluation marginal profit resulting from the evaluation and succession of assets is included in the gross income for the concerned business year. The assets here can fall under the category of intangible assets as well as intangible assets, and if there is an intangible business value (excess profit) in the case of a merged corporation, if the merged corporation succeeds to the evaluation and evaluation, the assets called business rights are appraised (the book value of business rights of the merged corporation is zero won) and the merger marginal profit is succeeded to the merged corporation. Thus

3) Determination

In light of the facts acknowledged earlier and the overall circumstances revealed in the argument of this case, the instant goodwill is merely an operating right on the account, and it is difficult to view it as an operating right under the tax law succeeded to by evaluating assets. Therefore, under the premise that the asset nature of the instant goodwill is recognized, the instant disposition that confirmed the value of the instant goodwill as depreciable assets after inclusion in the gross income as a merger evaluation marginal profit, should be revoked as it is unlawful.

A) Where a KOSDAQ-listed corporation merges with a corporation that is not a stock-listed corporation or KOSDAQ-listed corporation (hereinafter “unlisted corporation”), the parties to the merger shall not arbitrarily determine the merger value, and the merger value shall be determined based on the market price at the KOSDAQ market of the KOSDAQ-listed corporation and the “value obtained by calculating the average of the weighted average of the asset value and profit values” of the unlisted corporation (where it is impossible to compute the large value, the average of the asset value and profit values) and the merger-related matters shall be reported to the Financial Supervisory Commission and the Korea Securities and Futures Exchange (Article 190-2(1) of the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007), Article 84-7(1) of the former Enforcement Decree of the Securities and Exchange Act, Article 36-12(1) and (3) of the former Enforcement Rule of the Securities and Exchange Act, and the merged corporation shall make a merger agreement calculated in accordance with the above laws and regulations, and shall make a report thereon to the related institutions.

As can be seen, the purport of the former Securities and Exchange Act and subordinate statutes stipulating the method of computing the merged value in the case of a merger between KOSDAQ-listed corporations and unlisted corporations is to prevent unfair merger by guaranteeing the objectivity and appropriateness of the merger ratio, and thus, it is difficult to view that the merged corporation has a business right and its evaluation has been conducted on the sole basis of the fact that there is an evaluation of the profit value, etc. in calculating the merged value, solely on the basis of the existence of a business right to operate the merged corporation and its evaluation.

B) Meanwhile, in cases where the merged corporation issues new shares to the shareholders of the merged corporation according to the merger ratio after determining the merger ratio as above, the merged corporation is a result of paying the merged price equivalent to the intrinsic value of the merged corporation, and in fact, there is no room to generate profit or loss through the merger to the merged corporation, i.e., income

However, even though new shares are actually issued in accordance with the corporate accounting rules, if the purchase price (the price for a merger) is delivered to the stocks of the merged corporation, the fair price of the shares should be calculated on the basis of the closing price of the issue date. Since the purchase price (the fair price for purchase) exceeds the fair value of the net assets recognizable from the purchasing company as of the purchase date, the part of the purchase price (the fair price for purchase) can be recognized as business rights. Thus, in accounting, the purchase price can be more than the net assets succeeded from the merged corporation. (2) According to Article 17 (1) 3 of the former Corporate Tax Act, Article 12 (1) of the former Enforcement Decree of the Corporate Tax Act, Article 459 (1) 3 of the former Enforcement Decree of the Corporate Tax Act, Article 459 (1) 3 of the former Commercial Act, the merger profit can be generated since the merger profit should be calculated on the basis of the increase in capital, not on the market price of the shares to be deducted from the net assets value of the extinguished corporation.

Therefore, it cannot be viewed that there is a evaluated asset subject to taxation under the Corporate Tax Act (merger evaluation marginal profit) solely on the basis of the existence of the goodwill and merger marginal profit in the account.

C) In addition, in cases where the market price of stocks is higher than face value, if the merged corporation issues new stocks at the market price instead of delivering the stocks of the merged corporation to the shareholders of the merged corporation with the consideration of the merger, and then pays the consideration for the merger, the merger marginal profit may not occur if the merged corporation issues new stocks to the shareholders of the merged corporation with the consideration of the merger. In other words, the merger marginal profit included in the calculation of earnings is recognized only within the scope of the merger marginal profit. In other words, the merger marginal profit and the merger marginal profit may bring about unfair results because the merger marginal profit is determined depending on the contingency of the market price and face value of the stocks when the payment of the consideration for the merger (whether stocks or cash are delivered) and the consideration for the merger are delivered to the stocks with the stocks. In light of this, in the case of a merger between the listed corporation and the listed corporation or the unlisted corporation by determining the merger ratio in accordance with the former Securities and Exchange Act and the issuance of new stocks, it should be determined immediately by recognizing the amount deducted from the net asset value as the intangible asset value of the excess profits.

D) In addition, as alleged by the Defendant, “a case in which assets are evaluated and succeeded from the merged corporation” refers to a merger under the Purchasing Act, so if it is deemed unnecessary to separately evaluate business rights, a merger price assessed by the stock price, etc. under the relevant provisions of the former Securities and Exchange Act shall be always taxed if the cost of the merger exceeds the net asset value of the merged corporation. This is against the purport of Article 24(4) of the former Enforcement Decree of the Corporate Tax Act stipulating that “The merger price shall be depreciable assets only if it is paid for business value due to the trade name, transaction relationship, and other trade secrets

E) In the instant case, as of June 23, 2008, the date of the resolution of the board of directors for merger as of June 23, 2008, ① the arithmetic average of trading volume increase in the last one month, the weighted average of trading volume increase in the last one week, and the closing price in the last one, which is calculated by the lower of the average of the closing prices in the last one week, the Plaintiff’s base price and ② the Plaintiff’s share price calculated by the method of analysis of fundamental value under Articles 5 through 7 of the Enforcement Rule of the Regulations on Issuance, Public Disclosure, etc. of Securities (hereinafter “Enforcement Rule of this case”).

A goodwill refers to an intangible asset value, such as the company’s tradition, social credibility, location conditions, existence of a special manufacturing technology or special trading relationship, etc., and other tangible and intangible profit-making profit-making profit-making profit-making profit-making by other companies operating the same kind of business (see Supreme Court Decision 84Nu281, Apr. 23, 1985, etc.). The income amount in 2006 is KRW 1,004,000,000, and the income amount in 2007 was KRW 1,693,00,000, but even if there was no data to know the profits earned by other companies operating the same kind of business during the same period, it cannot be deemed that there was an excess profit-making profit-making profit-making profit-making profit-making profit-making profit-making profit-making profit-making profit-making profit-making profit-making profit-making profit-making profit.

① Rather, the cost of merger paid to a merged corporation is not determined by evaluating whether the merged corporation has the ability to make profits higher than the ordinary profits of other companies engaged in the same kind of business, rather than by evaluating whether the merged corporation has the ability to make profits higher than the ordinary profits of the other companies engaged in the same kind of business, and is calculated by the weighted average of the asset value and profits value under Article 82 of the Regulations on Issuance and Public Disclosure of Securities and Articles 5 through 7 of its Enforcement Rule, respectively, and it is difficult to view that the merger cost paid in excess of the net asset value is the existence of the business right that reflects the total net profits exceeding the net asset value, and it is difficult to view that the merger cost paid in excess of the net asset value is the existence of the business right that reflects the total net assets value exceeding 1 and 1.5.

F) According to the literal interpretation of Article 24(4) of the former Enforcement Decree of the Corporate Tax Act, the part having asset value is recognized as business rights, not all the cost of merger exceeding the fair value of net assets of an extinguished corporation, and only the part having asset value is recognized as business rights. Thus, only the amount can be recognized as business rights under the tax law and imposed as a merger evaluation marginal profit. In this case, there was no direct perception or evaluation of business rights.

(g) The National Tax Service in September 2003 announced for the first time the authoritative interpretation that the goodwill appropriated as depreciable assets by evaluating the trade name, trade relations, and other business secrets of the extinguished corporation under Article 24(4) of the former Enforcement Decree of the Corporate Tax Act is included in the merger evaluation marginal profit under Article 12(1)1 of the Enforcement Decree of the same Act (as of September 27, 2003, “46012-1717” and “where the merged corporation succeeds to the appraisal of the assets of the extinguished corporation, the goodwill appropriated as depreciable assets by evaluating the trade name, trade relations, and other business secrets of the extinguished corporation under Article 24(4)1 of the former Enforcement Decree of the Corporate Tax Act shall be included in the merger evaluation marginal profit.” It shall not be included in the merger evaluation marginal profit under Article 12(1)1 of the former Enforcement Decree of the Corporate Tax Act in case where the merged corporation receives the difference between the net asset value of the extinguished corporation and the total asset value of the extinguished corporation after such interpretation.

5. Conclusion

If so, the plaintiff's claim shall be accepted on the grounds of its reasoning, and it is so decided as per Disposition.

[Attachment]

Judges Kim Tae-hun (Presiding Judge)

Note 1) The Governor of the Financial Supervisory Service shall determine upon delegation by the Financial Supervisory Commission of the Regulations on Issuance and Public Disclosure, etc. of Securities.