[1] The meaning of "non-profit assets" under Article 46 (2) 3 of the former Enforcement Decree of the Corporate Tax Act, which prescribes the type of wrongful calculation

[2] The purport of Article 20 of the former Corporate Tax Act concerning the denial of wrongful calculation and the meaning of Article 46 (2) 9 of the Enforcement Decree of the same Act

[3] The case holding that the purchase of unlisted stocks from a specially related person does not constitute an act of profit distribution subject to rejection of unfair calculation

[1] The phrase "non-profit assets" under Article 46 (2) 3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998) which provides the type of wrongful calculation means assets which are not contributing to a corporation's profit diffusion or are not related to corporation's profit sharing, and whose profits are rare enough in the future from the operation of the assets.

[2] "Calculation of wrongful acts" means the calculation of an act to reduce or exclude the tax burden that arises when a taxpayer takes the ordinary rational transaction form by taking the bypass, the multi-stage act and other abnormal transaction form without using the normal economic person's reasonable transaction form. The purport of Article 20 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) which provides for the denial of wrongful calculation provision in Article 20 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) is that a transaction with a juristic person and related parties should be made by taking advantage of all the forms of transaction as stipulated in the subparagraphs of Article 46 (2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998) and disregards the economic rationality by taking advantage of the various forms of transaction, and thus, it means an act to prevent the fairness of taxation by imposing taxes on investors.

[3] The case holding that the purchase of unlisted stocks from a specially related person does not constitute an act of profit distribution subject to rejection of unfair calculation

[1] Article 20 (see current Article 52) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998); Article 46 (2) 3 (see current Article 88 (1) 2 and (2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998) / [2] Article 20 (see current Article 52) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998); Article 46 (2) 9 (see current Article 88 (1) 9 and (2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998); Article 46 (2) 2 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 19 of Dec. 198) / [28, 1998

[1] Supreme Court Decision 98Du12055 delivered on November 10, 200 (Gong2001Sang, 58) / [2] Supreme Court Decision 95Nu18697 delivered on May 28, 1997 (Gong1997Ha, 1920) Supreme Court Decision 2001Du9394 Delivered on June 13, 2003 (Gong2003Ha, 1545) Supreme Court Decision 2002Du995 delivered on December 12, 2003

Domdo Co., Ltd. (Law Firm Pacific, Attorneys Lee Jong-chul et al., Counsel for the plaintiff-appellant)

The Head of the Central Tax Office (Attorney Choi Woo et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2003Nu2689 delivered on October 17, 2003

The appeal is dismissed. The costs of appeal are assessed against the Defendant. On each page of the judgment of the court of first instance and the judgment of the court of first instance, the “the administrator Nonparty 1’s successor to the lawsuit” in the indication column of the Plaintiff shall be corrected to “the administrator Nonparty 1’s successor to the lawsuit” respectively

1. Regarding ground of appeal No. 1

Article 46 (2) 3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970, Dec. 31, 1998; hereinafter “Enforcement Decree”) which provides for the type of wrongful calculation refers to a asset which does not contribute to a corporation’s profit wave or is not related to corporation’s profit-making, and which has a lack of trustability to make profits from its operation in the future (see Supreme Court Decision 98Du12055, Nov. 10, 200).

According to the above legal principles and the facts established by the court below and the records, the plaintiff, a person with a special relationship, offered 3,862,000 shares issued by Korea Hague and Foreign Economic Examination (hereinafter "Korea Hague") as security to the Korea Comprehensive Finance Co., Ltd. (hereinafter "Daehan") for the purchase of 19.3 billion won shares issued by the non-party 2, a company with a special relationship, as well as 3,862,000 shares (hereinafter "the shares of this case"), and the closing money of August 23 of the same year was exercised as security right to the shares of this case, and thus, the plaintiff, a joint and several surety of the above obligation, was exempted from the obligation to pay 27.5 billion won loans to ○○, a joint and several surety, a joint and several surety of the above obligation, by taking account of the fact that the non-party 2, as at the time of the sale and purchase agreement with the plaintiff, was not related to the operation funds of other affiliates of the ○○ Group and its profits to the above 2000 billion shares.

In the same purport, the decision of the court below that the shares of this case do not constitute "non-profit assets" under Article 46 (2) 3 of the Enforcement Decree is just, and there are no errors in the misapprehension of legal principles as to non-profit assets, as otherwise alleged in the ground of appeal.

2. Regarding ground of appeal No. 2

A. According to the facts and records established by the court below, on May 23, 1997, the plaintiff purchased all of the shares of this case from the non-party 2 in KRW 19.3 billion. On September 2, 1997, the plaintiff purchased all of the shares of this case from the non-party 2 in the amount of KRW 2.3 billion. The plaintiff purchased all of the shares of this case in the amount of KRW 2.6,2165,000. The above sale price of each of the shares of this case is 42.5% of the total shares of Korea Health Co., Ltd. and it can be known that all of the shares of this case is reflected in the circumstances that can have an absolute impact on securing the right to manage the Health Co., Ltd. because it is difficult to view that the plaintiff purchased the shares of this case in excess of the market price of KRW 4.3 billion among the non-party 2 in the light of the above circumstances and the claim for loans to ○.

The judgment of the court below to the same purport is just, and there is no error in the misapprehension of legal principles as to high-priced purchase of assets as otherwise alleged in the ground of appeal.

B. "Calculation of wrongful acts" means the calculation of an act that reduces or excludes the burden of taxes arising when a taxpayer takes a normal rational transaction form by taking a round-out, multi-stage and other abnormal transaction form without a normal economic person's reasonable transaction form. The purport of Article 20 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998), which provides for the denial of wrongful act and calculation under Article 46 (2) of the former Corporate Tax Act, is deemed to have neglected economic rationality by taking advantage of all the types of transactions with a juristic person and related parties under Article 46 (2) of the Enforcement Decree of the same Act, and thus, it is deemed that the taxation authority disregards the economic rationality from a legal point of view that there was an income objectively deemed reasonable from a legal point of view. Thus, in cases where it is deemed that the taxation authority reduces the burden of taxes under Article 46 (2) 1 through 8 of the Enforcement Decree of the same Act, it means 90-197.

According to the reasoning of the judgment below, the court below acknowledged the facts as follows. The non-party 2 was unable to obtain monetary benefits from ○○○○ Group's affiliate company's own financial institution's act of offering collateral, but it was difficult for ○○○○○ Group's affiliates such as the plaintiff, ○○○, and ○○ Heavy Industries to use the financial institution's loans as joint and several surety, and thus, it was difficult to view the non-party 2's demand for offering collateral on ○○○ Group's loans as an act of offering collateral on ○○○ Group's own funds, and thus, it was difficult for the non-party 2 to receive additional monetary benefits from ○○○ Group's affiliate company's financial act of offering collateral. The non-party 2 was also able to receive monetary benefits from ○○○ Group's financial act of offering collateral at the time of sale, and thus, it was difficult to exempt the non-party 2 from the duty of offering collateral to the non-party 200 million won shares after offering it as collateral.

In light of the above legal principles and records, we affirm the above fact-finding and judgment of the court below as just, and there is no error of law such as incomplete deliberation, misconception of facts due to violation of the rules of evidence, or misapprehension of legal principles as otherwise alleged in the ground of appeal.

3. Therefore, the appeal is dismissed, and the costs of the appeal are assessed against the losing party. According to the records, the judgment of the court of first instance and the judgment of the court of first instance on the 5th day above, the “trustee Nonparty 1’s successor to the lawsuit” in the column of the judgment of the court of first instance indicated by the plaintiff is obvious that it is a clerical error of the “trustee Nonparty 1’s successor to the lawsuit,” and thus, it is

Justices Kim Yong-dam (Presiding Justice)