Seoul Central District Court 2014Kadan519484 ( October 13, 2015)

Whether the disposition of imposition of value-added tax and corporate tax, etc. in this case constitutes abrupt invalidation and thus a return of unjust enrichment should be made.

If the non-party company transferred its possession to the non-party company for the exclusive use and disposal of each of the above buildings, it constitutes the supply of goods under the former Value-Added Tax Act, and thus, the plaintiff's assertion is without merit.

Article 24 of the National Tax Collection Act

2015Na14753 Action to Return Undue Benefits

DHMK Construction Corporation

Korea

Seoul Central District Court Decision 2014Gadan519484 Decided October 13, 2015

May 22, 2015

June 24, 2014

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The defendant shall pay to the plaintiff 79,945,960 won and the amount of KRW 50,167,740 from December 4, 2013 to December 3, 2013; KRW 3,801,040 from August 20, 2014; KRW 19,989,610 from September 24, 2014; KRW 150,020 from September 19, 2014; KRW 5,837,50 from October 31, 2014 to the date on which a copy of the application for change of the purport of the claim and the cause of the claim is served; and KRW 5% interest shall be paid at each rate of 20% per annum from the following day to the date on which a copy of the application for change of the grounds of the claim is served.

1. Facts of recognition;

A. On April 6, 2009, the Plaintiff entered into a contract on acquisition of all rights, such as the right to implement the project with respect to an officetel newly built on the land 561-11, 561-30, the Masan-si Masan-si Masan-si Masan-dong 561-11, 561-30 (hereinafter “the instant officetel”).

B. On March 26, 2010, the Plaintiff obtained approval for the use of the instant officetel and completed registration for the preservation of ownership on April 7, 201 of the same year, but agreed on December 17, 2010 on the payment of the acquisition price to the non-party company as follows (hereinafter “instant contract”) while the sales price of the officetel was low and the non-party company failed to pay the acquisition price to the non-party company.

① The Plaintiff transferred to the Nonparty Company the total value of 10 households of the instant officetel 10 (203, 309, 609, 701, 807, 902, 102, 1104, 1104, 1204, 1206, and 1,248, 162, 951 won (1,606,060 won per square meter): Provided, That the value excluding the three households under the following subparagraphs is the total value of 937,250,615 won, and the actual amount converted after deducting the loans for each household from the value of the said 10 households is the total amount of 825,162,951 won).

② However, in the case of three households (No. 807, 1004, and 1104) among the above 10 households, if the non-party company received a written contract for the withdrawal of the transfer of claim and the certificate of the withdrawal of the lawsuit from the Seodu ginseng and submitted it to the Plaintiff by January 17, 201, the contract shall be transferred.

③ The Plaintiff shall pay the Nonparty Company KRW 150,000,000 in cash, on December 17, 201, respectively, and shall pay KRW 70,000,000 on January 31, 201 and KRW 80,00,000 on January 31, 201.

(4) The balance in kind after payment in kind under the above paragraph (1) shall be settled in cash thereafter.

(5) Rights and duties to officetels transferred by payment in kind shall be borne by the non-party company.

6. The value-added tax on the tax invoice issued by the non-party company to the Plaintiff shall be paid.

7. The non-party company does not want to cancel the complaint against the case No. 2010 type No. 11577 which is being investigated by the Suwon Branch Office.

C. After that, on August 23, 2013, the Plaintiff demanded that the instant 6 households (203, 309, 609, 701, 902, 1102) of the instant officetels be transferred among the items that us promised to temporarily use for the entire sale of the building without paying the construction cost as a substitute for the entire sale of the building, but she cannot sell as a whole since it became a partial sale, she cannot sell as a whole.

D. Around August 2013, the director of the National Tax Service under the defendant-affiliated tax office conducted a tax investigation with the plaintiff on Sep. 2, 2013, and notified the plaintiff of the results of the tax investigation to determine and notify the amount of value-added tax of KRW 135,816,13 and KRW 88,298,800 as corporate tax for the business year 2010 and KRW 852,046,00 due to the payment in and payment to seven households of the instant officetel (No. 203, 309, 601, 701, 902, 1102, and 1204) (i.e., value-added tax of KRW 937,250,615- value-added tax of KRW 85,204,600). The plaintiff did not raise any particular objection to the notice within 30 days.

E. Accordingly, on October 1, 2013, the director of the National Tax Service imposed KRW 14,114,930 on the Plaintiff for the second-term value-added tax of 2010 and KRW 135,816,130 for the business year 2010, and KRW 8,298,80 for the corporate tax of 2010. After that, on February 11, 2014 through self-audit, he/she decided to reduce the above value-added tax amount of KRW 21,516,340 for the reason of revising the calculated tax base for the supply of commercial buildings on February 11, 2014, and notified the Plaintiff of the additional tax amount of KRW 1,719,936 (hereinafter “instant tax disposition”).

F. Accordingly, from December 4, 2013 to October 31, 2014, the Plaintiff paid the total of KRW 69,423,950 of value-added tax and KRW 10,52,010 of corporate tax, including additional dues, etc., as follows:

(Omission of List)

G. Meanwhile, the registration of ownership transfer was not made in the non-party company or the third party with respect to the 7 households of the instant officetel at the time of the instant taxation as well as at the time of the closing of argument in the instant case.

[Based on Recognition] A-2-5 evidence, Gap evidence 6-1 through 7, Gap evidence 7-1, 2, Eul evidence 1-1, 2-2, Eul evidence 2-5, Eul evidence 6-1 through 3, Eul evidence 6-7, Eul evidence 7, the purport of the whole oral argument

2. The assertion and judgment

A. The plaintiff's assertion

The payment contract for accord and satisfaction is a real contract and the ownership transfer registration under the contract takes effect. Thus, the taxation disposition in this case was made with respect to the seven households of officetel in this case without the ownership transfer registration under the contract in this case, and there was a lack of taxation requirements. Since the defect is significant, clear and void, the defendant is obliged to return the tax amount already paid to the plaintiff as unjust enrichment.

B. Determination

(i) the existence of a taxation requirement

A) First, we examine the part concerning the value-added tax among the instant taxation disposition.

Value-added tax is subject to the supply of goods or services directly produced by a business operator or produced in connection with the business, and the supply of goods and services is used and consumed.

Since the act refers to an act that is essentially unrelated to the transfer of ownership of goods and services (see, e.g., Supreme Court Decision 87Nu909, Jun. 28, 198). Furthermore, considering Articles 6(1) and 9 of the former Value-Added Tax Act (amended by Act No. 10409, Dec. 27, 2010; hereinafter “former Value-Added Tax Act”) and Article 14 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22578, Dec. 30, 2010), the supply of goods means the delivery or transfer of goods based on all contractual or legal grounds, and in light of the nature of value-added tax, such delivery or transfer is premised on the act of transferring ownership so that the goods can be consumed by consumption of the goods. If an entrepreneur concludes a sales contract for the sale of a building under the name of the other party to the transaction, even before the registration of transfer under the name of the other party to the transaction, it constitutes an exclusive supply of goods.

According to the above facts, the contract of this case is a promise of accord and satisfaction to transfer the 7 households of this case to the non-party company in lieu of the payment of its debt, and if the plaintiff transferred possession to the non-party company so that the non-party company can exclusively use and dispose of each of the above buildings, even if the non-party company's name has not been registered for transfer of ownership under the non-party company's name, it constitutes a supply of goods under the former Value-Added Tax Act. Thus, the plaintiff's assertion that the contract of this case does not constitute the supply of goods under the former Value-Added Tax Act merely because the non-party company's name

However, following the conclusion of the instant contract, as to whether the Plaintiff, as the de facto owner of the instant officetel, had the non-party company transferred possession to the non-party company for exclusive use and disposal of the instant officetel seven households, the Plaintiff appears to have concluded the instant contract with the non-party company and had the non-party company use the instant officetel seven households until the time of the instant taxation disposition. However, in light of the contents of the Plaintiff urged the non-party company to take over the transfer registration of the instant officetel six households around August 23, 2013, the Plaintiff: (a) decided to transfer a part of the instant officetels as payment in substitutes; (b) reserved to the non-party company; and (c) changed the sales price of the instant officetels to settle and pay the acquisition price of the instant officetels to the non-party company; (d) it is difficult to conclude that the non-party company had already agreed to use the instant officetel as temporary owner of the entire building until the sale price of the entire building; and (e) it is difficult for the Plaintiff to have agreed to take over the instant disposition as to the non-party company at the time of this case.

As to this, the defendant asserts that the non-party company should be deemed to have already supplied goods because the non-party company had already obtained approval for use of the instant officetel and could use it under the instant contract, but the possibility of general use and profit-making on the instant officetel cannot be deemed to have been the transfer of possession that can be exclusively disposed and used. Thus, the defendant's above assertion is without merit.

Therefore, the part concerning value-added tax in the instant taxation disposition is deemed to have not satisfied the taxation requirement of the supply of goods at the time of the disposition.

B) Next, we examine the part concerning corporate tax of the instant taxation disposition.

Article 40(2) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter referred to as the "former Corporate Tax Act") and Article 68(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010; hereinafter referred to as the "former Enforcement Decree") provide that the business year of accrual of gross income and deductible expenses for the transfer of assets other than commodities, products, or other products shall be the business year which includes the date on which the price is settled: Provided, That in cases where the transfer of ownership, etc. (including the registration) is made before the price is settled, or the other party distributes the relevant assets or uses them for profit, it shall be the date of transfer (including the date of registration), delivery,

In light of the provisions of the former Corporate Tax Act and the Enforcement Decree of the same Act concerning the period of attribution of such income, if the Plaintiff, a real estate broker, has liquidated the price of the instant officetel, delivered it to the other party, or allowed the other party to use it for profit, even before the registration of ownership transfer was completed, the income accrued from the transfer of the relevant asset shall be deemed to have been reverted to the Plaintiff as of that time. As such, the Plaintiff’s assertion that the registration of ownership transfer was made in the name of the non-party company pursuant to the contract of this case and the payment should take effect, but the relevant income should be attributed to the Plaintiff is without merit (Supreme Court Decision 86Nu10695 Decided June 26, 190, which is invoked by the Plaintiff, is related to the special surtax provided in Article 59-2

However, in order to say that the transfer of assets under the former Corporate Tax Act has been attributed to the company, either of the liquidation, delivery, or use or profit-making should be made prior to the registration. In this case, delivery and profit-making refer to the transfer of possession to enable the other party to exclusively dispose of and use the relevant assets as the de facto owner. As seen earlier, the non-party company's transfer of and profit-making from the instant officetel after the conclusion of the instant contract is merely the temporary permission for the use of the instant officetel until the time of the sale of the entire officetel, rather than the premise of exclusive disposal and use as the owner. There is no evidence to support that the settlement of the price for the seven households of the instant officetel between the Plaintiff and the non-party company has already been completed, or that the delivery or profit-making has been finally made under the former Corporate Tax Act.

Therefore, the part concerning the Corporate Tax Act of this case regarding the taxation disposition of this case should be deemed to have not satisfied the taxation requirement such as the reversion of earnings from the transfer of assets at the time of the disposal.

2) Whether the instant taxation disposition is unreasonable and invalid as a matter of course

A) In order for a taxation disposition to be deemed null and void as a matter of course, the mere fact that there is an unlawful ground for the disposition is insufficient, and the defect is objectively and objectively in violation of important Acts and subordinate statutes, and in determining whether the defect is significant and apparent, the purpose, meaning, function, etc. of the laws and regulations, which serve as the basis for the pertinent taxation, shall be examined as a teleological purpose and at the same time, reasonable consideration should be given on the specificity of the specific case itself (see, e.g., Supreme Court Decision 90Meu10862, Nov. 27, 1990). However, in a case where a person who does not have any factual basis for the legal relation, income, or act, etc., which is generally subject to taxation, is deemed to have a significant and obvious defect. However, in a case where an objective reason exists to believe that it is subject to taxation with respect to a certain legal relation or fact that is not subject to taxation, if it can only be found that the factual basis is apparent even if the defect is serious, and it cannot be deemed unlawful (see, etc.).

B) The following circumstances revealed from the above facts in this case, namely, ① the Plaintiff entered into the instant contract with the non-party company on December 17, 2010, and deemed that the non-party company allowed the non-party company to use the instant officetel 7 households around that time. In light of the fact that the period of use is about three years as of the time of the instant taxation disposition, the Defendant transferred possession to the non-party company pursuant to the instant contract so that the non-party company can be allowed to exclusively dispose of the instant officetel and use it (However, the Plaintiff could have deferred its registration until the subsequent sale to the general consumer). Furthermore, the Plaintiff’s tax investigation cannot be seen as not only the Plaintiff’s debt amount extinguished by the payment in kind, but also the value of the officetel transferred to the non-party company by payment in kind. Furthermore, the Plaintiff’s tax investigation cannot be seen as having been made in light of the circumstances that the non-party company could not be seen as imposing the rights and obligations on the instant officetel without any other three households.

3) Sub-decisions

Therefore, the Plaintiff’s assertion that the instant taxation is void as a matter of course is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is with this conclusion.

Since the plaintiff's appeal is legitimate, it is dismissed as it is without merit. It is so decided as per Disposition.