Seoul High Court 2011Nu5300 ( November 18, 2011)

National Tax Service Review Income 2009-0133 (20103.09)

If acquisition tax belonging to year 2005 is finalized in 2009, it constitutes necessary expenses for the final business year 2009.

The necessary expenses are limited to the expenses corresponding to the total amount of income, which are not appropriated as the necessary expenses before the relevant year, and since the acquisition tax, etc. was determined in the business year 2009, it shall be deemed as the necessary expenses of the business year 2009 even if it belongs to 2005.

2011Du33020 Revocation of Disposition of Imposing global income tax, etc.

-Appellant

XX

-Appellee

Head of Sungnam Tax Office

Seoul High Court Decision 2011Nu5300 Decided November 18, 2011

May 24, 2012

The part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the Seoul High Court.

The plaintiff's appeal is dismissed.

The grounds of appeal are examined.

1. As to the Defendant’s ground of appeal

A. Article 27(1) of the former Income Tax Act (amended by Act No. 8144, Dec. 30, 2006; hereinafter the same) provides that the amount to be included in the necessary expenses shall be the total sum of expenses corresponding to the total amount of income in the current year, which is generally accepted. Article 27(2) of the same Act provides that the expenses corresponding to the total amount of income in the current year, which are determined in the current year, shall be deemed the necessary expenses in the current year only if they are not appropriated as the necessary expenses before the current year. In relation to Article 5 of the former Income Tax Act concerning the taxable period under Article 27(1) of the same Act, and Article 39 of the same Act concerning the year to which the total amount of income and necessary expenses belong, the amount to be included in the necessary expenses shall be deemed the expenses corresponding to the total amount of income in the current year, which are determined in the same period, and Article 27(2) of the same Act shall be construed as the necessary expenses in the current year, not the revenue year even if the expenses corresponding to the revenue prior to the current year (see Supreme Court Decision 94Nu.

B. Review of the reasoning of the lower judgment and the record reveals the following facts.

1) After investigating the Plaintiff in 2008, the director of the Central Regional Tax Office confirmed the fact that the Plaintiff purchased the forest land from North-Gu, 479, and 61 lots of land from January 28, 2005 to March 17, 2005, and then transferred the land to 000 won in total, from March 17, 2005, to △△ branch Co., Ltd and △△ branch Co., Ltd.

2) On July 1, 2009, the Defendant issued the instant disposition imposing global income tax of 000 won (including additional tax on negligent tax returns of 000 won and 000 won for additional tax on negligent tax return) for the reason that the forest land capital gains from transfer constituted business income to the Plaintiff in 2005, and subsequently corrected the additional tax on negligent tax on July 28, 2009 to 000 won.

3) Meanwhile, the head of Si/Gun/Gu, who received taxation data from the director of the Central District Tax Office, imposed the principal tax of 000 won by the acquisition tax and special tax for rural development (hereinafter referred to as "acquisition tax, etc.") on the portion of the said forest land which was not resold, and the Plaintiff paid it around that time.

C. Examining these facts in light of the relevant statutes and the legal principles as seen earlier, the above acquisition tax, etc. was determined as necessary expenses only for the business year 2009 when the head of the Si/Gun/Gu rendered the disposition of imposition against the Plaintiff. Thus, even if it is corresponding to the income of the business year 2005, it should be deemed as necessary expenses for the business year 2009, not for the business year

D. Nevertheless, the lower court determined as necessary expenses for the business year 2005 the principal tax, including the above acquisition tax, to be reverted to the business year 2005, solely based on the circumstances indicated in its reasoning, such as that the above tax liability, including acquisition tax, was established in the year 2005. In so doing, the lower court erred by misapprehending the legal doctrine on the time when necessary expenses

2. As to the Plaintiff’s appeal

The plaintiff did not state the grounds of appeal in the petition of appeal, and did not submit the appellate brief within the due period for submission of the appellate brief.

3. Conclusion

Therefore, the part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. The Plaintiff’s appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.