[1] The method of calculating "transfer amount of assets" to be included in gross income, which is profits generated from the exchange of assets

[2] The meaning of "market price" under Article 72 (1) 5 of the former Enforcement Decree of the Corporate Tax Act and the method of calculating "market price" where its price is unclear and the burden of proving the market price in this case (=a taxable authority)

[1] Articles 15(1) and (3), and 41(1)3 of the former Corporate Tax Act (Amended by Act No. 10423, Dec. 30, 2010); Articles 11 subparag. 2 and 72(1)5 (see current Article 72(2)6) of the former Enforcement Decree of the Corporate Tax Act (Amended by Presidential Decree No. 17033, Dec. 29, 2000); / [2] Articles 15(1) and (3), 41(1)3, and 52(2) of the former Corporate Tax Act (Amended by Act No. 10423, Dec. 30, 2010); Article 15(1) and (2)9 of the former Enforcement Decree of the Corporate Tax Act (Amended by Presidential Decree No. 17035, Dec. 29, 200; Presidential Decree No. 1961, Apr. 19, 2007>

[1] Supreme Court Decision 2008Du5650 Decided July 28, 201 (Gong2011Ha, 1831) / [2] Supreme Court Decision 2003Du12493 Decided October 27, 2004

Central Reporting Co., Ltd. (Attorneys Lee Im-soo et al., Counsel for the defendant-appellant)

The director of the tax office

Supreme Court Decision 2007Du18017 Decided March 25, 2010

Seoul High Court Decision 2010Nu10220 decided November 1, 2011

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Article 15(1) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) provides, “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.” Article 15(3) provides, “The scope and classification of profit under the provisions of paragraph (1) shall be prescribed by the Presidential Decree.” Article 11 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1703, Dec. 29, 200; hereinafter the same) delegated by the former Corporate Tax Act provides, “The amount of transfer of assets” as one of the profits, and Article 72(1)3 of the former Enforcement Decree of the Corporate Tax Act provides, “The method of calculating the acquisition value of assets, other than the acquisition value of assets, which it purchased from Article 41(1)1 through 4 and Article 5 of the former Enforcement Decree of the Corporate Tax Act.”

In light of the contents of the above provisions and their legislative purport, “transfer amount of assets,” which shall be included in gross income as profits from the exchange of assets, shall be calculated by the “market price at the time of acquisition” as stipulated by Article 72(1)5 of the former Enforcement Decree of the Corporate Tax Act, barring any special circumstance (see, e.g., Supreme Court Decision 2008Du5650, Jul. 28, 201).

Meanwhile, without separately stipulating the concept of “market price” under Article 72(1)5 of the former Enforcement Decree of the Corporate Tax Act or the method of calculating the market price, however, Article 16-2 of the former Enforcement Rule (wholly amended by Ordinance of the Ministry of Finance and Economy, May 24, 1999) of the former Enforcement Decree of the Corporate Tax Act (wholly amended by Presidential Decree No. 15970, Dec. 31, 1998) provides that “market price under Article 52 of the Act” shall be deemed “market price” under Article 14(1)1(c) of the former Enforcement Rule of the Corporate Tax Act (wholly amended by Ordinance of the Ministry of Finance and Economy, No. 866, May 24, 199) shall be deleted.

In light of the structure and history of the relevant laws and regulations, it is reasonable to view “market price” under Article 72(1)5 of the former Enforcement Decree of the Corporate Tax Act also means the market price under Article 52(1)5 of the former Corporate Tax Act. Thus, in principle, in accordance with Article 52(2) of the former Corporate Tax Act, the “price applied or deemed applicable to sound social norms and commercial practice and normal transactions between persons who are not specially related persons” and in accordance with Article 52(2) of the former Corporate Tax Act. If the price is unclear, the price shall be determined by the “price applied or deemed applicable to sound social norms and commercial practices and ordinary transactions between persons who are not specially related persons.” In accordance with Article 89(2) of the former Enforcement Decree of the Corporate Tax Act, the former Corporate Tax and Gift Tax Act (amended by Act No. 6048, Dec. 28, 199; hereinafter “former Inheritance Tax Act”). In such case, the tax office, who is the Defendant, bears the burden of proving the market price.

2. The court below, citing the reasoning of the judgment of the court of first instance, acknowledged the fact that the plaintiff transferred the original capital business book to the original iona network through the exchange transaction and acquired the stocks of this case, and it cannot be concluded that the market price at the time of acquiring the stocks of this case is the same as the book value of the original flive business book at the time of acquiring the stocks of this case, and on the premise that the defendant did not prove any certification as to the market price at the time of acquiring the stocks of this case, among the disposition imposing the corporate tax of this case, the part that denied the disposal loss of the original flive business book as reported by the plaintiff at the time of acquiring the stocks of this case by denying the inclusion of KRW 2,601,856,391 in deductible expenses of the original flive business book at the time of acquiring the stocks of this case (hereinafter referred to as the "disposition loss portion") shall be revoked in whole as unlawful. Furthermore, the court below determined additionally that the market price at

Examining the reasoning of the judgment below in light of the aforementioned legal principles and records, the court below is just in holding that the book value of the capital capital business division cannot be deemed the market price at the time of acquiring the stocks of this case, and there is no error in the misapprehension of legal principles as to the calculation of market price of stocks acquired through exchange

However, the lower court erred in determining that the market price at the time of acquiring the instant shares cannot be based on the value assessed as a supplementary assessment method stipulated in Article 63 of the former Inheritance and Gift Tax Act. However, according to the records, the Defendant did not additionally assert the grounds for disposition to the effect that the market price at the time of acquiring the instant shares as a supplementary assessment method stipulated in Article 63 of the former Inheritance and Gift Tax Act at the time of closing the argument in the lower court. Therefore, the lower court’s error did not affect the conclusion of the judgment. Ultimately, the allegation in

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee In-bok (Presiding Justice)