Seoul High Court 2011Nu36137 (2012.05.03)

Cho High Court Decision 2010No3321 ( October 14, 2011)

The judgment of the court below that claims for indemnity are not directly related to business income is legitimate.

The judgment of the court below that a claim for indemnity has no direct connection with business income is legitimate. The judgment of the court below that did not recognize the claim for indemnity as losses of the plaintiff since the plaintiff did not appropriate the claim for indemnity in the necessary expenses as bad debt in the account book.

2012du12143 Disposition of revocation of refusal to correct income tax;

XX

head of Sung Dong Tax Office

Seoul High Court Decision 2011Nu36137 Decided May 3, 2012

September 27, 2012

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1 and 2

In light of the records, the court below did not err in finding facts beyond the limit of the principle of free evaluation of evidence in violation of the principle of logic and competition, or in misunderstanding the relevant legal principles, even if the claim for indemnity was not directly related to the business income of this case.

In addition, in calculating business income, bad debts corresponding to necessary expenses are classified into cases where the pertinent claim is legally extinguished and where the pertinent claim is not legally extinguished, but where the accounting perception that it is impossible to recover assets in light of the debtor's asset status and payment ability, etc. Of these, bad debts can be included in the necessary expenses for the pertinent taxable year only when the business operator clearly becomes unable to recover and appropriated as necessary expenses in the account book (see Supreme Court Decisions 2002Du7227, Dec. 11, 2003; 2005Du6737, Jun. 1, 2007). However, according to the records, the Plaintiff appears to have not appropriated the above claim for indemnity as necessary expenses in the account book, so in this regard, the judgment of the court below that did not recognize it as the plaintiff's loss is justified. The ground for appeal is without merit.

2. As to the third ground for appeal

The allegation in the grounds of appeal on this part is that the actual burden of the loan of this case is erroneous to determine that the court below determined that the actual burden of the loan of this case is insufficient evidence to regard it as the plaintiff, even though it conforms to the principle of substantial taxation by including the loan of this case as necessary expenses of the plaintiff.

However, the recognition of facts is within the discretionary power of the fact-finding court unless it exceeds the bounds of the principle of free evaluation of evidence. In light of the record, the lower court did not seem to have erred by exceeding the bounds of the principle of free evaluation of evidence in determining that there is a lack of evidence to acknowledge that the instant loan was substantially borrowed by the Plaintiff in the name of XX stock company. The

3. Conclusion

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.