Corporation 2013-0061

Key Credit does not meet the requirements for inclusion of bad debts in deductible expenses.

The reason why the head of a tax office closes the business ex officio cannot be readily determined as having practically closed the business, and where it is objectively clear that the collection of claims became impossible, the bad debt will be included in deductible expenses.

Article 19-2 of the Corporate Tax Act

Revocation of Disposition Imposing Corporate Tax

○○ Co., Ltd.

○○ Head of tax office

July 25, 2014

September 2, 2014

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of corporate tax of KRW 678,197,270 for the business year of 2011 against the Plaintiff on July 1, 2013 is revoked.

1. Details of the disposition;

A. The Plaintiff is a company engaged in civil engineering, construction business, real estate sale and lease business, and ○○ Development Co., Ltd. (hereinafter referred to as “○○○ Development”) is a company established to carry out the lease business, etc. by winning a successful bid of ○○○○ apartment located on July 8, 201, where construction was suspended due to the failure to pay for the existing Si events, ○○○ apartment located on the surface of ○○○○ ○○○○○○○, which was located on the surface of the existing Si, (hereinafter referred to as “instant apartment”).

B. On July 25, 2011, the Plaintiff entered into an investment agreement between ○○○ Rental Apartment (hereinafter “instant investment agreement”) with ○○○○○○○○ Development (hereinafter “instant loan”). Around that time, the Plaintiff lent KRW 2.5 billion to ○○○ Development in accordance with the instant investment agreement (hereinafter “instant loan”).

C. In the auction procedure of the instant apartment at ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○, which had been progress with the instant apartment as an object of auction, the ○○○○○○○○○○○○○○○○○○○○○○○ was participating in the bidding on July 25, 201 after paying a deposit for a purchase purchase on July 25, 201. On August 1, 2011, the ○○○ District Court decided to permit the sale of the apartment at the highest bidder. However, the ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○.

D. In the event that ○○○○ Development’s apartment without being awarded a successful bid and the deposit for purchase was reverted to the National Treasury in the amount of KRW 3.666 million, the Plaintiff treated the loan claim of this case as bad debt and added it to deductible expenses in the business year 2011.

E. As a result of the tax investigation conducted against the Plaintiff, the director of ○○ Regional Tax Office denied the inclusion of the instant loan claims in deductible expenses and notified the Defendant of the taxation data by deeming that the impossibility of collecting the instant loan claims was not finalized during the business year 2011. Accordingly, on July 1, 2013, the Defendant issued a correction and notification of KRW 678,197,270 to the Plaintiff for corporate tax for the business year 201 (hereinafter “instant disposition”).

F. The Plaintiff dissatisfied with the instant disposition and filed a petition for review on November 8, 2013, and the Commissioner of the National Tax Service dismissed the Plaintiff’s petition for review on January 27, 2014.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3, 8, 10, Eul evidence No. 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

① ○○○ Development is a corporation established in order to carry out the business of leasing an apartment of this case with a successful bid for the apartment of this case. The above business is the only business that promoted ○○○ Development. The ○○○○○ Development without a successful bid for the apartment of this case was reverted to the National Treasury, and it was closed as of December 31, 201, and ② the ○○○ Development’s total capital -3,618,83,600 won on the standard balance sheet as of December 31, 201, when the Plaintiff’s total capital -3,618,63,600 won on the standard balance sheet as of December 31, 201, and the loan of this case was appropriated as the loan of this case as other large capital losses during the business year of 2011, and the loan of this case was appropriated as the loan of this case as the loan of this case, despite the fact that the Plaintiff satisfied the requirements of Article 119(2)1 of the Enforcement Decree of the Corporate Tax Act.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

(1) On July 25, 2011, between the Plaintiff and ○○○○○ Development, the “Written Agreement on Investment in ○○○ Rental Housing” was drawn up between the Plaintiff and ○○○○○ Development. The main contents are as follows.

The Plaintiff (hereinafter referred to as “A”) and ○○○○ Development (hereinafter referred to as “○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○”) agreed to make a joint effort as a mutual trust in order to ensure the success of business objectives and to create high profits.

A. L. L. L.I.

1. Participation in investment;

1) A shall invest 2.5 billion won to B.

2) A and B are the full exercise of Gap’s shares following the investment in the main project and the waiver of the existing participants’ business.

2. Participation in the management of the company;

1) A has the right to appoint the representative director and the board of directors’ operation of B.

2) A’s prior approval shall be obtained with respect to the execution of all tasks and expenses related to the management of B.

3) A may actively participate in and perform the duties of the external duties for the promotion of B’s projects.

(2) The Plaintiff paid KRW 2.5 billion for ○○○ Development in accordance with the instant investment agreement. On December 31, 201, the standard balance sheet as of December 31, 201, the Plaintiff included KRW 2.0 billion in the short-term loan account among current assets and KRW 525,207,060 in the advance payment account. As of December 31, 201, the standard balance sheet as of December 31, 201 of ○○ Development was appropriated in the long-term loan account, which is an item of non-exclusive debt.

(3) On July 25, 2011, in-house directors, who hold 95% of the Plaintiff’s shares, were to take over 100% of the shares of ○○○ Development on the same day, and were appointed as the joint representative director of ○○ Development on the same day, and became the sole representative director of ○○ Development on October 17, 201.

(4) On January 3, 2012, ○○ Development filed an appeal against the above dismissal decision on June 19, 2012, on the premise that the instant apartment was defective, pursuant to Articles 578(1) and 572 of the Civil Act, with ○○○ Development, and sought the cancellation of the sales contract on the instant apartment with ○○○○ Development, and sought the return of the deposit for purchase request made by ○○○ Development along with the cancellation of the sales permit decision on ○○○ Development. The ○○ District Court dismissed the application for ○○○ Development on the ground that the ○○○○○ Development filed an appeal against the said dismissal decision on November 5, 2012. However, the ○○ District Court dismissed the appeal by ○○○○○ Development on the ground that the ○○○○○ Development was dismissed (○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ Development).

(5) On the other hand, on August 28, 2012, the head of ○○ Tax Office closed the business of ○○ Development on December 31, 2011, on which the date of closure was December 31, 2011.

[Ground of recognition] Facts without dispute, Gap evidence 4, Gap evidence 5-1, 2, Gap evidence 6 and 7, the purport of the whole pleadings

D. Determination

(4) Since ○○○○○○○○○○○○○○○○’s disposal of the foregoing facts by taking account of the following facts revealed during the pertinent business year, i.e., commencement and closure of business under the Value-Added Tax Act, regardless of whether the pertinent facts were registered or reported (see Supreme Court Decision 96Nu16193, Jun. 27, 197), the head of the relevant tax office’s disposal of the ○○○○○○○○○○○○○○’s disposal of the closure of business on December 31, 2011 cannot be readily concluded that the ○○○○○○○○○○○○○○○’s disposal of the ○○○○○○○○○○○○○○○○○○’s disposal of the loan was impossible. As such, it was difficult to readily conclude that the ○○○○○○○○’s sales of the loan had been subject to revocation of the ownership of the loan on December 31, 2011.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.