Plaintiff (Law Firm Sejong, Attorneys Clerks-won et al., Counsel for the plaintiff-appellant)

Head of Namyang District Tax Office

November 23, 2012

District Court Decision 2011Guhap3246 Decided April 17, 2012

1. Of the judgment of the first instance court, the part against the plaintiff falling under the order to revoke below shall be revoked.

The Defendant’s disposition of imposition of KRW 26,751,907 on global income tax accrued in 2006 against the Plaintiff on November 3, 2009 is revoked.

2. The plaintiff's remaining appeal is dismissed.

3. 70% of the total litigation cost shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

The judgment of the first instance shall be revoked. The imposition of global income tax of KRW 94,944,380 (including penalty tax for failure to report and pay) for the Plaintiff on November 3, 2009 shall be revoked.

1. Details of disposition;

The reason for this part of the judgment is as stated in the corresponding part of the judgment of the court of first instance. It shall be quoted in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The plaintiff was registered as the representative director on the corporate register of the non-party company from January 1, 2006 to November 8, 2006. However, for the above period, the actual control over the management of the non-party company was not only over the representative in form but also over the non-party 1 and the non-party 2, who held not less than 30/10 of the total number of issued and outstanding shares of the company. In particular, during the period from June 2, 2006 to November 2, 2006, the plaintiff and the non-party 2 were registered as the joint representative director, and thus, the disposition of this case on a different premise is unlawful.

2) The processing purchase amount of this case occurred in the process of circulation transaction without real transaction by non-bred Korea Co., Ltd., Co., Ltd., Co., Ltd., Co., Ltd, Co., Ltd., and Non-Party Co., Ltd., paid the price of goods equivalent to the value of supply stated in the false purchase tax invoice to Co., Ltd., and received no return thereof, this payment shall be deemed to have been ultimately reverted to the above company. Therefore, the disposition of this case on the premise that the ownership of the above amount is unclear is unlawful.

3) The notification of the change in the amount of income to the plaintiff should be made by the head of Dong-gu Tax Office or the head of Daejeon Regional Tax Office having jurisdiction over the location of the head office on the register of the non-party company, but the head of Jung-gu Regional Tax Office without authority. Therefore, the penalty tax on the premise of the notification of the change in amount of income

4) Even if not, the initial date of calculation of the penalty tax in bad faith is the day following the end of the month following the month in which a notice of change in the amount of income was received, and the Defendant, as the initial date of calculation on June 1, 2007, which was the day following the due date of the final return on the global income tax base, was deemed as the initial date.

B. Determination

1) As to the allegation in the above 1)

The reason for this part is the corresponding part of the judgment of the court of first instance (from 19 up to 14 pages 19 up to 5 pages). It shall be quoted in accordance with Article 8(2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

2) As to the allegation as to the above 2)

Although not only written evidence Nos. 2 and 3 but also the plaintiff's own assertion, the non-party company can recognize the fact that the non-party company received only a false tax invoice from the Co., Ltd. without any actual transaction. Thus, the above argument that the non-party company paid the price equivalent to the price of the above tax invoice to the Co., Ltd. to the Co., Ltd. is not reasonable in itself. The plaintiff's above argument cannot be accepted.

3) As to the allegation as to the above 3

According to Articles 9(1), 12, and 66(1) and (2) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter “former Act”), Article 67 of the former Act provides that the head of a tax office or a regional tax office having jurisdiction over the place of tax payment (the head office or the principal office on the corporate registry) shall determine or rectify the tax base and amount of corporate tax. Article 67 of the former Act provides that the head of a tax office or a regional tax office having jurisdiction over the place of tax payment (the head office or the principal office on the corporate registry) shall have jurisdiction over the tax office (the head office or the head of a regional tax office having jurisdiction over the place of tax payment) which determines or revises the corporate tax base pursuant to Article 66 of the former Act. Since the notice of change in the amount of income refers to the notification of change in the amount of income on the premise that the head of a tax office or the head of a regional tax office having jurisdiction over the place of tax payment is not unlawful.

According to this, the head of Dong-gu Tax Office or the head of the Daejeon District Tax Office having jurisdiction over the location of the head office in the register of the non-party company, which is the place of tax payment, is the tax authority having jurisdiction over the notification of change in the amount of income to the plaintiff. Therefore, the notification of change in the amount of income to the plaintiff made by the director of the Daejeon District Tax Office is illegal

Meanwhile, Article 134(1) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034, Feb. 18, 2010) provides that the additional return and payment deadline of the tax base and the amount of tax on the income resulting from a change in income disposal shall be postponed by the end of the month following the month in which the notice of change in the amount of income is received after the expiration of the statutory due date of global income tax base return. In full view of the purport of such provision and the fact that the penalty tax in bad faith of return and payment is imposed as administrative sanctions on the failure to report and pay the amount of tax on the income resulting from a change in income by the disposal of income after the due date of the statutory due date of final return of global income tax base is calculated by counting from the date following the end of the month following the month in which the notice of change in the amount of income (see Supreme Court Decision 2004Du9944, Jul. 27, 2006).

However, as seen earlier, the notification of the change in the amount of income to the Plaintiff was made by the director of the Central Tax Office without jurisdiction, and thus, the penalty tax cannot be imposed on the premise of such notification and payment in good faith. Therefore, the portion of KRW 26,751,607, which constitutes penalty tax for the failure to report and pay in the instant disposition, is illegal

The defendant asserts that the notification of change in the amount of income can not be asserted as a defect in a lawsuit disputing the detailed details and disposition of the global income of this case, which is an act subsequent to the preceding act, even if there is a defect that occurs a defect on the premise that the notification of change in the amount of income is a disposition subject to appeal litigation. However, the legal principles that can be applied to the notification of change in the amount of income of the corporation and the notification of tax payment premised on it (collection disposition) can be seen as belonging to an officer or employee, and in case the tax authority disposes of the amount of income as a bonus, it is deemed that the amount of income out of the company belongs to the officer or employee, and as a result, the tax withholding obligation is established on the date when the notification of change in amount of income was delivered to the corporation as the payer of the amount of income, and as such, if the disposition of income was made regardless of whether the notification of change in amount of income was delivered to the corporation, it cannot be seen as being affected by the plaintiff 20 (amended by Act No. 8140, Dec. 30, 2006).

C. Sub-committee

Therefore, among the dispositions of this case, the part of the principal tax of KRW 68,192,773 is lawful, and the part of the penalty tax of KRW 26,751,607 is unlawful.

3. Conclusion

Thus, the plaintiff's claim of this case shall be accepted within the scope of the above recognition, and the remaining claims shall be dismissed as it is without merit. Since the judgment of the court of first instance is unfair with a different conclusion, part of the plaintiff's appeal shall be accepted, and the part against the plaintiff falling under the above part among the judgment of the court of first instance shall be revoked, and the above part of the disposition of this case shall

Judges Kim Jong-chul (Presiding Judge)