Suwon District Court-2017-Guhap6207 ( December 20, 2017)

The Plaintiff cannot be deemed to have increased net assets other than marginal profits from the transfer of the instant land.

In the process of the purchase and sale of the land in this case, the plaintiff only acquired KRW 200 million in the name of transfer margin, and as a separate corporate tax was imposed thereon, it cannot be said that the plaintiff acquired the entire sale price as actual profit.

Article 15 (Scope of Gross Income)

2018Nu32042 Revocation of Disposition of Corporate Tax Imposition

O Industrial Development Co., Ltd.

O Head of tax office

Suwon District Court Decision 2017Guhap62007 Decided December 20, 2017

November 6, 2018

December 4, 2018

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant’s disposition of imposing corporate tax of KRW 540,457,760 (including additional tax on negligent tax returns of KRW 33,301,975, and additional tax on negligent tax of KRW 174,136,030) for the year 2010 against the Plaintiff on January 7, 2016 is revoked.

2. Purport of appeal

The judgment of the first instance is revoked, and the plaintiff's claim is dismissed.

1. Basic facts

The court's explanation on this part is the same as the corresponding part of the judgment of the court of first instance, and thus, this part is cited in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Whether the disposition is lawful;

A. The parties' assertion

1) Plaintiff

In around 2010, the Plaintiff had almost little possessed assets, and around July 2010, the Plaintiff did not engage in any other business than purchasing KRW 3.2 billion of the instant land and selling it in KRW 3.2 billion. The Plaintiff paid KRW 3 billion of the purchase price of the said land in borrowed money from the Plaintiff, the actual operator of the Plaintiff, from his branch. The Defendant, without disclosing the source of the purchase price of the said land, made the instant disposition with only the instant money, which is a part of the purchase price of the said land, and thus, the instant disposition was unlawful.

2) Defendant

Since the Plaintiff did not enter the sales price in the account book and omitted a report on its sales, the sales price should be included in the Plaintiff’s profit in the business year 2010 business as the transfer amount of assets under Article 11 subparag. 2 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22812, Mar. 31, 201; hereinafter the same). Furthermore, since the Plaintiff leaked out the sales price out of the instant amount to the company and reverted to Park O, an actual operator of the Defendant, the Defendant included the said amount in the Defendant’s gross income and disposed of it as a bonus to Park O, who is the person to whom it belongs, is legitimate under Article 67 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) and Article 106(1)1(b) of the former Enforcement Decree of the Corporate Tax Act.

However, even if it is not so, since the funds borrowed by the Plaintiff for the purchase of the land of this case are assets increase profits or debt exemption profits, it is legitimate for the Defendant to include the above funds in gross income pursuant to Article 11, subparagraph 5 or 6 of the former Enforcement Decree of the Corporate Tax Act and dispose of them as bonus to Park O as a bonus pursuant to Article 67 of the former Corporate Tax Act and Article 106 (1) 1 (b) of the Enforcement Decree of the same Act.

(b) Related statutes;

This Court's explanation is consistent with the reasoning of the judgment of the court of first instance, except for the addition of the following matters to the judgment of the court of first instance. Thus, this part is cited in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

○ In Part 8, paragraph 9, the following shall be added to the decision of the first instance court:

Article 4 (Real Taxation)

(1) Where a corporation to which all or part of revenues accruing from assets or business legally reverts and a corporation to which it actually reverts are different, this Act shall apply to the corporation to which the revenue actually accrues.

(2) The provisions concerning the calculation of the amount of taxable income subject to corporate tax shall apply according to the substance, notwithstanding the name or form of such income and profits.

○ In Part 9 of the first instance judgment, the following shall be added to the following:

5. The value of assets received without compensation;

6. The reduced amount (including the amount in the proviso to Article 17 (1) 1 of the Act) of liabilities due to the exemption from or expiration of debts;

C. Determination

1) The main sentence of Article 3(1) and each subparagraph of the former Corporate Tax Act provide that "the corporate tax shall be imposed on the income for each business year (subparagraph 1), liquidation income (subparagraph 2), land, etc. under Articles 5-2 and 95-2, and Article 14(1) provides that "the income for each business year of a domestic corporation shall be the amount obtained by deducting the total amount of deductible expenses belonging to that business year from the total amount of gross income belonging to that business year." In addition, Article 15(1) of the former Corporate Tax Act provides that "the amount of gross income shall be the amount of income generated from transactions that increase the net assets of that corporation, except as otherwise provided for in this Act, except as capital, financing, and this Act." Article 11(2) of the former Enforcement Decree of the Corporate Tax Act provides that "the amount of income under Article 15(1) of the Act shall be included in the transfer of assets.

Where a corporation fails to transfer its assets and enter the transfer proceeds in the account book, barring any special circumstance, it shall be deemed that the amount equivalent to the transfer proceeds not entered in the account book has been leaked out of the company, and a taxpayer who asserts such special circumstance must prove that such transfer proceeds are not leaked (see Supreme Court Decision 2005Du2049, Dec. 21, 2006). The income of a corporation that has not been entered in the account book has no choice but to be disposed of as bonus for the representative under Article 67 of the Corporate Tax Act and Article 106(1)1 of the Enforcement Decree of the Corporate Tax Act, unless it is clear that the income belongs to the corporation, and in this case, the burden of proving the legality of a taxation disposition exists at the tax office, and thus, it is difficult to prove that the income subject to taxation has been attributed to the pertinent tax office during the pertinent business year, regardless of whether it belongs to the income subject to taxation for a certain business year (see, e.g., Supreme Court Decision 2007Du16858, May 23, 208.).

2) On August 23, 2010, the Plaintiff sold the instant land to the OO of a school foundation for KRW 3.2 billion, and omitted matters concerning the transfer of the said land (such as transfer income, etc.) upon filing a corporate tax return for the Defendant for the year 2010, as seen earlier. According to each of the statements in the evidence Nos. 1, 1, 3, and 5, the Plaintiff did not enter matters concerning the purchase and sale of the instant land in the Plaintiff’s corporate account book, and the part of the sales price (including the instant money) was leaked to the Plaintiff’s actual operator O, the Plaintiff’s representative director, etc.

On the other hand, the following facts can be acknowledged in full view of the purport of the entire pleadings in each statement of evidence Nos. 4, 5, 2, 10, 11 (including paper numbers).

① On July 1, 2010, the Plaintiff purchased the instant land in KRW 3 billion (hereinafter referred to as “the instant purchase price”) from four and KimO, and sold the said land in KRW 3.2 billion on August 23, 2010 immediately thereafter.

② On March 8, 2016, after the instant disposition, the Defendant rendered a decision (revision) and disposition of corporate tax for the business year 2010, which included the Plaintiff’s corporate tax base in the amount of KRW 200 million (i.e., KRW 3., KRW 3 billion) from the sale of the instant land (i.e., KRW 3., KRW 3 billion).

③ The Plaintiff’s account in the Plaintiff’s name was deposited only with an amount of less than KRW 100 million from April 2010 to July 2010. Of the instant sales price, KRW 1.5 billion out of the sales price and KRW 1.5 billion on July 26, 2010, and KRW 1.7 billion on August 6, 2010 were deposited into each of the instant Obank accounts.

④ However, the Plaintiff’s purchase and sale of the instant land was carried out by the president of the OO, and at the same time, ordering OO and OO to prepare a site for the KO2’s training center operated by the OO2. In other words, OO also purchased KRW 6.4 billion for the real purchase price of the instant land, including the instant land, as the site for the OO2 training center, and KRW 9.2 billion for the sales price under the contract, and the said sales price was paid in exchange for delivery from the O2 and the O20, thereby allowing OO to prepare for the remainder of KRW 1.5 billion, excluding various taxes and expenses.

3) Examining the above facts in light of the legal principles as seen earlier, the Plaintiff merely transferred ownership registration under the name of the Plaintiff’s actual operator, Gao, the representative director of the Plaintiff, and Mao Institute’s president, pursuant to the internal agreement to raise funds between Gao and Gao, and immediately transferred it to the side of the Oo Institute and only acquired KRW 200 million in the name of transfer margin (as seen earlier, corporate tax was imposed separately), and the Plaintiff cannot be said to have actually earned the total sales proceeds.

The disposition of this case is based on the premise that the money of this case 1.642 billion won, out of the sale price of 2.314 billion won which the plaintiff leaked out of the company's company, was leaked to GabO, and as long as it cannot be deemed that the sale price itself should be included in the plaintiff's gross income, the disposition of this case which is based on the premise that the plaintiff distributed the money of this case to GabO is unlawful since there is no ground for the disposition of this case.

In addition, even if the defendant's conjunctive assertion that the funds borrowed by the plaintiff for the purchase of the land of this case are assets increase profit or loan exemption profit, the plaintiff did not borrow any money or have received any donation for the purchase of the land of this case, so the defendant's conjunctive assertion is without merit.

3. Conclusion

Therefore, the judgment of the first instance court is just, and the defendant's appeal is dismissed as it is without merit.