Busan High Court Decision 2013 Busan High Court Decision 4852

A revised report on processing expenses shall be filed with the prior knowledge that it will be corrected and collected;

Since a revised return on processing expenses was filed with prior knowledge of correction and collected the amount equivalent to the processing expenses, it cannot be deemed that it was recovered by voluntary efforts, and on the other hand, it is reasonable to see that the subcontract contract was concluded and the price was paid as the retainer, etc., but it was paid as a reward under Article 21 (1) 17 of the Income Tax Act.

Article 67 of the Corporate Tax Act and Article 106 of the Enforcement Decree of the same Act

2015Guhap21023 Revocation

△△△, Inc.

○ Head of tax office

2015.20

o October 20, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

On May 13, 2013, the Defendant revoked the part of KRW 000,000,000 among notice of change in income amount of KRW 200,000,000 belonging to the year 201, in which the income earner, who had been reported by the Defendant to the Plaintiff on May 13, 2013, and revoked the imposition of KRW 00,000,000 for other income tax reverted to year 201.

1. Details of the disposition;

A. On August 13, 2012, the Plaintiff submitted a corporate tax return for the business year 2011 (hereinafter referred to as “instant return”) to the Defendant by a business operator operating the manufacturing business of industrial machinery in the Dong ○○-○○-○, and the Defendant reviewed the return on August 13, 2012, issued a guide for a revised report stating that the Plaintiff shall either file a revised report by September 21, 2012 or submit the relevant data if the details of the report are legitimate (hereinafter referred to as “instant guide”).

Pursuant to the income statement and the report on the manufacturing cost, the amount of the tax invoice received is KRW 00,000,000 among the expenses included in the income statement and the report on the manufacturing cost, but the suspicion of including the purchase cost as KRW 00,000,000,

☞ 경상개발비 000백만 원 …(중략)… 외주가공비 0,000백만 원 합계 00,000백 만원에 대해 명세서 및 세금계산서 등 증빙서류 수취내역 제출

.

B. On October 25, 2012, the Plaintiff appropriated the instant report to the Defendant for processing expenses of KRW 000,000,000 for the cost of outsourcing processing (hereinafter “instant expense”) and filed a revised corporate tax return to the effect that the instant report is non-deductible expenses and disposed of as an internal reserve, and paid KRW 00,000,000 for corporate tax accordingly. The Plaintiff’s representative director, the Plaintiff’s representative director, deposited the amount equivalent to the instant expense into the Plaintiff’s account.

C. From February 27, 2013 to March 28, 2013, the Defendant conducted a tax investigation with the Plaintiff, as a result, disposed of KRW 00,000,000, including the instant expenses, as a bonus of ○○○○○ for the business year 201, and disposed of KRW 000,000,000 as corporate tax for the business year 2011, and issued a notice of change in the amount of income (hereinafter “the notice of change in the amount of income”) to the Plaintiff ○○○○, with the income earner as the income earner ○○, for the business year 200,000,000 as income amount reverted to 2011 (hereinafter “the notice of change in the amount of income”).

D. Meanwhile, on March 29, 2012, the Plaintiff: (a) paid △△△△△ in relation to the manufacturing and installation contract (hereinafter “instant supply contract”); and (b) the Defendant deemed the instant income as falling under the honorarium under Article 21(1)17 of the Income Tax Act and failed to perform its withholding duty on May 13, 201 on the ground that the Plaintiff was subject to imposition of KRW 00,000,000 (hereinafter “instant imposition disposition”); and (c) the Plaintiff was subject to imposition of KRW 00,000 on the income accrued in 2011 and the instant disposition along with the notice of change in the amount of income was issued.

E. On November 4, 2013, the Plaintiff dissatisfied with each of the instant dispositions and filed an appeal with the Tax Tribunal on November 4, 2013, but the Tax Tribunal dismissed the part seeking the revocation of each of the instant dispositions on January 26, 2015.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 6, Eul evidence 1 and 2, the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

1) The main text of Article 106 (4) of the Enforcement Decree of the Corporate Tax Act (hereinafter referred to as "the provision of this case") provides that the amount shall be recognized as not being out of the company if the corporation recovered the amount of the outflow from the company by voluntary efforts. The plaintiff voluntarily recovered the expenses of this case and filed a revised report on this matter in accordance with the purport of the above provision, and thus, the expenses of this case must be disposed of as retained earnings. In addition, in the case where the plaintiff was included in the gross income of this case which was out of the company with prior knowledge that the correction would be made in accordance with the proviso of the provision of this case, the main text of the provision of this case cannot be applied, although the purpose of the provision of this case is to recommend voluntary correction of the business operator, unlike the notice of tax investigation aimed at detecting illegal facts, unlike the notice of tax investigation, the proviso of the provision of this case does not include the information of this case, and ③ the specific contents of the expense of this case are not stated in the notice of this case.

2) When the Plaintiff concluded the instant supply contract with the △△△△△ through the instant service provided by the △△△△△, the Plaintiff agreed to conclude the instant supply contract by re-fixing 85% of the subcontract price (the instant supply contract amount) including the instant income, and paid the instant income to the △△△△△△△ for the starting fee and activity expenses. The instant supply contract was concluded due to the service provided by the △△△△△△△△△.

Therefore, the instant income falls under the price received by △△△△△ for the provision of services, and thus, constitutes other income under Article 21(1)19(d) of the Income Tax Act, and thus, the amount equivalent to 80% of the instant income should be recognized as necessary expenses.

Nevertheless, since the Defendant considered the instant income as an honorarium that is not recognized as necessary expenses and imposed the instant disposition, the instant disposition is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Whether the Plaintiff was aware of the rectification in advance

1) Article 106(1)1 of the Enforcement Decree of the Corporate Tax Act under delegation of Article 67 of the Corporate Tax Act provides that where it is clear that the amount included in gross income under Article 67 of the Corporate Tax Act has been leaked out of the company, it shall be disposed of as dividends, bonuses from the disposal of profits, other income, and other income from the outflow from the company according to the person to whom it reverts, and where it is unclear to whom it belongs, it shall be deemed that it has been reverted to the representative. The provision of this case provides that "where a domestic corporation collects the illegally flown amount, such as omitting sales, processing expenses, etc., within the period for filing a revised return under Article 45 of the Framework Act on National Taxes, and reports it by including it in gross income as tax adjustment, the disposal of income shall be deemed internal reserve: Provided, That the same shall not apply to any of the following cases where it is known in advance that it will be corrected, and subparagraph 4 of the proviso of the same Article provides that "where it is deemed that it should not be corrected in advance."

As to the amount reverted to the representative, etc. of the relevant corporation, once the income tax liability becomes effective, it shall not affect the income tax liability already established even if the amount was returned to the relevant corporation later (see, e.g., Supreme Court Decision 98Du7350, Dec. 24, 199). In principle, the disposition of income is conducted pursuant to Article 106(1)1 of the Enforcement Decree of the Corporate Tax Act. However, in the case where the amount was recovered by voluntary efforts made by the relevant corporation within the prescribed period, the main text of the provision of this case shall be deemed not to have been disclosed from the corporation, and thus, the relevant corporation shall be given the opportunity of voluntary correction by failing to take a disposition of income under the above principle. Accordingly, even if the amount that was withdrawn from the corporation is recovered, if it is not by the corporation’s voluntary efforts, it shall be again made that the income

2) Therefore, in light of the following circumstances: (a) whether the Plaintiff recovered the instant expenses by voluntary efforts; (b) the Plaintiff’s report of modification was made; or (c) the details of the report were revealed through the fact that the details of the report were insufficient to receive the amount of the tax invoice; and (b) the Plaintiff filed a revised report to exclude the instant expenses from the deductible expenses; and (c) collected the amount equivalent to the instant expenses from the ○○○○ upon receipt of the instant notice; and (d) in light of the content, purport, and circumstance of the guidance, it cannot be deemed that the Plaintiff collected the instant expenses by voluntary efforts, since the Plaintiff received the notice of explanation of taxation data from the Defendant or other similar cases and received the revised report with prior knowledge that it would be corrected, and thus, the Plaintiff collected the instant expenses by voluntary efforts.

Therefore, the notification of change in the income amount of this case is justified and the plaintiff's assertion is without merit.

D. Whether the instant income is a honorarium

1) Article 21(1)17 of the Income Tax Act provides for any of the following personal services as other income: “Honorary money and valuables” refers to money and valuables paid in the manner of expression of appreciation in connection with administrative affairs or provision of services, and whether it constitutes such money and valuables ought to be determined by comprehensively taking into account the motive and purpose of receiving the relevant money and valuables, relationship with the other party, amount, etc. (see, e.g., Supreme Court Decision 2014Du1215, Aug. 27, 2015). Furthermore, Article 21(1)19 of the Income Tax Act provides for any of the following personal services as other income, while Article 21(1)19 of the said Act provides for the services provided without an employment relationship, in return for allowances or other similar amounts:

2) In light of the above legal principles, the following circumstances, which can be acknowledged by comprehensively taking into account the health stand, the evidence incurred prior to the instant case, and the overall purport of the statement and arguments of the △△△△△△△, namely, ① on April 14, 201, when the Plaintiff orders the instant supply contract to the △△△△△△△ for its activities, the Plaintiff paid a maximum amount of KRW 00 million as the retainers and intermediate payments to the △△△△△△△△△△△△△△△△△△△△△△△, and the Plaintiff paid the instant income to the △△△△△△△△△△△△△△△△△△△, which was not deemed to have been paid for the instant supply of the instant income until March 2, 2012 or when the △△△△△△△△△△△△△△△△△ was not deemed to have been paid for the instant supply of the instant income, and the Plaintiff’s specific details of the instant supply contract were not deemed to have been sufficiently known to the extent possible to the Plaintiff 2 during the instant supply contract.

3. Conclusion

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

(c)