Seoul High Court 2011Nu25205

The early 2010 depth092

Since it is not possible to have engaged in forestry, the transfer of forest trees shall be subject to the transfer income tax.

If the transfer of forest trees does not constitute a project, such as forestry, the transfer income tax shall be imposed by considering the entire transfer of forest land as the transfer income tax, and there is no justifiable reason for additional tax reduction or exemption.

2012Du1703

IsaA

Head of the Do Tax Office

Seoul High Court Decision 2011Nu25205 Decided December 27, 2011

2014.10

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

We examine the grounds of appeal.

1. As to the grounds of appeal Nos. 1 through 3

A. Article 19(1) of the former Income Tax Act (amended by Act No. 9270, Dec. 26, 2008; hereinafter “Income Tax Act”) provides that “income generated from the forestry” under subparagraph 1 as a result of listing the income subject to business income. Meanwhile, the main sentence of Article 29 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034, Feb. 18, 2010; hereinafter “Enforcement Decree of the Income Tax Act”) delegated by Article 19(3) provides that “The scope of businesses under each subparagraph of Article 19 of the Act shall be based on the Korean Standard Industrial Classification unless otherwise provided in this Decree with respect to the scope of businesses under each subparagraph of Article 19 of the Act.” The Korean Standard Industrial Classification provides that “the forest is planted, planted and protected in order to produce the “income from the forest,” and that the forest is defined as “income from the forest and the forest is not transferred when calculating its income from the forest land” under Article 5(1).

In light of the language, purport, structure, etc. of these regulations, it is reasonable to deem that, in cases where forest trees are transferred along with forest land, income generated from the transfer of forest trees constitutes business income, in principle, if only the remaining income, excluding income generated from the transfer of forest trees, is subject to the taxation of capital gains tax following the transfer of forest land. In such cases, whether income generated from the transfer of forest trees constitutes business income shall be determined according to ordinary social norms by taking into account whether activities for growing forest for the purpose of producing forest are for profit and the substance, scale, period, mode, etc. of business activities to the extent that business activities can be seen as business activities, in light of whether such activities are continued and repeated. Accordingly, even if forest trees were transferred along with forest land, even if there was no growing activity for the production of forest trees or there were growing activities, and if business feasibility is not recognized, all income generated from the transfer of forest shall be subject to the taxation of capital gains tax (see, e.g., Supreme Court Decision 2011Du6493, Sept. 13).

B. citing the reasoning of the judgment of the court of first instance, the court below determined that: ① the Plaintiff’s transfer of the forest of this case as well as the forest of this case was not subject to the transfer of the forest of this case, on the ground that there was no significant difference in the amount of compensation compared to the officially assessed value of the forest of this case and the above dry field; ④ the Plaintiff’s transfer of the forest of this case, as well as the land of this case, did not fall under the Plaintiff’s individual employee of the Plaintiff, and there was no difference in the amount of compensation compared to the officially assessed value of the forest of this case and the above dry field; ② there was no provision regarding the amount of compensation for trees in this case’s forest of this case’s case’s forest of this case’s case’s forest of this case’s case’s case’s forest of this case’s case’s case’s forest of this case’s case’s case’s forest of this case’s case’s case’s forest of this case’s case’s case’s forest of this case’s case’s case’s forest of this case’s case’s transfer.

Examining the reasoning of the judgment below in light of the aforementioned legal principles and records, the judgment of the court below is just and acceptable. In so doing, the court below did not err by misapprehending the legal principles on Article 19 of the former Income Tax Act and Article 51 (8)

2. Regarding ground of appeal No. 4

In citing the reasoning of the judgment of the court of first instance, the court below determined that the Plaintiff’s assertion that the Plaintiff’s income from the transfer of trees among the forest of this case, referring to the relevant National Tax Service’s established rules and the Supreme Court’s precedents, is unreasonable to impose penalty tax on the Plaintiff because it is unreasonable to expect the Plaintiff to fulfill its tax liability in such a case, by referring to the following arguments, namely, the Plaintiff’s income from the transfer of trees among the forest of this case as business income, and not under-reported capital gains tax for the purpose of reducing the burden of taxation. However, the court below determined that the Plaintiff’s establishment rules and Supreme Court precedents required by the Plaintiff do not constitute a justifiable ground for not being able to cause any negligence on the part of the Plaintiff’s tax liability solely on the ground that the Plaintiff’

In light of the relevant legal principles and records, the above determination by the court below is just and acceptable, and it did not err by misapprehending the legal principles on additional tax under tax law.

3. 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 on the bench.