[1] The case holding that the imposition of global income tax on this portion is lawful where a purchase tax invoice stating an amount exceeding the face value of the above bill is received when concluding a contract for supplying construction materials and paying promissory notes as material cost advance, because it is difficult to view that the amount exceeding face value is due to a real transaction

[2] The case holding that where a contract for supplying construction materials was concluded and a promissory note was received as material cost advance and a false tax invoice was received as if it was actually supplied with materials, the transaction under the above tax invoice cannot be deemed that the amount equivalent to the value of supply was leaked out of the company

[1] Article 67 of the Corporate Tax Act; Article 106 (1) 1 of the Enforcement Decree of the Corporate Tax Act / [2] Article 67 of the Corporate Tax Act; Article 106 (1) 1 of the Enforcement Decree of the Corporate Tax Act

Plaintiff (Law Firm Ulus et al., Counsel for the plaintiff-appellant)

The director of the tax office.

Seoul High Court Decision 2004Nu5227 delivered on February 2, 2005

The judgment below is reversed and the case is remanded to Seoul High Court.

1. As to the Defendant’s ground of appeal

After finding the facts as indicated in its holding, the lower court determined that the disposition imposing global income tax on the Plaintiff for the year 1999, on the ground that: (a) the purchase tax invoice of November 9, 1999 (hereinafter “tax invoice of this case”) issued by the KS Integrated Development Co., Ltd. (hereinafter “KS Integrated Development”) from the Food and Drug Distribution Co., Ltd. (hereinafter “T”) entered into a contract for the supply of construction materials between the price of supply 146.5 million won (including value added tax) (hereinafter “tax invoice of this case”) on Nov. 1, 1999; and (b) the payment of promissory notes under the name of the material cost advance payment, and cannot be deemed as a processing tax invoice, on the ground that the Defendant recognized the transaction pursuant to the tax invoice of this case as a processing transaction, and on the premise that the amount equivalent to the supply price of the tax invoice was leaked out,

However, according to the facts acknowledged by the court below, the tax invoice No. 1 of this case received at the time of payment of a promissory note of KRW 12,650,000 in face value as advance under the above material supply contract concluded between the KS comprehensive development and the reduction of rice distribution, and thereafter, it can be known that the said promissory note was discounted from financial institutions, but the said promissory note was not settled. Thus, the amount equivalent to the said promissory note money paid under the name of advance payment out of the supply price of the tax invoice No. 1 of this case cannot be deemed to have been leaked out of the real transaction because it was based on the material transaction, but it is difficult to view that the remaining amount equivalent to KRW 20,000 is due to the real transaction, and there is no other material to support this.

Nevertheless, the judgment of the court below that the disposition imposing global income tax on the plaintiff for the year 199 was unlawful on the whole amount equivalent to the value of supply of the tax invoice No. 1 of this case. The judgment below erred by misapprehending the legal principles as to real transactions, or failing to exhaust all deliberations, which affected the conclusion of the judgment. The defendant's ground of appeal that the amount equivalent to the value of supply of the tax invoice No. 1 of this case is a processing transaction

2. Plaintiff’s ground of appeal

After finding the facts as indicated in its reasoning, the lower court affirmed the disposition imposing global income tax on the Plaintiff for the year 200 on the premise that the purchase tax invoice of January 11, 2000 (hereinafter “the second tax invoice of this case”) of the supply value of 48,40,000 won (including value added tax) received by the KS Integrated Development from the reduction distribution constituted a processing tax invoice prepared differently from the fact, on the ground that the Defendant’s tax invoice of this case was based on the processing transaction, and the amount equivalent to the value of the supply was leaked out, as it was subject to the processing transaction, was subject to the imposition

However, we cannot accept the above judgment of the court below for the following reasons.

Even based on the facts acknowledged by the court below, the tax invoice 2 of this case was received when issuing and delivering a promissory note of KRW 48,400,000,000,000 in the face value as the payment title of the material cost payable in advance, KRW 28,400,000,000,000 in total, and KRW 48,440,000,000 in the face value as the payment title of the material cost payable in accordance with the above material supply contract concluded between the case Es. 2 and Es. 2 of this case’s tax invoice was falsely prepared as if the above promissory note was actually supplied with materials. In light of these facts, although the tax invoice 2 of this case was made differently from the fact that the above promissory note was actually supplied with materials, it cannot be deemed that the above promissory note was not paid with material cost, advance payment, and incidental expenses, and thus, the transaction under the tax invoice 2 of this case’s amount corresponding to the supply value was leaked.

Nevertheless, the judgment of the court below that the amount equivalent to the value of supply was leaked out of the company solely on the ground that the tax invoice No. 2 of this case was a false tax invoice prepared differently from the fact, was erroneous in the misapprehension of legal principles as to processing transactions and outflow of company, which affected the conclusion of the judgment. The plaintiff's ground of appeal pointing this out has merit.

3. Conclusion

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Ji-hyung (Presiding Justice)