New Village Traffic Co., Ltd. (Attorney Obong-soo, Counsel for defendant-appellee)

The Head of Seodaemun Tax Office (Government Law Firm Corporation, Attorney Seo Byung-jin, Counsel for defendant-appellant)

June 5, 2013

Seoul Administrative Court Decision 2012Guhap24825 decided November 9, 2012

1. All appeals filed by the Defendant are dismissed.

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

1. Purport of claim

The Defendant’s disposition of imposition of value-added tax imposed on the Plaintiff on October 12, 201, KRW 8,012,950 for the second period of 206, KRW 12,415,730 for the year 207, KRW 12,194,380 for the year 207, KRW 8,271,940 for the first period of 2008, KRW 8,484,510 for the second period of 208, KRW 3,727,820 for the year 209, KRW 3,80 for the second period of 209, KRW 3,820 for the year 209, KRW 3,80 for the year 3,807, KRW 720 for the year 2010, KRW 305, KRW 200 for the year 205, KRW 2016 for the year 2016.

2. Purport of appeal

The judgment of the first instance is revoked. All of the claims filed by the plaintiff are dismissed.

1. cite the judgment of the first instance;

The reasoning of the judgment of this court is that the Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same) is higher than the Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same). The following is identical to the ground of the judgment of the court of first instance. Thus, the judgment of the defendant is cited in accordance with Article 8(2) of the Administrative Litigation Act

2. Additional determination

The Defendant asserts that the instant input tax amount cannot constitute the common input tax amount for the instant passenger transport business and the instant advertising business. However, in full view of the circumstances and the following circumstances in the first instance court, it is difficult to accept the Defendant’s assertion. Accordingly, the instant disposition is unlawful.

① Article 9 of the agency contract for urban bus advertising business concluded with the Seoul newspaper company (hereinafter “instant advertising contract”) provides that the term of the contract may be changed when a long-term advertising business cannot be run due to a natural disaster, bus wave, etc., or when a route is changed due to the change of traffic policy or the reorganization of the Seoul urban bus transportation system. Therefore, the instant advertising business ought to be deemed to be premised on the “operation” of the bus.

② According to Article 17(1)1 of the Value-Added Tax Act, a business operator may deduct the amount of tax on the supply of goods or services that have been, or are to be, used for his own business from the input tax amount. However, since the instant input tax amount has an essential relationship with the operation of buses due to bus purchase cost, oil cost, parts for repair, etc., it constitutes “the amount of tax on the supply of goods or services that have been, or are to be, used for his own business.” Furthermore, even if the instant input tax amount was not necessary even if the instant input tax amount did not exist, it should also be deemed necessary for the instant advertising business after

③ Article 61(1) of the Enforcement Decree of the Value-Added Tax Act provides that an input tax amount, in cases where an entrepreneur concurrently operates a taxable business and a tax-free business, for which the actual attribution may not be separated, shall be calculated in accordance with the calculation method. The issue of actual attribution depends on whether the relevant goods or services have substantially influenced the relevant business part. The input tax amount in this case shall be deemed to have influenced all of the instant passenger transportation business and the instant advertising business premised on bus operation. Therefore, it is reasonable to divide it in proportion

④ Article 5 of the advertising contract of this case provides that Seoul newspaper company shall take charge of attracting advertisements, producing advertising facilities, installing, and maintaining and managing advertising facilities. However, in relation to the advertising business of this case, it should be premised on bus operation. The Seoul newspaper company does not bear the part related to the operation, and the cost related to the operation is borne by the Plaintiff. As such, the input tax amount of this case actually reverts to the advertising business of this case

⑤ The Defendant asserts to the effect that the instant input tax amount is necessarily necessary for the instant passenger transport business, which is a tax-free passenger transport business. Article 12(3) of the Value-Added Tax Act provides that the supply of goods or services, which are essentially incidental to the supply of goods or services exempt, shall be deemed to be included in the supply of goods or services. However, since the instant advertising business is not an incidental business to the instant passenger transport business, it is deemed that the Defendant also becomes a taxable business, the instant input tax amount is not subject to Article 12(3) of the Value-Added Tax Act, and as seen earlier, is also necessary for the instant advertising business. Accordingly, as alleged by the Defendant, the instant input tax amount is not subject to the instant advertising business solely on the grounds that the instant input tax amount is essential for the instant passenger transport business.

3. Conclusion

The judgment of the first instance is justifiable. All appeals filed by the defendant are dismissed.

Judges Choi Jong-ho (Presiding Judge) Kim Tae-ho