[1] The validity of the part of Article 57 (2) 1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act by expanding the scope of stocks subject to evaluation to include the stocks during the period from six months before the report of securities to the report of securities in addition to the “stocks of a corporation that reported the securities, etc.” under the parent law (negative)

[2] The meaning of “market price”, which is the standard for determining whether a case constitutes a low-price transfer subject to the denial of wrongful calculation, and whether the face value determined as the issue price by the corporation at the time of issuing new stocks can be deemed as the market price reflecting an objective exchange value appropriately

[1] Article 63(2)2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6048, Dec. 28, 199); Article 63(1)1(c) of the former Enforcement Decree of the Securities and Exchange Act provides that the scope of stocks of a corporation which has reported to the Financial Supervisory Commission or the Korea Securities Association for over-the-counter trading purposes under the Securities and Exchange Act shall be appraised by the method prescribed by the Presidential Decree in consideration of its business feasibility, transaction situation, etc.; however, its application shall be limited to “stocks of a corporation which has reported to the Financial Supervisory Commission or the Korea Securities Association,” and only the method of appraisal shall be delegated to the Presidential Decree, other than those of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1660, Dec. 31, 199); Article 63(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16660, Dec. 31, 199).

[2] Article 88(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17457, Dec. 31, 2001) stipulates that one of the objects of the rejection of unfair calculation under Article 52(1) of the Corporate Tax Act refers to a case where a corporation transfers assets to a person with a special relationship, such as shareholders, at a price lower than the market price. The “market price” refers to an objective exchange value formed through a general and normal transaction. Thus, barring any special circumstance, it is difficult to view that the face value determined as the issue price by a corporation at the time of issuing new shares is a market price reflecting an objective

[1] Article 63(2)2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6048 of Dec. 28, 1999); Article 57(2)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16660 of Dec. 31, 199) / [2] Article 52(1) of the Corporate Tax Act; Article 88(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17457 of Dec. 31, 2001)

[2] Supreme Court Decision 94Nu8013 delivered on December 23, 1994 (Gong1995Sang, 714) Supreme Court Decision 97Nu195 delivered on November 14, 1997 (Gong1997Ha, 3898) Supreme Court Decision 2002Du1588 delivered on September 23, 2004 (Gong2004Ha, 1753)

Gwangjin Electronic Co., Ltd. (Attorney Lee Jae-soo et al., Counsel for the plaintiff-appellant)

Head of the Tax Office

Gwangju High Court Decision 2005Nu1502 Decided April 27, 2006

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. As to the ground of appeal on the invalidity of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act

Article 38 of the Constitution provides that "All citizens shall have the duty to pay taxes under the conditions as prescribed by Act." Article 59 of the Constitution provides that "types and rates of taxes shall be determined by Act." This principle of no taxation without the law adopts the principle of no taxation without the law. Such principle of no taxation without the law means that taxation requirements, etc. shall be prescribed by the law enacted by the National Assembly, which is a representative body of the people, and strict interpretation and application shall be made in the implementation of the law, and expansion or analogical application of administrative convenience shall not be permitted. Therefore, without the delegation of the law, the provision of matters concerning taxation requirements, etc. by administrative legislation, such as orders or rules, or the provision of interpretation of the contents that may be inferred and expanded without the delegation of the law violates the principle of no taxation without the law (see Supreme Court en banc Decision 86Nu694 delivered on September 22, 198, 98Du1731 delivered on March 16, 200).

Article 63(2)2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6048 of Dec. 28, 199; hereinafter the same) provides that the Financial Supervisory Commission or the Korea Securities Association shall appraise the stocks of a corporation which has reported on securities for over-the-counter trading under the Securities and Exchange Act among the stocks provided for in Article 63(1)1(c) by the method prescribed by the Presidential Decree, taking into account the business feasibility, transaction situation, etc. of the relevant corporation, notwithstanding Article 63(1)1, the applicable provisions are limited to the “stocks of a corporation which has reported on securities, etc. to the Financial Supervisory Commission or the Korea Securities Association,” and only the method of appraisal is delegated to the Presidential Decree, and Article 63(2)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16660 of Dec. 31, 199; hereinafter the same shall apply) provides that the scope of stocks appraised by the Korea Securities Dealers Association during the period of 6 months prior to the date of appraisal.

However, it is not consistent with the provisions of Article 63 (2) 2 of the former Inheritance Tax and Gift Tax Act, which is the mother corporation, to expand the scope of stocks subject to appraisal to the disadvantage of taxpayers, and there is no provision delegated so that it can be expanded so that it can not be found in the same Act. Thus, the part which expands the scope of stocks subject to appraisal under Article 57 (2) 1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act by expanding the scope of stocks subject to appraisal other than the “stocks of a corporation that reported securities, etc.” as provided by the parent law to include the stocks during the period from six months before

In the same purport, the court below held that the disposition of this case based on the value assessed by the method under Article 63 (2) 2 of the former Inheritance Tax and Gift Tax Act and Article 57 (2) 1 of the Enforcement Decree of the same Act with respect to the stocks of this case, which was reported to the Securities Business Association after the date of stock transfer, is unlawful after the premise that the part of the above Enforcement Decree is null and void, and there is no violation of law as

2. As to the remaining grounds of appeal

Article 88(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17457, Dec. 31, 2001) provides that one of the objects of the rejection of unfair calculation under Article 52(1) of the Corporate Tax Act refers to a case where a corporation transfers assets at a price lower than the market price to a person with a special relationship, such as stockholders, etc. In this context, “market price” refers to an objective exchange value formed through a general and normal transaction (see Supreme Court Decisions 94Nu8013, Dec. 23, 1994; 2002Du1588, Sept. 23, 2004; 2002Du1588, Sept. 23, 2004), barring any special circumstance, it is difficult to view the issue price determined to be issued by a corporation at the time of capital increase with new stocks

In light of the above legal principles and records, the court below did not accept the defendant's assertion that the amount of KRW 5,000 per share value as the issue value of capital increase at the time of the transfer of the shares should be the market price at the time of the transfer of the shares, but it is just to evaluate the value of the shares of this case whose market price is unclear as the supplementary assessment method under Article 63 (1) 1 (c) of the former Inheritance Tax and Gift Tax Act, and there is no violation of law as otherwise alleged in the ground of appeal.

3. Conclusion

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.

Chief Justice Lee Yong-chul (Presiding Justice)