[1] Whether it constitutes a change in the grounds for disposition within the scope of the identity of disposition, along with the assertion that the income amount was attributed to the representative director, etc. separately from the disposition of income based on Article 94-2 of the Enforcement Decree of the same Act, which lost its effect as the Constitutional Court's decision of unconstitutionality on Article 32 (5) of the former Corporate Tax Act (affirmative)

[2] Whether the existence of "special relationship" under Article 25 (1) 12 of the former Income Tax Act should be determined by Article 111 (1) of the Enforcement Decree of the same Act concerning the denial of wrongful calculation (affirmative)

[3] Whether the representative director's separation of corporate income from the company constitutes an earned income in which it is not clear that it was used for the corporation's business (affirmative)

[1] The subject matter of a lawsuit seeking cancellation of a taxation disposition is objective existence of the tax base and amount of tax recognized by the tax authority’s taxation disposition. The tax authority may exchange and change the grounds for disposition within the scope that maintains the identity of the disposition in order to support the legitimacy of the tax base and amount of tax recognized by the disposition in question, even during the lawsuit, by the time of the closure of the arguments in fact-finding proceedings. Unlike the disposition of income which the tax authority considers as having paid the amount of income under Article 94-2 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080, Dec. 31, 1993) until the closing of arguments in fact-finding proceedings, it is permissible to claim the same amount of income within the scope of the global income subject to cumulative taxation, along with the assertion that the real income was attributed to the representative director or investors, as well as

[2] Article 25 (1) 12 of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994) stipulates that the person having a special relationship with a resident, non-resident, or corporation receives economic benefits from the resident, non-resident, or corporation concerned, which are not considered as wages, dividends, or donations, as one of other income, and "special relationship" refers to "special relationship" under the provisions of each subparagraph of Article 111 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467 of Dec. 31, 1994).

[3] Where it is unclear that the representative director of a corporation used the corporation's business from among those which he/she used his/her status to leak the corporation's income to others than the company, it shall be deemed as bonus or other similar temporary salary for the representative director, unless there are special circumstances.

[1] Article 32 (5) of the former Corporate Tax Act (amended by Act No. 4804 of Dec. 22, 1994) (see current Article 67), Article 94-2 (1) 1 (a) and (b) (see current Article 106 (1) 1 (a) and (b) (see current Article 106 (1) 1 (a) and (b)) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080 of Dec. 31, 1993), Articles 1 [general administrative disposition] and 19 of the Administrative Litigation Act / [2] Article 25 (1) 12 (see current Article 21 (1) 13), Article 94-2 (1) 1 (a) and (b) (see current Article 106 (1) 1 (a) and (14) of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994) of Dec. 14, 1997)

[1] [3] Supreme Court Decision 97Nu4456 delivered on December 26, 1997 (Gong1998Sang, 539) / [1] Constitutional Court Order 93HunBa32 delivered on November 30, 1995 (HunGong13, 54), Supreme Court Decision 97Nu2429 delivered on October 24, 1997 (Gong1997Ha, 3683 delivered on November 14, 1997), Supreme Court Decision 96Nu8307 delivered on November 14, 199 (Gong197Ha, 3897), Supreme Court Decision 98Du1675 delivered on February 9, 19 (Gong199, 501) / [1] Supreme Court Decision 97Nu19799 delivered on August 29, 199; 209Du1979497 delivered on August 39, 1997

Cho Ho-Hy Mutual Savings Bank

The director of Busan District Office

Busan High Court Decision 94Gu6376 delivered on May 21, 1997

Of the part of the judgment below against the defendant, the part on the aggregate of Class A earned income amounting to KRW 909,683,990 and the defense tax amounting to KRW 45,005,430 are reversed, and this part of the case is remanded to Busan High Court. The defendant's remaining appeal is dismissed.

1. Summary of the judgment below

The court below found that the Plaintiff, a corporation established for the purpose of mutual credit and credit installment business, etc. under the Mutual Savings and Finance Company Act, paid the tax amount of KRW 7,60,000 to Nonparty 1 who is the shareholder and the representative director, and KRW 20,000,000 for each of the above provisions of Article 9-2 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1989, Mar. 29, 198; Presidential Decree No. 200,000,000 for each of the above provisions of Article 9-2 of the Corporate Tax Act (amended by Presidential Decree No. 994, Oct. 29, 198; Presidential Decree No. 200,000 for each of the above provisions of Article 9-2 of the Corporate Tax Act (amended by Presidential Decree No. 940, Apr. 1, 198; Presidential Decree No. 2000,000) to the above non-party 1, who was specially related party 9.

In addition, the court below determined that the disposition of withholding income tax, defense tax, dividend income tax, and defense tax notice was unlawful on the ground that the Constitutional Court rendered that Article 32 (5) of the Corporate Tax Act, which served as the basis of the disposition of this case, violates the Constitution which provides for the principle of no taxation without law and the limitation of delegated legislation, with respect to Article 32 (5) of the Corporate Tax Act in the case No. 93Hun-Ba32, Nov. 30, 195 and No. 94Hun-Ba14

2. Judgment on the Grounds for Appeal

A. The subject matter of a lawsuit seeking the revocation of a tax disposition is objective existence of the tax base and amount of tax recognized by the tax authorities. The tax authorities may exchange and change the grounds for the disposition within the scope that maintains the identity of the disposition in order to support the legitimacy of the tax base and amount of tax recognized by the relevant disposition, even during the lawsuit, in addition to the disposition of income which is deemed to have been paid by the Defendant under Article 94-2 of the Enforcement Decree of the Corporate Tax Act not later than the closing of pleadings in the fact-finding proceedings. The assertion that the same amount of income in order to support the legitimacy of the relevant tax disposition belongs to the representative director or investors, along with the assertion that the same amount of income in order to support the legitimacy of the relevant tax disposition belongs to the real income of the representative director or investors, it shall be allowed as it constitutes a change within the scope that maintains the identity of the disposition (see, e.g., Supreme Court Decisions 97Nu2429, Nov. 14, 1997; 96Nu8307,

In other words, the record of this case reveals that the defendant, separate from the legal fiction income equivalent to the interest recognized by the disposition of income at the court below, the economic interest equivalent to the ordinary interest accrued during the period of use by lending the corporation's funds without compensation, and the non-party 1, the representative director, as Class A earned income under Article 21 (1) 1 (a) of the former Income Tax Act (amended by Act No. 4803, Dec. 22, 1994; hereinafter the "Income Tax Act"), was alleged to have been actually reverted to the non-party 2 and the non-party 3, who is the investor, as other income under Article 25 (1) 12 of the Income Tax Act. This constitutes a change in the grounds for disposition to the extent that the identity of the disposition is maintained.

B. Article 25 (1) 12 of the Income Tax Act provides that financial benefits received by a person having a special relationship with a resident, non-resident or corporation in question from the resident, non-resident or corporation concerned as one of other income, and the term "special relationship" refers to "special relationship" means "special relationship" under each subparagraph of Article 111 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467 of Dec. 31, 1994; hereinafter the "Enforcement Decree of the Income Tax Act") shall be determined pursuant to each subparagraph of Article 111 (1) of the former Enforcement Decree of the Income Tax Act. In this case, even if the non-party 2 or non-party 3 did not use the changed legal principles as to the non-party 2's other income under Article 111 (1) 5 of the Enforcement Decree of the Income Tax Act, it cannot be deemed that the non-party 2 or non-party 3 did not have any economic benefits from the change of the plaintiff's total issued stocks.

The ground of appeal on this point is without merit.

C. Meanwhile, it is not clear that the representative director of a corporation used the corporation's business among the income accrued to himself/herself out of the company by using his/her position and releasing the corporation's income from outside the company, barring any special circumstance, it can be deemed that it constitutes bonus or other similar temporary salary for the representative director (see Supreme Court Decision 97Nu456, Dec. 26, 1997). Thus, the court below should have deliberated on whether the economic profit equivalent to the interest accrued during the period of use by Nonparty 1, the representative director of the corporation, free of charge, borrowed the amount of KRW 7,600,000 from the plaintiff's capital to be paid to him/her during the period of use and decided whether the disposition in this case can be maintained.

Nevertheless, the court below determined that the part of the disposition of this case, among the disposition of this case on the ground that Article 32 (5) of the Corporate Tax Act on the Disposition of Income is unconstitutional, is in violation of Article 32 (5) of the above non-party 1's tax amounting to KRW 909,683,90 in total and KRW 45,005,430 in total, and the defense tax amounting to KRW 909,683,90 in total, and KRW 45,005,430 in total, is illegal. Thus, the court below erred by misapprehending the legal principles on the change of the disposition reason, which led to failure

3. Conclusion

Therefore, of the part of the judgment below against the defendant, the part of the disposition of withholding tax amounting to KRW 45,005,430, which is the aggregate of the Class A earned income tax for the year 1989 through 1992 and the defense tax for the year 909,683,990, and the defense tax for the year 192, shall be reversed, and this part of the case shall be remanded to the court below for a new trial. The defendant's remaining appeal shall be dismissed and it is so decided as per

Justices Kim Jong-sik (Presiding Justice)