[1] The legislative intent and standard of determining the denial of wrongful calculation under Article 20 of the former Corporate Tax Act

[2] The case holding that the act of transferring stocks and convertible bonds of the parent company which guaranteed the debt to a third party at a low price on behalf of the related party does not constitute a subject of rejection of unfair act by wrongful act

[1] Article 20 (see current Article 52) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) Article 20 (see current Article 52), Article 46 (2) 9 (see current Article 88 (1) 9) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998) Article 20 (see current Article 52) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) Article 46 (2) 9 (see current Article 88 (1) 9) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998)

[1] Supreme Court Decisions 87Nu357 delivered on October 13, 198 (Gong1987, 1728) 87Nu925 delivered on February 9, 198 (Gong198, 534) 88Nu8630 delivered on April 11, 198 (Gong1989, 772) 89Nu8095 delivered on May 11, 1990 (Gong190, 1292 delivered on July 24, 190), 89Nu472 delivered on July 24, 1992 (Gong190, 197Du1979 delivered on May 24, 197) 192; 20Nu5301 delivered on May 10, 196 (Gong1979 delivered on May 29, 209)

Pacific Co., Ltd. (Law Firm KEL, Attorneys Kim Jae-soo et al., Counsel for the defendant-appellant)

[Defendant-Appellee] Head of Yongsan District Tax Office (Attorney Choi Jong-soo et al., Counsel for defendant-appellee)

Seoul High Court Decision 2002Nu600 delivered on September 17, 2002

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

The grounds of appeal are examined (to the extent of supplement in case of reference documents submitted after the period).

Wrongful calculation means an act of reducing or removing the tax burden incurred when a taxpayer takes an ordinary and rational transaction form without reasonable transaction form. The purport of Article 20 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998; hereinafter referred to as the "Act") provides for the exclusion of wrongful calculation under Article 50 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998; hereinafter referred to as the "Enforcement Decree of the Corporate Tax Act"). Since a taxpayer’s transaction with a juristic person and a related party is deemed to have neglected the economic rationality by abusing all the forms of transactions as stipulated in each subparagraph of Article 46(2)1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998; hereinafter referred to as the "Act"), it means an act of imposing taxes on an investor under Article 97(1)2 of the former Enforcement Decree of the Corporate Tax Act.

The court below acknowledged the facts in light of the above legal principles as a whole, and found that there was no change in the contents of the principal debt after the purchase and sale contract and the transfer of convertible bonds between the Plaintiff and the Pacific Co., Ltd., the special relationship with the Plaintiff. However, since major shareholders and debt guarantee holders change only to the Plaintiff, it cannot be said that there was no distribution of any economic profit due to the purchase and sale contract and the transfer of convertible bonds, it cannot be said that there was an economic profit under Article 46 (2) 9 of the Enforcement Decree. In light of the economic rationality, the court below's determination that there was no possibility that the Plaintiff could continue to provide the guaranteed debt guarantee to the Plaintiff on the grounds that there was no possibility that the Plaintiff would have suffered any loss arising from the purchase and sale contract of the Pacific Co., Ltd., Ltd., which was concluded for the purpose of the Pacific Co., Ltd., Ltd. for the purpose of minimizing the guaranteed debt of the Pacific Co., Ltd., Ltd., which was concluded for the purpose of the Pacific Co., Ltd., Ltd.

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.

Justices Byun Jae-chul (Presiding Justice)