In calculating the "land excess profit" under Article 11 (1) of the Land Excess Profit Tax Act, whether the development charges may be deducted as the improvement cost under subparagraph 2 of the same paragraph (negative)

According to Article 94(2)4 of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 14083 of December 31, 1993) and Article 47(1)1 of the former Enforcement Decree of the Income Tax Act (amended by the Ordinance of the Prime Minister No. 505 of May 3, 1995), the land excess profit tax law provides that the scope of improvement expenses which are deductible in calculating land excess profit in the current taxable period, which serves as the basis for calculating land excess profit in the current taxable period, shall be applied mutatis mutandis to the calculation of land excess profit in the actual taxable period. Since the development charges, land excess profit tax, and transfer income tax have the same function in that the land increase for reasons such as the implementation of development projects, etc., which is the basis for calculating the land excess profit in the current taxable period, the above Enforcement Rule of the Income Tax Act provides for one of the improvement expenses to be deducted from the development charges, which is applied mutatis mutandis in the calculation of the transfer profit tax, the part of the development charges shall not be applied in the tax period.

Article 5(1)3 and Article 11(1) and (3) of the Land Excess Gains Tax Act; Article 32 of the former Enforcement Decree of the Land Excess Gains Tax Act (amended by Presidential Decree No. 15194, Dec. 31, 1996); Article 94(2)4 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14083, Dec. 31, 1993; see current Article 163(3)4); Article 47(1)1 of the former Enforcement Rule of the Income Tax Act (amended by Ordinance of the Prime Minister No. 505, May 3, 1995; see current Article 79(1)1)

Plaintiff 1 and six others (Law Firm Rate, Attorneys Ha Chang-soo et al., Counsel for the plaintiff-appellant)

Head of the Office of Government

Seoul High Court Decision 96Gu44275 delivered on July 16, 1997

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

We examine the grounds of appeal.

Article 11 (1) of the Land Excess Gains Tax Act provides that the tax base of excess gains shall be calculated by parcel of land excess gains, except as otherwise provided for in this Act, that the amount calculated by subtracting the standard market price of the land from the date of commencing the relevant taxable period (hereinafter referred to as the “amount of increase in land prices”) shall be calculated by deducting the following amounts from the standard market price of the land at the end of the relevant taxable period, and that the amount of basic deduction under Article 11-2 shall be made again from the land excess gains; subparagraph 1 provides that the improvement cost and capital expenditure (hereinafter referred to as the “improvement cost, etc.”) prescribed by the Presidential Decree for the relevant taxable period shall be calculated by deducting the excess gains from the amount of land excess profits; Article 32 of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 15194, Dec. 31, 196; hereinafter the same shall apply) shall not apply to the improvement cost and capital expenditure of the land which are calculated by the Enforcement Decree of the Income Tax Act.

Therefore, since it is reasonable to view that the part concerning development charges in the above provision of the Enforcement Decree of the Income Tax Act and the Enforcement Rule can not be applied to the land excess profit tax, the development charges shall not be deducted by using the improvement cost in calculating the land excess profit in the pertinent taxable period.

The decision of the court below that made the above conclusion is just, and there is no error of misunderstanding the legal principles or violation of the Constitution as argued in the above. There is no reason to discuss.

Therefore, all appeals are 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 on the bench.

Justices Park Jong-chul (Presiding Justice)