Seoul Administrative Court 2014Guhap50217 ( October 22, 2015)

The act of having the representative director acquire farmland does not fall under the provisions of the wrongful calculation report.

The amount paid free of charge by having the representative director acquire farmland through an auction shall not have a dividends for auction because the representative director did not participate in the auction if there was no amount provided. Therefore, it does not fall under the provisions of the Evaluation of Wrongful Acts and subordinate statutes.

Article 52 of the Corporate Tax Act: Denial of Wrongful Calculation

2014Nu71278 Revocation of Disposition of Corporate Tax Imposition

○○ Co., Ltd.

Head of △ District Office

Seoul Administrative Court Decision 2014Guhap50217 decided November 13, 2014

oly 2015.17

oly 2, 2015

1. The defendant's appeal is dismissed.

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

3. According to the correction of the purport of the claim in the trial, Paragraph 1 of the judgment of the first instance was modified as follows.

The Defendant’s disposition of imposition of KRW 00 of the corporate tax for the year 2010 against the Plaintiff on October 5, 2012 shall be revoked.

1. Purport of claim

On October 5, 2012, the Defendant revoked the disposition of imposition of KRW 00 of the corporate tax for the year 2010 against the Plaintiff (the Plaintiff, in the first instance trial, claimed revocation of the disposition of imposition of KRW 00 of the corporate tax for the year 2010 against the Plaintiff on October 15, 2012, but the tax disposition that the Defendant raised against the Plaintiff was clearly stated in the trial.)

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Quotation of judgment of the first instance;

The reasoning for this Court’s reasoning is as follows: (a) the part of the judgment of the first instance is either dismissed or added as set forth in paragraph (2) below; and (b) the part of the reasoning for the judgment of the first instance, except for the rejection of the entries in the evidence Nos. 6, 7, and 8, which are insufficient to recognize the defendant’s assertion, as additional evidence submitted in the trial, are the same as the part of the judgment of the first instance; and (c) thus, the same shall be cited as such in accordance with

2. Parts used or added;

○○ 4 [Attachment 2] On October 18, 2012, the Plaintiff issued a disposition of imposition of KRW 486,493,010 of corporate tax in 2010 (hereinafter “instant disposition”) following the 7-8th [Attachment 2] notified the Plaintiff of KRW 486,493,018 as corporate tax in August 1, 2012, and the Plaintiff corrected the Plaintiff’s claim for review of the legality of the taxation prior to the imposition of corporate tax on August 9, 2012, and subsequently decided not to adopt the review of the legality of the taxation prior to the imposition of corporate tax on October 5, 2012 (hereinafter “instant disposition”).

Pursuant to Section 5, Section 3 of the 5th page [based on recognition], "No. 5-1, 2, and 3" shall be added.

The ○○ 5th 7th 7th 'unfair' is considered to be ‘unfairly', and the 5th 11th 'Plaintiff' is considered to be ‘00'.

○ The 5th page 18 to 7th page 18 are as follows.

“1) The rejection of unfair act and calculation is a system that, when a corporation trades with a person in a special relationship, instead of using various types of transactions listed in each subparagraph of Article 88(1) of the former Enforcement Decree of the Corporate Tax Act in a reasonable manner and at the same time evades or reduces tax burden. It is limited to cases where the taxing authority denies or makes an unreasonable and unreasonable act or calculation in a manner that is objectively and objectively reasonable in accordance with the statutory provisions. From the perspective of the economic person, the determination of the existence of economic rationality is limited to cases where it is deemed that the economic rationality was neglected by disregarding the economic rationality. Determination of the existence of the economic rationality is not just based on the fact that only the price relation of the pertinent transaction is not ordinarily done in the form of transaction with a person who is not a person with a special relationship, but rather on the basis of whether the transaction is unfair in light of sound social norms or commercial practice (see, e.g., Supreme Court Decisions 200Du31304, Sept. 8, 2006; 2015Du31417.

2) In light of the above legal principles, considering the following circumstances, it is insufficient to view the instant claim acquisition agreement and the instant claim payment agreement as an abnormal transaction with no economic rationality falling under the provisions of the wrongful calculation panel under Article 88(1)6 or 9 of the Enforcement Decree of the Corporate Tax Act, and there is no other evidence to acknowledge otherwise.

① The Plaintiff paid the instant amount to 000 is subject to the instant claim acquisition agreement, and there is no reason to deem that the instant claim acquisition agreement has no effect since it violated the mandatory law. Therefore, it cannot be deemed that only the part of one party’s payment obligation is naturally removed from the bilateral contract, and thus it constitutes an act corresponding to Article 88(1)6 of the Enforcement Decree of the Corporate Tax Act or an act corresponding to subparagraph 6 under subparagraph 9 of the same paragraph.

② The Plaintiff concluded the claim acquisition agreement with 000, determined the transfer value of the claim on the instant land as KRW 00. The above KRW 00 is the amount determined by the Korea Deposit Insurance Corporation by appraising the instant land, which the Plaintiff acquired from the Korea Deposit Insurance Corporation. In light of the fact that the appraisal price of the instant land at the auction procedure exceeds the normal successful bid price as KRW 00, it is difficult to view that the claim acquisition agreement on the instant land is unilaterally unfavorable to the Plaintiff or favorable to 000.

③ The Plaintiff is a company specialized in the housing construction and sales business, real estate sales business, construction business, etc., and has been promoted a business plan premised on the purchase of the instant land, such as purchasing and examining the land adjacent to the instant land from around 2006 to 000, and examining the whole development project. Since the instant land is located among the land purchased by the Plaintiff and the stock company, the acquisition of the instant land can be deemed as a business necessity of the Plaintiff.

④ Since the instant land was farmland located within the land transaction permission zone, it is impossible for the Plaintiff, a legal entity, who is not eligible for farmland acquisition, to acquire the instant land. Accordingly, the Plaintiff appears to have examined the said problems inside the said zone, and 000 was involved in the implementation of the instant land development project as a major shareholder of the Plaintiff. As such, it is difficult for the Plaintiff to secure the instant land through 000 from the standpoint of the economic person, to view that it is infinite or unreasonable.

⑤ Although the Defendant alleged that 000 won acquired the instant land by receiving a free bid fund from the Plaintiff, the Plaintiff lent 000 billion won to 8.5% interest per annum as provisional payment, and 000 won was awarded the instant land to the Plaintiff on April 29, 2010, following the bid price of the said money, and the Plaintiff paid KRW 000 to the Plaintiff on April 29, 2010. After the death of 000, the Plaintiff paid 00 non-listed stocks of 000 and paid the remainder of the principal and interest of the loan by payment to the Plaintiff on November 2012, 200, and thus, it cannot be deemed that 00 won was granted a free loan from the Plaintiff.

(6) The defendant asserts that in the absence of the bonds acquisition agreement of this case, the difference between the dividend received by the plaintiff and the acquisition value of the bonds of this case could be included in the calculation of earnings from the disposal of investment bonds. Thus, the plaintiff's tax burden was unjustly reduced by the contract of this case, and thus constitutes the object of rejection of unfair calculation. However, in the absence of the bonds acquisition agreement of this case, 000 did not bid 150% of the appraisal value of the land of this case. In this case, there is no evidence to prove that the plaintiff would have obtained the profits from the disposal of investment bonds by receiving dividends from the Korea Deposit Insurance Corporation in excess of the value acquired by the Korea Deposit Insurance Corporation. Thus, there is no possibility that tax reduction may be no possibility [Article 8, 11, 16, 18, 222-2].

3) Ultimately, the Plaintiff’s act of entering into the instant claim acquisition agreement with 000 and paying the instant claim amount to 0000 is difficult to be deemed as being subject to the rejection of unfair act and calculation, and thus, the instant disposition made on a different premise is unlawful.

3. Conclusion

Therefore, the plaintiff's claim is justified, and the judgment of the court of first instance is just, and the defendant's appeal is dismissed as it is without merit, and it is so decided as per Disposition by the decision of the court of first instance after the reduction of claim in the trial.

Judges Lee Sung-tae, Counsel for defendant

Judges Woo-ok

Judges Lee Dong-soo