early 2010 Heavy014 (2010.06.09)

It is reasonable to see that the return of the investment principal and interest, not the cost of stock transfer, is the return of the investment principal

It is reasonable to view that the share transfer price stipulated in the share transfer agreement is not the actual amount agreed upon as the consideration for the transfer of shares as the transfer of shares, and rather, it is the amount agreed to return the principal invested in the business of a corporation issuing shares and its interest as the interest.

Article 88 of the Income Tax Act

Article 96 of the Income Tax Act

2010Guhap12621 Revocation of Disposition of Imposing capital gains tax

XX

The director of the tax office

Intervenor joining the Defendant

O KimO

July 19, 2012

August 16, 2012

1. The Defendant’s imposition disposition of KRW 000 on January 14, 201 against the Plaintiff on January 14, 201 shall be revoked.

2. Of the costs of lawsuit, the part arising between the plaintiff and the defendant is borne by the defendant, and the part arising from the participation is borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

The following facts are not disputed between the parties, or acknowledged by Gap evidence 1, Eul evidence 1, 2, and 3, taking into account the whole purport of the pleadings.

A. On July 4, 2008, the Plaintiff acquired 3,300 shares (the face value of which is KRW 000; hereinafter referred to as the “instant shares”) issued by the Defendant at KRW 00 on October 1, 2005, and filed a final return on capital gains tax on March 26, 2007 that the Intervenor (hereinafter referred to as the “ Intervenor”) transferred 00 won to the Defendant’s Intervenor (hereinafter referred to as the “ Intervenor”).

B. After conducting a tax investigation according to the report on tax evasion against the plaintiff et al., the head of Gangnam District Tax Office deemed that the plaintiff transferred the shares of this case to 000 won, not to 000 won (hereinafter referred to as "the key amount of this case"), and notified the defendant thereof. The defendant considered the key amount of this case as the real transfer value of the shares of this case, and issued a disposition to correct and notify the plaintiff on September 4, 2009 of the transfer income tax of 00 won for the year 2007.

C. The Plaintiff, who was dissatisfied with the above disposition, filed an appeal with the Tax Tribunal on December 2, 2009, but the Tax Tribunal dismissed the said appeal on June 9, 2010.

D. On January 14, 2011, the Defendant confirmed that the time of the transfer of the instant shares was 2006 while the instant lawsuit was pending, and revoked the disposition of imposition of capital gains tax for the year 2007, and issued a disposition of imposition of capital gains tax for the year 2006 upon the transfer of the instant shares to the Plaintiff (hereinafter “instant disposition”).

2. The assertion and judgment

A. The plaintiff's assertion

1) The primary argument

The share transfer agreement concluded on September 7, 2006 between the Plaintiff and the Intervenor is a share transfer agreement or its substance, and the key amount of the instant case, which the Plaintiff received pursuant to the said investment refund agreement, shall be the principal invested in the Intervenor and its interest. Thus, the instant disposition that deemed the said key amount as the transfer value of the instant shares, is unlawful.

2) Preliminary assertion

If the issue amount falls under the transfer price of the instant shares, the acquisition price of the instant shares shall not be KRW 000,000, which is the face value, but shall be the total amount invested by the Plaintiff in the intervenors for the tourist hotel business of the non-party company, and such amount shall be at least KRW 00,000, which is recognized as the principal of the investment by the Intervenor. Thus, the instant disposition based on the premise that the acquisition

(b) Related statutes;

former Income Tax Act (amended by Act No. 19270 of Dec. 26, 2008)

Article 94 (Scope of Transfer Income)

(1) An economic income shall be the following income generated during the relevant year:

3. Income accruing from the enhancement of stocks or investment shares falling under any of the following items (including preemptive rights; hereafter referred to as "stocks, etc." in this Chapter):

(c) Stocks of a corporation which is not a stock-listed corporation or KOSDAQ-listed corporation.

(1) The transfer value of assets under the subparagraphs of Article 94 (11) shall be based on the actual transaction value between an applicant and transferee at the time of the enhancement of the relevant assets (hereinafter referred to as "actual transaction value").

C. Determination

1) Facts of recognition

The following facts may be recognized by integrating the purpose of the entire pleadings in each entry in Gap evidence Nos. 5, 7, 13, 24 through 31 (including each number), and there is no counter-proof otherwise.

A) The non-party company was established on August 31, 2005 by the Plaintiff, HAA, the Intervenor, and KimB as a company established on August 31, 2005 by contributing 00 won in capital for the purpose of taking over the OO tourist hotel in Jeju-si and operating the tourist hotel accommodation business. At the time of the incorporation, the shares of the above company were 50% of the Plaintiff, HAAA, and 50% of the Intervenor (the last shares were 33% of the Plaintiff, HAAAA17% of the Intervenor, and 25% of the Intervenor and KimB respectively), and the representative director was to take charge of the Intervenor, and on August 30, 2005, the Plaintiff and HB transferred 00 won in the amount of the non-party company’s established capital, namely, the share payment, respectively.

B) From August 30, 2005 to May 24, 2006, the Plaintiff remitted total of KRW 000 to each deposit account in the name of the intervenor or the non-party company as shown in the list of the Plaintiff’s remittance statements. HA also remitted total of KRW 000 to December 12, 2005 for the same kind of investment, etc. between September 9, 2005 and December 12, 2005, the Plaintiff and HA’s total of the principal of the investment was KRW 00.

C) The Plaintiff, HA, the Intervenor, and KimB entered into a share transfer and takeover contract (hereinafter “instant share transfer and takeover contract”) with the following terms on September 7, 2006, when the dispute between the Plaintiff and the Intervenor was issued in the course of the operation of the Nonparty Company, and the notary public was certified as H et al. by H et al. (hereinafter “instant share transfer and takeover contract”).

The following 1

1. The Intervenor and the KimB shall pay the share price to the Plaintiff and the HB in installments as follows, and the Plaintiff and the HB shall transfer their shares to the Intervenor and KimB.

(a) By November 30, 2006, the Intervenor and KimB shall pay to the Plaintiff and HB a gold of KRW 000 (price: investment principal + KRW 000 + interest00) as share price to the Plaintiff and HB.

B. The Intervenor and the KimB shall pay 000 won as additional interest to the Plaintiff and the HaB by January 10, 2007.

C. The plaintiff and HA shall be promoted to the intervenor and KimB, simultaneously with the payment of the full amount of the above money (000 won).

2. If the Intervenor and KimB fail to pay the full amount of the above money by November 30, 2006, the following arrangements shall be made:

A. The Intervenor, and the KimB, on the ground of the non-performance of the contract, shall be promoted without compensation to the Plaintiff and the HB without compensation to the Plaintiff and the HB. The Intervenor and the KimB shall transfer 2,500 shares owned to the Plaintiff free of charge. The KimB shall transfer 800 shares out of 2.500 shares owned to the Plaintiff and the remainder 1,70 shares to the HB free of charge to the Plaintiff.

B. The plaintiff and the HaA may independently report the above stock transfer to the tax office and acquire the rights of shareholders pursuant to the number of stocks.

D) Meanwhile, the sum of the investment principal and interest stipulated in the instant stock transfer agreement was determined according to the settlement details as follows 2.

Following 2

① The sum of principal invested by the Plaintiff and HA for the establishment of the non-party company and the hotel business is KRW 000.

② The Intervenor paid to the Plaintiff the total amount of KRW 000,00 on October 28, 2005, KRW 22.00 on December 22, 2005, KRW 000 on February 26, 2006, KRW 17.00 on May 17, 2006, KRW 000 on June 30, 2006, and KRW 000 on June 30, to the Plaintiff. As of August 2006, the Plaintiff and HAA’s total amount of principal invested (=00,000 won – KRW 000) are adjusted to determine the principal of the investment as KRW 00.

③ The sum of interest on the principal invested by the Plaintiff and HA is KRW 000,000. Here, the amount of interest paid by the Intervenor would be KRW 000 (=00-000) if the amount of interest paid by the Intervenor is deducted: (i) the fractional amount of one million won is adjusted to determine the interest as KRW 000,000.

④ Therefore, the sum of the investment principal and interest thereon to be returned to the Plaintiff and HA is KRW 000 (=00 +00). Of these, the amount to be returned to the Plaintiff according to the Plaintiff’s share would be 000 won (=00 won x 33/59) equivalent to the instant issues amount.

E) On November 1, 2006, the intervenor deposited the issue amount of this case with the deposited money No. 4400 of the Seoul East Eastern District Court (Seoul Eastern District Court 2006) as the plaintiff, and the plaintiff paid it.

2) Whether the instant disposition is lawful

The actual transaction price, which is the basis for the calculation of gains from transfer, is not a general market price that reflects the objective exchange value, but an actual amount of price for the transaction itself or at the time of the transaction (Supreme Court Decision 2006Du7171 Decided April 26, 2007). The following circumstances revealed by the above facts, i.e., the share price paid by the Plaintiff and HAA to acquire shares at the time of the incorporation of the non-party company is 00 won, respectively. ② The Plaintiff and HA made an investment in the Plaintiff as the principal and interest of the non-party company in the transaction to the non-party to the Plaintiff from August 30, 205 to May 24, 2006. ③ Such investment is not the price for capital increase or acquisition of shares, but the share price of the Plaintiff to the non-party company to which the Plaintiff and the Intervenor agreed to transfer shares to the non-party to the Plaintiff, including the share price of the Plaintiff and the share transfer price of the non-party company, is not the share price of the Plaintiff and the share transfer price of the Plaintiff.

Therefore, the key issue amount of this case, which the intervenor deposited with the plaintiff as the principal deposit for the repayment of the obligation to return the investment money under the stock transfer contract of this case, cannot be deemed as the actual amount of transaction price in itself or at the time of transaction. Thus, the disposition of this case, which reported the key amount of this case as the actual transaction price of the stocks of this case on different premise, is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.