Cheongju District Court-2015-Gu Partnership-1900 ( August 18, 2016)

(1) Whether the contract for stock investment is cancelled as in the first instance;

(1)As in the first instance trial, the contract cannot be deemed to have been cancelled (i.e., the transfer transaction) on the ground of the nonperformance of obligations and the cancellation of the contract by a third party (joint investors, etc.) who is not a party

Article 88 of the Income Tax Act

2016Nu10757 Revocation of Disposition of Reduction or Correction of Capital Gains Tax

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○ Head of tax office

April 11, 2018

June 27, 2018

1. The part of the judgment of the court of first instance against the Plaintiff, which orders the revocation below, shall be revoked. The part in excess of KRW 1,95,276,690, among the disposition rejecting correction of KRW 5,364,739,100, which the Defendant rendered to the Plaintiff on September 16, 2014, which was rendered against the Plaintiff on September 16, 2014,

2. The plaintiff's remaining appeal is dismissed.

3. Of the total litigation costs, 40% is borne by the Plaintiff, and the remainder 60% is borne by the Defendant, respectively.

The judgment of the first instance shall be revoked. The transfer income tax reverted to the Plaintiff on September 16, 2014 that the Defendant rendered to the Plaintiff on September 16, 2014

The portion exceeding 185,274,695 won among the disposition rejecting correction of KRW 5,364,739,100 shall be revoked.

1. Details of the disposition;

The reasoning for this part of this Court is that "AA shall contribute 30,000,000 US dollars to BB Holdings" in Part 8 of Part 8 of the Reasons for Judgment of the court of first instance except that "A shall contribute money or goods equivalent to US$ 30,000,000 to BB Holdings, thereby making an investment in CCC," and therefore, it shall be accepted in accordance with Paragraph 1 of Article 1 of the Administrative Litigation Act and Article 8 (2) of the Civil Procedure Act and Article 420 of the Civil Procedure Act.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Even if the Plaintiff invested the instant shares in kind in BB Holdings and acquired the instant shares in return, as long as AA does not invest USD 30,000,000 in BB Holdings according to the instant agreement, so long as DD shares do not have any economic value, the Plaintiff ultimately does not contribute the instant shares in kind and pay any consideration. Accordingly, the Defendant’s disposition based on the premise that the Plaintiff transferred the shares at a cost under the Income Tax Act was unlawful [it is not explicitly expressed by the Plaintiff, but this part of the claim is deemed to have asserted the grounds for filing a claim for correction under Article 45-2(1)1 of the former Framework Act on National Taxes (amended by Act No. 2848, Dec. 23, 2014; hereinafter the same shall apply).

2) Even if the Plaintiff’s transfer of the shares in this case constitutes an investment in kind, since the Plaintiff’s declaration of intent was cancelled on July 10, 2014 by exercising the right to rescind the agreement under Article 12 of the above Agreement on July 8, 2014 on the ground that the Plaintiff’s failure to perform the obligation to make an investment under the instant agreement, it constitutes grounds for filing a subsequent claim for rectification under Article 45-2(2)5 of the former Framework Act on National Taxes and Article 25-2 subparag. 2 of the Enforcement Decree of the Framework Act on National Taxes. Accordingly, the Defendant’s disposition in this case is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination as to whether to pay for the transfer of the instant shares

However, the main text of Article 88(1) of the Income Tax Act provides that "transfer" refers to the actual transfer of assets at a price due to sale, exchange, investment in kind in a corporation, etc., regardless of the registration or enrollment of the assets. As seen earlier, the Plaintiff acquired a DNA shares (38.9%) instead of acquiring 28,824 shares of the new shares of BB Holdings in return for the investment in kind pursuant to the agreement of this case in BB Holdings. However, as long as DD is a holding company of BB Holdings Holdings, which holds at least CCC shares, it shall not be deemed that AA has no economic value, as alleged by the Plaintiff, on the ground that AA failed to perform its investment obligation, and there is no evidence to acknowledge the circumstances contrary to its assertion. Accordingly, this part of the Plaintiff's assertion on the premise that the Plaintiff did not transfer the shares of this case at a price because it did not receive any consideration.

2) Determination as to whether to cancel the instant agreement

A) We examine whether the Plaintiff lawfully exercised the right to rescind the agreement stipulated in the instant agreement. According to the evidence of evidence Nos. 1, 6, 7, 9, 14, and 25 of the instant agreement, the Plaintiff, a seller, may terminate the instant agreement in the event that the underwriter does not perform his contractual obligations under the instant agreement, and the part performed in the instant agreement should be restored to its original state. The fact that AA did not invest an amount equivalent to USD 30,000,000 in accordance with the instant agreement. Accordingly, it is recognized that the Plaintiff’s employee, revealed to the FF who was in charge of the Plaintiff’s business of AA around July 10, 2014 the Plaintiff’s employee’s failure to perform his/her duty to contribute to the Plaintiff, and sent the Plaintiff in writing (hereinafter “instant document”) to request the Plaintiff to re-transfer his/her management right and the instant stocks, etc.

B) However, in full view of the following circumstances, comprehensively taking account of each of the above evidence, Gap evidence Nos. 13 and 15 through 19 and the overall purport of arguments, it is difficult to view that the plaintiff lawfully rescinded the instant agreement by delivering the instant document, and there is no other evidence to acknowledge it (in the case of income tax, the burden of proof as to the facts subject to taxation exists, but if the facts revealed in the specific litigation process, the grounds for taxation disability, such as cancellation, which is the grounds for filing a subsequent request for correction, are the tax obligor’s territory, and it is reasonable to bear the burden of proof as to them). Accordingly, the plaintiff’s assertion on this premise cannot be accepted.

① The title of the instant document (Evidence A9) is “To chirman AA” (the president of the AA), and the said document did not use any expression such as “cancellation” as “cancellation” of the instant agreement, and upon disclosing the progress of the instant agreement, pointed out the failure to perform the obligation of investment equivalent to USD 30,000,000 of the AA, but is distinguishable from the document that generally exercises the right of rescission, such as sending and requesting the relevant data, if the contribution was made.

② Above all, the agreement dated February 8, 2015, prepared seven months after the delivery of the instant document (Evidence A No. 13), which was concluded on February 8, 2015, concluded that AA had the right to manage as a major shareholder of CCC even after the date of delivery of the instant document asserted by the Plaintiff, and on this premise, the Plaintiff requested AA to transfer the right to manage and the Plaintiff and AA had the right to manage and entered into a new agreement between the Plaintiff. Furthermore, the content stated that AA would transfer USD 5,00,000 lent to the Plaintiff’s Korea CCC CCC (which is a company different fromCCC) to AA, and that the Plaintiff would transfer the instant shares to the Plaintiff if the Plaintiff repaid the said shares to AA.

Furthermore, while clearly stating that AA owns the instant shares, it separately agreed on the method of return of the said shares when the Plaintiff repaid the loan, but confirmed that the Plaintiff has a preferential right to purchase. These points are completely inconsistent with the Plaintiff’s assertion that the instant agreement was rescinded by delivery of the instant document.

③ Meanwhile, it is not clear that FF is an agent of AA. The e-mail address (mmmmAA andcom) designated to be used for all notifications related to the instant arrangement with respect to AA as prescribed in Article 18 of the instant arrangement and the e-mail address (gggggal AA andcom) received the instant document is inconsistent.

④ Since July 10, 2014, the right to rescind an agreement, asserted by the Plaintiff, from July 10, 2014, to the expiration of 11 months from the date of delivery of the instant written document, the right to rescind the agreement was not completely returned to the Plaintiff, and the Plaintiff also appears to have not actually returned the DD shares received in return for investment in kind.

⑤ With the exception of the Agreement dated February 8, 2015 (Evidence A13), which is rather unfavorable to the Plaintiff, it appears very important to determine whether the instant agreement has been lawfully rescinded, and no data showing the position of AA, which is the contracting party to the contract with respect to the rescission of the said Agreement, has been submitted.

3) Determination on the income accrued to the Plaintiff from the transfer of the instant shares

A) Relevant legal principles

The Income Tax Act adopts the so-called principle of confirmation of a right to taxable income by deeming the income as realizing the income in a case where a right that is a cause of income does not actually accrue even if there is no income. However, even if a claim that is the cause of income accrues, if it is objectively apparent that the claim that is the cause of income becomes impossible to recover due to the debtor's bankruptcy and that the income is entirely impossible to be realized in the future, income tax may not be imposed on the taxable income (see, e.g., Supreme Court Decision 2002Du1953, Oct. 11, 2002).

Since capital gains do not have a bad debt system unlike business income, it is necessary to consider the possibility of income as of the time of relatively reporting or taxation.

B) Determination

In accordance with the agreement of this case, the Plaintiff acquired 38.9% of the shares of this case in lieu of acquiring 28,824 shares of the new shares of BB Holdings in return for the investment in kind in BB Holdings, and as a result, it is reasonable to view that the Plaintiff and the Plaintiff agreed that the Plaintiff would transfer the shares of this case to AA when the Plaintiff repaid the amount of USD 5,000,000 that the Plaintiff would have been lent to CCC CCC CCC to the Plaintiff, or that the Plaintiff did not transfer the shares of this case to the Plaintiff, etc. in consideration of these circumstances, it is reasonable to view that there is no possibility that the AA would have made the investment of USD 30,000,00 in accordance with the agreement of this case.

Therefore, the income accrued by the Plaintiff from the transfer of the instant shares is 38.9% of the DD’s shares. Since DD is a holding company of BB Holdings holding all of the instant shares, the 38.9% price of DD’s shares is 27,569,250,529, which is the actual transaction price of the instant shares (based on the cost, USD 24,438,455 won as at the time of filing a return of the Plaintiff’s capital gains tax for the convenience of calculation, 10,724,438,45 (hereinafter the same shall apply) equivalent to 38.9% of the actual transaction price of the instant shares. The Defendant’s assertion that the acquisition price is 1,65,374,729 won, and 16,553,747 won, which is 16,979,970,979,797, which is the Plaintiff’s capital gains tax, 209,507,97,097.1.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted within the scope of the above recognition, and the remaining claims shall be dismissed as it is without merit. Since part of the judgment of the court of first instance differs from this conclusion, the plaintiff's appeal is partially accepted, and the remaining part of the judgment of the court of first instance is justifiable, and the plaintiff's remaining appeal is dismissed. It is so decided as per Disposition.