[1] Requirements for determining whether the profit under Article 40(1) of the Corporate Tax Act has become final and conclusive, and the standard for determining whether the possibility of realizing the right which is the cause of income has been mature

[2] The case holding that in case where Gap corporation for the purpose of the Guarantee Insurance Business, etc. included the guaranteed insurance benefit paid for the occurrence of an insured incident as before in its deductible expenses, and reported and paid corporate tax for the business year 2005, which was acquired by adding the amount estimated to be recovered from the previous recovery rate to its gross income for the business year of collecting the indemnity claim, and later filed a claim for correction that the tax base and corporate tax for the business year 2005 should be reduced if the amount of income or loss for the business year 199 or 2004 was estimated to be added to its deductible expenses in the business year when the recovery of the indemnity claim was finalized, but the tax authority rejected the claim, the above disposition was lawful

[1] Article 40(1) of the Corporate Tax Act provides that "the business year of accrual of earnings and losses of a domestic corporation for each business year shall be the business year which includes the date on which the concerned earnings and losses are determined." In order to have the profits finalized, the rights which form the cause of income should be considerably mature in the feasibility of the realization of the rights which form the cause of income, and the mere establishment of a complex without this degree cannot be said to have been finalized in the process of the establishment of the complex. The issue of whether the rights which form the cause of income have been considerably mature in the feasibility of the realization of the rights can not be uniformly stated, and the determination shall be made by

[2] The case holding that in a case where Gap corporation with the purpose of a guarantee insurance business, etc. included the guaranteed insurance money paid to policyholders, etc. in deductible expenses, and reported and paid corporate tax in the manner of including it in gross income for the business year during which the insured was acquired, and thereafter, reported and paid corporate tax in the above manner in 2005, which was presumed to have been recovered in excess of the previous recovery rate among the claims for indemnity in the business year during which the claim for indemnity was acquired, and if the amount of income or deficit in the business year of 1999 through 2004 is estimated to be included in deductible expenses in the business year during which it was finalized, the amount of losses that can be used in the deduction of income should increase and the tax base and corporate tax for the business year of 2005 should be reduced. However, in a case where Gap corporation's disposition of rejection was rendered, it is difficult to view that it was legitimate in light of the above presumption that the claim for indemnity was acquired in the business year since it was difficult to evaluate the actual value of assets due to profit and expenses.

[1] Article 40(1) of the Corporate Tax Act / [2] Article 20 of the former Framework Act on National Taxes (Amended by Act No. 9911, Jan. 1, 2010); Article 43 of the former Corporate Tax Act (Amended by Act No. 8141, Dec. 30, 2006); Articles 15, 19, and 40(1) of the Corporate Tax Act; Article 441 of the Civil Act

[1] Supreme Court Decision 2001Du7176 decided Dec. 26, 2003 (Gong2004Sang, 259) Supreme Court Decision 2003Du14802 decided Nov. 25, 2004

Seoul Guarantee Insurance Co., Ltd. (Law Firm Square, Attorneys Lee Lee Hong-hoon et al., Counsel for defendant

Sejong director of the tax office (Attorney Lee Jae-soo, Counsel for defendant-appellant)

Seoul High Court Decision 2008Nu25342 decided June 10, 2009

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

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

Article 40(1) of the Corporate Tax Act provides that "the fiscal year of accrual of earnings and losses of a domestic corporation for each fiscal year shall be the fiscal year which includes the date on which the concerned gross income and losses are finalized." In order for the domestic corporation to be established as a taxable income, the right which is the cause of the income must be considerably mature in its realization possibility, and it cannot be deemed that the taxable income has been finalized at the stage of only the fact that the right is established without this degree. Here, the issue of whether the right which is the cause of the income has considerably mature due to the possibility of its realization shall not be determined uniformly, and the determination shall be made by comprehensively taking into account the specific nature, contents, and law of the individual right and the various actual circumstances (see Supreme Court Decisions 2001Du7176, Dec. 26, 2003; 2003Du14802, Nov. 25, 2004, etc.).

According to the reasoning of the judgment below, the court below determined that: (a) as a corporation with the purpose of a guaranteed insurance business, the insured benefit was paid and added to deductible expenses; and (b) the Plaintiff filed a corporate tax return by adding the recovered amount to gross income for the business year in which it was actually recovered to gross income for the business year during which it was acquired; and (c) as such, the Plaintiff did not include the amount of income for the business year 691,69,116,237 in the calculation of gross income; (b) the amount of income for the business year 2005, the amount of income for the business year 280,548,980,518; (c) the Plaintiff’s tax base was 41,149,135,719 (=the amount of income 691,698,116,237 - the amount of income 280,548,980,518) and the Plaintiff’s claim for correction and correction can be calculated to 2060.

In light of the above provisions and legal principles and the above facts, it is difficult to see that the actual value of assets cannot be assessed at the same time as the payment of insurance money is not a claim acquired by profit-making but also a claim acquired by Article 441, etc. of the Civil Act for the collection of the expenses. In light of the above, it is difficult to see that the amount estimated to be recovered at the previous recovery rate of the claim for reimbursement is merely an estimated value, and it is difficult to see that the possibility of realizing the amount is mature for the business year in which the claim for reimbursement was acquired. The above judgment of the court below is just, and there is no error of law in the misapprehension of legal principles as to the right confirmation principle

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 Min Il-young (Presiding Justice)