Seoul Administrative Court-2017-Gu Partnership-54968 (2018.09)

Cho High Court Decision 2016Do3619 ( November 25, 2016)

Where a bad debt disposal claim has been converted into an investment in accordance with the rehabilitation plan, the acquisition value of the shares acquired through a conversion into investment shall be the tax book value of

Even if a bad debt depreciation has been made with the recognition of bad debt from the Governor of the Financial Supervisory Service, if a debt-equity swap has been conducted pursuant to the rehabilitation plan, the acquisition value of the shares acquired through a debt-equity swap is not the amount reduced by the bad debt depreciation, but the tax book value of the

Article 19-2 of the Corporate Tax Act

2018Nu6386 Revocation of Disposition of Rejecting Corporate Tax;

AAAA

BB Director of the Tax Office

Seoul Administrative Court Decision 2017Guhap54968 Decided August 9, 2018

December 11, 2018

November 2019

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant's refusal to correct the corporate tax of KRW 18,722,709,190 against the plaintiff on June 15, 2016 shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning for the court’s explanation concerning this case is as follows. Thus, the court’s reasoning is as stated in the judgment of the court of first instance except for dismissal or addition as follows. Thus, it shall accept it in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

○ No. 7 of the first instance court’s decision No. 8, “No. 8,” added the following:

In other words, Supreme Court Decision 2012Du4111 Decided January 15, 2015 ruled that "the allowance for bad debts constitutes a matter of settlement adjustment to be reflected in the settlement of accounts in the corporation's settlement of accounts, and even if the settlement of accounts that set up the allowance for bad debts before the settlement of accounts, it shall not be recognized as losses if it was not yet reflected in the settlement of accounts." The bad debts by approval of the Governor of the Financial Supervisory Service constitute a matter of settlement adjustment, and thus, it shall be deemed that the settlement of accounts during the period is maintained until the end of the taxable period and it is reflected in the financial statements approved at the general meeting of shareholders at the

○ On the 8th judgment of the first instance court, the following shall be added to:

② The Plaintiff converted assets into equity on the ground that the said rehabilitation plan was a bad debt depreciation for the instant disputed claims, instead of paying off the bad debt, which is based on the premise that the Plaintiff was returned to the bad debt depreciation before the bad debt depreciation for the instant disputed claims. Therefore, the Plaintiff’s report on the value of the shares arising from the conversion into equity of the instant disputed claims at the time of reporting and paying the corporate tax for the business year 2014 was based on the actual revocation of the accounting of the bad debt depreciation for the instant disputed claims.

In addition, the accounting of bad debt depreciation for the disputed claim of this case is managed by the plaintiff in the business year 2014.

If the settlement of accounts is also reflected in the settlement of accounts, it will result in leaving the accounts inconsistent with the acquisition of shares by the debt-equity swap as they are, as well as making the plaintiff enjoy double profits such as inclusion of deductible expenses due to the bad debt depreciation of the claim in this case and acquisition of shares due to the debt-equity swap.

○ In Part 9 of the first instance judgment, the following shall be added to the following:

④ Meanwhile, the Plaintiff asserts to the effect that, compared to the fact that the transfer value of real estate in the case of depreciation of a building, etc. is the value reflecting the depreciation as it is, the said bad debt depreciation should be calculated by reflecting the above bad debt depreciation. However, while the depreciation of the building, etc. and the transfer of real estate in which such depreciation was made are not contradictory, it can be deemed that the above-mentioned debt depreciation and the settlement of accounts for bad debt depreciation was substantially cancelled due to the above-mentioned debt depreciation, as seen earlier, and the purport of the above revised Enforcement Decree of the Corporate Tax Act is that the acquisition value of a debt-equity swap under the rehabilitation plan under the above revised Enforcement Decree of the Corporate Tax Act is not recognized as bad debt at the time of the debt-equity swap and that the difference between the acquisition value of the debt and the market value of the stock should be recognized as losses from the disposal of the stocks until the time of the disposal of the stocks, the above argument by the Plaintiff

○ The following shall be added as follows, because Section 10 No. 3 of the first instance court ruling is not in place:

(O) In light of the fact that Article 72 (2) 4-2 (main sentence) of the Enforcement Decree of the Corporate Tax Act explicitly provides that in the case of stocks acquired through conversion of investment according to the rehabilitation plan approval plan, the amount of the above "fair price" shall be deemed as the book value of bonds which are not the market value, it may be said that the above "fair price" may be deemed as the book value of bonds.

2. Conclusion

Therefore, the judgment of the first instance court is justifiable, and the plaintiff's appeal is dismissed as it is without merit.