The judgment below is reversed and the case is remanded to Seoul High Court.

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

1.(a)

The main text of Article 48(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “Act”) provides that gift tax shall not be imposed on “property contributed by a public-service corporation.”

This is a provision to support the activities of public interest corporations at a tax policy level, taking into account the fact that public services conducted by public interest corporations are services to be performed by the state or local governments.

However, the proviso of Article 48(1) of the Act provides that gift tax shall be imposed on “where a public-service corporation receives contributions to stocks of a domestic corporation, the contributed stocks, etc. exceed 5/100 of the total number of issued voting stocks of the domestic corporation.”

The purpose is to prevent the avoidance of inheritance tax or gift tax while using the public corporation as a means of controlling the domestic corporation by means of stock contribution to the public corporation in crepansing the fact that the gift tax is not imposed on the property contributed to the public corporation.

Meanwhile, the proviso of Article 48(1) of the Act limits the scope on which gift tax is imposed in accordance with the proviso of Article 48(1) of the Act by providing that “the cases falling under the proviso of Article 16(2) of the Act (excluding the cases falling under the proviso of Article 16(2) of the Act (hereinafter “the proviso of Article 16(2)”).

In other words, the proviso of Article 16(2) of the Act provides that no gift tax shall be levied on “where stocks of a domestic corporation that is not specially related to the contributor to a public-service corporation are contributed.”

Even if shares exceeding 5/100 of the total number of issued voting shares of a domestic corporation are contributed to a public-service corporation, it shall be made by means of stock contribution to a public-service corporation.