Seoul High Court 2010Nu1288 ( November 19, 2010)

No incidental expenses, such as sales fees, shall be deducted when calculating capital gains, such as land.

Article 55-2 (6) of the Corporate Tax Act provides that capital gains from land and other assets shall be deducted only from the transfer amount, so expenses, such as sales commission, etc. shall not be deducted, and the discretion of legislative formation that can be prescribed by the tax law in consideration of all the policy elements should be respected unless it is contrary to the constitutional ideology.

2010Du28601 Revocation of Disposition of Imposing Corporate Tax

AAABS Co., Ltd.

Samsung Head of Samsung Tax Office

Seoul High Court Decision 2010Nu1288 Decided November 19, 2010

May 23, 2013

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).

1. As to the misapprehension of legal principles as to "transfer income, such as land"

Article 55-2(6) of the former Corporate Tax Act (amended by Act No. 7838, Dec. 31, 2005; Act No. 10423, Dec. 30, 2010; hereinafter referred to as the "Corporate Tax Act") provides that "transfer income, such as land, shall be the amount obtained by subtracting the book value as at the time of transfer from the transfer amount of land, etc." This provides that "the amount obtained by subtracting the book value as at the time of transfer from the transfer amount" as transfer income, because it is related to the specific method of calculating "transfer income, such as land," and it does not mean the book value as revised by the tax accounting, not the book value under the Corporate Tax Act, and it is understood that the balance of the book value of the relevant asset is added to the acquisition value of the asset and subtracting the depreciation and loss from the book value under Article 55 of the Corporate Tax Act. Therefore, the court below's determination that "the transfer of assets, such as sale fees, cannot be seen as the grounds for final appeal."

Article 55-2(6) of the Corporate Tax Act cannot be deemed as infringing on a corporation’s property right in violation of the excessive prohibition principle as an appropriate means to achieve the legitimate legislative purpose, such as preventing real estate speculation of a corporation and resolving tax imbalance with individuals. Considering the economic status of a corporation superior to individuals, the demand for public interest to regulate real estate speculation of a corporation is greater than that of an individual, and thus discrimination against a corporation and an individual cannot be deemed as infringing on the right to equality or against the principle of tax equality by unreasonably discriminating. In addition, in the enactment and amendment of tax-related Acts, the legislators have the discretion of legislative formation that can determine by taking into account various political elements in the enactment and amendment of tax-related Acts, and insofar as the outcome of such legislative discretion does not violate the constitutional ideology of guaranteeing fundamental rights and the constitutional principle that supports it, and thus, the said provision does not contravene the Constitution (see Constitutional Court en banc Decision 2010Hun-Ba21, Oct. 25, 201).

The court below did not err in the misapprehension of legal principles as to whether Article 55-2 (6) of the Corporate Tax Act is unconstitutional.

3. As to the misapprehension of legal principles as to the grounds for exemption from penalty tax (justifiable grounds)

Under the tax law, in order to facilitate the exercise of the right to impose taxes and the realization of tax claims, the taxpayer's intentional and negligent acts are not considered as administrative sanctions imposed as prescribed by the Act in cases where the taxpayer violates the reporting and tax liability under the Act without justifiable grounds, and the taxpayer's intentional and negligent acts do not constitute justifiable grounds (see, e.g., Supreme Court Decision 2001Du1918, Nov. 13, 2002). The court below determined that just because the Plaintiff asserted by the court below, unlike Article 55-2(6) of the Corporate Tax Act at the time of reporting and paying corporate tax, the amount calculated by deducting the "sale commission" from the "sale commission" under the tax law cannot be deemed as a legitimate ground for the under-payment of corporate tax, as well as the "sale commission" under the tax law at the time of reporting and paying corporate tax. There is no error in the misapprehension of legal principles

4. Regarding misapprehension of legal principles as to burden of proof, etc.

In light of the records, we affirm the judgment of the court below that the land of this case transferred by the plaintiff constitutes non-business land is just, and there is no error of law in the misapprehension of legal principles as to the burden of proof of taxation requirements and non-business land as alleged in the grounds of appeal.

5. Conclusion

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 on the bench.