Daegu District Court-2014-Gu Partnership-20522 ( November 18, 2015)

The cancellation of the apartment sale contract is a ground for subsequent claim for correction.

(The same as the judgment of the first instance) The termination of the apartment sale contract is different from the sales company, and the effect of the termination of the contract shall be calculated retroactively to the sales rate and income amount at the time of concluding the contract.

Request for correction, etc. under Article 45-2 of the Framework Act

Article 25-2 of the Enforcement Decree of the Framework Act on National Taxes

2015Nu7419 Revocation of Disposition of Rejecting Corporate Tax;

○○ Co., Ltd.

○○ Head of tax office

Daegu District Court Decision 2014Guhap20522 Decided November 18, 2015

May 27, 2016

June 24, 2016

1. The defendant's appeal is dismissed.

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

1. Purport of claim

The Defendant’s refusal to rectify the amount of KRW 4,510,52,00,00 for corporate tax belonging to the business year 2009 that the Plaintiff paid to the Plaintiff on April 3, 2013 is revoked.

2. Purport of appeal

The part against the defendant in the judgment of the court of first instance is revoked, and the plaintiff's claim corresponding to the above revocation is dismissed.

The reasoning of this court's explanation concerning this case is that "No. 21, 22 of the judgment of the first instance court" is added to "Evidence No. 40 of the judgment of the first instance court," and "No. 11 of the 11 of the 8 of the 11 of the 3th judgment is added to "No. 40", and "No. 15 of the 3th and 11 of the 11 of the 11 of the 11 of the 3th judgment is changed to "the court of the first instance", and therefore, it is identical to the part of the reasons of the judgment of the first instance. Thus, it is accepted in accordance with Article 8

Therefore, the judgment of the first instance court is legitimate, and the defendant's appeal is dismissed as it is without merit. It is so decided as per Disposition.

(Visits. First Instance)

1. The Defendant’s refusal to rectify the amount exceeding KRW 58,270,327 of the disposition imposing corporate tax of KRW 4,510,552,00 for the business year 209 on the Plaintiff on April 3, 2013, shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. The costs of lawsuit shall be borne by the defendant.

Cheong-gu Office

The Defendant’s refusal to rectify the amount of KRW 4,510,52,00,00 for corporate tax belonging to the business year 2009 that the Plaintiff paid to the Plaintiff on April 3, 2013 is revoked.

1. Details of the disposition;

A. From 2005 to 2012, the Plaintiff newly built and sold 1,494 households on the ○○○○-dong ○○○○○○-dong ○○○, and 201 parcels.

B. The Plaintiff calculated the rate of work progress and the amount of sales in lots for each business year from 2005 to 2012, based on which the Plaintiff reported and paid corporate tax from the business year 2005 to the business year 2012. During the business year 2005 and 2006, the amount of income was deducted from the initial high-quality maintenance expenditure, such as loans for land acquisition, and the amount of income was entirely deducted from the amount of losses carried forward in the business year 2007 and 2008. While the Plaintiff reported and paid corporate tax of KRW 10,57,000 in the business year 209, the amount of corporate tax was reported and paid KRW 10,57,000 in the business year 209, 2010, 2011, and

C. The Plaintiff, among the buyers of the instant apartment from December 20, 2005 to April 28, 2006, concluded a contract for the sale of the instant apartment from December 20, 2005 to April 28, 2006, did not pay the sale price. The Plaintiff cancelled the relevant contract for the sale of the instant apartment from January 6, 201 to September 15, 201 (hereinafter “the cancellation of the instant contract”).

D. On October 4, 2012, the Plaintiff filed a request for correction to the effect that if the effect of the rescission of the instant sales contract is reflected retroactively, the corporate tax for the business year of 2009 should be reduced by KRW 4,510,552,00, and that the corporate tax equivalent to the same amount should be refunded to the Defendant on October 4, 2012.

E. On November 8, 2012, the Defendant dismissed a request for correction filed by October 4, 2012, based on Article 45-2(3) of the former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 2014; hereinafter the same) on the ground that the proceeds from sale and the proceeds from sale changed following the cancellation of the sale contract should be reflected in the profit and loss of the business year in which the date of cancellation of the sale contract falls. The Plaintiff filed a request for correction of corporate tax for the same content with the Defendant on November 30, 2012, and on the same ground, the Plaintiff dismissed the Plaintiff’s request for correction filed on November 30, 2012 on the same ground.

F. On April 1, 2013, the Plaintiff filed a request for correction of corporate tax attributed to the business year 2009 (hereinafter “instant request for correction”) with the same content as the Defendant, but the Defendant rejected the request on April 3, 2013 for the same reason as the prior rejection disposition (hereinafter “instant disposition”).

G. On June 10, 2013, the Plaintiff sought revocation of the instant disposition to the Tax Tribunal. However, on December 5, 2013, the Plaintiff was dismissed on the ground that the instant disposition repeats the content of the reply and is merely a mere notification of fact, and thus, the disposition is not recognized.

Evidence Nos. 1 through 10, 15, and Eul Nos. 1 through 4 (including each number; hereinafter the same shall apply) for recognition

C) Each entry, the fact-finding results on ○○ Construction Co., Ltd. in this court, and the purport of the entire pleadings

2. Judgment on the defendant's main defense

A. The defendant's assertion

(1) The Plaintiff’s claim for correction as of October 4, 2012 was final and conclusive because it did not appeal the notification of the rejection disposition as of November 8, 2012 regarding the claim for correction as of October 4, 2012, and thus, it cannot be filed for the same reason. Since the claim for correction of the instant case was based on the same reason as the aforementioned final and conclusive disposition, the instant disposition is not a mere notification of fact that does not infringe upon the Plaintiff’s new rights or interests, and is not an object

(2) The instant request for correction is an ex post facto request for correction pursuant to Article 45-2(2)5 of the former Framework Act on National Taxes and Article 25-2(2)2 of the Enforcement Decree of the Framework Act on National Taxes, and a request for correction is filed within two months from the date on which the grounds for cancellation of the sales contract occur. Since the instant request for correction was filed with the lapse of the period, it is unlawful, and the instant

B. Determination

(1) Determination on the first argument

A disposition of refusal is established when an administrative agency expresses its intention of refusal against a citizen's application for a disposition, and the subsequent declaration of intention of rejection is clearly made for the same contents, it shall be deemed that a new disposition is made. In this case, even if the period allowed for an administrative appeal and an administrative lawsuit is in progress based on each disposition and the period allowed for litigation against the previous disposition expires, it shall not be deemed that the subsequent disposition cannot be subject to an administrative litigation against a new disposition (see, e.g., Supreme Court Decisions 92Nu7542, Dec. 8, 1992; 96Nu15251, Mar. 13, 1998; 200Du6084, Mar. 29, 2002).

The Plaintiff has the right to file a request for correction within three years after the statutory due date of return of tax base pursuant to Article 45-2 of the former Framework Act on National Taxes. The system for filing a request for correction is the only remedy for a taxpayer to assert the reduction of the tax base and amount of tax so declared excessive, and can receive relief by administrative litigation based on a request for correction. As seen below, a request for correction of this case may be filed again as long as the application for correction of this case is within the period of filing a request for correction. The disposition of this case clearly stated the intention of refusal of the request for correction of this case. It is reasonable to deem that the disposition of this case was a disposition subject to administrative litigation, not just factual act, and as long as the Plaintiff received the disposition of this case and filed the lawsuit of this case through a request for adjudication on

The defendant's above assertion is without merit.

(2) Judgment on the second argument

Article 45-2 (1) of the former Framework Act on National Taxes provides that where a taxpayer’s initial return exceeds the tax base and tax amount to be reported under the tax laws, the taxpayer may file a request for correction without asking the grounds for the excessive return if three years elapse from the statutory due date of return. Paragraph (2) of the same Article provides for the additional and supplementary claim system so that a taxpayer may file a request for correction within two months from the date of occurrence of such cause in order to further protect the taxpayer if any subsequent cause provided for in each subparagraph occurs.

Therefore, even if two months have elapsed from the date of occurrence of the cause under Paragraph (2), it is reasonable to view that a request for correction can be filed for the reason that the cause occurred at any time during the period of request for correction stipulated in Paragraph (1) (three years from the statutory due date of return) (see, e.g., Seoul High Court Decision 2003Nu4043, Jan. 8, 2004; Supreme Court Decision 2004Du2332, Jan. 27, 2005).

The claim for correction of this case is a claim for correction of corporate tax belonging to the business year 2009 on the ground of cancellation of the sales contract for the cancellation of this case. This is a request for follow-up correction pursuant to Article 45-2(2)5 of the former Framework Act on National Taxes and Article 25-2(2)2 of the Enforcement Decree of the Framework Act on National Taxes, and even if two months have elapsed from the date of occurrence of each cause, it is legitimate as long as it was filed within three years after the statutory due date

The defendant's above assertion is without merit.

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

The effect of the cancellation of the sales contract is the same as that of the first place where the goods have not been supplied. Therefore, the cancellation of the sales contract in this case should be seen as the same as that of the first place where the sales contract was not concluded retroactively to the date of the initial contract. This constitutes a ground for ex post request for correction under Article 45-2 of the former Framework Act on National Taxes and Article 25-2 of the Enforcement Decree of the same Act, and thus, the Defendant should refund the corresponding amount of corporate tax attributed to the Plaintiff for the

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Reasons for cancellation of sales contract and ex post request for correction under the Corporate Tax Act

Article 25-2(2)2 of the Enforcement Decree of the Framework Act on National Taxes delegated by Article 45-2(2)5 of the former Framework Act on National Taxes stipulates that “When a contract related to the effect of transaction or act, etc., which serves as the basis for calculating the tax base and amount of tax, is cancelled by the exercise of the right to cancel or is cancelled due to unavoidable reasons that occur after the formation of the relevant contract,” as one of the grounds for the first return, determination, or revision, as one of the grounds for the latter return, determination, or correction.” Such later request system aims at expanding the protection of taxpayers’ rights by allowing taxpayers to claim reduction by proving the relevant fact where there occurs a change in the tax base and amount of tax due to the occurrence of certain reasons after the establishment of the tax liability (see, e.g., Supreme Court Decision 2009Du22379, Jul. 28, 2011).

On the other hand, Article 40 (1) of the Corporate Tax Act provides that "the business year to which the profits and losses of a domestic corporation accrue shall be the business year to which the date on which the profits and losses are determined belongs" shall be the business year to which the profits and losses of the domestic corporation are determined, if the rights which are the cause of such income have not been actually realized, they shall

Such a principle of confirmation of right refers to: (a) in a case where there is an interval of time between the time when the right which causes income and the time when income is realized, income is deemed not the time when income is realized; and (b) the method of calculating income for the pertinent business year is deemed to have accrued when the right is finalized; and (c) in substance, it is allowed to impose prior taxation on the income of which income is uncertain on the premise that it would be realized in the future. Therefore, even if a right which causes income has been finally created and the tax liability was established upon meeting the requirements for taxation, if it is determined that income is not realized due to the occurrence of a certain subsequent cause, the tax liability initially established ought to be deemed as not imposing corporate tax, in principle, because it loses the premise (see, e.g., Supreme Court Decision 2011Du1245, Dec. 2

Therefore, in principle, corporate tax is also a cause for filing a subsequent claim for correction, such as exercising the right to cancel or cancelling the contract due to unavoidable reasons under Article 25-2 (2) of the former Enforcement Decree of the Framework Act on

However, in special circumstances, such as the Corporate Tax Act or relevant regulations stipulate the amount of income not realized due to the cancellation of a certain contract separately as the grounds for deductions, etc. against the amount of income in the business year to which the date of such cancellation belongs, or the taxpayer has filed corporate tax by deducting the amount of income in the business year to which the date of such cancellation belongs in accordance with corporate accounting standards or practices in lieu of cancelling a sales contract, etc., such cancellation of a contract shall not affect the original tax liability, and thus, cannot be a ground for filing a subsequent claim for correction (see, e.g., Supreme Court Decision 2012Du10611, 2013Du12829, Mar. 13, 2014).

2) Grounds for ex post request for correction due to the cancellation of the instant sales contract

The Plaintiff newly built and sold the instant apartment from January 6, 201 to September 15, 201, and the fact that the sales contract for the rescission of the instant apartment from January 6, 201 to September 15, 201 is cancelled is as seen earlier. The following facts can be acknowledged in full view of each of the above evidence, as well as the overall purport of the statements and arguments in the Evidence Nos. 16 to 19, No. 12 and 13.

(1) In cases of new construction and sale of multi-family housing, the sales price to be included in the gross income (total estimated sale price ¡¿ sales price x work progress rate x cumulative sales profit) and the sales price to be included in the deductible expenses (the cumulative sales price x work progress rate x the cumulative sales profit) shall be calculated by applying the work progress rate (the cumulative total construction cost ± the cumulative total construction cost x the total construction cost) and the sales rate pursuant to Article 40 of the Corporate Tax Act, Article 69 of the Enforcement Decree of the same Act, and Article 34 of the

② In accordance with the above accounting method from 2005 to 2012, the Plaintiff calculated the sales proceeds and the sales price as indicated in [Attachment 1] based on the estimated sales price, estimated sales amount, work progress rate, and sales rate of the instant apartment from 2005 to 2012, and filed a corporate tax return thereon.

[Attachment 1]

③ In the event that the effect of the cancellation of the instant sales contract is calculated retroactively and repeatedly, the Plaintiff’s sales rate, income amount, etc. for each business year is reduced as indicated below [Attachment 2]. Accordingly, if the Plaintiff’s corporate tax amount for each business year 2009 is appropriated as property, it shall be corrected from 10,476,009,852 to 6,023,728,179 as shown below [Attachment 3].

4,452,281,673 Won shall be reduced.

[Attachment 2]

[Attachment 3]

According to the above facts, although the plaintiff was obligated to sell the apartment of this case and pay corporate tax, it was confirmed that income on the corresponding part has not been realized due to the cancellation of the sales contract of this case. Thus, it is a ground for filing a subsequent request for correction under Article 25-2 subparagraph 2 of the Enforcement Decree of the Framework

Therefore, barring any special circumstance, the Defendant shall refund corporate tax of KRW 4,452,281,673 to the Plaintiff for the business year 2009 according to the instant claim for correction. Therefore, the portion exceeding KRW 58,270,327 of the instant disposition that rejected such claim should be revoked in an unlawful manner.

3) Judgment on the defendant's assertion

A) The Defendant’s 70 households out of the rescission portion of the instant case were cancelled in 2012, and Article 69(3) of the Enforcement Decree of the Corporate Tax Act amended by Presidential Decree No. 23589, Feb. 2, 2012; applied to Article 69(3) of the Enforcement Decree of the Corporate Tax Act, which was not realized by the cancellation date, shall be reflected in the profit and loss of the business year belonging to the cancellation date. As such, the cancellation of sales contract for the 70 households out of

I argue that it cannot be available.

Article 69(3) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 23589, Feb. 2, 2012; Presidential Decree No. 23589, Article 69(1) provides that "where the difference between the amount determined due to the cancellation of a construction contract and the amount determined due to the cancellation of a construction contract occurs, the difference shall be included in the gross income or deductible expenses for the business year in which the cancellation date belongs", which applies from the first business year that begins after January 1, 2012 (Article

In full view of the purport of the statements and arguments as stated in Section 5 through 11, No. 14 and No. 15, the Plaintiff’s 201 of this case’s cancellation date, on or after January 1, 2012, paid part of the cancellation date to financial institutions, and received value-added tax reported and paid for each household’s sales on or after the date of cancellation of each payment by subrogation. The Plaintiff included the down payment confiscated to each household for the business year of cancellation of this case’s cancellation date as 11, 201 and 201, and included the difference as miscellaneous loss for each household of this case’s cancellation date as 10,000,000 won for 20,000 won for each of the above 10,000 won for 20,000 won for 10,000 won for 20,000 won for 20,000 won for each of the above cancellation date’s cancellation date.

This part of the defendant's argument is without merit without further review.

B) The Defendant asserts that the cancellation of the instant sales contract constitutes a special circumstance in which the taxpayer reported corporate tax in the manner of deducting the amount of income in the business year to which the date of cancellation belongs according to corporate accounting standards or practices, and thus, it cannot be a ground for ex post facto request for correction as it does not affect the original tax liability.

As the Plaintiff applied the rate of work progress and the rate of sale in lots to the business year 2005 until the business year 2012, it calculated the sales proceeds (total estimated sale price x the cumulative sales proceeds x the rate of work progress - the cumulative sales proceeds x the cumulative sales cost at the end of electricity x the cumulative sales cost) to be included in the deductible expenses, as seen above, and reported corporate tax for each business year as described in [Attachment 1]. The rate of work progress has been continuously increased, the cumulative sales proceeds at the end of 3 billion won are calculated by deducting the cumulative sales proceeds from the total proceeds of sale in lots, the cumulative sales proceeds at the end of 1.7 billion won are reflected in the sales rate of 200 billion won for the business year to which the date of cancellation belongs 70 billion won x 700 billion won for the sales in lots, and the remaining sales proceeds at the end of 200 billion won for the business year to which the date of cancellation belongs 80 billion won per annum 206 billion won per business year after the cancellation rate of sale in lots.

However, such effect is naturally the result of calculating sales proceeds and sales cost by applying the work progress rate and sales rate according to the method as stipulated in Article 40 of the Corporate Tax Act, Article 69 of the Enforcement Decree of the same Act, and Article 34 of the Enforcement Rule of the same Act. Nevertheless, even if corporate tax is reported in accordance with the above method, so long as the cancellation of sales contract constitutes a ground for ex post request for correction, it shall not be deemed as a special reason for exception of ex post request for correction with the effect of deducting the above income amount.

Furthermore, it is difficult to see that the cancellation of the sales contract of this case constitutes a "cancellation of sales contract, etc. that occurs on ordinary and repeated basis". It is difficult to see that a business that newly constructs and sells multi-family housing takes place over a long-term period of more than several years (e.g., the conclusion of the sales contract is concentrated at the beginning of the business, the sales contract is concentrated at the time of completion of the apartment house, and the cancellation of the sales contract is not specified in the business conditions of each business year, such as continuous occurrence after completion of the apartment house). As a result, losses are accumulated during the beginning of the business, and profits are concentrated at the time of completion of the sales contract after completion of the apartment house, and in addition, each household of multi-family housing sold in lots has different characteristics from each other in terms of price formation factors, and the time or reason for the cancellation of the sales contract of multi-family housing, such as this case, is difficult to see that the cancellation

The defendant's above assertion is without merit.

4. Conclusion

Therefore, the plaintiff's claim of this case is accepted within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.