The plaintiff constitutes a specially related person under Article 52 of the Corporate Tax Act.

The plaintiff is a person who is recognized as exercising de facto influence over the management of the corporation, such as exercising the right to appoint officers or determining the business policy, and falls under a specially related person.

Article 52 (Disstatement of Calculation)

2014-Gu Partnership-20799 global income and revocation of disposition

N

000 director of the tax office

September 19, 2014

October 15, 2014

1. The plaintiff's claim is dismissed.

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

On June 1, 2013, the disposition that the Defendant issued a correction notice of KRW 123,288,780 on global income tax belonging to the year 2008 against the Plaintiff shall be revoked.

1. Details of the disposition;

A. On October 15, 2007, A Co., Ltd., a non-listed corporation, engaged in the business of manufacturing semiconductor equipment, etc., was merged with B and dissolved on January 7, 2008 after a resolution was passed to merge with B that engaged in the business of processing agricultural, fishery, and livestock products. At the time of the resolution of merger, B’s representative director was the Plaintiff, A’s representative director was X, and X was the representative director of B after the resolution of the merger.

B. On April 10, 2008, Company B prepared a division plan to incorporate a new company by spin-off of the food processing business sector, and the main contents are as follows.

C. On May 29, 2008, Company B changed its trade name to Company A, and Company A completed the division registration that divides the food processing business sector into the trade name of Company A and CompanyM. D. The Plaintiff resigned from the representative director of Company A on July 3, 2008, and Company X on July 23, 2008, and the Y was appointed as the representative director on July 23, 2008. The Y was dismissed on March 30, 2009 and the Z was appointed as the Z representative director. The 'Ma.' was wholly issued stocks (20 million won, 2000 won, 300 won, 2009, 2009) on September 10, 2008, the Plaintiff (hereinafter 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the shares'.

F. From July 19, 201 to September 11, 2011, the Director of the Regional Tax Office assessed the market price of the shares of this case as the market price of the shares of this case, and notified the defendant et al. of the taxation data that Gap transferred the shares of this case to the transferee of the plaintiff et al. of this case at a price lower than the market price of the shares of this case by considering that Eul transferred the shares of this case at a price lower than the market price of this case to the plaintiff et al. of this case under Article 54 (4) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; Presidential Decree No. 22042, hereinafter the same).

G. Accordingly, the Defendant issued a prior notice of taxation on April 17, 2013 to the Plaintiff, and subsequently corrected and notified the Plaintiff’s global income tax amounting to KRW 123,288,780 as of June 1, 2013.

H. The Plaintiff dissatisfied with the request for adjudication on September 5, 2013, but the Tax Tribunal decided to dismiss the request on December 30, 2013.

I. Meanwhile, on January 27, 2014, the Plaintiff filed a lawsuit against the director of the regional tax office against the head of the regional tax office having jurisdiction over the head of the regional tax office seeking the revocation of the disposition of correction and notification of the amount of KRW 54,163,740, global income tax for the year 2008 (Seoul Administrative Court 2014Guhap51319), and the said court rendered a ruling dismissing the disposition on August 14, 2014, and D filed an appeal on September 19, 2014 (Seoul High Court 2014Nu62892). 2. Whether the instant disposition is legitimate or not, the instant disposition is still pending.

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons.

(1) Although the Plaintiff was a joint representative of A prior to the transfer of the instant shares, on July 3, 2008, the Plaintiff resigned and retired the representative director on July 3, 2008, and was appointed as the representative director on September 9, 2008. The board of directors’ resolution was made on September 10, 2008, and the acquisition of the instant shares was made on the same day. Therefore, whether the acquisition of the instant shares constitutes a wrongful calculation should be based on the standards at the time of the transaction. As such, the transferee of the instant shares, including the Plaintiff, was not in a special relationship with A on September 10, 2008, when the Plaintiff acquired the instant shares, and was not in a special relationship with A. (2) In light of the fact that the assessed value of the instant shares was determined at the price of the instant shares at the price of J Accounting Corporation’s 6,952,517,32 won, and that the Plaintiff did not have any economic appraisal and assessment relation with B and building’s land.

"A" on September 23, 2008, the defendant evaluated "A" as the book value on the ground that the standard market price is less than the book value, compared with the book value 1,788,182,861 won and the standard market price 1,437,324,440 won attached to the report on acquisition. The above book value shall be the 3,089,062,90,80,047 won as the result of the appraisal of assets and liabilities prepared by J Accounting Corporation as of July 31, 2008 after deducting the book value of "A" from the 3,089,00,000,060,047 won as the total amount of 60,000,000 won as of June 30, 2008.

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) On January 15, 2008, "A" has been discussed about the procedures and schedule of the law firm construction and physical division. (2) On July 2, 2008, "A" entered into a share guidance transaction agreement with the Plaintiff, C, E, F, G, H, I, J, D (hereinafter "Plaintiff et al.") to sell the shares of this case for KRW 6.5 billion, and its main contents are as follows.

3) T appraisal corporation which was requested from B to assess land and buildings on the land and buildings on the land of Jinsan-si in Busan-si in Busan-si, 57, 624-83 was assessed as KRW 2,752,680,000 on August 6, 2008, and the above building was assessed as KRW 968,953,150 on the price basis.

4) The J Accounting Corporation requested A to assess B’s asset value on the basis of the materials presented by A, but, in the case of land and buildings on the land and its ground, the J Accounting Corporation prepared a “written opinion of appraisal on the acquisition and transfer of assets and value of assets on July 31, 2008, using the appraisal value of T Accounting Corporation for the purpose of evaluating the appraisal value.”

5) According to the above evaluation statement, A’s book value of a building presented by Jinsan-si is KRW 537,624-83, and KRW 1,740,836,401 of the building on land and KRW 00-1,788,82,861 of the total amount of KRW 47,346,460 of the book value of the building on land at Minsan-si 300,000, KRW 537,624-83, and KRW 71,781,00 of the total amount of KRW 47,346,460 of the book value of the building at Minsan-si 301, KRW 300,80, KRW 80 of the total amount of acquisition value - KRW 1,300, KRW 537,624-83, KRW 781,681, KRW 57,9681, KRW 196,81686,

A around September 2008, around 2008, filed a report on asset acquisition with the Financial Supervisory Service.

On the other hand, the evaluation statement contains the following points on the limitations of duties performed in using the written opinion.

6) In calculating the net asset value of B in order to evaluate the net asset value, the Defendant compared the total amount of KRW 1,788,182,861, the book value of the building as of July 31, 2008, which was submitted by A to the Financial Supervisory Service around September 2008, and the total amount of the standard market value of the building as of July 31, 2008, with the total amount of KRW 1,437,324,440, the book value under Article 55(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act,

7) On November 6, 2008, A submitted an explanatory note to the Public Disclosure Review Office of the Financial Services Commission. The main contents are as follows.

8) A around September 201, X, the representative director of A, signed and sealed a written confirmation that “A, a person with a special relationship, has transferred the instant shares at a price below the market price (32,500 won per share) of the Plaintiff, C, E, and D, which is below the market price (40,009 won per share).”

D. Determination

1) Determination on the first argument

Article 52(1) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) provides that where it is deemed that a domestic corporation’s act or income amount has unjustly reduced the tax burden on the income of the corporation due to transactions with a specially related party, the income amount of the corporation for each business year of the corporation may be calculated regardless of the calculation of the income amount of the corporation. Accordingly, Article 87(1)1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009; hereinafter the same) provides that one of the specially related parties exercises de facto influence over the management of the corporation, such as exercising the right to appoint officers or determining the business policy (including a person to be deemed a director under Article 401-2(1) of the Commercial Act) and his relatives.

The above facts and evidence, the whole oral arguments, and the following circumstances revealed. ① A, an officer of a corporation engaged in semiconductor manufacturing business, etc., is merely a KOSDAQ-listed corporation, which was established after the merger with B, a company engaged in the business of manufacturing agricultural, fishery, and livestock products processing business, and the newly established company, by spin-off and transferring to the Plaintiff. ② Accordingly, A is preparing a spin-off on January 15, 2008, including discussions on physical division procedure and schedule with the law firm, and ③ it is reasonable to deem A as having concluded a leading stock transaction contract with eight (8) billion won prior to the date of the conclusion of this contract, and to conclude a leading stock transaction agreement with the representative director on September 10, 2008, and the Plaintiff was not obligated to transfer the pertinent shares to the Plaintiff. Thus, it is reasonable to conclude a leading stock transaction agreement with the representative director at the time of the transfer of the Plaintiff’s shares to the effect that the Plaintiff did not transfer the shares to the Plaintiff.

2) Judgment on the second and third arguments

Article 88(1)3 of the former Enforcement Decree of the Corporate Tax Act provides that "where assets are transferred at a price lower than the market price" as one of the "where taxes are unjustly reduced under Article 52(1) of the former Corporate Tax Act. Article 89 of the former Enforcement Decree of the Corporate Tax Act provides that under similar circumstances with the relevant transaction, the relevant corporation's prices continuously traded with many and unspecified persons other than persons with a special relationship or prices generally traded between third parties other than persons with a special relationship (Article 1). In cases of stocks whose market price is unclear, the amount appraised by applying the provisions of Articles 38 through 39-2, and 61 through 64 of the Inheritance Tax and Gift Tax Act mutatis mutandis (amended by Act No. 9916, Jan. 1, 2010; hereinafter the same shall apply) shall be appraised at a price lower than the market price under Article 63(1)1 (c) of the former Inheritance Tax and Gift Tax Act, the value of new assets appraised by the Commissioner of the National Tax Service for less than the net Assets Value of the relevant corporation by Article 60.

In light of the above facts and the aforementioned evidences and the purport of oral arguments, the defendant evaluated the sale price of 1,788,182,861 won as the book value on July 31, 2008 on the ground that the standard market price of the building submitted by A to the Financial Supervisory Service on September 1, 2008 is less than the book value. On July 31, 2008, the appraisal of 1,788,182,861 won as the sale price of the building was 708.6 billion won, and the appraisal of 208.6 billion won as the sale price of the building was 1,788,182,861 won before the date of the transfer of the shares, it is reasonable to determine the market price of the above 308.6 billion won as the sale price of the building of 208.3 billion won as the market price of the building of 208.6 billion won as the market price of the building of this case.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.