[1] Purport of Article 18-3 (2) 3 of the former Corporate Tax Act

[2] Criteria to determine whether the "real estate exclusively used for lease" under Article 18 (21) 8 of the former Enforcement Rule of the Corporate Tax Act constitutes "real estate exclusively used for lease"

[3] The case holding that since several buildings are registered in a single building register and a single building register but they are not sufficient to independently use them as a single building, each building must be determined as "real estate exclusively for rent" under Article 18 (21) 8 of the former Enforcement Rule of the Corporate Tax Act

[1] The purpose of Article 18-3 (2) 3 of the former Corporate Tax Act (amended by Act No. 4804 of Dec. 22, 1994) is to prevent the deterioration of the company's financial structure due to an unreasonable corporate expansion dependent on other capital, to restrain the speculation in financial assets and the reckless corporate expansion of non-productive industries, thereby inducing the company's sound economic activities through the productive management of corporate capital, and to promote the efficient utilization of national land.

[2] According to Article 18-3 (2) 3 of the former Corporate Tax Act (amended by Act No. 4804 of Dec. 22, 1994), Article 43-2 (5) and (11) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14468 of Dec. 31, 1994), and Article 18 (2) 8 of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Prime Minister No. 492 of Mar. 30, 1995), where a corporation owns leased real estate, the amount calculated pursuant to Article 43-2 (6) of the former Enforcement Decree of the Corporate Tax Act (amended by Ordinance of the Prime Minister No. 1994 of Dec. 22, 1994) shall not be included in deductible expenses in calculating the amount of income for each business year. In addition, if the whole building or fixtures on the leased real estate is provided to a building that is the main body of the lease, it can be determined as to include only one building directly leased or management.

[3] The case holding that since several buildings are registered in one building register and one building register but they are not sufficient to use independently as a single building, each building should be determined as "real estate exclusively for rent" under Article 18 (21) 8 of the former Enforcement Rule of the Corporate Tax Act

[1] Article 18-3 (2) 3 (see current Article 27 subparagraph 1) of the former Corporate Tax Act (amended by Act No. 4804, Dec. 22, 1994); Article 18-3 (2) 3 (see current Article 27 subparagraph 1) of the former Corporate Tax Act (amended by Act No. 4804, Dec. 22, 1994); Article 43-2 (5) and (11) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1468, Dec. 31, 1994); Article 18 (2) 8 of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Prime Minister No. 492, Mar. 30, 1995) / [3] Article 18-3 (2) 3 (see current Enforcement Rule of the Corporate Tax Act (amended by Act No. 4804, Dec. 24, 1994)

[1] Supreme Court Decision 97Nu10642 delivered on October 10, 1997, Supreme Court Decision 97Nu6476 delivered on December 23, 1998 (Gong199Sang, 267) / [2] Supreme Court Decision 98Du2539 delivered on August 21, 1998 (Gong198Ha, 2346)

Copiting Tourism Co., Ltd. (Attorney Lee Dong-dong, Counsel for the plaintiff-appellant)

Head of the tax office;

Seoul High Court Decision 97Gu38215 delivered on January 28, 1999

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

We examine the grounds of appeal.

The purpose of Article 18-3 (2) 3 of the former Corporate Tax Act (amended by Act No. 4804 of Dec. 22, 1994; hereinafter referred to as the "Act") is to prevent the deterioration of the financial structure due to an unreasonable corporate expansion dependent on another person's capital, to restrain the speculation in real estate and non-productive business through financial assets, to induce the sound economic activities of an enterprise through the productive management of corporate funds, and to promote the efficient utilization of land. Thus, the disposition of imposition of corporate tax of this case based on this cannot be deemed as an unlawful restriction of excessive business activities of an enterprise (see Supreme Court Decision 97Nu10642, Oct. 10, 197).

According to Article 18-3 (2) 3 of the Act, Article 43-2 (5) and (11) of the Enforcement Decree of the Act (amended by Presidential Decree No. 1468 of Dec. 31, 1994), and Article 18 (21) 8 of the Enforcement Decree of the Act (amended by Ordinance of the Prime Minister No. 492 of Mar. 30, 1995), where a corporation owns an exclusive real estate that exceeds twice its equity capital, the amount calculated pursuant to Article 43-2 (6) of the Enforcement Decree of the Act out of the interest paid on the loan shall not be included in deductible expenses for the calculation of its income amount for each business year. The leased real estate mentioned above includes not only cases where all buildings or fixtures on the ground are provided for lease, but also cases where a corporation that is the main agent of the lease directly uses such real estate.

In addition, in principle, whether a building constitutes a leased real estate or the ratio of direct use by a leased juristic person should be determined by each building. However, in cases where each building is connected with one another and it can be deemed a single building as a result of integrated use and management within the same boundary, the whole building can be exceptionally considered as a single building (see Supreme Court Decision 98Du2539 delivered on August 21, 1998).

According to the reasoning of the judgment below, the court below acknowledged the following facts: (a) of this case, multiple buildings, warehouses, incineration houses, etc. in one fence and are registered in one building register and one building register; (b) each building is divided into warehouses, offices, and neighborhood living facilities; (c) each building has a considerable distance; (d) there is no connecting passage between each other; and (e) the entry and exit of this case is not a door, but a door, a door, a door, and the Na Dong are used; and (b) on the ground that the multiple buildings do not lack independent use as a single building, the court below determined that the tax disposition of this case was legitimate, on the ground that the two buildings should be separated from multiple buildings, warehouses, incineration houses, etc. and determine whether they constitute real estate exclusively used for lease for each building.

In light of the records, the fact-finding and judgment of the court below are just in accordance with the above legal principles, and there is no error of law by misunderstanding the legal principles as to leased real estate as a ground for non-deductible of loan interest as otherwise alleged in the ground of appeal. The ground of appeal pointing this out cannot

Therefore, 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.

Justices Lee In-hee (Presiding Justice)