Plaintiff (Law Firm Gyeong, Attorneys Lee Gyeong-chul et al., Counsel for plaintiff-appellant)

The head of Yangcheon Tax Office

January 17, 2013

Seoul Administrative Court Decision 201Guhap7632 decided June 1, 2012

1. All appeals filed by the plaintiff and the defendant are dismissed.

2. The costs of appeal shall be borne by each party.

1. Purport of claim

Of the disposition imposing global income tax of KRW 310,675,365 on March 19, 2009, the part exceeding KRW 195,428,083 among the disposition imposing global income tax of KRW 310,675,365 on the Plaintiff, the part exceeding KRW 161,709,967 among the disposition imposing global income tax of KRW 226,09,597 for the year 2006, the part exceeding KRW 449,403,210 among the disposition imposing global income tax of KRW 449,403,210 for the year 207, the part exceeding KRW 92,028,804 among the disposition imposing global income tax of KRW 92,80 for the disposition imposing global income tax of KRW 310,675,365 for the Defendant, and the quarter of January 4, 2006 for the first quarter shall be revoked.

2. Purport of appeal

A. The plaintiff

The part against the plaintiff in the judgment of the court of first instance shall be revoked. The part which exceeds KRW 195,428,083 among the corrective imposition disposition of KRW 310,675,365 on March 19, 2009 against the plaintiff, which belongs to the plaintiff on March 19, 2005, exceeds KRW 161,709,967 among the corrective imposition disposition of KRW 226,095,597 on global income for the year 2006, and the part which exceeds KRW 449,403,210 on the imposition disposition of KRW 92,028,80 on global income for the year 207, shall be revoked.

B. Defendant

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.

1. Quotation of the reasons for the judgment of the first instance;

The reasoning of this court's reasoning is as follows: ① part of the reasoning of the judgment of the first instance as stated below; ② by adding the judgment of the plaintiff's assertion in Paragraph 3, it is the same as the reasoning of the judgment of the first instance, and thus, it shall be accepted in accordance with Article 8 (2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. Parts to be dried;

A. The part of the 7th judgment of the court of first instance stating that “No material is available to submit any material about it,” and Nonparty 1’s representative director of Hongwon Ginseng appears to have been prepared around October 13, 201 (Evidence A5) that Nonparty 1 offered the Plaintiff only to three, including Nonparty 4, who introduced the Plaintiff, and the fact that Nonparty 1 did not pay the introduction fee to the Plaintiff is acknowledged (see, e.g., Supreme Court Decision 330 pages), and Nonparty 2 and 10-1 of the evidence No. 10, according to each of the above statements, Nonparty 1 did not directly state that “a content certificate” sent by Nonparty 1 to the Plaintiff on June 23, 2008, and that Nonparty 1 received the Plaintiff’s interest of this case from Nonparty 1 in the Daegu regional tax office on September 30, 2008, and each of the above statements that Nonparty 1 received KRW 500,500,000,000 from the Plaintiff.

B. From 7th to 8th of the first instance court’s judgment, Article 479 of the Civil Act provides that “(4) of the same Act shall be appropriated for repayment in the order of expenses, interest, and principal when the obligor pays expenses and interest for one or more obligations, and the person performing the obligation has paid the entire obligation,” although Nonparty 1 stated in the above statement (Evidence No. 5) that the said KRW 508,00,000 was remitted to the Plaintiff for the purpose of paying the principal, not interest (see, e.g., the records). However, according to each of subparagraphs 4-2, 5, 10-2, 5, 10-1, and 10-2 of the above statement, Nonparty 1 appears to have presented the above statement to the Plaintiff as the date of the above tax investigation (see, e.g., Supreme Court Decision 200, Sept. 30, 2008; Supreme Court Decision 2008Du50808, Dec. 2, 2008).

C. The part "(see Supreme Court Decision 2001Du8490 delivered on May 27, 2003)" in the 8th sentence of the first instance court is "(see Supreme Court Decision 2001Du8490 delivered on May 27, 2003, Supreme Court Decision 2005Du5437 delivered on October 28, 2005)."

D. From 7th to 11th of the judgment of the first instance court, the part of the "(3) Red Ginseng was closed on June 30, 2008, the following year after this interest was converted into principal, and there seems to be no circumstance to deem that the collection of the Plaintiff's claim against Hong Ginseng was impossible until this time, and ④ The representative of Hongwon Ginseng replys to the fact that Hongwon Ginseng's obligation is succeeded to and repaid by succession to Hongwon Ginseng, a separate corporate agricultural ginseng manufacturing corporation whose representative is Hongwon Ginseng is the principal, and thus, the repayment of the claim which is the cause of income is generally impossible should be objectively acknowledged that the debtor is not able to receive a loan, and that it is impossible for the debtor to receive a loan from the principal at the time of the above 7th of the judgment of the first instance court. According to the above circumstances, it is evident that it is objectively impossible for the Plaintiff to collect the loan from Hongwon Ginseng as the above 600 billion won loan from the above 200 billion won loan to 300 billion won.

3. Additional determination

A. The plaintiff's assertion

Of the interest accrued on April 5, 2007, Nonparty 1’s representative director of Hongwon Ginseng converted KRW 600 million to the loan principal of the Plaintiff (hereinafter “instant loan claim”), and as a security, Hongwon Ginseng’s “The land and the above ( Address 1/2 omitted) land and building on the ground” (hereinafter “instant real estate”) owned by Hongwon Ginseng as joint collateral (hereinafter “instant mortgage”). However, the instant real estate was already established with several senior senior mortgages and its total maximum debt amount was KRW 2.9 billion, and its total debt amount was imposed on May 7, 2008, and its total appraisal value was KRW 2.328 million, and thus, it cannot be deemed that the instant real estate was converted to the interest income amount realized by the Defendant as collateral, and thus, it was unlawful in view of the fact that the instant mortgage was established from the time of its establishment to the point of view that the Defendant did not actually have realized the interest income amount, and thus, it cannot be deemed that the instant realizing interest income amount was unlawful.

B. Determination

(1) On the other hand, the Income Tax Act adopts the so-called "the principle of confirmation of right" in the calculation of taxable income by deeming the income to be realized when a right that is the cause of income has not been realized even if there is no actual income. However, even when a claim that is the cause of income has occurred, if it is objectively apparent that the claim that is the cause of income becomes impossible to recover due to the debtor's bankruptcy, etc. and thus no possibility of realizing the future income exists, the income tax that is the object of economic benefits should lose its premise, and such income cannot be imposed on taxable income. Furthermore, the burden of asserting and proving that there are special circumstances that it is objectively clear that the possibility of realizing the income that is the object of income tax has no possibility of realizing the income is evident. In such a case, the issue of whether a claim is impossible should be determined by an objective method of assessment by taking account of the debtor's asset status and payment ability, etc. based on the specific details and subsequent circumstances (see, e.g., Supreme Court Decisions 201Du153684, Oct. 25, 20194).

(2) However, in full view of the following circumstances revealed by the facts cited earlier and evidence, etc., even if the evidence presented by the Plaintiff and the circumstances alleged therein are considered, the Plaintiff’s assertion that the instant loan claim does not constitute interest income realized on April 5, 2007, under the premise that the instant loan claim is an income that cannot be realized on April 5, 2007, and thus, the instant disposition on the said portion was unlawful in violation of the substance over form principle, etc. cannot be accepted.

① Red Ginseng appears to have operated its business normally at the time of April 5, 2007, approximately KRW 2 billion, KRW 3 billion, KRW 2007, KRW 2007, KRW 2008, KRW 5000, KRW 4000,000,000, KRW 5000,000,000, KRW 600,000,000,000, KRW 50,000,00,000, KRW 50,000,00,000, KRW 50,000,00,000, KRW 50,00,000,00, KRW 50,000,00,00,00 was 6,000,000,000,00,000,00,000,00,00,00 won was 6,00,00.

② Although Hong Ginseng, after the imposition year of global income tax in this case against the Plaintiff (2005, 2006, 2007) was following May 7, 2008, it appears that the voluntary auction procedure commenced with respect to the real estate in this case, which was its ownership, and that it was disposed of ex officio as of March 30, 2009. However, the imposition disposition of global income tax in this case was made on March 19, 2009, and it is difficult to view the Plaintiff’s right to collect the remainder as of March 19, 2009, unless it was objectively and objectively obvious that it was impossible to collect the remainder as of the time of the collection of part of the claim, as of the date of the commencement of the business, as a matter of principle, it could not affect the duty to pay interest income accrued from the non-business profit (see the above Decisions 2001Du8490, 205Du5437, supra, 2007).

③ On the other hand, on November 11, 2009, the date of the voluntary auction procedure for the instant real estate, the Plaintiff received a total of 983 million won as a collective security right holder established before April 5, 2007 to secure the original loan prior to the date of the instant loan. In light of the fact that the instant loan claims were not fully recovered, the Plaintiff asserted that there was no possibility of realizing the instant loan claims from the beginning. However, the Plaintiff did not submit an objective evidence, such as the distribution schedule to prove that only KRW 983 million was distributed during the said claim’s voluntary auction procedure, and even if the Plaintiff actually received only KRW 983 million from the Plaintiff, such circumstance appears to have not been enough to support the Plaintiff’s actual decrease in the value of the instant loan claims as a reason other than the Plaintiff’s loan’s loan claim’s deterioration, etc. (see, e.g., Red Ginseng’s loan claims from the Plaintiff at the time of the instant voluntary auction procedure.)

4. Conclusion

Therefore, all appeals by the plaintiffs and the defendant are dismissed, and it is so decided as per Disposition.

[Attachment]

Judges Lee Tae-tae (Presiding Judge)