Seoul Administrative Court 2005Guhap3660 ( October 14, 2005)

In the case of leasing old factory after relocating the factory outside the Seoul Metropolitan area, the reduction or exemption of the local small and medium enterprise is applied.

Even in cases where the Gu factory is leased to an area outside the Seoul Metropolitan area by relocating the place of business within the Seoul Metropolitan area, the reduction or exemption of the tax amount shall be applied to the relocated small and medium enterprises by deeming it as the same concept as a failure of transfer or removal within one year as prescribed by the Enforcement Decree, and in the case of lease, the National Tax Service's

The contents of the decision shall be the same as attached.

Article 46 of the former Regulation of Tax Reduction and Exemption Act

Article 46 of the Enforcement Decree of the former Tax Reduction and Exemption Control Act

* The case has been abandoned by the State in 2006.07.03.07.

1. The defendant's appeal is dismissed.

2. The costs of appeal are assessed against the defendant.

1. Purport of claim

The Defendant’s disposition of imposition of global income tax of KRW 53,52,020 for the year 198 against the Plaintiff on March 19, 2004 and global income tax of KRW 89,482,950 for the year 199 shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

The court's explanation of this case is identical to the statement of the reasoning of the judgment of the court of first instance, and thus cites this case in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act

Therefore, the judgment of the first instance court is just and the defendant's appeal is dismissed, and it is so decided as per Disposition.

[Seoul Administrative Court 2005Guhap3660, 14 June 2005]

1. The Defendant’s disposition of imposition of KRW 53,52,020 on the Plaintiff on March 19, 200 and KRW 89,482,950 on the global income tax for the year 198 and the global income tax for the year 199 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Circumstances of the taxation disposition; and

The following facts are either disputed between the parties, or acknowledged by Gap evidence 1-1-2-2-2-2-2-2-3-1, Eul evidence 1-2, Eul evidence 1-2-2, Eul evidence 4-1, and Eul evidence 4-2.

A. From April 16, 1982, the Plaintiff transferred the place of business (hereinafter referred to as the "place of business of this case") on July 5, 1996 to ○○-dong 1238- ○○○ 203, Singu, a region other than the Seoul Metropolitan area under the relevant Acts and subordinate statutes, with the trade name of ○○ ○-dong 223-○ ○ ○ ○ 203, the Plaintiff made a comprehensive payment for the income tax reduction and exemption for small and medium enterprises relocating to rural areas (hereinafter referred to as the "Act") under Article 46(1) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 5584, Dec. 28, 1998; hereinafter referred to as the "Enforcement Decree") and Article 26(1)1 of the Enforcement Decree of the same Act (hereinafter referred to as the "Enforcement Decree").

B. In moving the instant plant, the Plaintiff leased the factory building (hereinafter referred to as the “former factory building”) and the site used for the instant plant to the largest ○○○○ on November 1996, and the highest ○○○○ was engaged in the mechanical repair-related service business and mechanical manufacturing business with the trade name called the “○○ Machinery in the instant factory building”, and the present ○○○ level was currently in operation after taking over the business from the highest ○○ level.

C. However, in the event that a third party who leased a former factory building uses the leased building for the purpose of factory, the Board of Audit and Inspection demanded that the leased building be exempt from tax reduction or exemption pursuant to the National Tax Service’s established rules (Law No. 4601-1835, 1996.25). The Defendant excluded the portion originally reported to the Plaintiff on March 19, 2004 from the amount of reduced or exempted tax, thereby imposing KRW 53,552,020 of global income tax for the year 198 and KRW 89,482,950 of global income tax for the year 199.

D. On June 11, 2004, the Plaintiff appealed to the National Tax Tribunal, but dismissed the above claim on November 3, 2004, and filed the instant lawsuit on January 31, 2005.

2. Whether the disposition is lawful;

A. The parties' assertion

(1) The plaintiff asserts that the disposition of this case is unlawful on the ground that the disposition of this case is unlawful, since all of the facilities in the old factory building are removed and all of the factory facilities remaining in the old factory in the "Gu factory" under the relevant provision of tax reduction and exemption are removed and the operation of the factory facilities in question is impossible.

(2) As to this, the Defendant asserts that the instant disposition is lawful, since the lessee’s use of the former factory building as a factory continues to be subject to tax reduction and exemption, as in the instant case, in light of the legislative intent of tax reduction and exemption under the relevant regulations.

B. Relevant statutes

Article 46 of the former Regulation of Tax Reduction and Exemption Act

Article 46 of the Enforcement Decree of the former Tax Reduction and Exemption Control Act

C. Determination

Under the principle of no taxation without law, or under the principle of no taxation without law, the interpretation of tax laws and regulations shall be interpreted in accordance with the law unless there are special circumstances, and it shall not be allowed to expand or analogically interpret without reasonable grounds.

In this case, it is one of the tax support systems to restrain the concentration of industrial facilities and business activities in the Seoul Metropolitan area, to induce companies located in the Seoul Metropolitan area and to support the improvement of the management conditions of local industries. Article 46(1) of the Act provides that when a small or medium enterprise operating a business with factory facilities and relocates the whole factory to an area outside the Seoul Metropolitan area under the conditions as prescribed by the Presidential Decree, the benefit of tax reduction or exemption for the income accruing from the factory after the relocation shall be granted for a certain period of time. Article 46(1)1 of the Enforcement Decree of the Act provides that the owner of factory facilities in the Seoul Metropolitan area transfers the relevant factory to another person within one year from the date of relocation or removes or closes all the factory facilities located in the former factory within one year from the date of relocation to an area outside the Seoul Metropolitan area and thereby, the meaning and scope of the above factory facilities shall not be separately provided.

However, the requirements for tax reduction and exemption under Article 46 (1) 1 of the Enforcement Decree of the above Act are as follows: first, the factory facilities located in the Seoul Metropolitan Area should be relocated to another person; second, the operation of the factory facilities by either transferring the old factory to another person, or by disposing of or closing the old factory facilities within one year after the relocation. However, there is no dispute between the parties that the Plaintiff, who operated a small and medium enterprise in the Seoul Metropolitan Area, transferred the factory facilities to an area outside the Seoul Metropolitan Area and did not transfer the old factory facilities to another person within one year after the relocation; thus, the Plaintiff was unable to operate the factory facilities by removing or closing the old factory facilities to receive the multi-city tax amount under the above provision.

Therefore, as recognized earlier, the Plaintiff’s operation of the manufacturing business of plastic materials at the instant place of business, as recognized by the former Enforcement Decree, was no longer possible due to the Plaintiff’s removal of all of its factory machinery and equipment to a new factory outside the Seoul Metropolitan area. Although the Plaintiff’s operation of the manufacturing business of plastic materials at the instant place of business without transferring the instant place of business to a third party within one year, the Plaintiff’s operation of the manufacturing business at the instant place of business was carried out by leasing the building and site of the instant place of business to the largest director, the Plaintiff’s operation of the building at the instant place of business for the purpose of removing the building and site of the instant place of business is not deemed to have the nature of the Plaintiff’s involvement in the sale of the building and site of the instant place of business (see, e.g., Supreme Court Decision 9Da164, supra., Supreme Court Decision 200Da164416, supra, on the ground that the Plaintiff’s operation of the manufacturing facilities at the instant place of business was no longer necessary for removal.

Therefore, the plaintiff met all the requirements for tax reduction and exemption stipulated in the relevant laws and regulations, and the grounds alleged by the defendant cannot be the grounds for preventing the establishment of tax reduction and exemption. Therefore, the other purport of the disposition of this case cannot be deemed lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.

* This case is a case against the State and is terminated by the High Court after waiver of the appeal.