Plaintiff (Appointed Party)

Kimhae Tax Office et al.

May 13, 2015

Changwon District Court Decision 2014Guhap357 Decided July 18, 2014

1. Revocation of a judgment of the first instance;

2. On June 4, 2013, the head of the defendant Kimhae Tax Office imposed on the plaintiff (appointed party) on the Plaintiff on June 4, 2013, and the disposition of provisional payment for correction of KRW 54,700,346 as well as additional tax 12,620,016 as the global income tax return for 201 and 201 is revoked.

3. On September 3, 2013, the head of Si/Gun/Gu’s tax office’s corrective and provisional disposition on KRW 25,886,73 and additional tax 6,427,675 shall be revoked.

4. The total costs of the lawsuit shall be borne by the Defendants.

The text shall be as shown in the text.

1. Details of the disposition;

A. The Plaintiff (designated parties; hereinafter referred to as “Plaintiff”) and the Plaintiff Selectioner (hereinafter referred to as “Plaintiff Selectioner”), and the Plaintiff and the Plaintiff Selectioner (hereinafter referred to as “Plaintiff, etc.”) operate an oil retail business, such as duty-free oil, with the trade name “○○○○○○ Gas station” from the ( Address omitted) Jin-si Kimhae-si (hereinafter referred to as “Plaintiff, etc.”), and the Plaintiff, etc. were joint entrepreneurs of 50% shares by 2010, respectively. The Plaintiff is a sole proprietor from 2011.

B. According to the Busan Regional Tax Office’s audit and inspection records of the Board of Audit and Inspection, the Defendants notified the Plaintiff, etc. of the total amount of KRW 261,590,390 (hereinafter “the instant refund”) of individual consumption tax, traffic, energy, and environment tax, education tax, and driving tax (hereinafter “individual consumption tax, etc.”) refunded after selling the tax-free oil in 2010 and 2011 to the Plaintiff, etc., as well as the total amount of KRW 163,051,790 in 2010, and KRW 98,538,60 in 201, and KRW 98,60 in 2011; hereinafter “instant refund”). Accordingly, the Plaintiff, etc. notified the Plaintiff, etc. of the instant refund as filing a revised return, adding it to the total amount of income in 2010 and March 22, 2011 (hereinafter “the instant revised return”).

C. On May 31, 2013, the Plaintiff filed a request for rectification against the head of the tax office of Suwon-si for the total of KRW 30,613,93,939, and the total of KRW 31,120,326, and the total of KRW 36,706,423, and KRW 36,706,423, and the total of KRW 25,886,73, and KRW 6,427,675, and KRW 314,408,00,000 for the revised global income tax return for 2010. On July 11, 2013, the Plaintiff filed a request for rectification against the head of the tax office of Suwon-si for the revised global income tax return for 2010.

D. On June 4, 2013, the director of the regional tax office, and the director of the regional tax office, the director of the regional tax office, on September 3, 2013, issued the instant disposition of provisional payment for correction (hereinafter collectively referred to as “instant disposition”). The reason is that the Plaintiff, etc., without reflecting it in relation to the deduction of the instant refund from necessary expenses in 2010 and 2011 (sales cost).

E. The Plaintiff et al. appealed for a trial to the Tax Tribunal, but the claims were all dismissed on November 27, 2013.

[Ground of recognition] The fact that there is no dispute, Gap evidence 1-1-6, Gap evidence 2-1, 2-2, Gap evidence 7-1, 2-2, Eul evidence 1, and the purport of whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

Article 26(10) of the Income Tax Act provides, “The amount of tax refunded to a petroleum retailer pursuant to Article 106-2(2) of the Restriction of Special Taxation Act shall not be included in the total amount of income when calculating the amount of income in the relevant taxable period.” Moreover, corresponding to the public opinion, the Plaintiff, etc., etc.: “The amount of tax reduced or exempted by a petroleum retailer who supplied tax-free oil to farmers, fishermen, etc., and received directly a refund to such farmers, fishermen, etc., shall not be included in the total amount of income; thus, the Plaintiff

Nevertheless, the Defendants notified the Plaintiff, etc. of the instant refund money to be included in the global income tax base in 2010 and 2011 on the ground of “the established rule that the refund amount of tax-free petroleum reduced or exempted shall not be included in gross income and necessary expenses,” which does not fall under the public opinion of the tax authorities, according to the records of the Board of Audit and Inspection, and the Plaintiff, etc. made the instant revised return and payment without any need.

Unless there is a cause attributable to the Plaintiff, etc. in the revised report of this case, the revised report of this case should be corrected in accordance with the above laws and regulations, but the refusal by the Defendants violates the principle of no taxation without law and the principle of good faith, which is the large principle of national tax imposition. Therefore, the disposition of this case

B. Relevant statutes

It is as shown in the attached Form.

(c) Markets:

1) Article 24 of the former Income Tax Act (amended by Act No. 12153, Jan. 1, 2014; hereinafter the same) provides that “the total amount of income of a resident shall be the sum of the amounts received or received in the pertinent taxable period; however, matters necessary for the scope and calculation of the total income amount shall be prescribed by Presidential Decree.” Article 27 provides that “the amount to be included in necessary expenses when calculating the business income amount shall be the sum of expenses corresponding to the total amount of income in the pertinent taxable period, which is generally accepted as expenses generally accepted.” Article 33 of the same Act provides that the amount not included in necessary expenses shall be specifically listed in calculating the total

On the other hand, the Enforcement Decree of the Income Tax Act specifically stipulates the scope and calculation of total revenue and necessary expenses in Articles 51 through 114.

In full view of the structure and contents of the relevant provisions of the former Income Tax Act, it is reasonable to view that the business income, which is the tax base of income tax for a business operator, is calculated by deducting necessary expenses from the total income calculated under the former Income Tax Act and the Enforcement Decree of the Income Tax Act, and that the necessary expenses to be deducted here include all the ordinary expenses that are generally acceptable as expenses corresponding to the total amount of income, unless otherwise expressly prescribed in

2) In addition, Article 51 subparag. 3 of the Enforcement Decree of the Income Tax Act provides that when calculating the total amount of income from business income, the amount of tax paid as necessary expenses, such as a customs refund, shall be included in the total amount of income. Thus, in cases where a petroleum retailer supplies petroleum to farmers, fishermen, etc. pursuant to Article 106-2 of the former Restriction of Special Taxation Act (amended by Act No. 111133, Dec. 31, 201) and receives a reduction or exemption of individual consumption tax, etc., the amount of tax refunded by a petroleum retailer pursuant to Article 106-2(2) of the former Restriction of Special Taxation Act shall be included in the total amount of income pursuant to the same provision. However, Article 26 of the former Income Tax Act separately provides that “the amount of tax refunded by a petroleum retailer pursuant to

Meanwhile, Article 55 of the Enforcement Decree of the Income Tax Act provides that the purchase price of the raw materials for the goods sold and the expenses incidental thereto (Article 1) and taxes and public charges related to the business (Article 8) shall be included in the necessary expenses. The individual consumption tax, etc. borne by a petroleum retailer in the course of purchasing a duty-free petroleum from a petroleum manufacturer shall be included in the purchase price, and the individual consumption tax, etc. borne by the petroleum retailer in the course of accounting, including the purchase price, shall be included in the necessary expenses pursuant to subparagraph 1, and if he/she accounts at a separate tax and public charge, it shall be included in the necessary expenses pursuant to subparagraph

3) The fact that the Plaintiff, etc., purchased tax-free oil, etc. from petroleum manufacturers and recorded the accounts at the selling price including individual consumption tax, etc. corresponding to the refund in this case can be acknowledged by each statement of evidence Nos. 3, 4, and 5. In the end, in light of the relevant provisions, it is reasonable to deem that individual consumption tax, etc. corresponding to the refund in this case borne by the Plaintiff, etc. while purchasing tax-free oil, etc. from petroleum manufacturers should be included in necessary expenses pursuant to subparagraph 1 of Article 55 of the Enforcement Decree of the Income Tax Act (the necessary expenses prescribed in the above provision are enumerated as examples of necessary expenses recognized pursuant to Article 27 of the former Income Tax Act, and therefore, the requirement of “the cost corresponding

Therefore, the Plaintiff, etc. did not include the instant refund in the gross income in 2010 and 2011, but included the individual consumption tax, etc. corresponding to the instant refund in the necessary expenses in 2010 and 2011, and reported and paid the comprehensive income tax in 2010 and 2011 is lawful.

Therefore, according to the Defendants’ notice of revised return, the instant refund amount was added to the gross income in 2010 and 2011, and the instant revised return and payment by the Plaintiff, etc., who filed the comprehensive income tax is unlawful. Ultimately, the Defendants’ disposition rejecting the instant revised return against the Plaintiff, etc.’s unlawful correction claim is unlawful (as long as the instant disposition is deemed unlawful as it is deemed unlawful, it does not separately determine the Plaintiff’s assertion of violation of the principle of good faith).

3. Conclusion

Therefore, the claim of the plaintiff et al. shall be accepted in its reasoning, and the judgment of the court of first instance which differs from this conclusion shall be revoked, and all of the dispositions of this case shall be revoked, and it shall be so decided as per Disposition.

[Attachment]

Judges Kang Dong-dong (Presiding Judge)