Application of the market price of wrongful calculation avoidance in connection with the increase of capital;

It cannot be deemed as violating Article 29(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act to reflect the acquisition price of ○○ Technology Investment’s stocks at the time of issuing new shares in the assessment of the market price

Article 52 (Disstatement of Calculation)

1. The Defendant’s disposition of imposing KRW 653,310,030 for the business year 199 against the Plaintiff on March 15, 2005 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. ○○○ Co., Ltd. (the previous trade name was ○○○○, but the trade name was changed on October 12, 1999; hereinafter referred to as “○○○”). On August 4, 1999, the Plaintiff, a shareholder of ○○○, renounced the preemptive right of 37,185 shares allotted to it, and thereafter, acquired KRW 65,50 shares (hereinafter referred to as “instant shares”) out of the forfeited shares by the existing shareholders, including the Plaintiff, at KRW 57,50,50 per share (hereinafter referred to as “instant shares”).

나. 피고는 원고와 특수관계에 있는 ○○○○네트워크가 ○○으로부터 원고의 실권 주 37,185주를 재배정 받아 시가보다 높은 가격으로 주식을 인수하였다면서, 이를 법인세법 제52조, 구 법인세법 시행령(1999. 12. 31. 대통령령 제16658호로 개정되기 전의 것, 이하 같다.) 제88조 제1항 제8호 나. 목의 '부당행위계산'에 해당하는 것으로 보고, 구 법인세법 시행령 제89조 제2항에 의하여 준용되는 구 상속세 및 증여세법(2000. 12. 29. 법률 제6301호로 개정되기 전의 것, '구 상속세및증여세법'이라 한다. 이하 같다.) 제63조 제1항 제1호, 다.목, 구 상속세및증여세법 시행령(1999. 12. 31. 대통령령 제16660호로 개정되기 전의 것) 제54조 제1항의 "보충적 평가방법"에 따라 이 사건 주식의 1주당 가액을 9,460원으로 평가한 뒤, 구 법인세법 시행령 제89조 제5항, 제6항 및 이에 의하여 준용되는 구 상속세및증여세법 시행령 제31조의4 제1항 제1호에 따라 ○○○○네트워크가 고가매수를 통해 인수가액과 위 평가액의 차액 중 원고의 지분에 상당하는 금액 1,164,249,400원｛≒48,040원(=57,500원-9,460원)X37,185주X65,500주÷100,500주｝ 상당을 원고에게 분여한 것으로 보아 위 금액을 원고의 1999사업연도 익금에 산입하고, 2005. 3. 15. 원고에게 1999사업연도분 법인세 653,310,030원을 부과·고지하였다(이하 '이 사건 처분'이라 한다.).

C. On May 17, 2005, the Plaintiff dissatisfied with the request for adjudgment from the Director of the National Tax Tribunal, but the Director of the National Tax Tribunal dismissed the said request for adjudgment on June 16, 2006.

[Reasons for Recognition] Uncontentious Facts, Gap 1, Gap 3, Gap 9-1, 2, Eul 1, and Eul 2, the purport of the whole pleadings

2. Relevant statutes;

It is as shown in the attached Form.

3. Judgment on the plaintiff's assertion

A. The plaintiff's assertion

○○○○ network’s acquisition of 57,50 won per share is a normal transaction price that properly reflects the objective exchange value of new shares, and thus, the Plaintiff did not gain profit because it is a higher value than the current market price. The instant disposition that imposed corporate tax on the basis of the value calculated by supplementary valuation method on the premise that the Defendant did not have any market price despite the transaction price that can be recognized as the market price at the time of offering new shares, is unlawful.

B. Facts of recognition

(1) On August 4, 199, ○○ was a non-registered and non-registered corporation at the time of offering new shares for capital increase, and other shareholders, including the Plaintiff’s 37% shares (334,284 shares), 37% shares (334,273 shares), and ○○’s officers and employees, respectively, owned the remaining 26% shares.

On the other hand, as ○○○○ network’s shareholder and ○○○○ network’s representative director, the Plaintiff had a special relationship with ○○○ network.

(2) The ○○ Technology Investment Co., Ltd. (hereinafter “○○ Technology Investment”) was not only the ○○○ and ○○○○○○ network, but also a third party without any special relationship with the Plaintiff. At the time of the instant capital increase offering, 35,000 shares at KRW 57,500 per share, which is the same price as the ○○○ network.

The ○○ Technology Investment assessed the feasibility of the Internet auction business of ○○○ through the analysis of the status of members security at the time of acquisition of the above stocks, the results of auction transactions, and prospects, etc., and estimated the sales based on the feasibility assessment. The estimated sales by dividing such estimated sales by the number of stocks and dividing them into the number of stocks, and estimated the value of 159,642 won per share by multiplying the average sales value of ○○ stocks by the average sales value and per share sales value (the value divided by the stock price by the sales value per share) of ○○ Bank Communications registered with the KOSDAQ market and the per share sales ratio (the value divided by the stock price by the sales value per share) and the sales value per share. The actual amount of investment was determined as 57,500 won per share by reflecting the investment risk level appropriately

(3) However, ○○○ Network and ○○ Technology Investment agreed to make a new investment through capital increase with ○○ through prior consultation with ○○○○ through the provision of new capital increase, and accordingly, ○○○○’s capital increase through the third party allocation method according to the contents of the consultation.

(4) On November 17, 199, 199, ○○○’s representative director, sold 20,000 shares to ○○ Start-up Investment Company, which did not have any special relation with ○○○○○○ network, etc., after offering new shares, at KRW 57,500 per share. The ○○ Start-up Investment Company concluded that the investment review was conducted at the time of purchase of the shares, and the sales price per share was appropriate for KRW 57,500 per share was purchased.

(5) On November 27, 1999, OOO sold 4,000 shares of 57,500 won per share to OOO or OO and an exclusive ○○○○ who does not have any special relationship with OOO or OO.

(6) On January 19, 200, the Plaintiff sold to ○○ Communications KRW 23,500 per share 250,000 per share (on December 13, 1999, the par value was KRW 5,000 per share and the face value was KRW 5,000 per share, and the face value was converted to KRW 5,00).

(7) On the other hand, ○○ registered with the KOSDAQ on June 13, 200. At the time of registration, the base price was 400,000 won per share (in the case of converting the face value into 5,000 won), and the price per share on June 15, 2000, which was the first transaction day, became 448,000 won per share.

(8) On February 15, 2001, ○○○○ network sold 63,963 shares of the instant shares to 240,00 won per share (in the case of converting the face value into 5,000 won), and on March 5, 2002, 26,100 won per share (the face value of shares is 500 won; hereinafter the same shall apply) for 26,100 won per share; on March 14, 2002, 24,947 shares into 24,00 won per share; on March 14, 2002, 50 shares on March 27, 200; on March 15, 200, 208; on April 1, 200, 208; on April 28, 2008, 200 won per share; on May 28, 2001; and on May 28, 2001.

[Reasons for Recognition] Uncontentious Facts, Gap 2-8, Gap 10-1, 2, and Gap 11-13, the purport of the whole pleadings

B. Determination

(1) Article 52 of the Corporate Tax Act provides that the rejection of unfair act and calculation under the provision of Article 52 of the Corporate Tax Act does not refer to a reasonable method of a person with a special relationship, and where it is recognized that a corporation unjustly avoided or reduced tax burden by abusing all the forms of transactions listed in each subparagraph of Article 8(1) of the Enforcement Decree of the Corporate Tax Act, it shall be deemed that the person with the authority to impose taxes denies it and has the income objectively and appropriately shown in accordance with the method prescribed in the laws and regulations. In light of the economic person’s perspective, it shall be limited to cases where the person with the authority to impose taxes deems that the calculation of unfair act and unreasonable, is neglected. Determination of the existence of economic rationality shall be made based on whether the transaction lacks economic rationality in light of sound social norms and commercial practices (see, e.g., Supreme Court Decision 2004Du7993, May 11, 2006).

(2) In this regard, Article 52(2) of the Corporate Tax Act provides that, in applying Article 52(1) of the Corporate Tax Act, the prices applied or deemed as applicable to sound and social common sense and conduct and the normal transaction between persons other than persons with a special relationship shall be based on the market price, i.e., the “market price.” In applying Article 89(1) of the former Enforcement Decree of the Corporate Tax Act, under similar circumstances to the pertinent transaction, where there is a generally traded price between many and unspecified persons other than persons with a special relationship or a third party who is not a person with a special relationship, the relevant corporation shall be based on the price. In the event that Article 52(2) of the former Enforcement Decree of the Corporate Tax Act provides that where the market price is unclear, the transaction price shall be deemed as the market price at the time of the transaction, and where there are circumstances that can be deemed as reflecting the objective exchange value at the time of the transaction, the market price may not be calculated by supplementary evaluation methods provided for in Article 63 of the former Inheritance and Gift Act.

(3) According to the facts acknowledged in the instant case, ○○○○○ Network: (a) acquired 35,000 shares, which are relatively larger than 57,500 won per share, based on the investment evaluation result that ○○○○○ Network and the Plaintiff evaluated and examined the feasibility, investment risk, etc. of the instant shares; (b) ○○○○○○○ Network and ○○○○○○○○○○ Network have acquired 20,00 shares at the same price; and (c) 20,000 shares and 4,00 shares and 00 shares at the same price; and (d) 0,000 shares and 50,000 shares at the time of acquisition of the instant shares based on an objective market price of 0,000 shares and 50,000 shares at the same price; and (e) 00,000 shares and 50,000 shares and more than the acquisition price of the instant shares.

(4) Therefore, the defendant's calculation of the value of the shares of this case under the premise that there is no transaction price which can be recognized as the market price at the time, not based on such market price is erroneous. Thus, the disposition of this case based on the erroneous evaluation as above is unlawful, and the plaintiff's assertion is with merit.

4. Judgment on the defendant's assertion

A. The defendant's assertion

(1) The acquisition price of ○○ Technology Investment at the time of capital increase with consideration in the instant case does not fall under the market price as it does not fall under the generally traded price with the third party stipulated in Article 89(1) of the former Enforcement Decree

(2) In addition, in light of the process of issuing new shares, the transaction of ○ Technology Investment in the instant case’s participation in the offering of new shares does not constitute “ordinary transaction between parties, other than the specially related parties, as stipulated in Article 52(2) of the Corporate Tax Act.”

(3) Since the market value of the shares, which is the basis for calculating the denied amount of wrongful calculation due to the high-priced acquisition of new shares, should be deemed the value of the shares immediately after the payment of the capital increase, the acquisition of ○○○ network on the day when the shares were acquired shall not be considered in calculating the market value of the shares in this case.

In addition, in light of the provisions of each subparagraph of Article 29(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the market price evaluation shall be based on the market price per share before the capital increase, and the appraised value or transaction price immediately after the capital increase shall not be considered in determining the market price. Thus, the market price of ○ Technology Investment at the time of capital increase shall not be reflected in the market price evaluation of this case.

B. Determination

(1) Relationship between Article 52(2) of the Corporate Tax Act and Article 89(1) of the Enforcement Decree of the former Corporate Tax Act

(A) Article 52(2) of the Corporate Tax Act provides that “The prices applied or deemed to be applied to sound social norms and commercial practices and normal transactions between persons who are not persons with a special relationship” shall be the market price. In applying Article 89(1) of the former Enforcement Decree of the Corporate Tax Act to this regard, the provision of Article 52(2) of the former Enforcement Decree of the Corporate Tax Act provides that in a situation similar to the pertinent transaction, the pertinent corporation’s prices continuously traded with many and unspecified persons other than persons with a special relationship are based on the former price

(B) In light of Article 52 of the Corporate Tax Act and Article 89(1) of the former Enforcement Decree of the Corporate Tax Act, the concept of market price under Article 89(1) of the former Enforcement Decree of the Corporate Tax Act is only an example that falls under the market price under Article 52(2) of the Corporate Tax Act, but does not limit the concept of market price under the Corporate Tax Act.

Therefore, if the price of the pertinent transaction falls under the “price applied or deemed to be applied to a normal transaction between persons who are not specially related persons” under Article 52(2) of the Corporate Tax Act, it shall be deemed to fall under the “market price under Article 52 of the Corporate Tax Act, even if the pertinent corporation does not fall under the “price continuously traded with many and unspecified persons who are not specially related persons or the price generally traded between third parties who are not specially related persons” under the same Article

(C) Therefore, the argument that the market price of ○○ Technology Investment in the instant case’s offering of new stocks cannot be deemed as the market price solely on the ground that the transaction price was not a transaction price with a person with no special relationship.

(2) As to whether the acquisition of ○○○ network at the time of issuing new shares was a normal transaction or not

In light of the facts found in the above 3-B, the following circumstances revealed. In other words, the shareholders of ○○○○○○○ at the time of issuing new shares did not have a special relationship with the Plaintiff and ○○○○○○○○○○○○○○○○○○○○○, but did not have forfeited the Plaintiff’s right to new shares at the time of issuing new shares, but shareholders of 26% of the remainder of 26% did not forfeited the preemptive right to new shares (the total capital increase shares and ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○.

In addition, in light of the transaction cases of ○○○ shares after the offering of new shares, which are revealed by the facts acknowledged in the above 3-B, it is difficult to recognize that the transaction price of the instant shares after the offering of new shares lacks economic rationality (the Defendant’s determination on the existence of economic rationality should be made based on the circumstances at the time of acquisition, or cannot be made based on the situation after the offering of new shares, and the transaction cases after the offering of new shares should not be considered in determining economic rationality, while the transaction cases after the offering of new shares should not be considered in determining economic rationality, in that the price of the shares is basically reflecting the company’s future value. However, since the price of the shares after the trading in question is to reflect the company’s future value, the Defendant’s above assertion cannot be accepted, and even if the method is not somewhat general, it is difficult to find that the economic

Therefore, this part of the defendant's assertion is without merit.

(3) The relationship between the third party’s share price and the market price at the time of the offering of new shares

(A) On the day of acquiring the shares of this case, the ○○○○○ Network’s share price falls under the market price of the shares of this case. As such, the defendant’s assertion that the market price of the shares of a third party, which was made on the day of acquiring the shares, cannot be reflected in the market price of the shares of this case is groundless (Supreme Court Decision 2002Du7005 Decided February 13, 2004, which presented by the defendant as the ground of the above assertion, is based on the premise that the transaction in question constitutes an act subject to wrongful calculation, i.e., calculation of the market price which is the basis for calculating the corporation’s gross income, and it is not appropriate to be invoked in this case).

(B) Meanwhile, Article 89(6) of the Enforcement Decree of the Corporate Tax Act provides that the provisions of the Enforcement Decree of the Inheritance Tax and Gift Tax Act shall apply mutatis mutandis to the calculation of the amount to be included in the calculation of the amount of profit where profit is distributed to a specially related person. This is only a provision that applies to the stage of denying the transaction, i.e., where the transaction is based on the premise that the transaction is deemed to be an unfair act that is not in conformity with the market price, and that the provision of the Enforcement Decree of the Inheritance Tax and Gift Tax Act shall not apply to the determination of the market price in determining whether the transaction constitutes an unfair act, which is the premise for applying the above provision. Thus, it cannot be said that the inclusion of the acquisition price of ○ technology investment at the time of capital increase with consideration for the stocks in question

(C) Therefore, the defendant's assertion on this part is groundless.

5. Conclusion

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

public official law, order of law,

m. Corporate Tax Act

Article 52 (Dispudiation of Wrongful Acts)

(1) Where the head of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office deems that the tax burden of a domestic corporation has been unjustly reduced through transactions with persons with a special relationship prescribed by Presidential Decree (hereinafter referred to as "specially related persons"), he/she may calculate the amount of income for each business year of the relevant corporation regardless of the activities or calculation of the amount of income of the relevant corporation (hereinafter

(2) In the application of the provisions of paragraph (1), the standard for determination shall be the prices applied or to be applied in sound and generally accepted practices and normal transactions between persons without a special relationship (including forwards, interest rates, rents, exchange rates and other similar rates; hereafter referred to as "market price" in this Article).

(4) In applying the provisions of paragraphs (1) through (3), matters necessary for the types of wrongful calculation and the assessment of market price shall be prescribed by the Presidential Decree.

(1) The former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 16658, Dec. 31, 1999)

Article 87 (Scope of Person with Special Relationship)

(1) “Person with a special relationship as prescribed by the Presidential Decree” in Article 52 (1) of the Act shall mean a person with a relationship falling under any one of the following subparagraphs with a corporation (hereinafter “person with a special relationship”):

1. Persons recognized as exercising real influence over the operations of the concerned corporation, such as exercising the right to appoint officers or determining the course of business (including persons to be treated as directors under Article 401-2 (1) of the Commercial Act) and their families;

2. Stockholders (excluding minority shareholders, etc.; hereafter in this Sub-section the same shall apply) and their relatives;

3. Officers and employees of a corporation, or employees of a stockholder (referring to the officers in case of a profit-making corporation, and the director and founder in case of a non-profit corporations) or other persons whose livelihood depends on the cash and other assets of the corporation or stockholder, and their relatives who depend upon them for their livelihood;

Article 88 (Types, etc. of Unfair Acts)

(1) "Where it is deemed that the tax burden has been unjustly reduced" in Article 52 (1) of the Act means cases falling under any of the following subparagraphs:

8. Where profits are distributed by a stockholding corporation to another stockholder who is a person with a special relationship due to capital transactions falling under any one of the following items:

(b) Where the right to receive allocation of new stocks in the increase of the corporation has been partially or wholly waived (excluding the case where the waived new stocks are allocated by the public offering method under Article 2 (3) of the Securities and Exchange Act) or bought at a price higher than the market price of the new

Article 89 (Scope of Market Price, etc.)

(1) In the application of the provisions of Article 52 (2) of the Act, if there is a price generally traded between many and unspecified persons other than a person with a special relationship or between a third party who is not a person with a special relationship, the price shall apply.

(2) In applying Article 52 (2) of the Act, if the market price is unclear, the amount calculated by applying in sequence the following subparagraphs:

1. Where there is a value appraised by an appraisal corporation under the Public Notice of Values and Appraisal of Lands, etc. Act, that value: Provided, That stocks shall be excluded;

2. The amount appraised by the mutatis mutandis application of the provisions of Articles 38, 39, and 61 through 64 of the Inheritance Tax and Gift Tax Act.

(5) In cases falling under wrongful calculation under the provisions of Article 88, the market price and the margin under the provisions of Article 52 (1) through (4) of the Act shall be included in the calculation of earnings and the income amount of the concerned corporation for each fiscal year shall be calculated accordingly, except for loans of money as prescribed by the Ordinance of the Ministry of Finance and Economy

(6) Where profits are distributed by distribution to a person with a special relationship under the provisions of Article 88 (1) 8 and 8-2, the provisions of Articles 28 (3) through (7), 29 (2) through (4) and 31-4 (1) and (3) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act shall apply mutatis mutandis to the calculation of the amount to be included in gross income pursuant to the provisions of paragraph (5). In this case, the terms "large stockholder" and "person with a special relationship" shall be read as "person with a special relationship" under this Decree, and the terms "gains" and "gains prescribed by Presidential Decree" as "gains distributed to a person with a special relationship" shall be read as "gains distributed to him

(1) The former Inheritance Tax and Gift Tax Act (amended by Act No. 6301 of Dec. 29, 2000)

Article 39 (Presumption of Donation at Time of Capital Increase or Capital Reduction)

(1) Where a person receives any benefit falling under one of the following subparagraphs at the time of capital increase or decrease of a corporation’s capital or a stable amount, he/she shall be deemed to have received such benefit as a donation:

1. In case where a shareholder of the relevant corporation (including an investor; hereafter the same shall apply in this Article) has renounced in whole or in part the right to receive new stocks for the purpose of increasing the capital or investment amount of the relevant corporation (hereafter referred to as “new stocks” in this paragraph), benefits under the provisions of the following items (in case where there are not less than 2 minor shareholders who have renounced in whole or in part the right to receive new stocks, it means the benefits which are calculated by deeming that one minor shareholder has renounced his right:

(a) In case where such renounced new shares (hereafter in this paragraph, referred to as the “actual shares”) are again allocated (excluding the case where the public offering method of new shares is allotted under Article 2 (3) of the Securities and Exchange Act), the benefits prescribed by the Presidential Decree from among the benefits acquired by a person who was allocated the relevant forfeited shares by obtaining such allocation of forfeited

Article 63 (Evaluation of Securities, etc.)

(1) The appraisal of securities, etc. shall be made according to the following methods:

1. Appraisal of stocks and investment shares:

(b) The provisions of item (a) shall apply mutatis mutandis to the stocks and equity shares as prescribed by the Presidential Decree from among the stocks and equity shares of the Association-registered corporations as prescribed by the Presidential Decree. In this case, the “final market price”

(c) Stocks and equity shares not listed on the Korea Stock Exchange other than those under item (b) shall be appraised by the method as prescribed by the Presidential Decree in consideration of corporate assets and revenues

(1) Enforcement Decree of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16660 of December 31, 199)

Article 29 (Calculation Method, etc. of Value Deemed Donation upon Capital Increase or Capital Reduction)

(2) The term "gains prescribed by the Presidential Decree" in Article 39 (1) 1 (a) of the Act means the amount calculated by multiplying the value calculated under subparagraph 1 minus the value under subparagraph 2 by the number of new stocks under subparagraph 3:

1. [The number of stocks issued prior to the increase in the acquisition price per stock) + (the number of stocks increased by the X-X) ± (the number of stocks issued prior to the increase in the acquisition price per new stocks + the number of stocks increased by the increase in the number of stocks)

2. The acceptance price per stock of new stocks;

3. The number of new stocks for those who have been allocated in excess of the number of new stocks to be allocated under equal conditions; and

Article 31-4 (Presumption of Donation for Allotment, etc. of Real Rights)

(1) In one of the following cases, the amount equivalent to the relevant benefits shall be deemed to have been donated to a person having a special relationship or the largest shareholder, etc. pursuant to Article 42 (2) of the

1. In case where, in allocating forfeited stocks under Article 39 (1) 1 (a) of the Act, a stockholder who renounced wholly or partially the right to receive new stocks, and a person having special relation with him, acquires profits by accepting the forfeited stocks: The amount calculated by the following formula:

(The value referred to in Article 29(2)2 - Value referred to in Article 29(2)1 - Value referred to in Article 29(2)1) - The number of forfeited stocks acquired by a person in a special relationship with X forfeited stockholders who have renounced the acquisition of forfeited stocks ± the

Article 54 (Appraisal of Unlisted Stocks)

(1) Stocks and investment shares not listed on the Korea Stock Exchange (hereafter in this Article and Article 56-2, referred to as “nonlisted stocks”) under Article 63 (1) 1 (c) of the Act shall, except in the case of paragraph (2), be the value assessed by the following formula:

Value per share =

[Attachment]

the net asset value of the corporation concerned;

(hereinafter referred to as "net asset value")

+

Total number of shares

The weighted average amount of net profit and loss per share in the last three years;

(hereinafter referred to as "value of loss and loss")

±2

Average interest rate formed in the financial market;

Considering the rate prescribed by the Ordinance of the Ministry of Finance and Economy

(4) In applying the provisions of paragraph (1), "total number of issued stocks" shall be based on the total number of issued stocks as of the evaluation base date.