[Judgment of the court below]

Head of Central Tax Office

March 9, 2012

Suwon District Court Decision 201Guhap1727 Decided August 25, 2011

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The imposition of global income tax of KRW 308,525,430 against the Plaintiff on May 17, 2010 shall be revoked.

1. Details of the disposition;

The reasoning for this part of the judgment of the court is the same as that of the corresponding part of the judgment of the court of first instance, and thus, it is citing it in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The dividend income stipulated in Article 17 of the Income Tax Act refers to a dividend or distribution of profits or a surplus distributed to shareholders, employees, or other investors, and a dividend of construction interest and fictitious dividend, etc. However, the disposition of this case on the premise that the plaintiff obtained dividend income in relation to the real estate in this case, which was merely a change in the ownership form by dividing the real estate in the original co-ownership as sole ownership, when the plaintiff withdraws from a joint venture which is not a corporation.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the taxable income is subject to taxation

공동사업으로 인한 소득은 그 각 지분 또는 손익분배비율에 의하여 분배되거나 분배될 금액에 따라 각 소득금액을 계산하여야 하고, 동업관계에서 탈퇴할 때 수령한 금전 기타 재산의 가액 중 출자금을 초과하는 부분은 과세대상 소득이 된다고 할 것이다( 대법원 1995. 11. 10. 선고 94누8884 판결 참조).

In light of the above legal principles as seen earlier, it is reasonable to view that the portion exceeding KRW 5,351,750,000, the Plaintiff’s investment amount of KRW 5,865,40,000, which was the value of the instant real estate acquired by the Plaintiff in the course of withdrawing from the partnership relationship, is subject to taxation.

2) Whether the dividend income is dividend income

In light of the following circumstances cited earlier, it is reasonable to view that the Plaintiff, a member of the partnership of this case, who was withdrawn from the partnership of this case from the partnership of the Civil Act, acquired the real estate of this case subject to taxation as above, as the substance, falls under the dividend income by falling under the category of profit distribution, as stipulated in Article 17 (1) 3 and Article 17 (2) 1 of the former Income Tax Act (amended by Act No. 7319 of Dec. 31, 2004) of the former Income Tax Act (amended by Act No. 7319 of Dec. 31, 2004) and Article 17 (1) 7 of the same Act.

A) Article 14(2) of the Framework Act on National Taxes provides that the provisions on the calculation of tax base in the tax-related Acts shall apply according to the substance, notwithstanding the name or form of income, profit, property, act or transaction. Even if the Plaintiff acquired the instant real estate and took the form of partition of co-owned property as the Plaintiff’s sole ownership, such substance shall be deemed to have acquired the instant real estate in the sense that the Plaintiff would receive a refund of the Plaintiff’s share in the partnership upon withdrawal from the partnership. Thus, in substance, the Plaintiff purchased the instant real estate as the shares in the partnership business, and as long as the substance is the above, the Plaintiff’s return of the real estate as the shares in the return of shares following the withdrawal from the partnership.

B) Article 17(1)7 of the former Income Tax Act (amended by Act No. 6557 of Dec. 31, 2001) newly established Article 17(1)7 of the same Act (amended by Act No. 6557 of Dec. 31, 2001) introduced comprehensiveism by type in order to expand tax base and enhance equity in taxation by imposing the same tax on the income similar to that of subparagraphs 1 through 6 by deeming it as dividend income.

C) Article 17 (1) 7 of the former Income Tax Act (amended by Act No. 7319 of Dec. 31, 2004) provides that "the income similar to the income under subparagraphs 1 through 6 is in the nature of profit distribution," and Article 17 (1) 3 provides that "Fictitious dividend" as dividend income. Meanwhile, Article 17 (2) 1 of the same Act provides that "the amount of money or other property acquired by an employee or investor due to retirement or withdrawal from a company or reduction of investment exceeds the amount required for the employee or investor to acquire the investment in question." The purport of the above provision is to impose income tax on actual profits that an employee or investor gains by means other than cash dividend and stock dividend.

라) 2007. 1. 1. 시행된 구 소득세법(2006. 12. 30. 법률 제8144호로 개정된 것)은 제17조 제1항 제6의3호 를 신설하여 ‘ 제43조 의 규정에 따른 공동사업에서 발생한 소득금액 중 동조 제1항 의 규정에 따른 출자공동사업자에 대한 손익분배비율에 상당하는 금액’도 배당소득으로 보도록 규정하고 있는바, 위 규정에 비추어 보아도 배당소득의 분배 주체가 법인으로 한정된다고 볼 수 없다.

E) Article 100-22(1) of the Restriction of Special Taxation Act, effective January 1, 2009 (amended by Act No. 8827, Dec. 31, 2007) provides that “if a partner receives an asset distributed from a partnership firm and the market value of the distributed asset exceeds that of the partner’s equity value on the date of distribution, the partner shall be deemed as dividend income when calculating his income in the taxable year to which the date of distribution belongs.” Article 100-15(1) of the Restriction of Special Taxation Act stipulates that the partner’s business relationship is included in the partnership under the Civil Act (the Plaintiff’s business relationship is included in the partnership under the Civil Act).

F) The purpose of the Income Tax Act is to promote equity in tax burden and contribute to smooth raising of financial revenue by imposing appropriate tax on individual income in accordance with the nature of income and the ability to bear the burden of taxpayers.

D. Sub-determination

Ultimately, the disposition of this case, based on the premise that the part exceeding the amount of the Plaintiff’s investment among the value of the real estate acquired by the Plaintiff in the course of withdrawal from the partnership constitutes a dividend income subject to taxation under the former Income Tax Act (amended by Act No. 7319 of Dec. 31, 2004), is lawful. Therefore, the Plaintiff’s above assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just in conclusion, and the plaintiff's appeal is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment Omission of Related Acts]

Judges Kim Jong-chul (Presiding Judge)