Seoul Administrative Court-2013-Gu Partnership-21472 ( October 27, 2016)

Article 69 (3) of the former Enforcement Decree of the Corporate Tax Act applies to the case where a sales contract is concluded in 2012.

Article 69 (3) of the former Enforcement Decree of the Corporate Tax Act, which is a legal reason for restricting ex post request for correction due to cancellation of a sales contract, is applied only when a sales contract was concluded in the business year 2012.

Article 69 of the Enforcement Decree of Corporate Tax Act

2016Nu50497 Revocation of Disposition of Corporate Tax Imposition

AAAA

BB Head of the Tax Office

Seoul Administrative Court Decision 2013Guhap21472 decided May 27, 2016

on October 02, 2017

1. The defendant's appeal is dismissed.

2. The appeal cost (including the cost resulting from the supplementary participation) shall be borne by the Defendant.

The purport of the claim is to revoke the disposition of the corporate tax of 2009 against the Plaintiff on February 13, 2012 by the Defendant and the disposition of the corporate tax of o,o,o,o, ando in the business year 2009.

The purport of appeal: The part against the defendant in the judgment of the court of first instance shall be revoked, and the plaintiff's claim as to that part shall be dismissed (the judgment of the court of first instance shall be revoked with respect to the plaintiff's claim exceeding the o,o,oo, ando members in the disposition of imposition of corporate tax for the business year 2009, and the part against which the defendant shall be dismissed with respect to the remaining claim, and only the defendant shall be dismissed with respect to the part against which the judgment of the court of first instance shall be dismissed).

1. Details of the disposition;

The court's explanation on this part is the same as the corresponding part of the judgment of the court of first instance (from No. 2 of the judgment of the court of first instance to No. 13 to No. 9). Thus, this part is cited 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) Facts of recognition;

The court's explanation on this part is identical to the corresponding part of the judgment of the court of first instance (Article 8 (2) of the Administrative Litigation Act, Article 420 of the Civil Procedure Act, since the reasons for this decision are the same as the corresponding part of the judgment of the court of first instance (Articles 12 through 4).

B. Determination

1) Claim for revocation of a taxation disposition based on the grounds for subsequent request for correction

A) Although the grounds for ex post facto request for correction under Article 45-2(2) of the former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 2014; hereinafter the same) exist, where a tax authority imposed a tax disposition on the grounds that the tax authority initially established the tax liability, a taxpayer may seek revocation thereof through an appeal litigation (see, e.g., Supreme Court en banc Decision 2014Du5514, Jul. 16, 2015). Moreover, even where the grounds for ex post request for correction arise after the tax authority imposed a tax disposition, a taxpayer may seek revocation thereof through an appeal litigation (see, e.g., Supreme Court Decision 2014Du4076, Feb. 26, 2015).

B) On February 13, 2012, the Defendant issued a revised order to the Plaintiff for the business year of 2009 and the business year of 2010, and then revised the amount for the business year of 2009 to o, o, o, o, and o, and the business year of 2010 to o, o, o, o, o, and 2014 to o, o, o, o, o, o, o, o, respectively, for the following reasons: the Plaintiff’s request for correction from 208 to 2010 to 2010 to 2010 to 3, 1,281 to 204 to 2013 and 2014 to 10 to 2014 to 20 to 30 to 14, 2014 to 20 to 20 to 30 to 14, 2014 to 202 to m.

2) Legal principles as to the grounds for and scope of application of the ex post request for correction, the issues of this case

A) However, Article 25-2 Subparag. 2 of the Enforcement Decree of the Framework Act on National Taxes delegated by Article 45-2(2)5 of the former Framework Act on National Taxes stipulates, “Where a contract relating to the effect of transaction or act, etc., which served as the basis for calculating the duty base and the amount of duty, is rescinded or cancelled by the exercise of the right of rescission or due to unavoidable reasons that arise after the formation of the pertinent contract,” as one of the grounds for the first declaration, determination, or correction, of which is delegated under Article 45-2(2)5 of the former Framework Act on National Taxes.” The latter claim system based on such reasons aims to expand the protection of taxpayers’ rights by allowing taxpayers to prove the relevant fact and claim reduction (see Supreme Court Decision 2009Du209, Jul. 28, 2011)

2379, etc.) Unless otherwise provided for in individual tax-related Acts, the scope of application should not be without permission.

B) Meanwhile, Article 40(1) of the Corporate Tax Act provides, “The business year to which the income and deductible expenses of a domestic corporation accrue shall be the business year to which the date on which the income and deductible expenses are determined belongs,” and adopts the so-called principle of confirmation of right to taxable income by deeming the income as realizing the income when the rights that have become the cause of the income have not been actually realized if there is time interval between the time when the rights are determined and the time when the income is realized. Such principle of confirmation of rights refers to the time when the rights are determined not when the income is realized but when the rights are finally generated at the time when the income is determined, and thus, it is deemed that the income has the income at the time when the rights are generated at the time when the income is determined, and in substance, it is allowed to impose prior taxation on the income whose receipt is uncertain in the future. Therefore, even if the tax liability becomes effective upon the occurrence of a certain cause arising from the final occurrence of a right to the income and the occurrence of a certain cause, if the tax liability initially established becomes final and conclusive as a result of the occurrence of the income (see, etc.).

C) Therefore, in principle, corporate tax is subject to a request for reassessment by exercise of the right to rescind or by any inevitable reason under Article 25-2 subparag. 2 of the Enforcement Decree of the Framework Act on National Taxes, the “cancellation of a contract due to an unavoidable reason” becomes a ground for filing a later request for reassessment. (1) Under the Corporate Tax Act or relevant regulations, the amount of income not realized due to the cancellation of a contract is separately stipulated as the grounds for deductions, etc. against the amount of income in the business year to which the date of such cancellation belongs, or (2) under special circumstances, the taxpayer has reported corporate tax in the manner of deducting the amount of income in the business year to which the date of such cancellation belongs in accordance with corporate accounting standards or practices, and thus, such rescission of a contract cannot be exceptionally a ground for filing a later request for rectification (see Supreme Court Decision 2012Du10611, Mar.

D) In this case, the Defendant asserts that the above legal principle as to the cancellation of the sales contract of the apartment of this case cannot be applied, since the provision of Article 69(3) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 23589, Feb. 2, 2012) is not applied to the household whose sales contract was cancelled after January 1, 2012, and that if the Plaintiff voluntarily reported the corporate tax in the manner of deducting the income amount for the business year to which the date of cancellation belongs in accordance with corporate accounting standards and practices, the sales contract of this case can not be applied to the cancellation of the sales contract of the apartment of this case. Accordingly, the following feasibility is examined in order.

3) Whether Article 69(3)5 of the Enforcement Decree of the Corporate Tax Act is applied

A) Article 69(3) of the Enforcement Decree of the Corporate Tax Act (hereinafter “Article 69(3)”) provides that “In the application of paragraph (1), where the difference between the amount determined due to the cancellation of a construction contract and the amount determined due to the cancellation of a construction contract occurs, the difference shall be included in the gross income or deductible expenses for the business year in which the cancellation date belongs.” In light of the content of the provision, it can be seen that “in the case of the cancellation of a contract under the above Supreme Court Decision 2012Du10611 Decided March 13, 2014” or the relevant provision, it constitutes “a separate provision on the amount of income not realized due to the cancellation of a contract, as the grounds for deduction, etc. against the amount of income for the business year in which the cancellation date of the contract falls.” Therefore, if the provision of this case applies to the disposition of this case, the grounds for later filing a claim for correction before the cancellation of the sale contract of apartment houses

B) However, Article 1 of the Addenda of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 23589, Feb. 2, 2012) provides that "this Decree shall enter into force on the date of its promulgation," Article 2 provides that "this Decree shall begin with the business year beginning on or after January 1, 2012," and provides for various individual cases under Article 3 and below, but Article 69 (3) does not provide for separate applicable cases with regard to Article 14 (1) and Article 69 (1) of the Addenda. This provision provides that "from the first declaration after the enforcement of this Decree, Article 14 (1) and Article 69 (1) of the Addenda provides that "from the date of the first declaration after the enforcement of this Decree, Article 59 (1) 2 of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 23595, Feb. 2, 2012) shall apply to the revised tax bill, which is retroactively subject to the revised tax bill.

C) However, in cases where only the general application of Article 2 of the Addenda as above is applied to the timely scope of application of Article 69(3), in the following respect, if the time of cancellation is the business year that begins after January 1, 2012 as claimed by the Defendant, it cannot be deemed that Article 69(3) applies even if the corporate tax for the business year in which the initial sales contract was made according to the sales contract was included in the calculation of earnings for the previous business year.

First, Article 2 of the Addenda provides that the corporate tax in question shall apply from January 1, 2012 "the first business year beginning after January 1, 2012" and may be deemed to apply to a case where the corporate tax in question is a pro rata corporate tax for the business year beginning after January 1, 2012. With respect to the several amended provisions, the meaning of the above provision as a general application case that sets the time-based scope of application en bloc may be deemed to refer not to an individual act but to a case where the corporate tax in question itself for the business year itself can be commonly applied to the pertinent provisions. As claimed by the Defendant, deeming that the contract cancellation was made in the business year beginning after January 1, 2012 would be a general application case.

Second, it is intended to expand the scope of taxpayers' rights to request for correction (see, e.g., Supreme Court Decision 2009Du22379, Jul. 28, 201). Whether a subsequent claim for correction is recognized from a corporate tax which is a taxable period is actually established or not should be deducted from the tax base for the business year in which a subsequent cause such as termination of a contract occurs, or even if a corporation or an enterprise is dissolved or discontinued, it has great significance in the scope of rights in cases where the tax rate of the initial business year and the tax rate of the business year in which the subsequent cause occurred are different. Furthermore, the difference between the relief by a subsequent claim for correction and the deduction from the tax base for the business year in which the subsequent cause occurred. Accordingly, if the return for corporate tax was recognized as a ground for request for correction after the amendment, it can be restricted from the scope of taxpayers' rights in general, and thus, it is difficult to view the provisions of Article 2 of the Addenda as a general ground for application of the aforementioned provisions.

Third, corporate tax is one of the tax laws intending to calculate appropriate taxable income under the principle of satisfaction taxation for the sake of securing financial revenue for the state operation and realizing fair taxation, and from such point of view of tax law, it is more consistent with the principle of satisfaction taxation to correct the profit and loss by returning to the original business year in which the contract was concluded, not the business year in which the cancellation was made even if there was a subsequent cause such as cancellation of the contract, and therefore, it is difficult to interpret the provisions of Article 2 of the above Addenda as the grounds for such application, even in that there is a need for more clear application to apply the provisions of Article 69(3) of the above Addenda to the corporate tax for the business year prior to the enforcement date.

Fourth, the new provision of Article 69(3) was established in order to respect the corporate accounting standards that change automatically on the premise of a continuing enterprise and to bring about the cancellation of the corporate tax for the business year to be attributed to the business year to which the date of cancellation belongs in order to avoid confusion in tax administration. As such, the previous provision of the Corporate Tax Act (40-694) which was stipulated for the same purpose has been enacted as it is. Thus, if the cancellation date falls within the business year after January 1, 2012, it should be interpreted that Article 69(3) should be applied if it falls within the business year after January 1, 2012. However, the corporate accounting has the characteristic of the rule to record and track the business activities so that various interested parties who have an interest in the business activities of the company can make reasonable decisions, and the basic provision of the Corporate Tax Act has the nature of the rule to measure and deliver useful financial information on the company. The basic provision of the Corporate Tax Act can not be interpreted as the defendant's assertion in consideration of the principle of satisfaction taxation.

D) Ultimately, Article 69(3) of the above Addenda cannot be a provision that limits a subsequent claim for correction against the business year 2009 or corporate tax for the business year 2010 prior to the enforcement date. The defendant’s assertion contrary thereto is without merit.

4) Whether the grounds for subsequent request for correction by filing corporate tax return are exceptional non-recognition

A) As seen earlier, in principle, the revocation of a contract due to the exercise of the right of rescission or an inevitable reason becomes grounds for filing a subsequent claim for rectification, but in exceptional cases where there are special circumstances, such as that the person liable to pay corporate tax has reported corporate tax in a manner that deducts the amount of income in the business year to which the date of rescission belongs according to corporate accounting standards or practices, the grounds for filing a subsequent claim for rectification are not acknowledged (see, e.g., Supreme Court Decision 2012Du10611, Mar. 13, 2014).

B) However, in the instant case, no evidence exists to deem that the Plaintiff reported the amount of income in the manner of deducting the amount of income in the business year to which the date of cancellation belongs when the Plaintiff entered into a sales contract for the instant apartment.

C) In addition, for the purpose of not exceptionally recognized the grounds for filing a subsequent claim for correction, the sales contract and the cancellation of the sales contract for the apartment of this case constitute the cancellation of the sales contract that occurred on ordinary and repetitive occasions, and the corporate tax return should be in accordance with corporate accounting standards or practices by deducting the amount of income for the business year to which the date of cancellation belongs. In the corporate accounting standards, the accounting of earnings and losses should be made by the prior method in the case of the alteration of accounting presumption or the alteration of electric error, but the change of earnings and losses due to the cancellation of the contract falls under the case of changing the sales price, and it cannot be deemed as the alteration of accounting presumption or the alteration of the omission or distorted indication in the financial statements, and therefore, it cannot be deemed as the subject of accounting under the prior accounting law.

D) Furthermore, it is reasonable in terms of corporate accounting to deduct the business performance of an enterprise from the sales revenue of a business year issued by such reason from the perspective of a long-term response, in that the person liable for a discount of sales, return, or sales under corporate accounting standards falls under a price reduction or return that takes place according to the need for the transaction, and falls under a minor item ordinarily arising from the continuous and repetitive business activity. However, it is reasonable in terms of corporate accounting to accurately analyze and measure the business performance of the enterprise for each fiscal period. However, the relatively large amount of changes caused by special circumstances, such as cancellation of the sales contract of the apartment of this case, etc., such as the concentration of the purchaser, and cancellation of subrogation by the third creditor (Evidence A or No. 3)

In light of the legal effect of the rescission of both contracts, such as the extinction of retroactive rights, it cannot be viewed as bad debt based on the de facto reason that it is impossible to recover claims that account is kept by the former Act.

E) Ultimately, in terms of corporate tax return according to corporate accounting standards and practices, cancellation of the sales contract for the apartment of this case does not constitute the Plaintiff’s grounds for filing a subsequent claim for correction against the business year 2009 and the business year 2010 portion corporation tax of this case. The Defendant’s assertion against this is without merit.

3. Conclusion

Therefore, the defendant's appeal disputing the conclusion of the judgment of the court of first instance on the different premise above is dismissed as it is without merit. It is so decided as per Disposition.