[1] The meaning of "fund received" under Article 53 (4) 5 of the former Enforcement Decree of the Corporate Tax Act

[2] The case holding that in the case of bonds issued privately by a bank through the total acquisition method against a specific financial institution for the purpose of a long-term stable financing and enhancement of asset soundness, the nature of such bonds does not differ from the loans of general corporations, and they do not bear obligations against many and unspecified persons at the time of their issuance, the funds raised through the issuance of such bonds do not constitute a "receiving funds" excluded from the loans which are the premise of the object of non-taxation of interest paid in relation to assets unrelated to business under Article 53 (4) 5 of the

[1] Article 28 (1) of the Corporate Tax Act, Article 53 (4) 5 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17033 of Dec. 29, 2000) [see current Article 53 (4) 1 (e)], Article 53 (4) 1 (e) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619 of Feb. 22, 2008) / [2] Article 28 (1) of the Corporate Tax Act, Article 53 (4) 5 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1703 of Dec. 29, 2000], Article 53 (4) 1 (e) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17033 of Feb. 22, 2008]

[1] Supreme Court Decision 97Nu11812 delivered on December 23, 1998 (Gong199Sang, 271)

National Bank of Korea (Law Firm Rate, Attorneys So-young et al., Counsel for the defendant-appellant)

Head of Yeongdeungpo Tax Office

Seoul High Court Decision 2007Nu8975 decided September 5, 2007

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. Article 28(1)4 of the Corporate Tax Act, which is a provision on the exclusion of interest paid in connection with assets unrelated to business from deductible expenses, provides that the amount calculated as prescribed by the Presidential Decree from among the interest on the loan shall not be included in deductible expenses in calculating the income amount for each business year; and Article 53(4)5 of the former Enforcement Decree of the Corporate Tax Act (amended by the Presidential Decree No. 17033 of Dec. 29, 2000) and Article 53(4)1 Item (e) of the former Enforcement Decree of the Corporate Tax Act (amended by the Presidential Decree No. 17033 of Feb. 22, 2008) provide that "funds borrowed by a financial institution shall be excluded from the premise of the exclusion of interest paid in relation to assets unrelated to business in the calculation of deductible expenses. This refers to loans generally referred to in Article 53(4)1 Item (e) of the former Enforcement Decree of the Corporate Tax Act (amended by the Presidential Decree No. 20619 of Feb. 29, 2008). 198). 198.

2. According to the reasoning of the judgment below, the court below, based on the adopted evidence, acknowledged the following facts: (a) Dongnam Bank (hereinafter "Dongnam Bank") decided to issue the bonds of this case, which are subordinate bonds of 40 billion won in total, for the purpose of raising long-term funds and enhancing asset soundness (BS ratio); and (b) decided on December 26, 1997 that the bonds of this case were to be underwritten and sold from Dong branch bonds, and issued the bonds of this case on the same day after receiving the total amount of the bonds of this case from Dong branch bonds; (b) on June 29, 1998, the Korea Housing and Commercial Bank succeeded to the issuer status of the bonds of this case from Dongnam Bank; and (c) on November 1, 2001, it did not constitute the securities of this case against many and unspecified companies, which were not subject to the securities of this case, for the purpose of securing long-term funds and improving asset soundness; and (d) determined that the bonds of this case were not subject to the securities of this case, and its total amount of bonds issued.

In light of the above legal principles and records, the judgment of the court below is just in holding that the fund acquired by the issuance of the bonds of this case does not constitute the fund received, and there is no error in the misapprehension of legal principles as to the fund received under Article 53 (4) of the former Enforcement Decree of the Corporate Tax Act, as otherwise alleged in the ground of appeal, in the process of issuing the bonds of this case by entering into a total acceptance and sales contract with the securities of this case on December 26, 1997, and receiving the total amount of the bonds of this case from the securities of this case. Furthermore, the bank of this case applied for the listing of the bonds of this case to the Korea Stock Exchange and stated the method of issuance as private placement.

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ahn Dai-hee (Presiding Justice)