Plaintiff (Law Firm Rate, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Director of the District Office

July 18, 2006

1. The defendant's disposition rejecting correction on February 3, 2004 and the disposition rejecting correction on February 10, 2004 on the imposition of value-added tax for the second period of February 2001 and for the first period of January 2002 against the plaintiff, respectively, and the disposition rejecting correction on February 10, 2004 with respect to the imposition of value-added tax for the first period of February 2002.

2. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 40% is borne by the Plaintiff, and the remainder is borne by the Defendant, respectively.

The judgment of Paragraph 1 and Paragraph 1 of this Article, and each disposition rejecting correction made on February 10, 2004, concerning the imposition of corporate tax belonging to the business year 2001 and corporate tax belonging to the business year 2002 against the plaintiff by the defendant, shall be revoked.

1. Basic facts and circumstances of dispositions;

A. The plaintiff's business details, etc.

(1) On September 17, 201, the Plaintiff is a company established for the purpose of using 10% franchising franchise business, oriental medical hospital and membership business. Nonparty 1, etc., the representative director of the Plaintiff, via the Internet website, etc., “the Plaintiff,” planning the distribution network of domestic sirens, has been operated for several thousands, 26% of its new medical culture developed countries based on scientific research and development, and 26% of its employees are additionally established in only one year, and 100,000 won and 200 won of its employees are entitled to 1,50,000 won of its employees' membership at the latest 6% of its employees' membership at the 1,500,000 won of its employees' membership at the 1,500,000 won of its employees' membership at the 205,000 won of its employees' membership at the 1,500,000 won of its employees' membership at the 1,500,000,00 won of its employees' membership.

From October 1, 2001 to December 31, 2001 to December 31, 2001, 2002 to March 31, 2002, the sum of KRW 7,747,500,000 from April 1, 2002 to June 30, 2002, 23,158,50,000 won 6,678,00,000 won to KRW 37,58,00,584,00,000,00 won

(2) The Plaintiff’s revenue from January 22, 2002, when the number of 7,300 franchise stores was 7,300 franchise stores, approximately KRW 1.1 billion, KRW 680,000 (34,000 won for 11 members) and KRW 8,000,00 of affiliated oriental medical hospital revenues. Such revenue distribution has not significantly changed until April 30, 202, when the number of franchise stores was rapidly higher than 23,00 franchise stores, the number of affiliated oriental medical hospital revenues was 3.3% of the recommendation fees paid to new franchise solicitors; KRW 20% of the total monthly sales of the company; KRW 1.7% of the sales of the company; KRW 9,000 of the sales of the company; KRW 17,000 of the sales of the company; and KRW 1,000 of the sales expenses and the sales expenses of the newly affiliated oriental medical center; and KRW 167 of the sales expenses and the sales expenses of the company.

(3) Around October 16, 2001, the Plaintiff established an annexed oriental medical center of approximately 80 square meters with two oriental medical doctors in Bupyeong-gu, Seocheon-gu (hereinafter omitted). Around May 2002, the head office and Gwangju branch office of Yancheon-gu, Seoul, 2002, the head office of Yancheon-gu, Seoul, the branch office of Yanwon-si, the head office of Yandong-gu, Seoul, the head office of ○○○ Hospital, a social welfare foundation, entered into a business partnership agreement with the Plaintiff’s employees on the same conditions as the Plaintiff’s annexed hospital, but the Plaintiff agreed to provide herb materials and medical supplies to the Plaintiff, etc., which were normally used at ○○ Hospital, but the Plaintiff did not decrease the operation of each of the above hospitals or business partnership, and the Plaintiff did not provide the remainder of the hospital’s main office to the Plaintiff’s patients due to the reduction of the operation of the hospital.

B. The Plaintiff’s tax return and the Defendant’s rectification

(1) On January 25, 2002, the Plaintiff reported the input tax amount of KRW 44,441,020 without the output tax amount. On April 25, 2002, the Plaintiff reported that the input tax amount was KRW 139,791,39 without the output tax amount. On July 25, 2002, the Plaintiff reported the input tax amount of KRW 35,274,922 for the first half of 2002.

(2) On March 31, 2002, when filing a report on the corporate tax for the business year of 2001, the Plaintiff reported that the net loss for the business year of 3,317,160,773 won did not have any tax amount to be paid. On March 31, 2003, the Plaintiff reported KRW 1,477,805,505 of the corporate tax for the business year of 2002.

(3) On August 8, 2002, the Defendant issued a revised assessment of KRW 1,009,716,070 for the second term portion of value-added tax, KRW 2,764,492,120 for the first term portion of value-added tax for the year 2001, and KRW 1,415,749,670 for the corporate tax belonging to the business year 2001. The Defendant imposed a revised assessment of KRW 1,415,749,670 for the first term portion of value-added tax for the year 2002 and the corporate tax belonging to the business year 202 for which the Plaintiff had not paid after filing a return. The Defendant imposed a revised assessment of KRW 362,380,420 for the first term portion of value-added tax for the business year 202, KRW 1,495,539,70 for the business year 202.

C. Criminal punishment and damages claim

(1) On the other hand, until August 26, 2002, the plaintiff's executives, including the non-party 1, who were the representative director of the plaintiff, obtained money under the name of affiliated member from the chain store owners, and were indicted on the charge of violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud). The crime of having actually engaged in monetary transactions without any transaction of goods or services through the multi-level marketing organization was charged with the violation of the Act on the Aggravated Punishment, etc. of Door-to-Door Sales, etc. of Specific Economic Crimes. On November 14, 2003, Seoul High Court Decision 2003No2122, which was the appellate court, convicted all of the non-party 1

(2) Of the franchise owners, 2,300 members including Nonparty 2 filed a claim against the Plaintiff for the payment of damages of KRW 3,210,000 (480 members of the franchise store supplied with oriental medicine) from the Busan District Court Branch Decision 2003Ra19, 200,000 (1,000 members of the franchise store supplied with oriental medicine), and 1,820 members of the franchise store who did not receive oriental medicine filed a claim for the payment of damages of KRW 1,50,000. The above court ordered the Plaintiff to pay the above amount on June 20, 200. The above court filed an objection against the above payment order, but withdrawn on July 19, 2003, and the above payment order became final and conclusive.

(3) A member shop owner organized an emergency response committee and sought the recovery of damage against the Plaintiff. The Defendant seized the Plaintiff’s credit card payment claims against the Plaintiff on the ground that the Plaintiff did not pay taxes, and the Defendant did not receive the recovery of damage due to the Plaintiff’s lack of financial resources.

D. Grounds for the rejection disposition of this case

(1) On January 16, 2004, the Plaintiff filed a request for correction to the effect that the Plaintiff’s franchise fee that the Plaintiff received from the franchisee was obligated to return to the Defendant without delay, and that the Plaintiff’s franchise fee does not constitute a taxable object under the Value-Added Tax Act and the Corporate Tax Act, the Plaintiff revoked the value-added tax base for the second term of 2001, and requested the revocation of KRW 21,053,181,818, and the value-added tax base for the first term of 2002, and on February 5, 2004, the Plaintiff revoked the final value-added tax base for the first term of 2002, KRW 6,070,90,09,090, and requested the revocation of the corporate tax for the business year belonging to 201, KRW 1,415,749,670, and corporate tax for the business year of 2005,539,170.

(2) The defendant rejected the plaintiff's request for correction on January 16, 2004 on the ground that each of the above dispositions can only be subject to the provisions of Article 55 of the Framework Act on National Taxes, but it does not be subject to a request for correction pursuant to the provisions of Article 45-2 of the Framework Act on National Taxes. On February 10, 2004, the defendant rejected the plaintiff's request for correction on February 5, 2004, and rejected the plaintiff's request for correction on February 5, 2004.

(3) On April 13, 2004, the Plaintiff filed a request for a national tax trial against each of the instant dispositions of rejection. The National Tax Tribunal dismissed this part of the request for a trial on the grounds that the disposition of imposition of value-added tax for the second term of March 14, 2005, the disposition of imposition of value-added tax for the first term of January 2002, the disposition of imposition of value-added tax for the business year 2001, the disposition of imposition of corporate tax for the business year 2001, which was corrected as a result of the tax investigation conducted by the disposition agency, are subject to correction and is not subject to request for correction. While the disposition of imposition of value-added tax for the first term of January 2002 and the disposition of imposition of corporate tax for the business year 202 is subject to request for correction, the franchisor is subject to value-added tax for goods and services sold by the Plaintiff, as well as for goods and services sold by the Plaintiff, even if it was decided to have been returned to the person who actually reverted.

[Ground of recognition] Unsatisfy facts, Gap evidence 1 through 6, Gap evidence 7-1 through 4, Gap evidence 8 through 13, Eul evidence 14-1 through 10, Eul evidence 1, Eul evidence 2-1, 2, Eul evidence 3 through 7, the testimony by non-party 2, and the purport of the whole pleadings

2. Judgment on the Defendant’s main defense

A. Determination as to the assertion that a request for reduction or correction is not allowed on the disposition of imposition of correction

(1) The defendant's assertion

The Defendant’s imposition of value-added tax for the second period of February 8, 2002, imposition of value-added tax for the first period of January 2002, and imposition of corporate tax for the business year 2001, which the Defendant made to the Plaintiff on August 8, 2002, are the object of appeal and are corrected according to the result of the tax investigation, and are not subject to request for correction. However, it is inappropriate to request for correction after the lapse of the appeal period, and thus, the Plaintiff’s claim for revocation of the disposition

(2) Determination

Article 45-2(1) of the Framework Act on National Taxes provides for a request for correction, and does not limit the scope of the original tax base or amount of tax return, and rather, it provides for a request for correction as to a disposition for correction of increase by stipulating that “where a decision or correction is made pursuant to the provisions of each tax-related Act, it refers to the tax base and amount of tax after such decision or correction is made, if such decision or correction is made pursuant to the provisions of each tax-related Act,” and the tax-related authority may correct the request without limit to the number of times within the exclusion period if there is any error or omission in the details of a taxpayer’s return. Accordingly, in response to the request for correction, since the tax-related authority’s request for correction was established in order to expand the scope of the taxpayer’s right to remedy, it is necessary to balance the period of the exercise of the tax-related authority to impose the tax-related authority and the period of the taxpayer’s request for correction.

B. Determination as to the assertion that there is no benefit of lawsuit

(1) The defendant's assertion

Since the defendant judged that there is no possibility to collect value-added tax, etc. for KRW 5,548,00,000 among the plaintiff's delinquent tax amount, it has already been disposed of as deficit.

(2) Determination

The disposition on deficits is not a cause for extinguishment of tax liability, but only a cause for termination of disposition on deficits, and even if the defendant made a disposition on deficits, it cannot be said that the plaintiff's tax liability is extinguished, and if another property which can be seized is found after the disposition on deficits, it can be cancelled and the disposition on default can be conducted (Article 86 (2) of the National Tax Collection Act). Thus, this part of the defendant's defense against the purport that there is no interest in

3. Whether the rejection disposition is legitimate;

A. The plaintiff's assertion

(1) The plaintiff did not receive franchise fees in return for supplying goods and services to franchisors, but acquired only franchise fees, and it is erroneous for the defendant to impose value-added tax on the plaintiff on the premise that the goods and services were supplied. Therefore, the defendant's refusal of the plaintiff's request for correction of value-added tax is illegal

(2) The Plaintiff’s receipt of the franchise fee from the franchisee is null and void in light of social order. Even if it is not null and void, the Plaintiff is obligated to compensate for damages equivalent to the franchise fee under the court’s payment order, and since the franchisee urged the Plaintiff to return the franchise fee before the application for the above payment order, the amount arising from the obligation to return the franchise fee or the liability for damages equivalent to the amount is deemed as deductible expenses for the business year 2001 and the business year 2002, which received the pertinent amount. Therefore, it is unlawful for the Defendant to refuse the Plaintiff’s claim for correction of the corporate tax for the business year 201 and 2002.

(b) Relevant Acts;

It is as shown in the attached Form.

C. Determination

(1) Determination on a claim for correction of value-added tax part

Value-added tax is levied when receiving the price on the premise of the supply of goods or services, and if only money is traded without the supply of goods or services, the liability to pay value-added tax cannot be established.

As seen earlier, the Plaintiff can recognize the fact that the transaction of goods and services was actually carried out only without almost little, and in such a case, value-added tax cannot be imposed on the monetary transaction part. Thus, the Defendant must correct the imposition of value-added tax corresponding thereto by clarifying the monetary transaction part of the Plaintiff’s transaction part. However, the Defendant’s disposition rejecting the Plaintiff’s request for correction in whole is unlawful. The Plaintiff’s assertion on this part is with merit.

(2) Determination on the partial request for correction of corporate tax

In light of the economic aspect of taxable income, taxable income is deemed to have a taxable capacity to control and manage the profit in reality, and it is sufficient to determine that there is a taxable capacity to pay the income, and the legal evaluation of the causal relationship with which the income was derived is not always lawful and effective. Thus, even if illegal income is generated by criminal act, it shall be deemed as taxable income unless a measure to return is taken to the person to whom it belongs (see Supreme Court Decision 81Nu136, Oct. 25, 1983).

In this case, even if the plaintiff's receipt of the franchise fee from the franchisee was illegal, the plaintiff actually received the above franchise fee and controlled and managed it, and there is no evidence to prove that the plaintiff was responsible for returning the franchise fee to the franchisee at the time of the defendant's rejection of correction (the plaintiff did not return the franchise fee to the franchisee on the ground that the plaintiff was insolvent, etc.) and the income equivalent to the above franchise fee is taxable income. Thus, the defendant's disposition rejecting the plaintiff's request for correction is legitimate. The plaintiff's assertion on the different premise is without merit.

4. Conclusion

Therefore, the plaintiff's claim is justified within the scope of the above recognition, and each of the remaining claims of the plaintiff are dismissed as it is without merit. It is so decided as per Disposition.

Judges Kim Jong-hwan (Presiding Judge)