Where any interest paid by a corporation established under the Mutual Savings and Finance Company Act falls under business expenses and can be included in deductible expenses, and where the total amount is not recognized as deductible expenses because it falls under the “interest on loan” under the Corporate Tax Act.

The interest paid by a corporation established under the Mutual Savings and Finance Act in relation to the mutual credit fraternity business, credit installment savings business, small credit loan business under the method of installment repayment, discount of bills on the fraternity or installment, and business incidental to the above business, which is approved by the Minister of Finance and Economy, shall correspond to the so-called operating expenses in the account settlement of the company, and the interest paid in relation to the business approved by the Minister of Finance and Economy in accordance with the tax law shall be included in the calculation of losses. However, it is reasonable to regard the entire amount of the interest paid in relation to general loans borrowed from other financial institutions, other than the funds received as the business, as the business, as the interest paid in relation to the general loans borrowed from other financial institutions (amended by Act No. 4282, Dec. 31, 1990) under Article 18-3 (1) of the former Corporate Tax Act and Article 43-2 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 12878, Dec. 30, 1989).

Article 9(3) of the Corporate Tax Act; Article 12(2) of the Enforcement Decree of the same Act; Article 18-3(1) of the former Corporate Tax Act (Amended by Act No. 4282, Dec. 31, 1990); Article 43-2 of the Enforcement Decree of the same Act (Amended by Presidential Decree No. 12878, Dec. 30, 1989); Articles 11 and 17 of the Mutual Saving and Finance Company Act

[Defendant-Appellee] Defendant 1 and 3 others

Head of Eastern Tax Office

Seoul High Court Decision 91Gu8755 delivered on March 20, 1992

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

The Plaintiff’s attorney’s ground of appeal is examined.

1. The interest paid by a corporation established under the Mutual Savings and Finance Act in connection with the mutual credit fraternity business, credit installment savings business, credit loan business under the method of installment repayment, discount of bills on the fraternity or installment, and other businesses incidental to the above businesses, which are the business stipulated in Article 11 (1) of the same Act, is the so-called operating expenses for the company's account settlement, and the interest paid in connection with the business approved by the Minister of Finance and Economy shall be deemed as falling under the so-called operating expenses for the company's account settlement (see Article 9 (3) of the Corporate Tax Act and Article 12 (2) of the Enforcement Decree of the same Act)

However, it is reasonable to view that the interest paid on a general loan borrowed from another financial institution as above falls under the “interest paid on a loan” which is subject to the restriction on inclusion in deductible expenses under tax law under Article 18-3(1) of the Corporate Tax Act (amended by December 31, 1990) and Article 43-2 of the Enforcement Decree of the same Act (amended by December 30, 1989) and Article 18-3(2) of the same Act. Therefore, in calculating taxable income of a corporation, it shall be deemed that the total amount of the expenses actually incurred is not recognized as deductible expenses.

2. According to the facts established by the court below, the plaintiff corporation, a mutual savings and finance company, borrowed money from other financial institutions in addition to paying interest on the fraternitys or installments collected from many and unspecified persons, and paid the interest on the borrowed money, while holding and managing real estate for non-business purposes as stated in its holding. Thus, the above interest is the interest on the loan that a corporation, which holds real estate not directly related to the business of the corporation in question, has paid for each business year, and its inclusion in deductible expenses is limited within the scope stipulated in the above Corporate Tax Act and the Enforcement Decree.

The judgment of the court below that held to the same purport is just and there is no illegality of misunderstanding of legal principles as pointed out in the judgment of the court below, and the precedents of party members whose theory of lawsuit is written different cases, and thus cannot be a precedent for admitting this case. All arguments are without merit.

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