The meaning and scope of “land, the use of which is prohibited or restricted pursuant to Acts and subordinate statutes” under Article 168-14(1)1 of the former Enforcement Decree of the Income Tax Act, and the standard for determining whether it constitutes “where use is particularly restricted beyond the ordinary limit according to the use of land”

Articles 96(1) and (2)8, 104(1)2-7 (see current Article 104(1)8), 104-3(1)1(a) and (2) of the former Income Tax Act (Amended by Act No. 9897, Dec. 31, 2009); Article 168-14(1)1 of the former Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 21301, Feb. 4, 2009);

Plaintiff 1 and two others (Law Firm Barun, Attorneys Park Ho-ho, Counsel for the plaintiff-appellant)

The Director of the Pacific District Office

Seoul High Court Decision 2010Nu2670 decided July 23, 2010

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. Articles 96(1), 96(2)8, 104(1)2-7, and 104-3(1)1(a) of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter “Act”) provides that “any land corresponding to farmland for which the owner does not reside in the location of such land or does not cultivate himself/herself during the period determined by the Presidential Decree during which he/she owns the relevant land” shall, in principle, be deemed land for which gains from transfer are calculated based on the actual transaction price, and the tax rate shall be calculated based on 60/100 on the actual transaction price, and the transfer income tax shall be imposed on such land for which the criteria for determining any land which is not deemed land for non-business due to inevitable reasons pursuant to the delegation of Article 104-3(2) of the Act shall not be deemed land for which the use of such land is limited under Article 16(1)4 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 21301, Feb. 4, 201).

In light of the language, purport, etc. of these regulations, “land, the use of which is prohibited or restricted pursuant to the statutes” under Article 168-14(1)1 of the Enforcement Decree means land, the use of which is specially restricted beyond the ordinary limit according to its purpose of use, and it is reasonable to view that not only the land directly prohibited or restricted by the statutory provision itself, but also the land, the use of which is practically prohibited or restricted by an administrative agency as part of administrative action, etc. as part of the construction permission, etc. is uniformly controlled by the administrative agency. In addition, whether “the use of which is specially restricted beyond the ordinary limit according to the use of the land” constitutes “the use of the land beyond the ordinary limit according to its original purpose,” is based on the principle

2. citing the reasoning of the judgment of the court of first instance, the court below acknowledged the following facts: ① the Plaintiffs donated each land of this case, which is farmland, to the Nonparty’s father on June 14, 199; ② The Daegu Metropolitan City Mayor, on June 20, 2003, determined and publicly announced each land of this case as the Class-I district unit planning zone on July 5, 2003 pursuant to Article 30 of the former National Land Planning and Utilization Act (amended by Act No. 8564 of July 27, 2007); and the head of the Daegu Metropolitan City, the head of the Seo-gu Metropolitan City Office, on July 5, 2003 (amended by Act No. 7511 of May 26, 2005), pursuant to Article 12 of the former Building Act, publicly announced that the construction permission within the Class-I district unit planning zone was restricted (hereinafter “Building restriction measure”); and ③ the Plaintiffs did not reside in each of the instant land after donation, or did not cultivate each of each of this case by themselves from 10 to December 17, 19, 20.

Based on such factual basis, the lower court determined that each of the instant land does not constitute “where the use of the instant land is prohibited or restricted under the relevant Acts and subordinate statutes” as stipulated in Article 104-3(2) of the Act and Article 168-14(1)1 of the Enforcement Decree of the Act, on the grounds that, even if a construction restriction was imposed on each of the instant land, the use of the instant land cannot be deemed to have been specifically prohibited or restricted beyond the ordinary scope of restriction according to its original purpose, in view of the following: (a) the Plaintiffs’ donation of each of the instant land, which is farmland, appears to have changed its form and quality, or did not have any attempt or effort to build a new building thereon until it was transferred; and

In light of the above legal principles and records, the above judgment of the court below is just and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the scope of non-business land, etc.

3. Therefore, all appeals are 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 Lee In-bok (Presiding Justice)