Whether interest included in the successful bid price for non-performing real estate security can be imposed or not;

The disposal profit generated by an individual who does not engage in the business of trade of non-performing loans after purchasing and selling non-performing loans in the manner of transfer of claims under the Civil Act shall not be included

Article 16 of the Income Tax Act

1. The Defendant’s imposition of global income tax of KRW 43,178,110 against the Plaintiff on December 1, 2004 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On October 10, 2003, the Plaintiff received dividends of KRW 220,676,711 as a mortgagee in the Daegu District Court 98 another District Court 14312 concerning 263 square meters (hereinafter “instant land”) prior to ○○○○○-dong ○○○○○○○, ○○-dong, ○○○○○○○, Inc. (hereinafter “instant land”).

B. On December 1, 2004, the Defendant, at KRW 220,676,711 of the Plaintiff’s dividends, deducted KRW 90,000,000,000 from the amount calculated by deducting the principal of the claim under the distribution schedule as principal of the claim under Article 16(1)12 of the Income Tax Act, constitutes a non-business interest income under Article 16(1)12 of the Income Tax Act, and thus, the Plaintiff was required to report global income tax, and thus, the Defendant rendered a decision and notification against the Plaintiff on KRW 43,178,110 of the global income tax for the year 203 (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap 2's evidence 1 to 3, Eul 1-1 to 3's each entry, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

As to the Defendant’s assertion that the instant disposition was lawful on the grounds of the aforementioned disposition grounds and relevant statutes, the Plaintiff asserted that the ○ Bank loaned KRW 200 million to ○○○ Co., Ltd., and established a collateral security amount of KRW 260 million with respect to the instant land owned by 00 million. However, in the course of the ○ Bank’s withdrawal from bankruptcy, the said loan claims and collateral security was successively transferred to the Korea Assets Management Corporation, ○○, a special purpose company, and the Plaintiff in sequence. As such, the Plaintiff’s 130,676,711, expressed as interest on the dividend schedule among the dividends received by the voluntary auction of the instant land, does not constitute the income subject to income listed in the Income Tax Act, and thus, the instant disposition otherwise asserted that the instant disposition was unlawful.

(b) Related statutes;

○ Interest income Article 16 of the Income Tax Act

(1) Interest income shall be the following income generated in the relevant year:

1. Interest and discount amount of bonds or securities issued by the State or the local government;

2. Interest and discount amount of bonds or securities issued by a domestic corporation;

3. Interest and discount amount of deposits (including installment savings, installments, deposits, and postal transfers; hereinafter the same shall apply) received in Korea;

4. Profits accruing from the credit fraternity or credit installments as prescribed by the Mutual Savings Banks Act;

5. An investment trust received in Korea (referring to an investment trust cum interest prescribed by Presidential Decree; hereafter the same shall apply in this Article);

6. Interest and discount amount of any bonds or securities issued by a domestic branch or business office of a foreign corporation;

7. Interest and discount amount of bonds or securities issued by a foreign corporation;

8. Interest of deposits and profits of investment trust received abroad;

9. Profit with repurchase agreement of bonds or securities as prescribed by the Presidential Decree;

10. Profit margins on a savings insurance as prescribed by the Presidential Decree;

11. Excess repayment from the workplace mutual-aid association as prescribed by the Presidential Decree;

12. Profits accruing from a non-business loan;

13. Incomes similar to those under subparagraphs 1 through 12, which bear a nature of price following any use of money.

(2) The interest income amount shall be the gross income amount during the relevant year.

(3) Matters necessary for the laws on interest income under the provisions of each subparagraph of paragraph (1) and interest income amount under the provisions of paragraph (2) shall be prescribed by Presidential Decree

(c) Fact of recognition;

(1) On August 8, 1997, ○ Bank extended a loan of 200 million won to ○○ Co., Ltd., and received the right to collateral security with a maximum debt amount of 260 million won as to the instant land owned by 00 million won, the representative director of the said company.

(2) As ○ Bank was withdrawn from an insolvent financial institution on June 29, 1998, loans of 200 million won to ○○ Company upon a decision to transfer a contract by the Financial Supervisory Commission under Article 14(2) of the Act on the Structural Improvement of the Financial Industry have been transferred to the Korea Assets Management Corporation in entirety with the right to collateral security after the principal has been reduced to 150 million won.

(3) On November 23, 2000, the Korea Assets Management Corporation reduced the principal of the instant loan claim amounting to KRW 90 million and transferred it to ○○, a special purpose company, along with the right to collateral security. On October 29, 2002, the said special purpose company transferred the instant loan claim and right to collateral security to the Plaintiff to KRW 90 million.

(4) On October 10, 2003, the Plaintiff received dividends of KRW 220,676,711 in total under the pretext of the principal and interest of KRW 90,00,00 as a mortgagee in the case of voluntary auction of real estate at the Daegu District Court 98 another or 14312 on the instant land.

[Ground of recognition] Evidence Nos. 1-1, 2, and 3-1-3, the purport of the whole pleadings

D. Determination

(1) Article 16 (1) of the Income Tax Act provides that interest income shall be the income falling under any of the following subparagraphs generated during the pertinent year, and subparagraph 1 (the interest and discount amount of bonds or securities accrued by the State or local governments) through 12 (the profits accruing from non-business loans) and subparagraph 13 (the income similar to the income under subparagraphs 1 through 12, which has the nature of a consideration for the use of money). Therefore, interest income under the Income Tax Act should be the income accruing from the lending of money, etc. In this case, it shall be the income arising from the consideration of the lending of money, etc.

(2) As seen in the above-mentioned facts, the health team and the above-mentioned facts

① The Plaintiff acquired the instant collateral security claim from a special purpose company with the initial loan amount of KRW 200 million but the possibility of recovering the claim becomes uncertain. Since the instant collateral security claim constitutes securitized assets under Article 2 subparag. 1(a) and 3 of the Asset-Backed Securitization Act, as it constitutes claims, real estate, and other property rights transferred by ○○ Bank, the asset holder, and ○○○ Corporation, which is the asset holder, constitutes securitized assets under Article 2 subparag. 1(a) and (3) of the Asset-Backed Securitization Act, the substance of the transfer contract between the Plaintiff and the special purpose company, rather than ordinary assignment of claims, shall be deemed to be a sales contract for securitized assets, which is a claim with uncertain legal value, and thus, if any profit accrued in excess of the purchase price,

② Article 13 subparag. 4 of the Asset-Backed Securitization Act provides that "the transferee of the securitization assets shall take over risks associated with the transferred assets." Since the risk here includes the loss, damage, deterioration, and the risk of depreciation of the securitization assets, if the value of the securitization assets increases, the value increase also belongs to the transferee of the securitization assets. It is natural that the value increase should be attributed to the transferee of the securitization assets in the event of the increase of the value of the securitization assets. It cannot be viewed as the loss of "interest, which is the money paid in proportion to the original amount and the period of use as the consideration for the use of money and other substitutes of the securitization assets."

③ A special purpose company that is a party to a sales contract of securitization assets and the Plaintiff reached a decision on the price of the instant loan claims KRW 90 million, not based on the evaluation of the principal and interest of the above loan claims, which became non-performing and thus cannot be expected to have been repaid voluntarily from the obligor, but rather on the basis of the evaluation of the possibility of acquiring the principal and interest of the above loan claims itself. In the event the instant land which is the object of the right to collateral security is awarded in the course of a subsequent auction at the time of the above sales contract, the appraisal of the appraised amount, the recovery of investment amount from the mortgage and the possibility of creating future profits or risks, and it seems that the agreement was reached with the intent of the Plaintiff as to such an amount. In reality, it seems that the interpretation that the Plaintiff agreed

④ However, since the scope of the right to preferential repayment of a mortgage is the principal, interest, penalty, damages due to non-performance of obligation, and expenses for the execution of mortgage (Article 360 of the Civil Act), the Plaintiff who is required to participate in the distribution procedure as a mortgagee in the auction case is bound to prepare and submit a claim statement by including technically the decreased principal of the claim or the portion exceeding the purchase price of securitized assets in the distribution procedure, and the distribution court is bound to state the interest on the distribution schedule in distributing the dividends to the Plaintiff, who is a mortgagee, in excess of

⑤ Considering that the Income Tax Act and the Enforcement Decree of the same Act stipulate only profit margin on repurchase agreement of bonds or securities as interest income (see Article 16 (1) 9 of the Income Tax Act, and Article 24 of the Enforcement Decree of the same Act), general profit margin on bonds and securities are not considered as interest income, the essence of dividends that the Plaintiff acquired from a special purpose company for securitization of real estate mortgage bonds and received in excess of the purchase price amount in the auction procedure on the real estate shall not be deemed as investment profit or profit margin on the securitization assets, but it shall not be deemed as interest income as non-business proceeds under Article 16 (1) 12 of the Income Tax Act (In addition, in the distribution procedure of auction case, proceeds from sale shall be appropriated for repayment in the order of expenses, interest, principal, and principal. If the Plaintiff received dividends of less than 90 million won which are the purchase price of the securitization assets and actually suffered losses, if so, the entire dividend amount shall be deemed as interest income and the comprehensive income tax shall be imposed thereon, and in light of this point, it shall not be considered as the name of interest income only).

Therefore, the Defendant’s disposition of this case, which regarded the portion exceeding KRW 90 million of the Plaintiff’s dividend as an interest income as a non-business amount under the Income Tax Act, is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted for the reasons and it is so decided as per Disposition.

[Seoul High Court Decision 2007Nu4256 ( August 28, 2007)]

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant’s disposition of imposition of global income tax of KRW 43,178,110 against the Plaintiff on December 1, 2004 shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

The reasoning of this court's decision is the same as that of the judgment of the court of first instance, and thus, it is accepted by Article 8 (2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

Therefore, the decision of the first instance court as to this conclusion is justifiable, and the defendant's appeal is dismissed as it is without merit. It is so decided as per Disposition.