Plaintiff

Deputy Director of the Tax Office

August 25, 2011

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s refusal to refund KRW 27,046,747 of the transfer income tax of KRW 50,794,228, which was reverted to the Plaintiff on July 30, 2010, shall be revoked.

1. Details of the disposition;

A. On May 25, 2006, the Plaintiff acquired on May 25, 2006, and transferred on February 16, 2009, the Plaintiff reported and paid KRW 50,794,228 of the transfer income tax for the year 2009 to the Defendant on May 31, 2010.

B. On June 3, 2010, the Plaintiff filed a claim for correction that KRW 102,202,329 of the value-added tax borne by the Plaintiff on the remaining goods of the instant building upon the closure of the lease business conducted in the instant building was deducted from the necessary expenses when calculating the transfer income amount of the instant building. However, on July 30, 2010, the Defendant rejected the Plaintiff’s claim for correction on the ground that the said value-added tax was not incurred in relation to the transfer of the instant building (hereinafter “instant disposition”).

C. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on September 3, 2010, but the Tax Tribunal dismissed the said appeal on October 29, 2010.

[Reasons for Recognition] The entry of Gap evidence Nos. 4 through 7, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff: (a) incorporated the instant building into the said district and agreed on compensation for obstacles to the instant building on February 16, 2009 following the implementation of an urban development project of the Southern New Town; (b) was unable to engage in rental business on the instant building; (c) at that time, the Plaintiff abolished the relevant rental business; and (d) reported and paid the amount of value-added tax of KRW 102,409,068 on April 17, 2009 to the head of Suwon District Tax Office for the first period of January 2009. The said value-added tax includes KRW 102,202,329 (hereinafter “the amount of output tax of this case”) for the remaining goods upon closure of business pursuant to Article 6(4) of the Value-Added Tax Act. This should be deducted from the transfer value as necessary expenses, not listed in Article 97 of the Income Tax Act and Article 163 of the Enforcement Decree of the said Act.

B. Relevant statutes

The entries in the attached Table-related statutes shall be as follows.

C. Determination

(1) The essence of capital gains tax is capital gains, i.e., an increase in the objective value of the asset owned. Accordingly, capital gains tax, which is subject to such capital gains, is assessed by liquidation of the increase in the value of the asset during the period of ownership with an opportunity to transfer the asset and to leave the owner’s hand, and is a kind of acquisition tax (tax for selling the asset acquired by an individual or a corporation within a certain period) and is subject to profit tax imposed on the profit derived from the production elements owned by a certain person. In light of the purport that Article 95 of the Income Tax Act provides that the necessary expenses to be deducted from the transfer value is corresponding to the transfer value due to the nature of Article 97 of the Income Tax Act, because the necessary expenses to be deducted from the transfer value are corresponding to the transfer value in view of the purport that Article 95 of the Income Tax Act provides for the amount obtained by deducting the necessary expenses from the transfer value. Accordingly, it is reasonable to restrict the acquisition cost of the transferred asset, the installation cost, improvement cost, and the capital expenditure and transfer cost.

(2) Under each subparagraph of Article 97(1) of the Income Tax Act and Article 163 of the Enforcement Decree of the Income Tax Act, it is evident that the output tax borne for the remaining goods upon the closure of business pursuant to Article 6(4) of the Value-Added Tax Act is not listed as the necessary expenses for capital gains. Therefore, the instant disposition that the Defendant did not deduct the output tax amount of this case, which is not recorded as the necessary expenses deductible from the transfer value pursuant to each subparagraph of Article 97(1) of the Income Tax Act and Article 163 of the Enforcement Decree of the Income Tax Act, from the transfer income tax, is legitimate (in addition, Article 6(4) of the Value-Added Tax Act imposes value-added tax on the remaining goods upon the closure of business after deducting the input tax amount for the goods purchased by the entrepreneur in relation to the business, and thus, it is difficult to view that the output tax amount of this case is the expenses incurred in acquiring the building of this case as the supply of goods).

3. Conclusion

Therefore, the plaintiff's claim is without merit, and it is dismissed. It is so decided as per Disposition.

[Attachment Form 5]

Judges Choi Jin-Gyeong (Presiding Judge)