Effect of a disposition imposing capital gains tax in accordance with the Regulations on Tax Investigation Affairs for null and void Property

Even if there is a defect in the contents of a disposition of imposition, in cases where a disposition of imposition was taken by mistake on the basis that the defect was not subject to imposition or that of a person without tax liability, such disposition of imposition should be significant and obvious, but it should be calculated on the basis of the standard market price which is the principle of no recognition as an speculative transaction, and thus, it cannot be said that the method of calculating gains on transfer is erroneous, and that the calculation of gains on transfer based on the actual transaction price, which is an exceptional method, is only a cause of revocation of the disposition of imposition. Therefore, such defect should be deemed to be merely a cause of revocation of the disposition of imposition.

Articles 23(4) and 45(1)1 of the former Income Tax Act, Article 72(3)8 of the Regulations on the Conduct of Property Tax Investigation, Article 19 of the Administrative Litigation Act

Supreme Court Decision 84Nu354 delivered on August 21, 1984 (Gong1984, 1552) 89Nu8149 delivered on May 8, 1990 (Gong1990, 1285) 92Nu6983 delivered on January 19, 193 (Gong1993, 756)

Plaintiff

Korea

Seoul High Court Decision 91Na22133 delivered on October 9, 1991

The judgment below is reversed and the case is remanded to Seoul High Court.

We examine the grounds of appeal.

According to the reasoning of the judgment below, in imposing capital gains tax on the transfer of the real estate in this case owned by the plaintiff on or around March 1988 and the site and building located in Eunpyeong-gu Seoul ( Address omitted), the court below acknowledged that the transaction of the real estate in this case constitutes an speculative transaction under Articles 72 (3) 8 and 72 (3) of the Regulations on the Conduct of Property Tax Investigation (National Tax Service Directive No. 980 of January 26, 198) and imposed capital gains tax on the transfer of the real estate in this case. Since Article 72 (3) 8 of the above Regulation on the Conduct of Property Tax Investigation is invalid in violation of the principle of no taxation without law, the part concerning the real estate in this case among the disposition of this case based thereon is null and void as serious and obvious, and therefore, the defendant is obligated to return the amount of 257,650,905 won to the plaintiff as unjust enrichment.

However, according to Article 23 (1) 1 of the Income Tax Act, it is evident that the transfer of real estate in this case is subject to the imposition of capital gains tax. However, Articles 23 (4) (proviso), 45 (1) 1 (proviso), and 170 (4) 2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 12767 of Aug. 1, 1989), which were in force at the time of the transfer, provide for an speculative transaction designated by the Commissioner of the National Tax Service where the transaction should be based on the actual transaction price, which is an exceptional method for calculating capital gains, and Article 72 (3) 8 of the above Regulations on the Investigation of Property Tax, which is the direction of the National Tax Service pursuant to delegation of each of the above provisions, provides that "the director of a regional tax office (or the head of a regional tax office) has acknowledged a transaction as an speculative transaction transaction through consultation with the Commissioner of the National Tax Service, the head of a regional tax office or the head of a tax office having jurisdiction office's office."

However, even if there is a defect in the contents of the disposition of taxation, if there is a wrong disposition of imposition, such as a disposition of imposition on a person who is not subject to imposition or who is not liable to pay taxes, the defect is significant and obvious. However, as in the instant case, even if it is deemed that the calculation of gains on transfer based on the standard market price, which is the principle of no recognition as speculative transaction, is null and void, based on Article 72(3) Subparagraph 8 of the Regulations on the Management of Property Tax, and the calculation of gains on transfer based on the actual transaction price, which is an exceptional method, cannot be said to be a mere error in the calculation method of gains on transfer, and thus, the defect is merely a cause for revocation of the disposition of imposition.

Thus, the part of the disposition of this case on the real estate in the disposition of this case, which is calculated and imposed on the gains from transfer based on the actual transaction price pursuant to Article 72 (3) 8 of the above provision.

It is merely a ground for priority law and it is not a ground for invalidation, but it is not a ground for invalidation. However, the court below erred by misapprehending the legal principles on the ground for invalidation as a matter of course, thereby affecting the conclusion of the judgment. Therefore, the ground for appeal pointing this out has merit.

Therefore, the judgment below is reversed, and the case is remanded to the Seoul High Court. It is so decided as per Disposition by the assent of all participating Justices.

Justices Song Man-man (Presiding Justice)