Korea Spaw (Law Firm LLC, Attorneys Park Jong-hun et al., Counsel for the defendant-appellant)

Head of Yongsan Tax Office

November 22, 2012

Seoul Administrative Court Decision 2011Guhap37169 decided May 18, 2012

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The imposition of corporate tax of KRW 4,560,695,600 (including additional tax) made by the Defendant to the Plaintiff on October 4, 2010 shall be revoked.

1. The reasons for the judgment of the court of first instance are reasonable, and thus, are cited as the reasons for the judgment in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure

2. The plaintiff also expressed in the appellate court that the failure of the plaintiff to consider the "justifiable cause" that is not attributable to the taxpayer merely because there is no legal provision for such reason. However, in applying Article 3 (2) 5 of the former Corporate Tax Act (amended by Act No. 8141 of Dec. 30, 2006) and Article 2 (2) 5 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 19328 of Feb. 9, 2006), which applies to the disposition of this case, if there is "justifiable cause" that a nonprofit corporation fails to provide fixed assets to its own business for its own purpose, it is consistent with the objective interpretation that it is non-taxation on revenues from the disposition of the fixed assets. In this case, the plaintiff asserts that the disposition of this case should be revoked on the other premise, since the plaintiff did not use the pertinent land for its own purpose.

Therefore, this case’s provision provides that corporate tax shall be imposed on revenues arising from the disposal of fixed assets not directly used for its proper purpose business for three or more years as of the date of disposal of fixed assets, and it does not provide that the non-profit domestic corporation shall impose corporate tax on revenues arising from the disposal of fixed assets for its proper purpose business for three or more years, and it shall not be viewed differently depending on whether there are justifiable grounds for not using the assets directly for its proper purpose business. As such, in this case’s provision, whether there is “justifiable grounds” in the Plaintiff’s failure to directly use the land in question (Supreme Court Decision 2005Du14370 Decided July 27, 2006), and ② The interpretation of the tax law on the requirements for non-taxation or tax reduction and exemption should be interpreted as the legal text, and it is not permissible to expand or analogically interpret the provision of preferential treatment without any justifiable reason. In addition, the Plaintiff’s assertion that it is difficult to interpret the provision of this case’s provision on the grounds for non-taxation or exemption of corporate tax without any specific grounds as alleged by the Plaintiff.

3. If so, the plaintiff's appeal is dismissed as it is without merit.

Judges Lee Tae-tae (Presiding Judge)