Suwon District Court 2010Guhap8431 ( December 22, 2010)

National Tax Service Review Income 2009-0133 (20103.09)

Even if acquisition tax, etc. is immediately notified later, it is reflected in the cost in calculating the income amount.

In the case of unregistered resale of real estate, the payment date of the balance to the original seller will be the time of acquisition unless it is registered, and at that time, the obligation to pay acquisition tax occurs. Thus, even if the tax authority imposed tax in 2009, it is merely a notification that has already been made late after the liability to pay acquisition tax, etc., which became final and conclusive in 2005, should be reflected as a matter of course in calculating

2011Nu5300 Revocation of Disposition of Imposing global income tax, etc.

XX

Head of Sungnam Tax Office

Suwon District Court Decision 2010Guhap8431 Decided December 22, 2010

September 30, 2011

November 18, 2011

1. Of the judgment of the first instance court, the part against the plaintiff falling under the order to revoke below shall be revoked.

Defendant’s global income tax amounting to KRW 6,882,671,590 on July 1, 2009, belonging to the Plaintiff for the year 2005.

The part exceeding 6,689,228,430 won of the disposition of imposition shall be revoked.

2. The plaintiff's remaining appeal is dismissed.

3. Of the total litigation costs, 95% is borne by the Plaintiff, and the remainder is borne by the Defendant, respectively.

The judgment of the first instance shall be revoked. The defendant's imposition of global income tax of KRW 6,882,671,590 on July 1, 2009 against the plaintiff and KRW 1,091,138,810 on global income tax of KRW 2006 on December 12, 2008 shall be revoked.

1. Details of the disposition;

A. The Plaintiff’s acquisition and transfer of real estate

1) On December 2004, the Plaintiff attended the opening ceremony of XXDF company and asked the company to lend the fund to the new apartment construction business at the Posi-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-si, but rejected the request.

2) From January 28, 2005 to March 17, 2005, the Plaintiff entered into a contract for the sale of the instant land with the North-dong, 00 and 00 lots of forest land (hereinafter referred to as “instant land”) during the port from January 28, 2005 to March 17, 2005, and entered into a contract for the sale of the instant land to the OTRS Co., Ltd and the OTRS Co., Ltd. (hereinafter referred to as “stock Co., Ltd.” in indicating the above companies”) under the condition that part of the purchase price was paid.

B. Plaintiff’s global income tax return and payment

1) The Plaintiff leased 27,917,141,800 won to the Ote Commission and OO alone Holdings, and received a total of 40 billion won from each of the above companies for the instant land as the purchase price for the instant land.

2) On May 31, 2008, the Plaintiff paid 12 billion won, which is the difference with the above loans worth KRW 28 billion, among the above 40 billion paid to the Defendant on May 31, 2008, as the interest income accrued in 2007, and paid the comprehensive income tax accrued in 2007.

3) Meanwhile, between November 15, 2005 and January 10, 2006, the Plaintiff loaned KRW 8,313,892,00 in total for the purpose of purchasing the land of the members of the Cheongju-dong O-dong O-dong O-dong O-dong O-dong O-dong, which the said company promoted, to O alone. The Plaintiff was granted a loan certificate from the said company that KRW 6 billion is refunded to KRW 4 billion paid on November 15, 2005 from the said company until February 28, 2006, and received KRW 5 billion from the said company on August 18, 2006.

C. Defendant’s taxation disposition

1) From July 21, 2008 to October 31, 2008, the director of the Central Regional Tax Office confirmed that “the Plaintiff purchased forest land from Posi-dong P 000 and 00 square meters (hereinafter “land of this case”) from January 28, 2005 to March 17, 2005, and transferred the instant land to OOEs and OOEs.” On March 17, 2005, the director of the Central Tax Office confirmed that “the Plaintiff was subject to the global income tax of KRW 189,407,000,000,000,000,000,000,000 won was included in the amount of interest income of KRW 40 billion for which the Plaintiff reported as interest income was transferred to OOEs and OOSSs, and that the Plaintiff was subject to the global income tax of KRW 1189,000,000,000.

2) According to the above decision on December 12, 2008, the Defendant imposed the Plaintiff KRW 11,891,473,850 of the transfer income tax for the year 2005 following the transfer of the instant land, and global income tax for the year 2006 based on the above interest income, etc. (hereinafter above global income tax for the year 2006) (hereinafter above global income tax for the year 2006)

The first disposition was made.

3) The Plaintiff filed an objection, and on June 25, 2009, the director of the Central District Tax Office rendered a decision to revoke the imposition of the transfer income tax for 2005 on the ground that the income from the transfer of the instant land constituted the business income (the objection against the first disposition was dismissed).

4) According to the above decision, the Defendant revoked the full amount of the transfer income tax for the year 2005. The total amount of income was KRW 41,245,451,102, including the income from the transfer of the instant land, and the necessary expenses to be deducted was calculated as KRW 26,277,90,904,980 including the consulting fee of KRW 1,000,000,000 paid to △△△ around the end of February 2005, and then imposed the global income tax of KRW 7,384,49,120 (including the additional tax of KRW 1,001,06,902, the additional tax of KRW 1,634,732,695) for the global income tax for the year 2005.

5) Meanwhile, on July 28, 2009, the Defendant paid the global income tax accrued in 2007 to KRW 4,202,491,922 by making the Plaintiff’s income accrued from the transfer of the instant land as interest income. As such, on global income tax accrued in 2005, the Defendant decided to refund KRW 501,77,536 of the global income tax accrued in the period from the date of voluntary payment ( May 31, 2008) to the date of assessment and assessment of global income tax accrued in 2005 ( July 1, 2009), after deducting KRW 501,77,536 of the global income tax accrued in 205 from KRW 7,384,49,120 to KRW 501,77,92,530 of the above refunded global income tax and KRW 507,537,530,925 of the Management of the National Funds Act (hereinafter referred to as “the aforementioned disposition of the Management of the National Funds”).

D. On September 28, 2009, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service on September 28, 2009, but was dismissed on March 9, 2010.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3, Eul evidence Nos. 1, 2, and 3 (including each number), the purport of the whole pleadings

2. Whether dispositions Nos. 1 and 2 are legitimate;

A. The plaintiff's assertion

1) Claim as to the first disposition

As between November 15, 2005 and January 10, 2006, the Plaintiff lent a total of KRW 8,313,892,000 to O alone, and only received KRW 5 billion on August 18, 2006 as principal repayment, and did not receive interest. Therefore, the first disposition against the Plaintiff’s KRW 2 billion on the premise that it is interest is illegal.

2) The allegation as to the second disposition

A) The Plaintiff’s additional acquisition tax and special rural development tax imposed by the North Korean head of Dong-si on the ground that the Plaintiff had sold part of the land of this case as brokerage commission for the land of this case, and 624,073,400 won should be deducted as necessary expenses.

B) Since the Plaintiff did not properly classify the items of taxation under the Income Tax Act and filed a wrong return on and paid the Plaintiff by deeming them as interest income, it is unlawful to impose penalty tax amounting to KRW 958,697,056 and penalty tax amounting to KRW 1,120,751,280.

B. Judgment on the argument regarding the first disposition

In full view of the following circumstances, the evidence Nos. 5, 5-1 and 5-2, and the fact-finding results by the court of the first instance with respect to the O alone Holdings, the Plaintiff may be deemed to have received KRW 2 billion out of KRW 5 billion received from O alone Holdings as interest, and thus, the prior Plaintiff’s assertion cannot be accepted on a different premise.

1) On November 15, 2005, the Plaintiff (hereinafter referred to as the “each of the instant notes”) received a certificate of beneficial interest amounting to KRW 6 billion issued by OO-dong O-dong 000-0 land and its ground buildings in Cheongju-si, Chungcheongnam-gu, Cheongju-gu, and a certificate of beneficial interest amounting to KRW 6 billion and KRW 40 billion paid 6 billion until February 28, 2006 (hereinafter referred to as “each of the instant notes”). The time for repayment has been set according to each of the above notes. The Plaintiff’s additional payment of KRW 4 billion and KRW 40 billion for the principal amount of the loan is deemed to have been made, separate from the contents that the Plaintiff would pay KRW 4 billion and KRW 40 billion for investment profits. This may be deemed to have agreed to receive KRW 2 billion as interest on the loans of KRW 4 billion.

2) On August 18, 2006, the Plaintiff received reimbursement of KRW 5 billion from O alone Holdings, and around September 6, 2006, the Plaintiff was replaced with the certificate of beneficial rights of KRW 7,888,700,000 at par value (the interest during the period was determined to the effect that the interest should be taken into account). It is difficult to deem that the Plaintiff renounced interest of KRW 2 billion at par value or received interest later, which was paid as above, on the remaining loan, due to the beneficiary of the certificate of beneficial rights, including interest.

3) Although the OO branch asserts that the Plaintiff paid KRW 5 billion to the Plaintiff as the principal repayment name, the details of the repayment are specifically asserted, and the head of OO branch also stated that the principal was deducted, it does not exclude the application of the provisions on satisfaction of payment under Article 479(1) of the Civil Act even in the tax law (see Supreme Court Decision 97Nu10369, Jul. 24, 1998). As alleged by the Plaintiff, in order to recognize the designated appropriation, there should be any agreement between the parties who expressed any intent to appropriate the principal at the time of receiving the above KRW 5 billion, or evidence, such as a related receipt, etc.

4) Among the details of principal repayment claimed by the Plaintiff that the said five billion won was appropriated, regarding loans of KRW 335 million on January 5, 2006, it is difficult to believe such statement of repayment as is, since it is reflected in the Customer Director of OO Holdings in 2007, which was after repayment, in the case of loans of KRW 335 million.

5) On the other hand, in order to realize income in the case of interest income, it is sufficient that the interest income has not been paid in reality but has reached the due date for the payment of interest, and the bonds have been mature and confirmed as sufficient to realize the interest claim. However, in the case of OO Holdings, each of the instant notes, as well as the current status where the principal and interest can be recovered due to the discontinuance of business pursuant to Article 51 of the Enforcement Decree of the Income Tax Act, it may be deemed that the right to receive KRW 2 billion was finalized on February 28, 2006, with the payment of interest and investment return on each of the above notes, and therefore, it is justifiable that the Defendant considered the above KRW 2 billion as interest income in 2006.

C. Judgment on the argument on the second disposition

1) First, we examine the assertion on additional deductions of 1 billion won in the name of brokerage commission among the assertion on necessary expenses deduction.

According to the evidence No. 11, the plaintiff paid KRW 1 billion as a brokerage commission for the land of this case on or around February 2005, but it is not sufficient to recognize that the above KRW 1 billion was the same as the consulting fee paid by the defendant to △△△ Co., Ltd. after deducting the necessary expenses. The evidence submitted by the plaintiff alone is insufficient to recognize that the plaintiff paid the brokerage commission or consulting fee for the land of this case in addition to the above KRW 1 billion, and there is no other evidence to acknowledge that there is no other evidence to acknowledge it (if we comprehensively consider the statement No. 6, 7, and 8 evidence and the whole purport of the oral argument, it is deemed that the OO committee paid KRW 1 billion as a brokerage commission around July 2005).

2) Next, the Plaintiff’s assertion of deduction of necessary expenses for the acquisition tax and special rural development tax is examined. The Plaintiff’s allegation in this part is with merit, given that it was imposed by the North Korean head of the Posisi in 2009 on the acquisition tax and special rural development tax of the instant land and the total of KRW 624,073,40, and paid the said tax. However, in full view of the following circumstances acknowledged by the aforementioned evidence, even though the said acquisition tax and special rural development tax were imposed in 209, it is reasonable to include the said tax and special rural development tax in the necessary expenses for the 2005 taxable period, which is the year to which the income accrued.

A) Acquisition tax is liable to pay taxes at the time of acquiring an object of taxation (see Article 29(1)1 of the Local Tax Act); in cases of acquisition by onerous succession from a third party, the remaining payment date under the contract is the date 30 days have passed since the contract date if the remaining payment date is not specified; and in cases of acquisition by registration prior to each of the above dates, the registration date shall be the time of acquisition, respectively (see Article 73(1)2 and (3) of the Enforcement Decree of the Local Tax Act). In cases of unregistered resale of real estate, such as this case, unless the registration is completed, the date of payment of the balance to the original seller is the time of acquisition; and at that time, the liability to pay acquisition tax occurs; even if tax was imposed by a tax authority in 2009, it is merely a late notification after the tax liability to pay acquisition tax, etc. finalized in 205.

B) In addition, even if according to the General Rules of the Income Tax Act, the property tax, etc. imposed on the land, etc. acquired by the entrepreneur for the purpose of sale shall be included in the necessary expenses in calculating the income amount for each taxable period, but the acquisition tax and registration tax (including the education tax imposed on the registration tax) shall be included in the acquisition value of the relevant land, etc. (see e.g., 27-55.., 8), and even if the acquisition tax, etc. was immediately notified

C) Meanwhile, in general, Article 27(2) of the former Income Tax Act (amended by Act No. 7328 of May 31, 2005) provides that the expenses determined in the pertinent year with respect to the amount of total income corresponding to the amount of income before the pertinent year are not appropriated as necessary expenses before the pertinent year, but as necessary expenses for the pertinent year (see, e.g., Supreme Court Decisions 91Nu8814, Jul. 14, 1992; 99Du3980, Nov. 24, 200). However, Article 27(2) of the former Income Tax Act provides that the amount of expenses corresponding to the amount of income before the pertinent year shall be calculated as income tax if the expenses corresponding to the amount of income prior to the pertinent year are finalized and finalized, the amount of expenses corresponding to the amount of income prior to the pertinent year shall be calculated as income tax prior to the pertinent year shall not be deemed as income tax prior to the pertinent year’s correction.

D) From July 21, 2008 to October 31, 2008, the Central Regional Tax Office conducted a tax investigation with the Plaintiff, and notified the Plaintiff of the fact that the Plaintiff had not resold the north-dong 000 and 00 parcels at port, and accordingly notified the local government of the fact. Accordingly, the head of the Northern-si Office issued a prior notice of acquisition tax assessment twice to the Plaintiff, and notified and imposed acquisition tax, etc. The Defendant also received the notice of taxation by the Central Tax Office before disposing of 1 and 2. As long as he received the notice of taxation by the Central Tax Office prior to disposing of 1 and 2, it is reasonable to deem that the Plaintiff was aware of the scheduled fact of notification and imposition of acquisition tax, etc. due to the unregistered resale.

3) Finally, we examine whether the imposition of additional tax is lawful or not. Under the tax law, in cases where a taxpayer violates a return, tax liability, etc. as prescribed by the Act without any justifiable reason in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, the taxpayer’s intent or negligence is not considered, and it does not constitute justifiable grounds in accordance with the law. Therefore, in the instant case, the Plaintiff’s erroneous return and payment of additional tax by deeming it as an interest income without properly classifying the items of tax under the Income Tax Act cannot be deemed as a justifiable ground for the taxpayer’s failure to perform his/her duty (see, e.g., Supreme Court Decision 95Nu92, Nov. 7, 1995). The Plaintiff’s above assertion is

(d) The calculation of a legitimate tax amount;

As seen earlier, even if the acquisition tax and special rural development tax on the land of this case paid by the Plaintiff were included in the necessary expenses for the taxable period 2005, totaling 624,073,400 won for the acquisition tax and special rural development tax already paid by the Plaintiff is included in the aggregate of 624,659,400 won for failing to report and pay within two years from the date of actual acquisition by the Plaintiff. However, the above additional tax is an additional portion caused by the Plaintiff’s causes attributable to the Plaintiff, and it cannot be deemed necessary expenses naturally reverted to the taxable period 2005, and therefore, it can be recognized as necessary expenses only for 359,414,00 won for each principal tax of acquisition tax and special rural development tax

In light of this, when calculating the general income tax for the plaintiff in the year 2005, the amount is KRW 6,689,228,436, such as the entry of the notice column of the items in the attached tax calculation table in the attached tax calculation table, and the amount is ultimately KRW 6,689,228,436, such as the entry of the notice column of the items in the attached tax calculation table, the amount exceeding the above amount of tax in the

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted within the above scope of recognition, and the judgment of the court of first instance is partially unfair. The plaintiff's appeal is partially accepted and part of the judgment of the court of first instance is revoked and the remaining appeal of the plaintiff is dismissed. It is so decided as per Disposition.