The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

A. (1) Article 45-2(2)5 of the former Framework Act on National Taxes (amended by Act No. 13552, Dec. 15, 2015; hereinafter the same) and Article 25-2 subparag. 2 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 27833, Feb. 7, 2017; hereinafter the same) “the exercise of the right of rescission or the rescission of a contract due to unavoidable reasons” are, in principle, grounds for filing a subsequent claim for rectification of corporate tax.

However, in special circumstances where the Corporate Tax Act or the relevant regulations stipulate the amount of income not realized due to the cancellation of a certain contract separately as the grounds for deductions, etc. against the amount of income in the business year to which the date of such cancellation belongs, or the taxpayer has reported corporate tax by the method of deducting the amount of income in the business year to which the date of such cancellation belongs in accordance with corporate accounting standards or practices, such cancellation cannot affect the tax liability that was initially established, and thus, it cannot be the grounds for filing a later claim for correction.

(2) Article 69(1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 24357, Feb. 15, 2013) provides that “The business year to which a domestic corporation’s gross income and deductible expenses accrue for each business year shall be the business year which includes the date on which the relevant gross income and deductible expenses are determined” (see, e.g., Supreme Court Decision 2012Du10611, Mar. 13, 2014). Article 40(1) of the Corporate Tax Act provides that “The gross income and deductible expenses incurred from construction, manufacturing, and provision of other services, including contract construction and subscription sales, shall be included in the gross income and deductible expenses for the relevant business year, respectively.”