A. Whether the interest on the loan for acquiring real estate is added to the tax base of acquisition tax (affirmative)

A. In full view of Article 111(1) and (5) of the former Local Tax Act (amended by Act No. 3757 of Dec. 31, 1984), Article 16 subparag. 11, and Article 59-2(3) of the Corporate Tax Act, Articles 33(1) and 124-2(2) of the Enforcement Decree of the same Act, etc., the interpretation that, inasmuch as a corporation has borrowed money to acquire real estate, the amount of direct and indirect expenses actually invested by the acquisitor of the subject matter of taxation shall be the tax base of acquisition tax, it shall be construed that the interest, i.e., construction fund interest, indirectly invested for acquisition, should be added to the tax base of acquisition tax.

B. Where it is not clearly recognized that there is a loan for acquiring real estate, and it is not clear whether the loan is used for acquiring the real estate, the provisions of Article 16 subparag. 11 of the Corporate Tax Act, Article 33(6) of the Enforcement Decree of the same Act, and Article 12(3) of the Enforcement Decree of the same Act shall not apply mutatis mutandis, and interest on construction funds calculated by the above provisions shall not be added to the tax base

A. Article 111(1) and (5) of the former Local Tax Act (amended by Act No. 3757 of Dec. 31, 1984), Article 16 subparag. 11, Article 59-2(3) of the Corporate Tax Act, Articles 33(1) and 124-2(2) of the Enforcement Decree of the same Act. Article 12(3) of the Enforcement Rule of the same Act, Article 16 subparag. 11 of the Corporate Tax Act, Article 33(6) of the Enforcement Rule of the same Act

Attorney Shin Il Industrial Co., Ltd., Counsel for the plaintiff-appellant

The head of Jung-gu Seoul Metropolitan Government

Seoul High Court Decision 86Gu154 delivered on October 23, 1986

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Article 111(1) of the Local Tax Act (amended by Act No. 3757 of Dec. 31, 1984) provides that the tax base for acquisition tax shall be the value at the time of acquisition, and the tax base for the case of acquisition in annual installments shall be the amount of annual installments. The amount of annual installments shall be added to the amount equivalent to the interest accrued until the full payment of the price for temporary payment. Article 16 subparag. 11 of the Corporate Tax Act used by the court below, Article 33(1) of the Enforcement Decree of the Corporate Tax Act provides that the amount of interest paid on loans used for the purchase, improvement, manufacture and construction of fixed assets of the business year from among the loans of the corporation shall be added to the amount of income for each business year of the domestic corporation and shall be added to the original capital, so the actual amount of acquisition tax shall be added to the tax base for the acquisition of the real estate from a foreign country, Article 59-2(3) of the same Act and Article 124-2(2) of the Enforcement Decree of the Local Tax Act provides that the acquisition price shall be added to the tax base of the local government's.

However, in a case where it is not clearly recognized that a loan has been borrowed for acquiring real estate, and it is unclear whether the loan is used for acquiring the real estate, the provisions of Article 16 subparag. 11 of the Corporate Tax Act, Article 33(6) of the Enforcement Decree of the same Act, and Article 12(3) of the Enforcement Decree of the same Act shall not apply mutatis mutandis. Thus, interest on construction funds calculated pursuant to the same provisions shall not be added to the tax base for acquisition tax. The reason is that in determining the tax base for acquisition tax under the Local Tax Act and subordinate statutes, there is no legal basis for applying the above provisions under the Corporate Tax Act and subordinate statutes (Article 65 of the Local Tax Act cannot be the basis for applying them mutatis mutandis), and it is reasonable to include only interest on construction funds borrowed by a corporation in the tax base.

According to the court below's decision, the court below found that the plaintiff did not specially borrow or borrow the money for the payment of KRW 430,000,000 for the successful bid price in the acquisition of the real estate of this case by taking account of the timely evidence, and held that the tax disposition of this case, which is based on the premise that the plaintiff was paid as interest of the construction fund borrowed to auction and acquire the real estate of this case, was unlawful.

In light of the above evidence relations adopted by the court below and the above legal principles, the above fact-finding and judgment of the court below are just and acceptable, and there are no errors in the application of statutes and the misapprehension of legal principles as pointed out. The arguments are groundless.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Yong-sung (Presiding Justice)