Cho Jae-2015-Seoul Government-2445 (28 March 2016)

Where a corporation appropriates the cost of processing in the account book, the profit of the corporation equivalent to the cost of processing shall be deemed to have been leaked out of the company, except in extenuating circumstances.

Where a corporation appropriates the cost of processing in its account book, the profit of the corporation equivalent to the cost of processing shall be deemed to have been leaked out of the company, except in extenuating circumstances, and in such cases, the special circumstance that the total amount equivalent to the cost of processing shall not be leaked out of the company shall be proved by the legal entity claiming it.

Article 67 of the Corporate Tax Act

2016Guhap67509 Notice of change in amount of income

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O commissioner of regional tax office

December 16, 2016

February 3, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s respective disposition of notice of change in income amount of KRW 420,00,00 for the Plaintiff on September 1, 2014, as well as KRW 1,012,250,00 for the year 201, for the Plaintiff, and KRW 1,652,793,00 for the year 201, and KRW 420,000 for the year 2012 is revoked.

1. Details of the disposition;

A. The Plaintiff, a corporation engaged in construction and civil construction business, included the processing costs of KRW 1,012,250,00 in total in the business year 201, the total amount of KRW 1,652,793,00 in the business year 2011, and the processing costs of KRW 420,000 in the business year 20,000 in each raw material account of the settlement of accounts (hereinafter “processing costs of this case”) in the calculation of losses at the time of reporting each corporate tax. The Plaintiff’s account book appears to have been deposited in cash in each processing cost whenever each processing cost is appropriated, and at the end of the business year, it appears that the outstanding amount of the construction costs, such as bills, were repaid and the total amount of KRW 1,652,793,00 in the account of each raw material account

B. From April 30, 2014 to July 5, 2014, the Defendant conducted a tax investigation with respect to the Plaintiff, and discovered that the Plaintiff included the processing expenses in the deductible expenses, notified the head of Dongjak Tax Office, who is the head of Dongjak Tax Office, of the imposition of corporate tax on the Plaintiff. Meanwhile, the processing expenses of this case were deemed to have been out of the company, and disposed of as bonus for each business year for the Han Chang Chang, a representative director, and issued a notice of change in the amount of income (hereinafter referred to as “instant disposition”). On September 1, 2014, the head of Dongjak Tax Office issued a notice of change in the amount of income (hereinafter referred to as “instant disposition”). On September 1, 2014, on September 1, 2014, the Plaintiff issued a disposition imposing corporate tax of 390,340,840 won (including an unfair underreporting penalty tax, hereinafter the same shall apply), corporate tax of 600,410,940 won, 192.

C. On December 12, 2014, the Plaintiff dissatisfied with the instant disposition and the disposition of imposing corporate tax by the head of Dongjak Tax Office, and filed an objection against the Defendant on December 5, 2014. Accordingly, on February 5, 2015, the Defendant rendered a re-audit decision to the effect that “the Plaintiff’s representative restricts the amount of the construction amount entered and the amount of the construction amount actually deposited, by re-auditing the amount of the construction amount, and whether the amount of the construction amount has been disclosed or reserved in the company” (hereinafter referred to as “instant re-audit decision”). The Defendant rejected the remainder of the disposition.

D. From March 5, 2015 to March 13, 2015, the Defendant conducted a reinvestigation on the Plaintiff, and notified the Plaintiff that the instant disposition was lawful on March 31, 2015.

E. On April 30, 2015, the Plaintiff filed an appeal with the Tax Tribunal on the instant disposition and the imposition of each corporate tax by the head of the Dongjak Tax Office. However, on March 28, 2016, the Tribunal decided to dismiss the instant disposition, and the Tribunal decided to correct the amount of the wrongfully underreported additional tax calculated as additional tax for underreporting.

[Reasons for Recognition] No. 1-3, Gap evidence No. 4, and 5

2. Whether the disposition is lawful;

A. The plaintiff's assertion

For the following reasons, the instant disposition is unlawful.

1) In order to reduce corporate tax, the Plaintiff merely deposited cash in the available cash account in order to meet the lending and borrowing of the cash account in order to reduce corporate tax inevitably, and accounts have been kept as if the available cash account had been settled at the end of the annual settlement of accounts as if the available cash account was half-proof. Therefore, the amount equivalent to the processed expenses of the instant case is not in fact out of the company.

2) The Defendant concluded that the instant disposition was lawful without re-auditing the amount of the outstanding construction cost and the amount of the outstanding construction cost actually deposited, as ordered by the re-audit decision of this case. This contradicts the binding force of the re-audit decision.

B. Determination

1) Where a corporation fails to enter its sales in the account book despite a fact of sales or appropriates the cost of processing in the account book, barring any special circumstance, the corporation’s profit equivalent to the omitted sales or the cost of processing shall be deemed to have been leaked out, and in such case, special circumstances, barring special circumstances, such as the omission of sales or the cost of processing, should be proved by the corporation’s side that asserts the omission of sales (see, e.g., Supreme Court Decision 2003Du1797, Jan. 12, 2006).

It is insufficient to view that the processing expenses of this case were not leaked out of the private company solely with the descriptions of Gap evidence 3 and 5, and there is no other evidence to acknowledge them otherwise. Rather, in full view of the above evidence and the overall purport of the statements and arguments of Eul Nos. 2 through 6 (including virtual numbers), cash was frequently withdrawn from the plaintiff's corporate account during the business year 2010 through 2012 under the name of half of the annual amount of provisional receipts, and the sum of the annual amount of provisional receipts as shown on the president of the plaintiff's account was 5,19,000,000 won (as alleged by the plaintiff, 3,263,000,000 won, 200,000 won, 16,000 won, 205 won, 200,000 won, 205 won, 200,000 won, 206, 2006, 2006, 2006, 2006, 20000.1.

2) Article 80(1) of the Framework Act on National Taxes only prescribes the binding force of the decision following a request for adjudgment, but does not stipulate the binding force of the decision following the request for reexamination. Even if the defendant recognizes the binding force of the decision following the request for reexamination as alleged by the plaintiff and must comply with the purport of the re-audit decision of this case, the purport of the re-audit decision of this case appears to the purport of investigating whether the processed expenses of this case should be actually carried out or not, and the phrase "re-auditing the amount of the actual deposited construction deposits" as ordered by the re-audit decision of this case was recorded as if the plaintiff received payment of the outstanding construction deposits, such as bills, etc. at the end of the year of the settlement of accounts, so it is merely one method of investigating whether the processed expenses of this case were discharged from the company. Furthermore, according to the purport of the statement and the whole argument of the evidence No. 4, according to the purport of the re-audit decision of this case, the defendant will not accept this part of the plaintiff's assertion.

C. Sub-committee

The instant disposition is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.