In a case where a transferor submits a false contract which is different from the fact in filing a return of actual transaction price at the time of transfer and at the time of acquisition, whether it constitutes "a case where a false contract is prepared for the purpose of evading tax burden under Article 166 (4) 2 of the former Enforcement Decree of the Income Tax Act" (negative)

Article 166(4)2 of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 16664 of Dec. 31, 199) stipulates cases where real estate is acquired or transferred by unlawful means, such as the preparation of a false contract, and the false transfer of resident registration, with a view to evading tax burden. Thus, rather than cases where real estate is acquired or transferred, it shall not be deemed as falling under Article 166(4)2 of the Enforcement Decree of the same Act where a transferor submits a false contract as evidentiary documents when he/she reports the actual transaction value at the time of transfer and at the time of transfer at the time of the final return on the tax base of capital gains tax.

Article 96 Subparag. 1 proviso of the former Income Tax Act (amended by Act No. 6051 of Dec. 28, 1999) (see current Article 96(1) proviso), Article 166(4)2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 16664 of Dec. 31, 199), Article 96(2) of the Addenda (see current Article 96(1)5 of the Income Tax Act), Article 8(2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 16664 of Dec. 30, 195)

[Judgment of the court below]

Head of the District Tax Office

Gwangju High Court Decision 98Nu174 delivered on September 4, 1998

The judgment below is reversed, and the case is remanded to the Gwangju High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

Article 166(4) of the Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 16664, Dec. 31, 1999; hereinafter "the Enforcement Decree of the Income Tax Act") amended by the Presidential Decree No. 14860, Dec. 30, 1995 provides that the transfer value and acquisition value shall be based on the actual transaction value as an exception to the principle of taxation on the standard market price. Article 8(2) of the Addenda of the Enforcement Decree of the amended Act provides that the amended provision of Article 166 of the Enforcement Decree shall apply from the date of determining transfer income after this Decree enters into force ( January 1, 1996). Thus, Article 166(4)2 of the Enforcement Decree of the amended Enforcement Decree shall apply to this case in which the defendant decided capital gains after the enforcement date of the amended Enforcement Decree. Meanwhile, Article 166(4)2 of the amended Enforcement Decree shall be one of the actual transaction price at the time of acquisition or transfer of real property by fraudulent or other unlawful methods at the time of transfer.

Nevertheless, the court below did not examine whether the Plaintiff acquired or transferred the instant site by unlawful means such as preparing a false contract, etc. for the purpose of evading tax burden, and without examining whether the Plaintiff submitted a false contract at the time of the final return of capital gains tax on the instant site as a documentary evidence and reported the actual transaction price. The court below determined that the transfer of the instant site is subject to the actual transaction price under Article 170 (4) 2 Item (e) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467 of Dec. 31, 194). Thus, the court below erred in the misapprehension of legal principles as to the application of the actual transaction price, which points this out is with merit.

Therefore, without examining the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Sung-sung (Presiding Justice)