Cho-2016-China-941 ( December 28, 2016)

The time when the land was demolished prior to sale in deductible expenses;

The contract of this case is a consignment sales contract, and the date of sale of land to a purchaser who is not the date of delivery of land and a building on ground shall be deemed the date of accrual of earnings. Since the previous removal of a building on ground cannot be deemed to have been made together with the sale of land, it shall be deemed the time of removal of

Article 40 of the Corporate Tax Act

2017Guhap62298 Revocation of Disposition of Corporate Tax Imposition

AAtech Co., Ltd.

BB Director of the Tax Office

September 26, 2017

November 14, 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 disposition of imposition of KRW 50,475,380 of corporate tax for the business year 201, and KRW 594,814,730 of corporate tax for the business year 2012 against the Plaintiff on April 8, 2015 is revoked.

1. Details of the disposition;

A. On July 10, 2007, the Plaintiff entered into a sales consignment agreement (hereinafter referred to as the “instant agreement”) on the Plaintiff’s ownership ***Gu**** Dong 3*** Dong 9,959 square meters of land for factory (hereinafter referred to as “market land”) and its ground buildings (hereinafter referred to as “market building”). The main contents of the instant agreement are as follows.

B. Around the date of entering into the instant contract, the Plaintiff contracted the construction of a new factory to the IntegratedCC Construction for the relocation of the existing factory.

C. Under the instant contract, the integratedCC construction paid 3 billion won out of the entrusted performance bond of 4 billion won to the Plaintiff on the date of the contract, September 20, 2007, and November 30, 2007, each of the KRW 1 billion on the date of the contract, and carried out the removal work of the main building used as the existing factory.

D. On July 11, 2008, the GeneralCC Construction completed the construction of a new factory supplied by the Plaintiff, and the Plaintiff moved to a new factory on July 31, 2008, and removed the key building on December 17, 2008, and completed the registration of destruction on February 12, 2010.

E. On January 6, 2009, the key land was divided into six parcels of land (hereinafter referred to as "each parcel of land after division," and each parcel of land is specified only once) as shown in annexed Table 1.

F. The Plaintiff entered into a sales contract with DDR, KimE, New FF, SongG, Park H, Inc., Ltd. (hereinafter “DDR, etc.”) with respect to each parcel of land after division as listed below, and completed the registration of ownership transfer with respect to each parcel of land after division into DDR, etc.

G. The ○○ regional tax office conducted a tax investigation on the Plaintiff. Although the removal of the building at issue was conducted in the business year of 2008, the Plaintiff appropriated the depreciation costs of KRW 76,018,299 as deductible expenses at the time of filing a corporate tax return for the business year of 2010; and confirmed that the book value of the building at issue was appropriated as deductible expenses at the time of filing a corporate tax return for the business year of 2011; and notified the Defendant of the taxation data. The Defendant reflected this on April 8, 2015, and notified the Plaintiff of the assessment data (including additional taxes) of the corporate tax of KRW 50,475,380 for the business year of 2011; KRW 645,290,110 for the corporate tax of KRW 594,814,730 for the business year of 2012 (including additional taxes) (hereinafter “instant disposition”).

H. The Plaintiff filed an objection on June 30, 2015, but was dismissed. On December 18, 2015, the Plaintiff filed an appeal with the Tax Tribunal, but was dismissed on December 28, 2016.

[Reasons for Recognition] The facts without dispute, Gap evidence 1 to 12, Eul evidence 1 to 8 (including each number), the purport of the whole pleadings

2. The plaintiff's assertion

A. The instant contract aims to purchase the pertinent land and key building on its own account, not for the Plaintiff’s calculation, and sell a divided land to a third party after the removal of the building and the division of the land. If it is commissioned, there is no remuneration agreement with the mandatory who is naturally required to do so. Therefore, notwithstanding the form and name of the contract, the actual sales contract is a sales contract. Therefore, it is reasonable to deem that the Plaintiff, according to the instant contract, had a tangible asset disposal profit from the transfer of the pertinent land and key building in the 2008 business year from July 31, 2008, to which the date when the Plaintiff delivered the pertinent land and key building belongs, and a decrease in assets due to the removal of the key building, and thus, the instant disposition based on the different premise

B. Even if a sales contract for the instant contract is deemed as a sales contract for consignment, so long as the key land and the key building are sold in a lump sum, a disposal loss of the key building should be included in deductible expenses for the business year of 2011 or 2012 where the disposal profit of the key land was generated, but the instant disposition that was not included in deductible expenses for the business year of 2011 or 2012 is unlawful.

3. Relevant statutes;

Attached Table 2 shall be as stated in the relevant statutes.

4. Determination on the legitimacy of the instant disposition

A. Article 40(1) of the Corporate Tax Act provides that the business year of accrual of earnings and losses of a domestic corporation for each business year shall be the business year which includes the date on which the concerned earnings and losses are settled, and Article 40(2) provides that matters necessary for the scope of the business year of accrual of earnings and losses under paragraph (1) shall be prescribed by Presidential Decree, and Article 68(1)3 of the Enforcement Decree of the Corporate Tax Act provides that where assets, other than commodities, etc., are transferred by transfer of ownership (including the registration date), transfer of the relevant assets, transfer of the relevant assets, or use and profit-making of the relevant assets prior to the settlement of the price, the business year which includes "the earlier of the registration date (including the registration date), delivery date, or use and profit-making date (including the registration date), whichever comes earlier, shall be the business year of accrual of earnings and losses, and subparagraph 4 shall be the business year of accrual of earnings and losses,

B. First, on the premise that the instant contract is a sales contract, the Plaintiff’s assertion that the 2008 business year to which July 31, 2008 belongs should be deemed as the business year of accrual of gross income and deductible expenses, on the premise that the instant contract is a sales contract.

In addition to the above evidence, the following circumstances, which are acknowledged by adding the purport of the entire pleadings, include ① the title of the contract is called “the certificate of a contract to entrust the sale of a factory.” Article 1 of the contract of this case provides that the plaintiff shall grant the right of representation to the CC General Construction. ② The contract of this case does not include the agreement on the registration of transfer of ownership to each land after the transfer of ownership or division of the land at issue. ③ In full view of each provision of the contract of this case and the profit analysis table (No. 10-3) submitted to the plaintiff by the CC General Construction Co., Ltd., the contract of this case is interpreted as having the difference when the construction of a new factory due to the transfer of the plaintiff's factory and the new construction of a new site factory after division, and the construction of a new site after the division is above the price stipulated in the contract of this case, ④ The contract of this case is reasonable to conclude that the contract of this case is a sale contract of this case on behalf of the plaintiff General Construction Co., Ltd.

C. Next, we examine the assertion that the disposal loss of the building at issue should be included in deductible expenses for the business year of 2011 or 2012 where the disposal profit of the land at issue was incurred.

The contract of this case is a consignment sales contract, and the contract of this case is the main contents of the division and sale of the land at issue after the removal of the building at issue, and each land was sold from around 201 to 2012 to Dtetetetetetetetetetetetetetetetete, etc. as seen earlier. According to this, it is difficult to view the building at issue and the land at issue as a blanket sale, and there is no other evidence to acknowledge it. Therefore, it is reasonable to include the cost of removal and the book value as deductible expenses for 2008 business year to which the date of destruction belongs. Thus, the disposition at issue is legitimate, and the plaintiff's assertion on this part is without merit.

5. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.