Whether the opening of access roads to golf courses is capital expenditure for land or goodwill;

Generally, the construction of access roads falls under the capital expenditure for land, except in extenuating circumstances, and the required expenses are disbursed in connection with the license of a specific project or the commencement of a project, etc. does not vary.

Article 9 (Income of Each Business Year of former Corporate Tax Act)

Article 16 (Non-deductible Expenses of the former Corporate Tax Act)

1. The plaintiff's appeal is dismissed.

2. The plaintiff shall bear the total costs of the lawsuit after the appeal.

The decision of the court of first instance shall be revoked. The defendant's disposition of imposition of KRW 37,653,420 for the business year of 1999 for the corporation tax against the plaintiff on May 1, 2003 and KRW 1,199,059,380 for the business year of 200, and KRW 1,882,201,980 for the business year of 201 shall be revoked.

1. Details of the disposition;

A. On September 28, 1989, the Plaintiff is a legal entity that operates the ○○ consortium (hereinafter referred to as “instant golf course”) which is a membership golf course located in ○○○, Gwangju-si, Gwangju-si, and obtained approval for the business plan from the Governor of the Gyeonggi-do on November 11, 1991 on the condition that “the Plaintiff shall construct the access road of the instant golf course and obtain a completion inspection under the Private Road Act” as a condition for approval.

B. On July 2, 1992, the Plaintiff obtained permission from the head of Gwangju-si to build a private road with a total length of 3,56 km and a width of 8m on the ground of 29,48m2, such as ○○○○○○-2, etc. in Gwangju-si, which is a site for the access road of this case, from the head of Gwangju-si. The said permission was accompanied by the condition that “the construction should be divided at the same time as the construction should be completed and the land category should be changed to a road, and the land category should be transferred to Gwangju-si before submitting the completion report, and the Plaintiff shall manage the road in accordance with the provisions of the Private Road Act, and if the Plaintiff intends to restrict the passage

C. After that, from July 1, 1993 to February 14, 1997, the Plaintiff opened the access road of this case by inserting a total of KRW 8,317,141,072 (hereinafter “the amount of this case”) with expenses for purchase of the access road of this case and expenses for road construction and other incidental expenses. From November 14, 1996 to June 30, 1997, the Plaintiff reverted the ownership of the above access road of this case to Gwangju-si.

D. The Plaintiff appropriated the instant amount as the amount of business right, which is intangible fixed assets, and filed a return on the tax base and amount of tax for each business year by dividing the instant amount into five years from the business year 1997 to the business year 2001. The Defendant, based on the result of the tax investigation conducted by the director of the Central Regional Tax Office, made a disposition of this case imposing corporate tax as stated in the purport of the claim on May 1, 2003, on the ground that the instant amount constitutes capital expenditures on the remaining land, which is the site of the instant golf course.

E. On June 10, 2003, the Plaintiff filed a request for a national tax trial with the National Tax Tribunal on each of the dispositions of this case, and the National Tax Tribunal dismissed the Plaintiff’s request on December 11, 2003.

[Ground of Recognition] A1-1, 2, 3, A2 through 4, A5-1 through 6, A6-8, A9-1, 2, 3, A1, A1, 12, B1, 2, 3, and a witness testimony

2. Determination on the legitimacy of each of the dispositions of this case

A. The plaintiff's assertion

(1) The amount of this case is paid under the business approval conditions of the golf course in this case, and is "the donation, etc. borne in connection with the license of specific business, commencement of business, etc." under Article 12 (1) 2 of the former Enforcement Rule of the Corporate Tax Act (wholly amended by Ordinance of the Ministry of Finance and Economy No. 86 of May 24, 1999). Thus, Article 23 (2) of the former Corporate Tax Act (wholly amended by Act No. 5581 of December 28, 1998), Article 24 (1) 2 (a) of the former Enforcement Decree of the Corporate Tax Act (wholly amended by Presidential Decree No. 15970 of December 31, 1998) shall be included in deductible expenses as it falls under the business license, which is depreciable assets, and the value of land, which is the site of this case, has increased due to the disbursement of the amount of this case, and thus the capital expenditure for the land

(2) If the instant amount invested to open access roads to the instant golf course is not an operating right, it shall be deemed that it constitutes a “profit-making donated asset” under Article 73 subparag. 4 of the former Enforcement Decree of the Corporate Tax Act, and since the profit-making donated asset may be included in deductible expenses pursuant to Article 77 of the former Enforcement Decree of the Corporate Tax Act, there is no difference between the amount of the instant case and the inclusion in deductible expenses by

(3) Therefore, each of the instant dispositions that imposed corporate tax on the Plaintiff on the ground that the instant amount constitutes capital expenditures on the remaining land which is the site of the golf course is unlawful.

(b) Related statutes;

Article 9 (Income of Each Business Year of former Corporate Tax Act)

Article 16 (Non-deductible Expenses of the former Corporate Tax Act)

Article 17 (Timing for Reversion of Profits and Losses and Calculation of Acquisition Value of Corporate Tax Act)

Article 18 (Non-Inclusion of Donations in Calculation of Losses)

Article 12 (Definition of Profits and Losses)

Article 38 (Evaluation of Deferred Assets)

Article 48 (Scope of Depreciation Amount)

Article 49 (Durable Years and Depreciation Ratio)

Article 16 (Calculation of Losses of Assets Donated for Use and Profit-Making Contributions)

Article 27 (Durable Years and Depreciation Ratio, etc.)

The plaintiff's assertion is premised on the fact that the law applicable to this case was amended by Act No. 5581 of Dec. 28, 1998, the Corporate Tax Act, its Enforcement Decree, and its Enforcement Rule. However, all of the opening and donation of access roads to this case was made before July 1997. The issue of this case is that the plaintiff appropriated the amount of this case as a goodwill in the 1997 business year. Thus, the law applicable to this case is the same as the relevant law of the Corporate Tax Act, which was enforced at the time of the 1997 business year (hereinafter referred to as the "former Corporate Tax Act, the former Enforcement Decree, and the former Enforcement Rule").

C. Determination

(1) Whether the instant amount constitutes capital expenditures on land

Capital expenditure for land refers to the cost required to increase the real value of the land (see, e.g., Supreme Court Decision 98Du15290, Nov. 12, 1999); and ordinary access roads contribute to the increase of the utility value of the land which is offered convenience through the access road, barring any special circumstance. Therefore, in a case where an access road is opened to the land and provided free of charge to the State or a local government for the convenience of land utilization, the value of the land as reported and the cost of road construction are actually used to increase the value of the land, and the cost of construction is deemed capital expenditure for the land in question, and the cost of construction is not different from that of the specific project license or the commencement of the project.

According to the facts acknowledged above, the plaintiff, a golf course operator, obtained the approval of the business plan on September 28, 1989 and the approval of the completion of construction under the Private Road Act on November 11, 1991 from the Governor of the Gyeonggi-do on the condition that "the plaintiff, a golf course operator, constructed access roads to the golf course of this case and undergo a completion inspection under the Private Road Act". On July 2, 1992, the permission for the construction of private roads to the golf course of this case was granted on the condition that the land category after opening the golf course of this case should be changed from the head of Gwangju Gun to a road and reverted to Gwangju Gun free of charge after opening the private road, and then the ownership of the access road site was reverted to Gwangju Gun without compensation. In light of the above legal principles, it is reasonable to view the cost of purchasing the access road of this case and the cost of constructing roads as expenses incurred in the actual increase of the value of the land for the golf course of this case as capital expenditures on the site of this case.

Therefore, this part of the plaintiff's assertion is without merit.

(2) Whether the instant amount is a donated asset that can be included in deductible expenses

Although the plaintiff asserts that the amount of this case constitutes a donation that can be included in deductible expenses as a donation property for use. However, since the donation that can be included in deductible expenses of a corporation under Article 18 (1) and (2) of the former Corporate Tax Act refers to the value of the donation of the property that is gratuitously disbursed to another person, regardless of its business, if it is directly related to the business of the corporation, it shall not be included in deductible expenses (see Supreme Court Decision 87Nu108, Jul. 21, 1987). Thus, as long as it cannot be deemed that the amount of this case was gratuitously disbursed regardless of the plaintiff's golf course, it cannot be viewed as a donation that can be included in deductible expenses, as long as it is obvious in light of the above facts.

Therefore, the plaintiff's assertion on this part is without merit.

3. Conclusion

Therefore, the plaintiff's claim is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed and it is so decided as per Disposition.