Appellate Court 2014J 391 ( December 15, 2014)

Even if money is paid to the proper purpose business and the proper purpose business, it shall not be included in the calculation of losses if it is not established as proper purpose business reserve funds.

Unless the school establishment procedure is interrupted, land directly used for proper purpose business shall not be deemed land, and even if a non-profit domestic corporation disburses money to the proper purpose business, it shall not be immediately included in deductible expenses unless it sets the money as reserves for proper purpose business.

Article 29 (Inclusion of Reserve Funds for Reserve Funds in Loss

2015Guhap5288 Revocation of Disposition of Corporate Tax Imposition

OOOOO

O Head of tax office

oly 23, 2015

November 06, 2016

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposing corporate tax of KRW 00,000,000 (including additional tax of KRW 00,000,000) for the year 209 against the Plaintiff on April 10, 2014 is revoked.

1. Details of the disposition;

A. The Plaintiff is a school juristic person established for the purpose of establishing and operating the OOO university. The land owned by the Plaintiff as OO-dong O-0 (hereinafter “instant land”) was expropriated in the Republic of Korea. Accordingly, the Plaintiff deposited KRW 00,000,000 from the Republic of Korea for each term deposit with the total amount of KRW 0,000,000,000,000,000 from the Republic of Korea as the total amount of KRW 200,000,000,000, and used only a part of the amount during the pertinent year, and used the remainder in the following year. Meanwhile, the Plaintiff omitted the transfer margin of the instant land when filing a corporate tax return in 208 and 2009.

B. Of KRW 900,674,100, the Defendant’s transfer margin of the instant land, the amount of KRW 00,000,000 (hereinafter “the instant money”) excluding KRW 00,000,000 directly used for the proper purpose in the current year.

On April 10, 2014, the Plaintiff determined and notified the Plaintiff of KRW 000,000 (including additional tax of KRW 000,000,000) of the corporate tax reverted to the year 2009.

C. The Plaintiff appealed and filed an appeal with the Tax Tribunal on June 23, 2014, and the Defendant filed an appeal with the Tax Tribunal.

On July 7 of the same year, the portion of the corporate tax for the year 2009, on which the penalty tax for non-declaration was imposed, shall be underreported.

As an application of penalty tax, 13,659,350 won was reduced by ex officio rectification (hereinafter referred to as "4 April 2014").

10,000,000 won (=00,000,000,000) remaining after ex officio rectification among the disposition imposing corporate tax as above

Won - The disposition of imposition of KRW 00,000,000) is to be taken by the Tax Tribunal, while the Tax Tribunal on December 2, 2014

10. The plaintiff's appeal was dismissed.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 and 2, the purport of the whole pleadings

2. Details of the disposition;

A. The plaintiff's assertion

1) Although the Plaintiff had sufficiently endeavored to use the instant land that was acquired before several hundred years ago as educational facilities, it is deemed that the instant land was used for the proper purpose business because it was no longer used as educational facilities due to force majeure. Therefore, the instant money does not constitute taxable income.

2) The Plaintiff should be recognized as losses since it actually used the instant money for its proper purpose business.

3) Considering the fact that the Plaintiff took the best school establishment procedure to use the instant land as a school site for several years, but was interrupted due to administrative reasons, and that the Plaintiff’s failure to report the transfer margin of the instant land as income was erroneous in interpreting the proper purpose reserve fund, among the instant dispositions, the penalty tax portion among the instant dispositions ought to be revoked as it falls under the case where a taxpayer has justifiable grounds for non-performance of his/her obligations.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination on the first argument

In light of the principle of no taxation without law, or the requirements for tax exemption or tax exemption, the interpretation of tax laws shall be interpreted in accordance with the text of the law, barring any special circumstances, and it shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, the strict interpretation of the provisions that clearly see the preferential provisions among the requirements for reduction or exemption accords with the principle of fair taxation (see Supreme Court Decision 2008Du7830, Oct. 23, 2008). In addition, whether a non-profit corporation falls under a case where “the non-profit corporation directly uses fixed assets for its proper purpose business” under Article 2(2) of the Enforcement Decree of the Corporate Tax Act shall be determined by comprehensively taking into account the purpose of the corporation, the developments leading up to the acquisition of the relevant assets, the purpose of the use thereof, the actual state thereof, the period after the acquisition, and the degree related to the assets and the business of the corporation, and if the purpose of the corporation is wide, it shall be interpreted only where “direct use” is used for the “self-purpose business.”

Article 3(3)5 of the Corporate Tax Act (amended by Act No. 9924, Jan. 1, 2010; hereinafter the same) and Article 2(2) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22035, Feb. 18, 2010; hereinafter the same) provide that income generated from the disposal of fixed assets other than those directly used for the proper purpose business prescribed by statutes or the articles of incorporation for at least three consecutive years as of the date of disposal of the fixed assets concerned shall be taxable income of corporate tax. According to the above provisions, income generated from the disposal of fixed assets used directly for the proper purpose business for at least three consecutive years shall not be taxable income of corporate tax. In light of the above legal principles, the interpretation of the non-taxable proper purpose business

It is reasonable to strictly interpret the principle of strict interpretation. On the other hand, the Plaintiff, as a school juristic person, has gone through the school establishment procedure to use the instant land as a school site, but such procedure has been interrupted, it cannot be deemed that the instant land was used for a proper purpose business, and Article 3(3)5 of the Corporate Tax Act and Article 2(2) of the Enforcement Decree of the Corporate Tax Act provide that a nonprofit domestic corporation imposes corporate tax on revenues arising from the disposal of fixed assets which have not been used directly for a proper purpose business for three or more years as of the date of disposal of fixed assets, and there is no provision different depending on whether there is justifiable reason for not using the instant land directly for a proper purpose business

There is no need to consider whether this case’s money constitutes taxable income, and this case’s money constitutes the Plaintiff’s non-taxable income.

Sectoral argument is without merit.

2) Determination on the second argument

Article 29 (1) of the Corporate Tax Act provides that where a non-profit domestic corporation appropriates reserve funds for proper purpose business for proper purpose business to be used for the proper purpose business of the corporation in the fiscal year in which income accrues, such reserve funds for proper purpose business shall be included in the deductible expenses within a certain amount. Article 29 (2) of the same Act provides that where a non-profit domestic corporation appropriates reserve funds for proper purpose business for proper purpose business which is appropriated as deductible expenses for proper purpose business, such funds shall be offset in sequence from the reserve funds for proper purpose business of the fiscal year in which the funds are first appropriated. In such cases, where any funds are disbursed for proper purpose business of the fiscal year in excess of the balance of the reserve funds for proper purpose business as of the end of the fiscal year immediately preceding the fiscal year, such funds shall be deemed disbursed from the reserve funds for proper purpose business to be appropriated for proper purpose business in the fiscal year concerned, and the provisions of paragraph (1) shall apply to such funds. In light of the above provisions, where a non-profit domestic corporation establishes reserve funds for proper purpose business for proper purpose business as deductible expenses in the fiscal year concerned, such funds shall not be included as deductible expenses.

In this case, there is no evidence to prove that the plaintiff set the reserve fund for proper purpose business as well as the reserve fund for proper purpose business even after the receipt.

It can not immediately include money in deductible expenses. Accordingly, it is not possible to do so on a different premise.

The plaintiff's assertion on this part is without merit.

3) Judgment on the third argument

Under the tax law, where a taxpayer violates various obligations, such as reporting and tax payment, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, a taxpayer’s intention or negligence is not considered, but does not constitute justifiable grounds that do not cause the taxpayer’s breach of duty (see Supreme Court Decision 2012Du7370, Mar. 13, 2014).

In light of the above circumstances, the Plaintiff’s assertion on this part cannot be viewed as a case where there is a justifiable reason for a taxpayer to refuse to perform his/her duty.

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.