[1] Whether Article 140(2)1 of the former Enforcement Decree of the Corporate Tax Act shall apply to the calculation of acquisition value for calculating the tax base of special surtax where the land acquired before the enforcement of the former Enforcement Decree of the Corporate Tax Act is transferred after its enforcement (affirmative)

[2] In calculating the tax base of special surtax, whether the acquisition value calculated pursuant to Article 140(2)1 of the former Enforcement Decree of the Corporate Tax Act includes the interest on the loan appropriated for the construction fund of inventory assets (affirmative)

[1] The special surtax is a transfer act as a taxation requirement and is subject to transfer margin. Whether it falls under the taxation requirements and tax exemption requirements should be determined on the basis of the transfer time. The proviso of Article 2 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17033 of Dec. 29, 200) also provides that the amended provisions of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1703 of Dec. 29, 200) shall apply from the first transfer after the enforcement of the Enforcement Decree of the Corporate Tax Act. Article 8(3) of the former Enforcement Decree of the Corporate Tax Act provides that the individual application period of the amended provisions of Article 72 of the former Enforcement Decree of the Corporate Tax Act concerning the calculation of acquisition value of the special surtax, and Article 140(2)1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17033 of Dec. 29, 200) shall apply mutatis mutandis to the calculation of the acquisition value of the special surtax.

[2] Article 59-2(3) of the former Enforcement Decree of the Corporate Tax Act (wholly amended by Act No. 5581, Dec. 28, 1998; hereinafter “former Enforcement Decree”) and Article 99(3) of the former Corporate Tax Act (amended by Act No. 6293, Dec. 29, 200; hereinafter “former Act”) do not define the acquisition value to be deducted from the transfer value, or do not delegate the same acquisition value to the Presidential Decree. Thus, the former Enforcement Decree of the Corporate Tax Act (wholly amended by Presidential Decree No. 15970, Dec. 31, 1998; hereinafter “former Enforcement Decree”) provides that “the provisions of Article 124-2(2) of the former Enforcement Decree of the Corporate Tax Act concerning the amount of money borrowed using the same amount of money borrowed from the construction to the same amount of money borrowed from the construction to the acquisition value of fixed assets after deducting the same amount of money borrowed from the new Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14065, Dec. 29, 200).

[1] Article 59-2(3) of the former Corporate Tax Act (wholly amended by Act No. 5581, Dec. 28, 1998; see current Article 55-2); Article 99(3) of the former Corporate Tax Act (amended by Act No. 6293, Dec. 29, 200; see current Article 55-2); Article 124-2(2) of the former Enforcement Decree of Corporate Tax Act (wholly amended by Presidential Decree No. 15970, Dec. 31, 1998; see current Article 92-2); Article 72, Article 140(2)1 of the former Enforcement Decree of Corporate Tax Act (wholly amended by Presidential Decree No. 1703, Dec. 29, 200; see current Article 92-2); Article 99(3) of the former Corporate Tax Act (wholly amended by Act No. 2597, Dec. 29, 1998>

[1] Supreme Court Decision 94Nu6871 delivered on March 24, 1995 (Gong1995Sang, 1770) / [2] Supreme Court en banc Decision 82Nu221 delivered on November 23, 1982 (Gong1983, 223) Supreme Court Decision 86Nu787 delivered on November 14, 1989 (Gong1990, 47) Supreme Court Decision 90Nu3607 delivered on November 27, 1990 (Gong191, 258)

Plaintiff (Law Firm White General Law Office, Attorneys Kim Young-young et al., Counsel for the plaintiff-appellant)

Head of the Jeonju Tax Office

Gwangju High Court Decision 2007Nu615 decided Nov. 30, 2007

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

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

Article 59-2 of the former Corporate Tax Act (wholly amended by Act No. 5581, Dec. 28, 1998; hereinafter “former Enforcement Decree”) and Article 99 of the former Corporate Tax Act (wholly amended by Act No. 5581, Dec. 28, 1998; hereinafter “former Corporate Tax Act”) stipulate that all gains from transfer arising from the transfer of land, etc. (paragraph (1) and the amount calculated by deducting acquisition value and transfer cost from the transfer value of such land, etc. (paragraph (3)). Article 24-2(2) of the former Enforcement Decree of the Corporate Tax Act (wholly amended by Presidential Decree No. 15970, Dec. 31, 1998; hereinafter “former Enforcement Decree”) provides for a total of the acquisition value of land, etc. subject to subparagraph 3 of Article 19-1 of the former Enforcement Decree of the Corporate Tax Act (wholly amended by Act No. 15970, Dec. 29, 1998).

Meanwhile, Article 1 of the Addenda to the Enforcement Decree after the amendment (hereinafter “Supplementary Rule”) provides that “this Decree shall enter into force on January 1, 199, and the amended provisions of Article 72 shall enter into force on the date of its promulgation,” and the proviso of Article 2 provides that “the amended provisions concerning special surtax shall apply to general application cases from the first transfer after this Decree enters into force,” and Article 8(3) provides that “the amended provisions of Article 72 shall apply to individual application cases concerning the business year of accrual of profit and loss from the first acquisition after this Decree enters into force.”

Article 140 (2) 1 of the Enforcement Decree of the Special Surtax provides that the transfer act shall be subject to taxation and transfer margin shall be determined on the basis of the transfer time (see Supreme Court Decision 94Nu6871 delivered on March 24, 1995, etc.). Article 2 of the Addenda provides that the amended provision on special surtax shall apply to the first transfer after the enforcement of the Enforcement Decree after the amendment. Article 8 (3) of the Addenda provides that individual application time of the amended provision on the calculation of acquisition value in corporate tax, and Article 72 of the Enforcement Decree of the Special Surtax is not a provision on special surtax which forms a separate taxable unit from corporate tax, and Article 140 (2) 1 of the Enforcement Decree of the Special Surtax provides that Article 72 of the Enforcement Decree shall apply mutatis mutandis to the calculation of acquisition value of the special surtax even if the land was acquired before the enforcement of the Enforcement Decree after the amendment.

The court below, as stated in its reasoning, acknowledged that the plaintiff for the purpose of housing construction business from around 1994 to June 27, 1998 acquired the land in this case as inventory assets and sold total of KRW 28,274,972,370 to Korea Land Corporation on March 7, 200, and thereafter, the plaintiff did not err in the misapprehension of the legal principle and the record as to the acquisition value of special surtax calculated by deducting KRW 4,925,09,025 (hereinafter "construction interest of this case") from the acquisition value and the interest on loans used to acquire the land in this case from the above transfer value, as long as the plaintiff acquired the land in this case before the enforcement of the Enforcement Decree after the amendment, it did not err in the misapprehension of legal principle and the application of Article 14(2)1 of the Addenda to the Enforcement Decree.

2. Regarding ground of appeal No. 2

After the amendment, Article 140(2)1 of the Enforcement Decree provides that “The acquisition value calculated by applying mutatis mutandis the provisions of Article 72(1) through (3) and (4)2 shall be one of the amounts included in the acquisition value of fixed business assets” as one of the amounts included in the acquisition value of Article 9(3) of the Act. Article 72(2)2 provides that “interest on loans appropriated for construction funds under Article 52 shall be included in the acquisition value” and Article 52(1) provides that “the interest on loans appropriated for construction funds shall be included in the acquisition value.” In short, Article 52(1) provides that “the interest on loans appropriated for construction funds shall be the interest on loans borrowed for the construction of fixed business assets or other similar expenses

As seen earlier, Article 9(3) of the Act does not define, or delegate, the acquisition value to be deducted from the transfer value to the Presidential Decree. As such, Article 124-2(2) of the Enforcement Decree of the Act and Article 140(2) of the Enforcement Decree after the amendment, which defines the above acquisition value, can be construed as an interpretation provision. It violates the principle of no taxation without law to stipulate matters concerning tax requirements, etc. by administrative legislation such as order or rule without statutory delegation, or to provide an interpretation provision that expands and expands the contents of the Act without permission (see, e.g., Supreme Court en banc Decision 82Nu21, Nov. 23, 1982). Meanwhile, Article 124-2(2) of the former Enforcement Decree of the Act, which provides for the amount of funds for business use as one of the acquisition value of the funds for business use as stipulated in Article 124-2(3) of the former Enforcement Decree before and after the amendment, separately from the acquisition value of the funds for business use as stipulated in the foregoing Act.

Nevertheless, the court below held that the Defendant’s disposition of this case, which did not include the interest of the instant construction fund in the acquisition value in calculating the special surtax tax base without examining and determining whether the interest of the instant construction fund was interest on the loan used to purchase the instant land solely on the ground that the instant land is a inventory asset, was lawful. Such judgment below erred by misapprehending the legal principles on the interpretation and application of Article 140(2)1 of the Enforcement Decree after amendment, thereby failing to exhaust all necessary deliberations and determination, which affected the conclusion of the judgment. The Plaintiff’s ground of appeal assigning this error is with merit

3. Conclusion

Therefore, without further proceeding to decide on 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 Young-chul (Presiding Justice)