Gyeongnam Enterprise Co., Ltd. (Law Firm Cho & Lee, Attorneys Kim Sang-hee, Counsel for the plaintiff-appellant)

The Director of the National Tax Service

May 2, 2013

Daejeon District Court Decision 2012Guhap1442 Decided November 21, 2012

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance court is revoked. The defendant revoked each disposition of imposition of KRW 1,422,806,110 for the business year 2007 against the plaintiff on July 25, 201, and KRW 513,621,720 for the business year 2008 (the purport of the plaintiff's complaint and the appeal stated in the petition of appeal is to seek the revocation of the disposition of imposition as of August 2, 201, but this seems to be a clerical error in the disposition of imposition as of July 25, 201).

1. Details of the disposition;

The reasoning for this Court’s explanation is as follows: Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act, i.e., Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act, except where “ August 2, 201” is deemed to be “ July 25, 201.”

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

Under Article 47-3(2) of the former Framework Act on National Taxes, the term “unfair method” stipulated as the requirement for an unfair underreported penalty tax under Article 47-3(2) refers to a deceptive scheme or other affirmative act that makes it impossible or considerably difficult to impose and collect taxes by means of tax evasion, and it does not constitute a mere failure to file a tax return under the tax law or a tax return by underreporting the tax base without accompanying such act.

However, in paying corporate tax for the business year 2007 or 2008, the Plaintiff did not engage in active activities, such as manipulating the rate of work progress, and only reported an excessive appropriation of the amount of income for the business year 2000 or 2002 business year, depending on the circumstance where the total amount of income is fixed. The Plaintiff is merely the deduction of the amount included in the gross income from the “amount of income for the immediately preceding business year” under Article 34(3) of the Enforcement Rule of the Corporate Tax Act, which provides that the “amount of income included in the gross income until the end of the immediately preceding business year” shall be deducted from the “amount of income for the pertinent business year.” Therefore

Even if the Plaintiff under-reported the amount of revenue by manipulating the rate of work progress in the business year 2007 or 2008, it cannot be deemed that the Plaintiff simply prepared a balance sheet and profit and loss statement without manipulating construction contract or profit and loss related documents and under-reported corporate tax accordingly, it cannot be deemed that the Plaintiff under-reported corporate tax as “unfair method” under Article 47-3(2) of the former Framework Act on National Taxes.

Therefore, the instant disposition should be revoked as it is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) The meaning of an unfair under-reported penalty tax

According to Articles 47-2(2) and 47-3(2)1 of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter the same), where there exists a underreported tax base by unlawful means (referring to a taxpayer’s breach of the duty to report the tax base or amount of national tax, as prescribed by Presidential Decree, on the basis that the taxpayer conceals or disguises all or part of the fact that serves as the basis for calculating the tax base or amount of national tax) the amount equivalent to the underreported tax base by unlawful means is to either add an amount equivalent to 40/100 of the amount calculated by multiplying the calculated tax amount by the ratio of the amount equivalent to the underreported tax base to the tax base by unlawful means to the payable tax amount or

In addition, Article 27(2) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 22038, Feb. 18, 2010; hereinafter the same) provides for “the method prescribed by Presidential Decree” as “the preparation of double books, etc.; preparation of false evidence or false documents (Article 1); receipt of false evidence (Article 2); destruction of books and records (Article 3); concealment of property; subparagraph 4; fabrication or concealment of income, profit, act, transaction (Article 5); and fraud or other unlawful act (Article 6) to evade, refund, or deduct national taxes.

(2) Whether the Plaintiff underreported the tax base by improper means

(4) In light of the aforementioned facts, it is difficult to deem that the Plaintiff filed a false report on the tax base of earnings for 200 to 202 business years because it did not reduce or omit the total construction cost for 200 to 208 and that even if it did not return the tax base for 203 to 208 business years, it cannot be deemed that the Plaintiff did not return the tax base for 203 to 208 business years. 203 to 208 business years, even if the Plaintiff did not manipulate the construction progress rate for 203 to 208 business years, the Plaintiff should deduct the “amount included in the calculation of earnings for 200 to the end of the immediately preceding business year” from the “amount included in the calculation of earnings for 200 to 200 business years” under Article 34(3) of the former Enforcement Decree of the Corporate Tax Act, and the Plaintiff may not have any choice but to estimate the revenue for 200 to 200 business years from the date of calculating the tax base of revenue for 20 to 200 years or more business years.

(3) Sub-determination

Therefore, the disposition of this case against which the defendant imposed an unfair under-reported penalty tax pursuant to Article 47-3 (2) 1 of the former Framework Act on National Taxes is legitimate, and the plaintiff's assertion that caused the violation of the disposition of this case is without merit.

3. Conclusion

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

[Attachment Form 5]

Judges Lee Jin-hun (Presiding Judge)