Whether the proceeds from the sale of casino business rights was deposited into the account of the corporate shareholder, and can be seen as a dividend.

The original disposition of the defendant on the premise that the money deposited into the passbook in the name of the corporation in which the plaintiff is involved is shown to be the account used and managed by the nominal corporation, and that the money deposited into the account of the plaintiff is reverted to the plaintiff.

Article 67 of the Corporate Tax Act

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

We examine the grounds of appeal in comparison with the records and the judgment of the court below. Since it is clear that the grounds of appeal by the appellant fall under Article 4 of the Act on Special Cases Concerning the Procedure for Appeal, it is dismissed under Article 5 of the same Act. It is so decided as per Disposition by the assent

[Seoul High Court Decision 2007Nu6894 ( October 17, 2007)]

1. The defendant's appeal is dismissed.

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

1. Purport of claim

The Defendant’s disposition of imposition of global income tax of KRW 59,031,160 on May 2, 2004 against the Plaintiff shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Quotation of judgment of the first instance;

The reasons why a member of the company should explain this case are as follows: 4-6 of the judgment of the court of first instance; 2-6 of the judgment of the court of first instance; 3.0 billion won was transferred to ○○○○○○○○○ (hereinafter referred to as “○○○○○○”) on March 30, 2001; 4-5 of the judgment of the court of first instance; 3.0 billion won was transferred to ○○○○○○○○ (hereinafter referred to as “○○○○○”); 6.0 billion won was the “○○○○○○○ business right”; 7.4-5 of the judgment, “the debtor of ○○○○○○○○○○”) was the “the creditors of ○○○○○○○○○○○○○○; 8-2 of the judgment of the court of first instance changed the “each corresponding date” from 9-5 of the judgment of the court of first instance to 9-201 of the Civil Procedure Act, and 9-31-2 of the judgment”.

2. Conclusion

Therefore, the judgment of the court of first instance is legitimate, and the defendant's appeal is dismissed. It is so decided as per Disposition.

[Seoul Administrative Court 2005Guhap3357, 2007.08]

1. The Defendant’s imposition of global income tax of KRW 59,031,160 against the Plaintiff on May 2, 2004 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On March 30, 2001, the Plaintiff (hereinafter referred to as “○○ Tourist”) transferred ○○ Casino Business (hereinafter referred to as “○○ Tourist”) to 3 billion won on March 30, 2001.

B. As a result of investigating the use place of the proceeds from the sale of the casino business in ○ Tourism, the head of ○○ Tax Office confirmed that ○ Tourism transferred KRW 250 million to ○○ Industry Co., Ltd. (hereinafter “○○ Industry”) upon the Plaintiff’s request, and notified the Defendant of the taxation data on dividend income by regarding 200 million out of the above amount as the dividend income to the Plaintiff of ○ Tourism.

C. On May 2, 2004, the Defendant imposed and notified the Plaintiff the global income tax of KRW 59,031,160, which reverts to the year 2001 (hereinafter “instant disposition”).

D. The plaintiff, who is dissatisfied with the disposition of this case, filed a request for examination with the Commissioner of the National Tax Service on November 25, 2004 on June 14, 2004, but was notified by the Commissioner of the National Tax Service of his decision to dismiss the request for examination on August 30, 2005.

[Reasons for Recognition] Facts without dispute, Gap 13, 14, Eul 1 and 10, and the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

(1) Despite the fact that ○○ Industry was repaid out of ○ Tourism a total of KRW 5666 million loans to ○○ Tourism, the instant disposition that deemed that ○○ Industry was reverted to the Plaintiff and constitutes dividend income for the Plaintiff was unlawful.

(2) Even if the instant source of the instant issue is not a collection of loan, since the ○ Industry held a title trust to the Plaintiff, the actual owner of the said shares is the ○○ Industry. Therefore, the instant disposition imposed on the Plaintiff, who is merely the nominal owner of the said shares, in light of the substance over form principle, as dividend income on the ○ Industry, which is the actual owner of the said shares under the substance over form principle, is unlawful.

(3) (i) The amount remitted to the Plaintiff from a deposit account (Account Number: ○○-○○-○-○-○○-○○, hereinafter referred to as “instant account”) in the name of the ○○ industry, in which ○○○○ Tourism remitted the instant key money to the ○○ industry, is KRW 86 million, but this amount was collected in part of KRW 145 million loaned by the Plaintiff to the ○ industry, and thus, it cannot be deemed that the said amount was reverted to the Plaintiff’s income.

ii) In addition, since October 27, 2001, ○ Tourism first paid the instant key money to ○○ Industry, the amount transferred from the instant account to the Plaintiff was KRW 74 million in total, and there was no proof that KRW 131 million, excluding the said key money and KRW 74 million, was reverted to the Plaintiff.

Nevertheless, the disposition of this case, which was made on the premise that the principal source of this case belonged to the Plaintiff, is unlawful against the principle of burden of proof.

(4) Even if the plaintiff is deemed as the actual shareholder of ○○ Tourism, a total of KRW 1.5 million out of the key money of this case was transferred to the account of this case in 2001, and the remaining KRW 55 million was transferred to the account of this case in 2002, and thus, the above KRW 1.5 million shall be reverted to the plaintiff in 2001, and KRW 55 million shall be deemed as reverted to the plaintiff in 2002. However, the disposition of this case, without the division of the year in which it was reverted, shall be deemed as reverted to the plaintiff in 2001.

(b) Related statutes;

○ Dividend income under Article 17 of the Income Tax Act

(1) Dividend income shall be the following incomes generated in the relevant year:

4. The amount treated as dividend under the Corporate Tax Act;

Article 67 of the Corporate Tax Act

In filing a report on the tax base of corporate tax on the income for each business year under the provisions of Article 60 or in determining or revising the tax base of corporate tax under the provisions of Article 66 or 69, the amount included in the calculation of earnings shall be disposed of as bonus, dividends, and other outflow from the company, retained reserves, etc. according to the person to

Article 106 of the Enforcement Decree of the Corporate Tax Act

(1) The amount included in gross income pursuant to Article 67 of the Act shall be disposed of pursuant to the following subparagraphs:

The same shall also apply to non-profit domestic corporations and non-profit foreign corporations.

1. Where it is obvious that the amount included in the calculation of earnings has leaked out of the company, the dividends, bonuses from the disposition of profits, other income, and other outflow from the company under each of the following items according to the person to whom they accrue:

(a) Where the person to whom benefits accrue is a stockholder, etc. (excluding a stockholder, etc. who is an executive officer or employee), the dividends to such person;

(c) Other outflow from the company, if the person to whom it belongs is a corporation or an individual; and

(c) Fact of recognition;

(1) The ○○ Development Co., Ltd. (hereinafter referred to as “○○ Development”) is a corporation that owns and operates ○○○○○○○-dong ○○○○○○○○○-dong, and ○○ Tourism is a corporation that runs a casino business, travel arrangement business, etc. in the above hotel, and ○○ Industry is a corporation that was established on August 16, 199 as a hotel business, etc. as an objective business (the head of ○○ Tax Office closed ex officio business on April 27, 2001).

(2) The ○○○ worked as the auditor of ○ Tourism from January 23, 1999 to October 25, 2001, and from October 25, 2001 to October 25, 2001, the ○○○○ was the representative director of ○○ Tourism from September 6, 200 to October 25, 2001, and the ○○○○○○○ was the representative director from May 15, 200 to December 30, 200, and the Plaintiff served as the ○○ industry representative director from August 16, 199 to December 29, 200, and the Plaintiff was the auditor of ○○ industry from December 30 to December 30, 203.

(3) On July 10, 1998, when ○ Tourism borrowed KRW 5.3 billion from ○○ Development and failed to repay the principal and interest, ○○ Tourism entered into a contract with ○○ Development to comprehensively transfer all the business including casino business rights in a case where ○ Tourism fails to repay the said debt by the due date specified in a separate plan for repayment of debt, but failed to repay the debt in accordance with the said plan for repayment of debt.

(4) However, as ○○ Development’s financial standing has aggravated and making it difficult to run a casino business, it comprehensively transferred all of the casino business rights, etc. between ○○ Industries and ○○ Industries, which ○ Development would take over from ○ Tourism, to ○○ Industries. However, ○ Industry entered into a contract with the effect that ○○ Industries should immediately comply with the said request when there is a request for emergency financial support from ○ Tourism.

(5) On December 17, 199, the ○ industry entered into a sales contract with the ○○ Hospital Development to purchase all real estate-related assets in addition to the above casino business license agreement. On March 27, 2000, the ○○ Hospital Development entered into the said sales contract with the ○○ Hospital Development to purchase all real estate-related assets.

(6) A shareholder of ○○ Tourism had been a shareholder of ○○○ (34% of shares), Park○ (33% of shares), and 33% of shares (33% of shares). However, the actual owner of the entire shares was the largest shareholder, who was the representative director of ○○ Development. On September 5, 2000, the management status of ○○ Tourism suspended its business due to delayed payment of rent for more than one year and did not pay wages to employees.

(7) The Plaintiff experienced the need to normalize ○ Tourism’s casino business, and discussed this issue, which is the representative director of ○○ Development. In this context, the Plaintiff and ○○○ agreed on 33% of ○○ Tourism’s stocks in the name of the Plaintiff, instead of inserting cash necessary for ○ Tourism, delaying the settlement of smuggling rents, and suspending the exchange of bills issued by ○○ Tourism, and instead changing the exchange of bills issued by ○○ Tourism into ○○ Tourism’s name.

(8) According to the above agreement, 33% of ○○ Tourist Shares in the name of ○○○○○○ was transferred on September 15, 200 to the Plaintiff’s name, and 3.3 million won was paid to ○○○○○.

(9) Meanwhile, pursuant to the above funding agreement on December 17, 1999, ○○ Tourism directly deposited KRW 10 million in the account of ○○ Tourism on September 7, 200, KRW 26 million in cash on October 10 of the same year, KRW 15 million in cash on the 12th of the same month, KRW 15 million in cash on the 16th of the same month, KRW 20 million in cash on the 23th of the same month, KRW 30 million in cash on the 25th of the same month, and KRW 46 million in cash on the 25th of the same month, and KRW 566 million in cash on the 25th of the same month, but the remaining amount was deposited in the account of ○○ Tourism on the 2000,000 won in the form of cashier’s checks, which had been holding concurrent office with the representative director at the time.

(10) At the time of ○○ Tourism’s funding as described in Paragraph (9) above, the relationship between ○○○ Development and the debtor of ○○ Development, who had already deposited the remaining amount in the personal account of the accounting staff or the representative director, and used the expenses necessary for the maintenance of the company. As such, some of the above funding was deposited in the account of ○○○○○, etc.

(11) The ○○ Tourism was used to adjust part of the retirement allowances and liabilities of employees with funds provided from the ○ Industry.

(12) On December 19, 200, 200, after the ○ industry provided the above financial support to ○○ Tourism, ○○ Hotel, which had been purchased by ○○ Industries, was awarded a successful bid to ○○○○ Company on December 19, 200. The ○○ Development transferred ○○ Tourism’s casino business license to ○○ Tourism on March 30, 2001, contrary to the contract entered into on December 17, 199 with ○○ Industries.

(13) On October 26, 2001, ○○○○, ○○○○, ○○○○○, ○○○○○○○○○, and ○○○○○○○○○○○○○’s representative director, in the presence of the Plaintiff, drafted a supplementary note (No. 6-2) to the following purport.

① The ○○ Tourism’s sales of his cash assets, real estate, and corporeal movables are subject to the respective annexed documents to this Agreement. In principle, ○○ Development, ○○ Industry, and ○○ Tourism shall distribute the assets of ○○ Tourism equally. ② ○○ Development and ○○ Tourism shall cooperate to the maximum extent that it does not conflict with the law, if it is necessary for ○○ Industries to assist in the issue of redemption of casino business rights with ○○ Tourism, and ○○ Industries shall give priority to the employment of the former employees where it redeems the casino business rights from ○○ Tourism.”

(14) In addition, on October 26, 2001, the ○○ Tourism Representative ○○○○ and the ○○ Industrial Representative ○○○○○○ ○○○ ○○ ○○ ○○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○○

“○○ Tourism” implements the contents of the notes annexed to this Agreement (No. 6-2). “The remaining total assets distributed to ○○ Development shall be left to ○○ Tourism on the basis of the original report of ○ Tourism and ○○ Industry on October 26, 2001, on the basis of the agreement between ○○ Tourism and ○○ Industry, and shall transfer all cash and real estate, corporeal movables, and corporeal movables to ○○ Industry.”

(15) Pursuant to the contents of the notes attached to the above agreement and the memorandum of agreement, ○○ Industries remitted the sum of KRW 10 million to the account of this case on October 27, 2001, KRW 90 million on October 31, 201, KRW 13,40 million on November 13, 200 of the same year, KRW 10 million on January 30, 2002, KRW 15 million on February 16, 2002, KRW 250,000 on March 6, 200, KRW 290,000 on March 29, 200, KRW 200 on October 19, 201, and KRW 2,500,000 on October 29, 200 on the same year, and KRW 2,500,000 on the pertinent date on which ○○ Tourism’s receipts and disbursements (certificate 200,00.

(16) Although the ○ industry was difficult to finance the Plaintiff, it was unable to obtain a loan of operating funds from any other person except the Plaintiff, and thus, from June 2001 to December 2001, the ○○ industry received a considerable amount of money from the Plaintiff (in a case where the employees of the ○ industry directly withdraw by using the card in the name of the Plaintiff), and paid retirement consolation money and the wages of the employees who retired from the ○ industry, and paid part of the loans to the Plaintiff at any time.

(17) The office of ○○ Industries was first located on the ○○○○○○, but later transferred the office to ○○○○○○○○. The office of ○○○○○ was maintained until 2003, and six to seven employees were on duty. On December 19, 200, the ○○○ hotel was successful, and on March 30, 2001, the amount of wages and expenses incurred by the employees during the process of continuing the business, such as finding other businesses even after the casino business was transferred.

(18) On February 23, 2001, the account of this case was opened at the ○○○ Branch. The ○○ Industry, as described in the above (16) and (17) through the account of this case, borrowed operating funds required by the ○○ Office (○○○) from the Plaintiff and traded some of them.

[Reasons for Recognition] Facts without dispute, Gap 1-23 evidence (including additional numbers), Eul 3-12 evidence (including additional numbers), witness Kim ○, Kim○-○'s testimony, and the purport of the whole pleadings

D. Determination

The defendant judged the above issue amount as the dividend income of the plaintiff on the basis that the plaintiff was the shareholder of ○○ Tourism under the premise that the issue amount of this case was reverted to the plaintiff by transferring it to the account of this case which was actually used by the plaintiff as an individual. We examine whether the issue amount of this case can be deemed to have been reverted to the plaintiff.

As seen earlier, (1) ○○○ Industries concluded a comprehensive acquisition of casino business rights with ○○○○○○○○○○○○ Development on December 17, 199, and provided ○○○○○○○○○○○○○○○○○○○○ Tourism with funds worth KRW 560 million in total pursuant to the above terms and conditions, but ○○○○ Development transferred its casino business rights to ○○○○○○○○○ Tourism on March 30, 2001. Accordingly, ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ KRW 6,00,000,000 won, which is one of the 60-years of the instant financial resources to be used by ○○○○○○○○○○○○ Industries’s employees, which is one of the instant financial resources to be used.

Nevertheless, the disposition of this case based on the premise that the key issue source of this case belonged to the Plaintiff is unlawful, and even though the key issue source of this case was the money collected from existing loans, it was erroneous in the part of the Plaintiff’s assertion that the key issue source was the money collected from existing loans, but the part of the Plaintiff’s assertion that the said key issue source was not reverted to

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.