2015Du2284 Revocation of Disposition of Imposition of Value-Added Tax, etc.

A Foundation

person

Head of Si Tax Office

Seoul High Court Decision 2014Nu7383 Decided April 28, 2015

December 10, 2015

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

The grounds of appeal are examined.

1. If an administrative disposition is revoked as to the Defendant’s grounds of appeal, the disposition is null and void, and no longer exists, and a lawsuit seeking revocation against a nonexistent administrative disposition is unlawful as there is no benefit of lawsuit (see, e.g., Supreme Court Decision 2012Du18202, Dec. 13, 2012).

According to the records, on June 17, 2015, after filing the final appeal of this case, the Defendant was aware of the fact that the lower court revoked ex officio the disposition of imposition on the part against the Defendant among the lower judgment. As such, regarding the revoked part of the lawsuit of this case, the Defendant sought revocation of the disposition that did not extinguish, and thus, did not have any interest in the lawsuit.

2. Plaintiff’s ground of appeal

A. Whether the transfer of the right to sell a unit of the instant container constitutes the supply of goods

1) Article 1 (1) 1 of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010; hereinafter the same) provides that "the supply of goods or services" is subject to value-added tax, and Article 1 (2) of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013) provides that "any tangible goods or intangible goods having property value" as one of intangible goods included in goods.

In full view of the language and purport of these regulations, the value-added tax is a consumption tax imposed by recognizing the capacity to pay for the act of using and consuming goods, and the existence of property value, which serves as the standard for determining whether goods are goods, should be objectively determined by the economic utility value of the goods, and should not be changed according to the subjective evaluation of the parties to the transaction. In order to constitute a “supply of the right, which is the future subject of the imposition of value-added tax,” objective property value should be recognized, such as the right can be actually used and having economic exchange value (see Supreme Court Decision 2015Do1504, Jun. 11, 2015).

2) The evidence duly admitted by the lower court reveals the following facts.

A) On May 16, 191, C obtained a permit to establish a private charnel house with 25,004 amounting to 25,004 in the name of D religious organization E, or its own name, after establishing B houses. From February 2005, C issued a “certificate of establishment of a private charnel house for 21,833 out of 21,00, to the public corporation, etc. in the form of payment for the construction cost, etc., and suspended a project to construct and sell a charnel house for shortage of funds (hereinafter referred to as “charnel house project”).

B) On March 22, 2005, L, K, and N made a contract with C to take over all of the rights to permit the operation of B houses and real estate from C, and the name of B houses was changed into the ‘B houses' as the Act on Funeral Services, etc. was amended on May 25, 2007; hereinafter referred to as the ‘B houses' is planned to carry out the business by expanding the number of the houses within 80,000 units of charnel houses promoted by C (hereinafter referred to as the “furnal houses”) and establishing the Plaintiff who is the representative of R in order to promote this.

C) Meanwhile, P et al. (hereinafter “P et al.”) intended to promote the wing party project jointly with human means, to lend funds necessary for the said project through S Limited Liability Company (hereinafter “S”), limited liability company V (hereinafter “V”), and W.

D) On April 3, 2005, the Plaintiff entered into an agreement with C on the acquisition of assets and liabilities and succeeded to the status of C, and entered into a business agreement with K, L, N, and B on behalf of D, D, and on April 6, 2005, the Plaintiff agreed that “the means of the Plaintiff shall provide the Plaintiff with a fund of at least eight billion won necessary for the inurnment Party’s business, and recover the investment fund by taking over 35,000 won for the inurn Party’s sales right to be held by the Plaintiff from the inurn Party,” and the means of human being shall take charge of the business of expanding the number of the inurned period of at least 80,000.

E) On June 13, 2005, when entering into an agreement on the transfer of the right to sell in lots with S on June 13, 2005, "The means of persons" transfer 35,000 won to S, and at the same time S shall pay 10 billion won upon entering into an agreement, so that S may purchase 35,000 won from the Plaintiff and distribute profits from the sale in lots to S, 50% of the profits from the sale in lots, and 8 billion won of the profits received from the Plaintiff after transferring 35,000 won in total to S, and receiving 15 billion won in total from the Plaintiff. The Plaintiff received additional KRW 5 billion by November 22, 2006 and received KRW 13 billion from the Plaintiff.

However, as the means of persons fail to perform their obligations to increase the number of 10,000 won or more per 80,000 won, the number of 20,000 won per 35,000 to 18,000 won per 35,000 won and 18,000 won per 20,000 won from 35,000 won to 17,000 won per 17,000 won per 7,000 won from 20,000 won from 20,000 won from 17,00 won from 20,000 won from 20,000 won from 17,00 won from 20,000 won from 20,000 won from 20,000 won from 30,000 won from 20,000 won from 20,000 won per 7,000 won from 2,00 won.

F) On the other hand, on May 23, 2005, the Plaintiff agreed that “the construction company and the construction company shall settle the price of the construction work with 15,000 won per salary unit, and that the settlement of the price shall be valid only when approval is granted for 80,000 or more times by promoting the modification of the existing charnels (hereinafter “transfer of the Plaintiff’s right to sell the price per salary unit to the Plaintiff’s construction company”) and on June 1, 2005, “V and the Plaintiff shall receive 15,000 won per salary unit from V to pay the price for the construction work for the construction company with the amount of 1,00,000 won per salary unit. In accordance with such agreement, V provided the sales right to the 15,000 won per salary unit received from the construction company as security and provided a approximately KRW 1,381,500,000,000 for the construction company.”

G) As the former Burial and Graveyard Act was amended on January 12, 2001 under the Act on Funeral Services, etc., the establishment of a private charnel facility was modified to the reported matters under the permission. However, a person who intends to establish and manage a private charnel facility for the purpose of installing and managing a charnel facility for the purpose of storing more than 500 remains under the Civil Act was a foundation established for the purpose of installing and managing a charnel facility or a religious organization. However, the Plaintiff was merely a profit-making corporation for the purpose of gaining profits from the construction and sale of a charnel hall, not a foundation established under the Civil Act, and did not have any substance as a religious organization. Accordingly, on August 10, 2006 and February 8, 2007, the Plaintiff filed a report on the modification of the installation of a private charnel hall for the purpose of changing the number of a private charnel house to 25,004 to 105,125,000, but all of it was rejected from the mayor of Si, which was rejected on June 1, 2008.

3) Examining these facts in light of the legal principles as seen earlier and the fact that a report on the establishment of a charnel party is a report requiring acceptance by an administrative agency, and the fact that the head of the relevant agency can establish a wing party only as reported (see, e.g., Supreme Court Decision 2009Du6766, Sept. 8, 201). Unlike the right to sell a charnel house issued after permission for the establishment of a private charnel house, the Plaintiff, who failed to meet the basic qualification requirements necessary for the business of the wing party, was unable to extend the wing party due to the failure to receive the report on the wing party’s establishment, cannot be deemed to have practically used the wing party’s right to sell a wing party, and thus, it is difficult to view the transfer of the wing party’s right to sell a wing party’s right to sell a wing party’s property right to use it as an objective property right. Moreover, it is difficult to view that the Plaintiff’s transfer of the wing party’s right to sell a wing party’s right to the sale.

4) Nevertheless, the lower court rejected the Plaintiff’s assertion as to the transfer of the instant right to sell the instant container, deeming otherwise constituted the supply of goods. In so determining, the lower court erred by misapprehending the legal doctrine on the supply of goods, which is a value-added tax transaction, thereby adversely affecting the conclusion of the judgment. The allegation contained in

B. Whether taxable income under the Corporate Tax Act belongs to the Plaintiff

1) Article 14(1) of the former Corporate Tax Act (amended by Act No. 10423, Jan. 2, 2010; hereinafter the same) provides that “The income for each business year of a domestic corporation shall be the amount calculated by deducting the total amount of losses incurred during the pertinent business year from the total amount of earnings for the pertinent business year,” and Article 15(1) of the same Act provides that “The income shall be the amount of profits generated from transactions that increase the net assets of the pertinent corporation, except for capital input or financing and other transactions provided for in this Act.”

2) In light of the facts as seen earlier, it is reasonable to view that the Plaintiff transferred the right to sell the instant container to the person means, etc. by dividing the ownership of the instant container into an inner marbing method, and as such, the Plaintiff transferred the right to sell the instant container to the person means, etc., in a sense that it is reasonable to view that the Plaintiff determined the shares of the investors or the partners regarding the instant container business, and guarantees the sales revenue of

At the same time, all funds received from human means, etc. are investments or investments in the sealing project, and they do not constitute taxable income under the former Corporate Tax Act.

3) Nevertheless, the lower court rejected the Plaintiff’s assertion on the ground that the funds that the Plaintiff received as a result of providing the right to sell the instant bill constituted gross income. In so determining, the lower court erred by misapprehending the legal doctrine on taxable income under the former Corporate Tax Act, thereby adversely affecting the conclusion

The ground of appeal pointing this out is with merit.

Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal by the Plaintiff, 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.

Supreme Court Decision 200

Justices Lee In-bok

Justices Kim Gin-young

Chief Justice Lee Dong-won