The standard for determining whether it constitutes an object of exclusion from additional collection of gift tax under the proviso to Article 48 (2) 1 of the former Inheritance Tax and Gift Tax Act, etc., where it can be “a compelling reason that the donated property is not used for a business directly for the public interest, etc.” and whether it constitutes an object of exclusion from additional collection of gift tax under the proviso to Article 48

In light of the legislative purport and text of Article 48(1)1 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “Gift”) and Article 38(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter “Enforcement Decree of the Inheritance Tax and Gift Tax Act”), the property contributed by a public corporation, etc. was not used for the purpose of the direct public interest, etc. even if it was known that the cause of such disability was easily known if it was not used for the public interest, etc., and if it was not used for the same reason within three years thereafter, it is impossible to directly determine the property subject to additional collection pursuant to the proviso of Article 8(1)4 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act that could not directly be used for the purpose of public interest due to unavoidable reasons, such as where there was a possibility that it could be an inevitable reason to exclude the property directly from the gift tax.

Article 48(1) and (2)1 of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 8828, Dec. 31, 2007); Article 38(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (Amended by Presidential Decree No. 22042, Feb. 18, 2010);

Korea-U.S.D. (Bae, Kim & Lee LLC, Attorneys Han-soo et al., Counsel for the defendant-appellant)

Daejeon Head of the District Tax Office

Daejeon High Court Decision 2011Nu1137 decided September 29, 2011

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. The main sentence of Article 48(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007; hereinafter the same shall apply) provides that "the value of property contributed by a public-service corporation, etc. shall not be included in the taxable value of donated property." The main sentence of Article 48(2) provides that "Where the public-service corporation, etc. to which the property is contributed pursuant to the provisions of paragraph (1) falls under any of the following subparagraphs 1 through 4 and 5-1, the value prescribed by the Presidential Decree shall be deemed as donated by the public-service corporation, etc. and the gift tax shall be levied immediately." The main sentence of subparagraph 1 provides that "Where the property contributed is not used for the direct public-service business, etc. (including where it is operated for profit-making business or profit-making business for which it is difficult to use it for a long time, etc.)" and the proviso of subparagraph 3 of the former Enforcement Decree provides that "where it is submitted a report under the proviso of Article 218(3)."

Considering the fact that a public interest corporation, etc. performs part of its duties on behalf of the State or a local government, gift tax shall not be imposed on the property contributed to a public interest corporation, etc. under Article 48(1) in order to support the smooth performance of its purpose business; and for follow-up management, where the property contributed to a public interest corporation, etc. is not used for a direct public interest business within three years, gift tax which was not originally imposed shall be collected immediately; Provided, That it is unreasonable to collect gift tax immediately without exception until there are inevitable circumstances where it is difficult to take responsibility for the public interest corporation, etc., and thus, the proviso, etc. of Article 48(2)1 of the Inheritance Tax and Gift Tax Act excludes cases where the property contributed to the public interest corporation, etc. is not used for a direct public interest business within three years due to unavoidable reasons,

In light of the legislative purport, language, contents, etc. of the relevant provision, if a public corporation, etc. knew that there was a statutory obstacle that could not use the property contributed to it for the purpose of the public interest project, or even if it was unaware of such obstacle, if it could easily have known the existence of such obstacle if it was done so, and if it was not used for the purpose of the public interest project, etc. within three years thereafter, there was a possibility of sufficiently resolving the obstacle in the law that existed at the time of receiving property contribution in the future, and it could not be used for the purpose of the public interest project for any other reason that was unexpectedly unforeseeable even after it was resolved by endeavoring to solve the obstacle, barring special circumstances such as where it was impossible to use the property contributed for the public interest project, which is the reason for excluding collection of gift tax stipulated in the proviso of Article 48(2)1 of the Inheritance Tax and Gift Tax Act, etc. In addition, whether it falls under the category of property subject to collection of gift tax under the proviso of Article 48(2)1 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act shall not be determined by the competent Minister.

2. The reasoning of the judgment below and the evidence duly admitted by the court below are as follows: ① the Plaintiff was a public interest corporation established with the purpose of prepaid education, prepaid training center, social welfare activities, and line performance activities on November 5, 2003, and was contributed to 342,810 square meters of the instant forest located within a development restriction zone from the Nonparty on November 20, 2003; ② the Plaintiff attempted to use the instant forest as contributed for the purpose of restoring the site and constructing temples, etc., but it is impossible to construct a temple, training place, etc. in the instant forest due to the restriction on activities under Article 11 of the former Act on Special Measures for Designation and Management of Development Restriction Zones (amended by Act No. 8852 of Feb. 29, 2008; hereinafter “Restriction on Development Restriction Zones”), and ③ The Plaintiff could not answer the methods and procedures of obtaining permission to construct religious facilities, such as the instant forest site from the Daejeon Metropolitan City Mayor entrusted by the Minister of Culture and Sports as the site for religious facilities.

According to the above circumstances, the Plaintiff, who was contributed to the instant forest with the view to receiving benefits under Article 48(1) of the Inheritance Tax and Gift Tax Act by using the instant forest as a means of constructing religious facilities in the instant forest by means of construction of religious facilities, etc., cannot be deemed as having any inevitable reason for not using the instant forest directly for public interest business, even if it was impossible for the Plaintiff to construct religious facilities in the instant forest due to the provision on restricted acts under Article 11 of the Development Restriction Zone Act, even if it was impossible for the Plaintiff to directly use the instant forest for public interest business, and even if the Plaintiff’s response to questioning received from the Daejeon Metropolitan City Mayor cannot be deemed as falling under the recognition of the competent Minister under the proviso of Article 38(3) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, and even if there was no inevitable reason for the competent Minister to recognize it, it cannot be deemed that there was no reason under the proviso of Article 48(2)1 of the Inheritance Tax and Gift Tax Act.

The court below's determination that the disposition of gift tax of this case is legitimate on the ground that the plaintiff cannot be deemed as an inevitable reason for not using the forest land of this case directly for public interest business, etc., although it is somewhat inappropriate for the part of the court below's explanation to the purport that "in order to fall under a statutory or administrative inevitable reason prescribed in the proviso of Article 48 (2) 1 of the Inheritance and Gift Tax Act, the preparation period for the use of the forest land of this case must be at least three years." Thus, the court below did not err in the misapprehension of legal principles as to "a unavoidable reason" or "no taxation without law," which is a reason for excluding collection of gift tax under the proviso of Article 48

Supreme Court Decision 94Nu8600 Decided March 3, 1995 cited in the ground of appeal is not appropriate to be invoked in this case due to the different application statutes or issues.

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Chang-soo (Presiding Justice)