In calculating the transfer margin based on the standard market price, whether the development charges are illegal to not deduct the development charges as necessary expenses (negative)

According to Article 94(2)4 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467 of Dec. 31, 1994), and Article 47(1)1 of the former Enforcement Rule of the Income Tax Act (amended by Ordinance of the Prime Minister No. 505 of May 3, 1995), in cases of calculating gains on transfer based on the actual transaction value, development charges shall be deducted as necessary expenses. Thus, in calculating gains on transfer based on the standard market price, if the development charges are not deducted from necessary expenses, and if the taxpayer is disadvantageous to the taxpayer by reporting gains on transfer based on the more favorable actual transaction price, the taxpayer should not separately deduct the development charges from necessary expenses. In calculating gains on transfer based on the standard market price, it is difficult to say that the principle of no taxation without the law without the law, the principle of fair burden, the principle of prohibition of abuse of rights, the principle of property rights guarantee, and the principle of excessive prohibition.

Article 59 of the Constitution, Article 14(2) of the Framework Act on National Taxes, Articles 7(2) and 45(1) of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994), Article 94(2)4 and (5) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467 of Dec. 31, 1994), Article 47(1)1 of the former Enforcement Rule of the Income Tax Act (amended by Ordinance of the Prime Minister No. 505 of May 3, 1995)

Lee Tae-tae (Attorney Kang-sik, Counsel for defendant-appellant)

The director of the tax office.

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the plaintiff.

The defendant's disposition imposing capital gains tax of KRW 196,024,644 on the plaintiff on October 31, 1995 exceeds KRW 130,207,211 shall be revoked.

1. Details of the instant disposition

The following facts are either disputed between the parties, or acknowledged according to the descriptions of Gap evidence 1-1, Gap evidence 3-8, Eul evidence 1-2, and Eul evidence 2.

A. On March 27, 1978, the Plaintiff acquired shares in the assessment statement among 4,760 square meters in forests and 5,058 square meters in forests and 10,000 square meters in 44,00-7, Seoul Special Metropolitan City, Nowon-gu (1131/49, March 8, 1991; hereinafter the same shall apply) of 4,760 square meters in forests and 15,000 44,000,000 5,000 13,000,000,000 135 square meters in land and 15,000,000,000 13,000 and 15,000 square meters in forests and 15,000 square meters in forests and 13,000,000,000 for 13,000 and 15,000 square meters in forest and 15,0131.

B. However, on June 28, 1994, 1131-5, 56, 58-61 of each of the above lands (hereinafter “instant land”) was expropriated in Seoul Special Metropolitan City on June 28, 1994, and KRW 1,807,185,000 was paid to the Plaintiff. On July 30, 1994, the Plaintiff: (a) calculated gains on transfer from the expropriation of the instant land based on the standard market price; (b) reported the transfer value as KRW 283,438,890 as at the time of voluntary payment; (c) the Plaintiff reported the transfer value as KRW 870,948,752; and (d) the development charges were not reported as necessary expenses. On September 14, 1994, the Plaintiff deducted the Plaintiff’s share of the instant land from the said development charges as KRW 121,86,339, as necessary expenses.

C. However, the Defendant did not recognize the development charges as necessary expenses, and recognized only the amount calculated by adding 7% of the tax base price to the standard market price at the time of acquisition as necessary expenses, and calculated gains on transfer based on the standard market price, and decided to refund the amount of KRW 87,414,240, which was calculated by deducting the amount of KRW 196,024,644 from the amount voluntarily paid by the Plaintiff, to the Plaintiff on October 31, 1995.

2. Whether the instant disposition is lawful

A. Details of the relevant statutes

Article 45(1) of the former Income Tax Act (amended by Act No. 4803, Dec. 22, 1994; hereinafter the same) provides for one of the necessary expenses to be deducted from the transfer value in the calculation of transfer margin, the facility cost and improvement cost prescribed by the Presidential Decree in subparagraph 2, and the capital expenditure prescribed by the Presidential Decree in subparagraph 3.

However, Article 94(5) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 1467, Dec. 31, 1994; hereinafter the same) provides that where real estate gains are calculated based on the standard market price, only the amount calculated by adding 7% of the standard market price at the time of the acquisition to the standard market price at the time of the acquisition, shall be deducted from the necessary expenses.

B. Summary of the parties' arguments

The Defendant asserts that the instant disposition is lawful on the grounds of the above disposition grounds and relevant statutes. Accordingly, the Plaintiff asserts that Article 94(5) of the Enforcement Decree is contrary to Article 45(1) of the Act, which is the mother corporation, and that development charges are imposed on the same nature as capital gains tax, and thus, it is invalid as it violates the principle of no taxation without law, the principle of substantial taxation, the principle of fair burden, the principle of prohibition of abuse of rights, the principle of prohibition of abuse of rights, and the principle of excessive prohibition, and thus, the instant disposition, which did not deduct development charges, is unlawful

(c) Markets:

Since Article 45(1)2 and 3 of the Act provides that the “facility cost, improvement cost and capital expenditure prescribed by the Presidential Decree” shall be deducted from the necessary expenses. Thus, the Enforcement Decree does not stipulate that only part of the facility cost, improvement cost and capital expenditure shall be deducted from the necessary expenses or deducted from the actual expenses, and that there is no delegation of the mother law by uniformly allowing the deduction of a certain amount from the actual transaction value. In addition, when calculating gains on transfer based on the actual transaction value, development charges shall be deducted from the necessary expenses (Article 94(2)4 of the Enforcement Decree and Article 1(1)1 of the Enforcement Rule). Therefore, when calculating gains on transfer based on the standard market price, if the development charges are calculated based on the standard market price without deducting the development charges from the necessary expenses, the taxpayer shall be entitled to the deduction of gains on transfer based on the actual transaction price more favorable than the necessary expenses. In light of the fact that the legislative principle of no taxation without the law, the principle of no taxation without the law, the principle of prohibition of abuse of rights, the principle of property rights, and the principle of no taxation.

Therefore, the plaintiff's assertion against this is without merit.

3. Conclusion

Therefore, since the disposition of this case is legitimate, the plaintiff's claim seeking its revocation is dismissed as it is without merit, and the costs of lawsuit are assessed against the losing plaintiff. It is so decided as per Disposition.

Judges Kim-soo (Presiding Judge)