The input tax amount of this case cannot be viewed as a common purchase tax because the plaintiff's input tax amount is a cost inevitably required for the tax-free business only.

The input tax amount of this case cannot be deducted from the output tax amount because the input tax amount related only to the passenger transport business, which is a tax-free passenger transport business, falls under the input tax amount. The lease and advertising services cannot be deemed to be ordinarily supplied as incidental to the passenger transport business. The mere fact alleged by the Plaintiff cannot be deemed to have a legitimate ground

Article 61 (Method of Calculating Purchasing Tax Amount)

2013Guhap59019 Disposition of revocation of Disposition of Imposition of Value-Added Tax

AA

BB Director of the Tax Office

January 17, 2014

February 28, 2014

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

As shown in attached Table 1, the Defendant imposed an OO on October 4, 201 on the Plaintiff and imposed an OOO on July 10, 201 and imposed an OOO on the Plaintiff on July 10, 2013.

1. Details of the disposition;

A. The Plaintiff is a corporation that is established pursuant to the Local Public Enterprises Act and the Ordinance on the Establishment and Operation of OO Corporation and is engaged in passenger transport business, lease business, advertising business, etc. as tax-free business.

B. From February 2, 2006 to January 201, the Plaintiff reported and paid value-added taxes by dividing all input taxes, other than those that are not directly related to the taxable business, into common input taxes of the tax-free business and the taxable business.

C. On October 4, 201, the Defendant notified the Plaintiff of the correction and notification of the total amount of value-added tax and penalty tax as follows, on the ground that the Plaintiff constitutes the input tax amount directly related to the tax-free business, such as the purchase cost of electric and electric vehicle parts and the maintenance and repair cost of line facilities (hereinafter “the instant input tax amount”), and the Plaintiff reported and paid the value-added tax in proportion to the common input tax amount.

D. On January 6, 2012, the Plaintiff appealed to the Tax Tribunal, and filed a petition for an adjudication. The Tax Tribunal rendered a decision to the effect that “The power rate of the head office, among the input tax in the instant case, shall be deemed the common input tax amount.” As such, the tax base and tax amount of value-added tax shall be revised from February 2, 2008 to February 2010 with the common input tax amount, and the Defendant did not state the grounds for calculation on the penalty tax, and thus the penalty tax shall be revoked from February 2, 2006 to February 2, 2010.”

E. According to the above decision, the Defendant notified the Plaintiff of the tax amount of value-added tax upon the disposition of October 4, 201, as follows. On July 10, 2013, the Defendant again imposed and notified the penalty tax (hereinafter referred to as “assessment disposition of value-added tax as of October 4, 201 and the imposition disposition of penalty tax as of July 10, 2013,” respectively.

[Reasons for Recognition] Unsatisfy, Gap evidence 1 to 4 (including each number, hereinafter the same shall apply), Eul evidence 1 to 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The instant input tax amount can be deemed as related not only to the duty-free business, but also to the taxable business, since the leased and advertising profits also accrue through the medium of history and transfer.

2) Rental business and advertising business are necessarily incidental to passenger transport business, and thus the value-added tax on sales generated from the rental business and advertising business must be exempted.

3) On March 2001, the Plaintiff filed a claim for the rectification of value-added tax with the purport that, among the costs determined as input tax amount related only to the tax-free business, some of the costs should be considered as common input tax amount. The Defendant partially accepted the Plaintiff’s assertion on July 2001 and issued a disposition to refund value-added tax. In addition, the Plaintiff’s failure to know that the instant input tax amount does not constitute common input tax amount upon receiving a decision that there was no problem in the return of value-added tax in the tax investigation conducted in 2004, it would be unreasonable for the Plaintiff

B. Relevant statutes

Attached Form 2 shall be as listed in attached Table 2.

C. Determination

1) Determination on the first argument

Article 17(2)6 of the former Value-Added Tax Act (amended by Act No. 11129, Dec. 31, 201; hereinafter referred to as the "former Value-Added Tax Act") provides that "the input tax amount related to the business that supplies goods or services exempt from value-added tax shall not be deducted from the output tax amount," and the main sentence of Article 61(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 24359, Feb. 15, 2013; hereinafter referred to as the "former Enforcement Decree of the Value-Added Tax Act") provides that "in cases where an entrepreneur concurrently operates a taxable business and a tax-free business, the calculation of the input tax amount related

However, in cases where an entrepreneur concurrently operates a taxable business and a tax-free business, an input tax amount related to the taxable business and a tax-free business shall, in principle, be calculated based on the actual attribution, and where the input tax amount is only related to the tax-free business, it may not be deducted from the output tax amount (see Supreme Court Decision 2013Du17336, Dec. 26, 2013). Even if a lease business and an advertising business operated by the Plaintiff is premised on the operation of a history and operation of electric vehicles, the purchase cost of electric vehicles parts, maintenance cost of line facilities, etc. are naturally required for passenger transport business, which is a tax-free business, even in cases where the Plaintiff does not run a leasing business and an advertising business, and thus, the input tax amount in the instant case cannot be deducted from the output tax amount, as it constitutes

As to this, the Plaintiff asserts to the effect that the power cost of electric vehicles, the cost of purchasing historical products, the cost of replacing historical facilities, and the cost of maintaining historical facilities, etc. have been additionally required according to the performance of leasing business and advertising business. However, the evidence submitted by the Plaintiff alone is insufficient to recognize that the Plaintiff additionally required the power cost of electric vehicles and electric vehicles, the cost of purchasing historical products, the cost of replacing historical facilities, the cost of replacing historical facilities, and the cost of maintaining historical facilities according to the performance of leasing business and advertising business, and there is no other evidence to acknowledge it.

2) Determination on the second argument

Article 12(3) of the former Value-Added Tax Act provides that "the supply of goods or services essential for the supply of exempted goods or services shall be deemed to be included in the supply of exempted goods or services," and Article 3(2) of the former Enforcement Decree of the Value-Added Tax Act provides that "the supply of goods or services that are ordinarily deemed to be incidental to the supply of goods or services, which are the main transaction, shall be deemed to be included in the supply of goods or services, which are the main transaction."

However, although leasing business and advertising business operated by the Plaintiff are premised on the operation of dedicated cars and operation of history, no problem arises in operating passenger transport business even if the Plaintiff does not engage in leasing business and advertising business, it cannot be deemed that the Plaintiff’s leasing business and advertising business operated by the Plaintiff is an essential incidental business to passenger transport business (on the basis of fact, such determination does not change even if most passenger transport service providers, including the Plaintiff, operate rental business and advertising business in order to create more profits (it is not possible to change such determination).

In addition, passenger transport services operated by the Plaintiff are supplied to passengers using subways, while leasing business is supplied to the lessee, and advertising business is supplied to the advertiser, so it cannot be viewed that leasing and advertising services are ordinarily supplied to passenger transport services. Accordingly, the Plaintiff’s assertion on this part is without merit.

3) Judgment on the third argument

Under the tax law, in cases where a taxpayer violates various obligations, such as a return and tax payment, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, an additional tax is an administrative sanction imposed as prescribed by the Act, and where there is any extenuating circumstance where it is unreasonable to expect the taxpayer to fulfill the obligation, and thus, it is not possible to impose an additional tax on the taxpayer (see Supreme Court Decision 2004Du930, Nov. 25, 2005).

According to the evidence No. 5, the Defendant accepted the Plaintiff’s assertion that, on July 2001, part of the costs determined as the input tax amount related only to the tax-free business ought to be deemed the common input tax amount. However, the Plaintiff’s tax return disposition of value-added tax is recognized: (i) at the time, the National Tax Service’s established rules (the National Tax Service’s additional tax exemption 46015-4358, October 27, 199) also provides that, “passenger transport services exempt from value-added tax, and the tax invoices issued to the supplier of real estate rental and advertising services, which are necessary for the provision of passenger transport services exempt from value-added tax, are not deducted from the output tax amount; and (ii) even after the tax base and tax rate were determined or corrected, the tax authority may rectify the same again until the exclusion period is determined or corrected; and (iii) the Plaintiff’s assertion that the Plaintiff’s tax-free tax return of value-added tax cannot be deemed as having a legitimate ground to deem the Plaintiff’s tax return of the tax amount.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed in entirety as it is without merit. It is so decided as per Disposition.