[1] In the case of a charter party with acquisition of nationality for which two or more installments are paid, and which is at least one year prior to the date of the final payment, whether it should be treated the same as the sale on condition of long-term installment when applying the Corporate Tax Act (affirmative)

[2] The method of calculating the acquisition value of assets due to sale on a long-term installment condition under the Corporate Tax Act

[1] Although a charter contract with acquisition of nationality takes the form of a charter contract, it actually pays the purchase price of the ship in installments for a certain period, and is in a special form of ship revenue, as the buyer can use the ship during that period. Meanwhile, Article 68(3) of the Enforcement Decree of the Corporate Tax Act provides that "long-term installment condition" in relation to the sale or transfer of assets (for transactions abroad, including leases of assets under conditional contracts for transfer of ownership) shall be the sale or transfer of assets, and the sales amount or revenue amount shall be not less than one year from the date following the date of delivery of the concerned assets in installments, and the last installment payment date from the date of the date of the last installment payment until the date of the last installment payment shall be treated as the same long-term installment transaction in the application of the Corporate Tax Act."

[2] In principle, the acquisition value of assets due to sale on a long-term installment basis under the Corporate Tax Act shall be calculated by adding all the installments to be paid in the future. However, under corporate accounting standards, where the total amount of installments is assessed at the present value which is the discount price with the effective interest rate, etc. of the relevant transaction, and the difference between the nominal value which is the total amount of the installments and the present value is appropriated as the discounted value discount rate,

[1] Article 68 (3) of the Enforcement Decree of the Corporate Tax Act / [2] Article 72 (1) 1 and (3) 1 of the Enforcement Decree of the Corporate Tax Act

[1] Supreme Court Decision 82Nu328 delivered on October 11, 1983 (Gong1983, 1666)

Plaintiff Co., Ltd. (Attorney Go Jong-sung, Counsel for the plaintiff-appellant)

The director of the tax office

Seoul High Court Decision 2005Nu20407 delivered on October 25, 2006

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

1. As to the grounds of appeal Nos. 1, 2, and 3

Article 68(3) of the Enforcement Decree of the Corporate Tax Act provides that "the long-term installment condition" means the sale or transfer of assets (including lease of assets under conditional contract for transfer of ownership) in which the sales amount or revenue amount is not less than one year from the day after the date of delivery of the relevant assets in monthly installments, yearly installments, or by other payment methods, and the last installment payment is not less than one year in the application of the Corporate Tax Act to a conditional charter contract for acquisition of nationality, the payment of the sales amount of which is made in installments for a certain period of time and can be used by the purchaser during that period of time (see Supreme Court Decision 82Nu328, Oct. 11, 1983, etc.). Thus, in applying the Corporate Tax Act to a condition that the payment of installments is made in two or more installments and the last installment is made in one year or more, and the last installment payment is made in one year or more.

Meanwhile, in relation to the acquisition value of assets, Article 72 (1) 1 of the Enforcement Decree of the Corporate Tax Act provides that "the acquisition value of assets purchased from another person shall be the amount calculated by adding acquisition tax, registration tax, and other incidental expenses to the purchase value," and Article 72 (3) 1 of the same Act provides that "where assets are acquired on a long-term installment basis, etc. under the provisions of Article 68 (3) of the Enforcement Decree of the Corporate Tax Act, the debt incurred from the acquisition of the assets shall be evaluated and appropriated as the present value as the discounted value discount amount under the conditions as prescribed by the corporate accounting standards, the present discounted value shall not be included in the acquisition value." In full view of each of the above provisions, the acquisition value of assets due to a sale on long-term installment basis under the Corporate Tax Act shall be calculated by adding all installments to the future. However, in principle, the present value of the discounted value shall be excluded from the acquisition value, and it shall be appropriated as the interest cost through depreciation only if

The court below held that the bareboat charter on the instant vessel should be treated equally with the long-term installment under the Corporate Tax Act, on the premise that the Plaintiff, a charterer, shall pay 3 million US dollars for charterage between October 30, 1999 and October 30, 2005, the charter period, in 72 installments each month from October 30, 2009 to the payment of the unpaid charterage (total charterage - the total charterage paid to the prepaid) at the interest rate of 2.5% added to the interest rate of 2.5%, which is the fluctuation rate (5% at the time of the contract), should be paid as interest rate of 2.5% on the instant vessel, which is the premise that the Plaintiff shall pay the interest rate of 3 million US dollars in the current value as determined by the corporate accounting standards, and that the acquisition value of the instant vessel of this case shall not be included in the calculation of the present value as well as the interest rate of 3 million US dollars and the actual interest rate of 90% in the agreement and shall not be included.

In light of the above legal principles and records, the judgment of the court below is correct, and there is no error in the misapprehension of legal principles as to the acquisition value in a long-term installment sale as otherwise alleged in the ground of appeal.

Supreme Court Decision 92Nu13622 delivered on November 23, 1993, etc. cited in the ground of appeal, is a case before the enforcement Decree of the Corporate Tax Act had been newly established with respect to the calculation of acquisition value, and it is not appropriate to invoke the present case.

2. As to the fourth ground for appeal

The argument in the grounds of appeal that the revaluated cannot be corrected after the revaluation reserve was transferred into capital is not asserted in the court of final appeal, and it is not a matter of ex officio examination. Thus, it cannot be a legitimate ground of appeal (see, e.g., Supreme Court Decisions 92Da24325, Sept. 25, 1992; 9Da17319, Apr. 27, 2001).

3. Conclusion

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.

Justices Jeon Soo-ahn (Presiding Justice)