Cho Jae-2014-west-1288 ( October 31, 2016)

The re-deduction profit fee of the plaintiffs can be considered as a disposition of surplus, and it can not be considered as a sales incidental expense or sales discount, etc.

The distribution of the re-deduction fee shall not be made where benefits remain after the settlement of accounts related to the mutual aid project for each business year only for the members of the Plaintiff’s member cooperatives, which are the stockholders of the Plaintiff, and where no benefits remain, the substance thereof shall conform to the disposal of surplus

Article 19 (Scope of Deductible Expenses)

Article 25 (Non-Inclusion of Entertainment Expenses in Deductible Expenses)

2017Guhap52412 Revocation of Disposition of Imposing corporate tax, etc.

AAAA

The director of the tax office

January 18, 2019

January 25, 2019

1. On November 5, 2013, the part exceeding KRW 000,000,000 among the disposition imposing corporate tax for the business year 2008 (including additional tax), which the Defendant issued to the Plaintiff on November 5, 2013, exceeds KRW 00,000,000 among the disposition imposing corporate tax for the business year 2009 (including additional tax); the part exceeding KRW 00,000,000 among the disposition imposing corporate tax for the business year 209; the part exceeding KRW 00,000,000 among the disposition imposing corporate tax for the business year 200,000,000 (including additional tax); and the part exceeding KRW 00,000,000 among the disposition imposing corporate tax for the business year 2011 (including additional tax).

2. The plaintiff's remaining claims are dismissed.

3. One-half of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

Cheong-gu Office

Each disposition described in paragraph (1) and corporate tax for the business year 2010 that the Defendant rendered to the Plaintiff on November 19, 2013

The disposition of withholding tax of KRW 00,000,000 and the disposition of imposing additional tax of KRW 00,000,000 shall be revoked in entirety.

1. Details of the disposition;

A. The Plaintiff is a legal entity established pursuant to AAA law for the purpose of improving the common interest and sound development of its members, and carries out education and support projects for its members, AAeconomic projects, BB economic projects, andCC financial projects.

B. The director of the Seoul Regional Tax Office is a legal entity tax against the Plaintiff from May 27, 2013 to October 23 of the same year.

After conducting an integrated investigation, the following results were notified to the Defendant:

1) A local union and a product cooperative (hereinafter referred to as a "member cooperative") as a member of the Plaintiff had received mutual aid fees from a member of a mutual aid association to the business year 2008 from 2008 to the business year of 201, and operated a mutual aid business for which the Plaintiff received mutual aid fees from a member cooperative and received them from a member cooperative within the aforementioned period, and operated a mutual aid business for which the Plaintiff is liable for mutual aid under a mutual aid agreement. The Plaintiff is entitled to KRW 00 million out of the profits accrued from a mutual aid business during the above period of 2008 + approximately KRW 00 million in business year 200,000 in 200,000 in 200 + approximately KRW 00,000 in 200 in 200 in 200 in 2010 + KRW 000 in 200 in 20 in 200 in Inclusion of surplus funds from the member cooperative under the title of 1000.

2) From 2008 to 2011, the Plaintiff reduced or exempted interest of approximately KRW 00,000,000,000 in total to 62 debtors, including Park K, etc. (hereinafter “62 debtors”) for the business year 2008 + approximately KRW 000,000,000 in the business year 2009 + approximately KRW 000,000,000 in the business year 2009 + approximately KRW 000,000 in the business year 2010 + approximately 00,000,000 in the total amount of the reduction or exemption. However, since the Plaintiff made the above reduction or exemption for the purpose of facilitating transaction with the debtor, it constitutes entertainment expenses. Therefore, the amount exceeding the limit of entertainment expenses should be included in the calculation of losses (hereinafter “instant 2 disposition”).

3) The Plaintiff organized the instant system development team composed of the Plaintiff’s employees in the process of establishing the new system and the K-IFR system (hereinafter “instant system”) to introduce the International Financial Reporting Standards (hereinafter “Korea International Financial Reporting Standards”). The Plaintiff accounts for the benefits paid to the employees belonging to the instant system development team in the business year 2008, 2010, and 201 as operating expenses, and included in the calculation of losses, but the said benefits should be depreciated after being appropriated as intangible assets development expenses pursuant to Article 24(1)2(f) of the Enforcement Decree of the Corporate Tax Act. Thus, the amount exceeding the depreciation limit should be included in the calculation of losses (hereinafter “3 disposition”).

4) The Plaintiff acquired 000 public charges, which can pay local taxes, and established them in a local union by means of a financial lease, and disbursed approximately KRW 000,000,000,000, which is a total of the rent from March 2009 to September 201. The Plaintiff accounts for the above rent as operating expenses, but the said rent was paid for the purpose of facilitating business relations with the local union, and thus, it constitutes entertainment expenses. Therefore, the excess amount of entertainment expenses should be included in deductible expenses (hereinafter “the ground for disposition 4 of this case”).

5) The CCC Co., Ltd. (hereinafter “CC”) entered into an advance refund guarantee agreement with the EE Co., Ltd. (hereinafter “CC”) around 2008 and issued a 30-year advance refund guarantee agreement with the Plaintiff (hereinafter “Plaintiff 2, 300,000,000,000 won and 200,000,000 won and 200,000,000 won and 30,000,000,000 won and 20,000,000,000 won and 30,000,000,000,000,000 won and 20,00,000,000,000 won and 20,00,00,000,000 won and 20,00,000,00,00 won and 30,00,00,00,00.

C. On November 5, 2013, upon notification of the results of investigation by the director of Seoul Regional Tax Office, the Defendant imposed corporate tax (including additional tax; hereinafter the same shall apply) for the business year from 2008 to 2011 as stated in attached Table 1-2, on the ground that the Plaintiff was subject to imposition of corporate tax (including additional tax; hereinafter the same shall apply) as stated in attached Table 1-2. On the 19th of the same month, the Defendant imposed corporate tax and imposition of additional tax on the Plaintiff on the ground of the ground of the instant disposition No.

D. On January 29, 2014, the Plaintiff dissatisfied with each of the above dispositions and filed an appeal with the Tax Tribunal. On October 31, 2016, the Tax Tribunal accepted the Plaintiff’s request on the remaining grounds for disposition other than the grounds for disposition Nos. 1 through 4 of the instant disposition, and decided that part of the corporate tax imposed for each business year from 2008 to 2011 should be reduced. Accordingly, the Defendant corrected part of the corporate tax imposed for each business year from 2008 to 2011. The Defendant accepted the Plaintiff’s request on the remaining grounds for disposition other than the grounds for disposition Nos. 1 through 4 of the instant case, and corrected part of the corporate tax imposed for each business year from 208 to 2011. Accordingly, the final corporate tax imposed for each business year from 208 to 2011 as stated in the corporate tax list No. 31 of the corporate tax imposed for each business year from 2013 to 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3, Eul evidence No. 1 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

(4) The portion exceeding the amount of legitimate tax stated in attached Table 1-4 of the disposition imposing corporate tax of this case and the disposition imposing corporate tax of this case shall be revoked for the following reasons.

1) Regarding the ground for disposition No. 1 of the instant case

The fees paid by the Plaintiff to member cooperatives shall not constitute the disposal of surplus funds. The reasons are as follows.

A) The disposal of surplus funds that does not allow inclusion in deductible expenses under Article 19(1) and Article 20 subparag. 1 of the Corporate Tax Act means reducing the accumulated balance of surplus funds after deducting necessary expenses for business activities from profits arising from corporate business activities. Therefore, as long as a specific expenditure of a corporation falls under expenses necessary for business activities and is included in deductible expenses at the stage of disposal of surplus funds, deeming the specific expenditure already completed in deductible expenses as disposal of surplus funds cannot be allowed.

Re-deduction agreement entered into between the Plaintiff and member cooperatives is identical in nature to re-insurance contracts entered into by private insurance companies and private insurance companies. The Plaintiff pays 're-deduction profit fee' to member cooperatives in order to induce the acceptance of beneficial mutual aid agreements from member cooperatives, which has the nature of sales overcharge or sales incidental expenses like 're-insurance profit fee paid by re-insurance companies'. Even if the re-deduction profit fee differs from the substance of re-insurance profit fee, the re-deduction profit fee constitutes sales overcharge or sales incidental expenses, as it has business relation, which is the requirement of deductible expenses under the Corporate Tax Act, i.e., business relation, commercial nature, and revenue-related relationship. Therefore, the surplus earnings should be included in the calculation of losses at the pre-sale stage.

B) It is true that the distribution of surplus funds (i.e., ‘one-time profit distribution’) for the performance of business use under the current relevant laws and regulations is regarded as the disposal of surplus funds. However, since the use profit distribution has the nature of ex post facto adjustment of the transaction price, unlike the general dividend paid in return for investment, deeming it as the disposal of surplus funds does not coincide with the purport of Articles 19(1) and 20 subparag. 1 of the Corporate Tax Act. Furthermore, the use profit distribution is the source of surplus funds, whereas the re-deduction profit payment is not the source of surplus funds. Therefore, both cannot be the same.

C) Article 57 subparagraph 2 of the former AAAAA mutual aid program supervision guidelines (amended byuu Public Notice No. 2012-29 of March 1, 2012; hereinafter the same shall apply) and Article 126 (2) of the Plaintiff’s Mutual Aid Regulations (hereinafter “former Mutual Aid Regulations”) stipulate that a business performance share, which is the source of funds for re-deduction benefit fees, shall be used as corporate tax expenses. Article 35 (1) 8 of the AAA provides that disposal of surplus funds shall be conducted through a resolution of a general meeting. Article 190-3 (1) of the AAA provides that a resolution of a general meeting shall not be required to allocate re-deduction benefit fees, and that the same shall not apply to cases where the AAA law or the Plaintiff’s articles of incorporation, etc. provides that the method of calculating the amount of non-deduction benefit under Article 190-3 (1) of the former Mutual Aid Fund supervision guidelines, regardless of the amount of re-deduction benefit payment guidelines of the Plaintiff.

2) Regarding the ground for the instant disposition No. 2

62 debtors with interest reduction and exemption are insolvent debtors who are judged to have practical benefits in credit management. The reduction and exemption of interest on insolvent debtors for the purpose of recovering the principal is a normal business activity of other financial institutions, and thus, it constitutes losses as ordinary expenses generally recognized.

In order to appropriate the reduction or exemption of interest on a insolvent debtor as entertainment expenses, the period of attribution of interest income shall arrive. However, since the relevant provisions stipulate that the delinquent period of 90 days or more shall not account for the interest accrued to delinquent loan bonds and other bonds with low possibility of realizing other profits, the period of attribution of interest income cannot arrive until it is actually imported, and thus, it is not allowed to appropriate it as entertainment expenses. In addition, the amount paid for the purpose of enhancing friendship is limited to entertainment expenses under the Corporate Tax Act. The exemption of interest on 62 debtors does not fall under the amount paid by entertainment, entertainment, entertainment, entertainment, and other similar methods, and it is not the amount paid for the purpose of enhancing friendship. It does not constitute entertainment expenses under the Corporate Tax Act.

3) Regarding the ground for disposition No. 3 of the instant case

Article 24(1)2(f) of the Enforcement Decree of the Corporate Tax Act limits the amount of development expenses, which are intangible assets subject to depreciation, to the amount of development expenses appropriated by the relevant corporation. The Plaintiff accounts for the benefits paid to the employees belonging to the instant system development team, taking into account the circumstances where a large number of employees belonging to the instant system development team concurrently hold office other than the construction of the instant system, and it is difficult to reasonably distinguish only the portion related to the construction of the instant system from the portion related to the construction of the instant system. As long as the Plaintiff accounts for the benefits paid to the employees belonging to the system development team of this case as business expenses, it is not permissible for the tax authority to include them as intangible assets subject to depreciation.

4) Regarding the ground for disposition No. 4 of the instant case

In order to attract the treasury of a local government, a local government shall be equipped with various facilities for the convenience of local tax payment, such as a public charge collection machine, etc. In order to attract the treasury of a local government, the Plaintiff established the public charge collection machine in a local government without a public charge collection machine, thereby inducing the treasury of a large number of local governments, thereby gaining considerable profits. Therefore, the lease fee for the public charge collection machine is a cost for creating profits, and it does not constitute entertainment expenses under the Corporate Tax Act.

5) Regarding the grounds for disposition No. 5 of the instant case

The additional refund of this case is not compensation but compensation for the restoration of the original state following the cancellation of a shipbuilding contract of this case. Accordingly, the additional refund of this case does not constitute "compensation for damages paid due to breach or termination of a contract on property rights in the Republic of Korea, which is other income under Article 93 subparagraph 11 (b) of the former Corporate Tax Act and Article 132 (10) of the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010)."

Even if the additional payment on refund of this case constitutes damages, EE may not be deemed as falling under the “money received in excess of compensation for the payment itself as stipulated in Article 132(10) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010), since the additional payment on refund of this case incurred damages equivalent to all the expenses incurred under the trust in the shipbuilding contract, such as borrowing the advance payment to CCC from a foreign financial institution and paying interest at the interest rate of 3% or 4% per annum (hereinafter “Lonon inter-banked rate”).

Therefore, the refund of this case does not constitute domestic source income of EE.

B. Relevant statutes, the Plaintiff’s regulations, and K-IFRS

Attached Form 2 shall be as stated in the relevant statutes, etc.

C. Determination on the ground for Disposition No. 1 of this case

1) Facts of recognition

A) From 1961 to 1961 for the purpose of mutual aid among the members of a member cooperative, the member cooperative began to engage in a mutual aid project to pay the mutual aid money to the members when an accident that was agreed in advance occurs within a certain period of time after receiving the mutual aid money from the members of the cooperative. In 1977, the Plaintiff acquired the National Life Insurance Co., Ltd., which received the mutual aid money from the member cooperative and expanded the target amount to persons other than the members of the member. The Plaintiff operated a mutual aid project to take over the liability for mutual aid under the mutual aid agreement with the member cooperative. All the mutual aid products developed by the Plaintiff and the

B) A mutual aid agreement concluded by a member cooperative was entirely re-deductible to the Plaintiff without exception, and during which process, assets related to mutual aid, such as mutual aid fees, paid by the member cooperative from the mutual aid agreement party, were entirely transferred to the Plaintiff, and risks arising from mutual aid

C) The main contents of the re-deduction agreement entered into between the Plaintiff and member cooperatives are as follows.

Article 1 (Conclusion of Re-Mutual Aid Contracts)

the Plaintiff shall be entitled to a mutual aid agreement concluded by a member cooperative, and shall not be entitled to a mutual aid agreement

The conclusion of a re-deduction agreement shall be governed by this basic agreement.

III.(Terms and Conditions of Mutual Aid, Mutual Aid Securities, and All Other Forms)

Terms and Conditions of mutual aid, mutual aid securities, and all other forms necessary for the conclusion of mutual aid agreements by a member cooperative shall be the plaintiff.

shall be subject to the provisions of this subsection.

Article 6 (Payment of Mutual Aid Funds)

Members cooperatives shall not obtain the consent of the plaintiff after the amount of re-deduction to be paid by the plaintiff has become final and conclusive or after the

No mutual aid money shall be paid to the mutual aid contract for the re-mutual aid contract.

Article 13 (Performance of Duties by Members Cooperatives concerning Mutual Aid Contracts)

Work handling of a member cooperative concerning a mutual aid agreement and a mutual aid agreement shall be as determined by the Plaintiff; or

The plaintiff shall follow the direction of the plaintiff.

D) According to Articles 57, 57-2, 126, 190-2, and 190-3 of the former Regulations on the Supervision of Mutual Aid Projects, the Plaintiff settled accounts related to mutual aid projects at the end of each business year, and treated the remaining amount after accumulating the liability reserve as profits and losses from the distribution deductions, undividend deductions, profits and losses from the capital account, and profits from the capital account. Among them, the Plaintiff distributed an amount calculated by multiplying the business performance share by the re-deduction ratio, the contribution ratio of the member cooperative, etc. from the amount of less than 10/100 of the profits and losses from the undividend deductions, and the profits and losses from the distribution deduction to the member cooperative as the fee for re-deduction profits. The Plaintiff allocated the amount of 00,000,000 won in total to the member cooperative from the business year 2008 to the business year 200,000,000 won in 10,000 won in 200,000 won in business year.

[Ground of recognition] Facts without dispute, entry of evidence Nos. 8, 9, 16, 23, 26, 27 and the purport of the whole pleadings

2) Determination

Article 19(1) of the Corporate Tax Act provides that "deductible expenses shall be the amount of losses or expenses incurred by transactions which reduce the net assets of the corporation, excluding the refund of capital or financing, appropriation of surplus funds, and those prescribed by this Act," and Article 20(1) of the same Act provides that "the amount appropriated as deductible expenses when settlement of accounts is finalized shall not be included in deductible expenses for the purpose of calculating the income amount of a domestic corporation for each business year." A surplus refers to the amount of net assets of the corporation less the capital, which is the profit accrued from capital transactions and business activities, and only the earned surplus shall be disposed of as dividends, etc. in accordance with the statement of disposal of earned surplus with the approval of the general meeting of stockholders after settlement of accounts. A surplus disposal means the disposal of such earned surplus. It means the disposal of such earned surplus, and even if a specific amount is disposed of without being disposed of in the form of dividends, etc. by the appropriation of retained earnings with the approval of the general meeting of stockholders after settlement of accounts,

In full view of the following circumstances revealed by the statement No. 7 as well as the above facts of recognition and the purport of the entire pleadings, it is reasonable to view that the Plaintiff’s re-deduction profit fee distributed to member cooperatives constitutes a disposition of surplus funds subject to non-deductible losses under Articles 19(1) and 20 subparag. 1 of the Corporate Tax Act. Accordingly, the Plaintiff’s assertion on a different premise is without merit.

A) The former standards for supervision of mutual-aid projects and the mutual-aid regulations stipulate that “the Plaintiff shall refund part of the profits earned by taking over a mutual-aid benefit from a member cooperative from the member cooperative to the settlement term of each mutual-aid project (Article 2 subparag. 11 of the former Standards for Supervision of Mutual-Aid Projects). In settling accounts related to mutual-aid projects at the end of each business year, the amount calculated by multiplying the total sum of the remaining amount after accumulating the liability reserve by 10/100 of the profits and losses from mutual-aid deduction and the profits and losses from mutual-aid deduction and the contribution ratio of the member cooperative, etc. shall be distributed to member cooperatives

(former Guidelines for Supervision of Mutual Aid Project, Articles 57 and 57-2, Articles 126, 190-2, 190-3, etc. of the Mutual Aid Regulations)

The distribution of the re-deduction profit fee under the above provisions is consistent with the disposal of surplus because it does not take place in cases where benefits remain after the settlement of accounts related to mutual aid projects for each business year only for the member cooperatives which are the Plaintiff’s stockholders, and no profits remain.

B) Unlike a general profit-making corporation, a cooperative is an organization with the purpose of mutual aid among its members, and has the characteristics of making contributions, exercising voting rights, and receiving profits from the scale of use. The AAA law stipulates that a member who is the user of a cooperative makes an investment in the Plaintiff (Article 117 of the AAA), exercising voting rights (Article 122 of the AA) by attending the Plaintiff’s general meeting, and receiving dividends based on the results of the use of business (Article 161 and Article 68(3)1 and 2 of the AA law). The AA law provides that a cooperative shall receive dividends from surplus funds according to the results of the use of business by its members (Article 161 and Article 68(3)1 and 2 of the AA law). The dividends from surplus funds are calculated by multiplying the amount of dividends distributed for each business operated by the Plaintiff and the amount of dividends distributed by its members multiplied by the ratio of use of business (see Article 126(2) and 7 of the AA’s articles of association).

C) The term “re-insurance contract” refers to an insurance contract, the main function of which is to increase the ability of the original insurer to take over and to reasonably operate insurance risks in accordance with the law of the number of the re-insurers by taking over all or part of the liabilities under the insurance contract taken over by the original insurer to the reinsurance company. In the event of concluding the re-insurance contract, the original insurer may have the effect of expanding the business territory, improving the financial structure, etc. by allocating risks according to the insurance contract to the reinsurance company

A private insurance company enters into a reinsurance contract with a private insurance company for the purpose of distributing risks according to an insurance contract only when it sells its insurance products and obtains profits from the insurance contract. On the other hand, because the member cooperatives have no ability to design the mutual-aid products by themselves, they are only paying sales commission, etc. from the Plaintiff while selling the mutual-aid products designed by the Plaintiff. Property related to mutual-aid projects is entirely transferred to the Plaintiff, and the profits arising from mutual-aid contracts belong to the Plaintiff, not a member cooperative, and there is no risk that the Plaintiff bears the burden of the member cooperatives. As such, the nature of the mutual-aid contract entered into between the Plaintiff and the mutual-aid contract entered into between the private insurance company and the private insurance company, and the reinsurance contract entered into between the private insurance company and the private insurance company, it cannot be said to be identical with the re-insurance profit fee paid by the Plaintiff to the private insurance company. Rather, in light of the aforementioned roles of the Plaintiff and the member cooperatives, the re-mutual-aid business operated by the Plaintiff is considerably similar to the insurance business operated by the private insurance company, and thus, Article 8(2).

D) Since a private-managed re-insurance company acquires an insurance contract that it is not possible for it to participate in, it is an essential factor to promote the interest of re-insurance business by selecting a profit-making insurance contract. On the other hand, the Plaintiff’s own development of a mutual-aid product, instructs its member cooperatives to conduct its business, and takes over all the mutual-aid products that the member cooperatives concluded in accordance with the Plaintiff’s business practice direction without exception. As such, the essential factor promoting the interest of re-mutual-aid business is not to select and take over profitability mutual-aid contracts that are not for the Plaintiff to develop a profit-making mutual-aid product. Accordingly, unlike the profit-making fee paid in return for the acquisition of a profit-making insurance contract, the re-mutual-aid profit cannot be deemed as the cost incurred directly in connection

E) Above all, if the Plaintiff considered the sales overcharge or sales incidental expenses paid by the Plaintiff as the consideration for taking over a beneficial mutual aid agreement, even if the Plaintiff engaged in a mutual aid business during the pertinent business year and engaged in a mutual aid business for the pertinent business year, if the Plaintiff considered profits in relation to a specific member cooperative in the pertinent business year, the mutual aid profit fee should be paid to the member cooperative. In fact, the private-managed re-insurance company, which has gained profits in the pertinent business year even if losses incurred in operating a re-insurance business for the pertinent business year, appears to have paid the re-insurance profit fee.However, if the Plaintiff is deemed to have suffered losses in relation to the re-insurance business in the pertinent business year, the Plaintiff did not pay the re-deduction profit fee to the member cooperative even if considering the profits in relation to the specific member cooperative. The substance of the re-deduction profit fee allocated to the

F) Article 57 subparag. 2 of the former Guidelines for Supervision of Mutual Aid Fund provides that "the management performance and shares shall be used as financial resources for the payment of corporate tax costs." Considering that the remaining balance after deducting corporate tax costs is a surplus, it is true that the above provision is not inconsistent with the concept of appropriation of surplus funds. However, uuuu division, who has established the former Guidelines for Supervision of Mutual Aid Fund, seems to have continuously prescribed the above provision without serious consideration as to the concept of surplus funds. However, it cannot be denied that the distribution of re-deduction profits with only the above provision constitutes the disposal of surplus funds.

G) As mentioned earlier, if, even if a specific amount was disposed of by taking the form of commission, etc. without being disposed of as a dividend, etc. with the approval of the general meeting after the settlement of accounts, it shall be deemed the disposal of surplus funds if the substance is to distribute the earned surplus reserved to the corporation to the shareholders. Therefore, even if there is no provision that requires the resolution of the general meeting when allocating the re-deduction profit fee under the related statutes, it shall not be denied that the distribution of the re-deduction profit fee constitutes the disposal of surplus funds

H) Whether the appropriation of surplus earnings is enforced by internal regulations, and whether the standards for disposition of surplus earnings are stipulated by internal regulations are not directly related to the nature of the disposition of surplus earnings. Thus, whether there exists a provision that stipulates the allocation of re-deduction earnings as mandatory or the allocation standards for re-deduction earnings under the mutual aid regulations does not fall under the circumstances that are significant to consider in determining whether the allocation of re-deduction earnings constitutes the disposal of surplus funds.

(On the other hand, Article 190-2 (1) of the Mutual Aid Regulations explicitly stipulates that the allocation of the re-deduction benefit fee is discretionary matters, so the allocation of the re-deduction benefit fee cannot be considered as the obligation.

D. Determination on the ground for Disposition No. 2 of this case

Article 19-2 (1) of the Corporate Tax Act provides that "the amount of claims which cannot be recovered due to reasons prescribed by Presidential Decree, such as the debtor's bankruptcy, etc. among claims held by a domestic corporation (hereinafter referred to as "deductible expenses") shall be included in deductible expenses when calculating the amount of income for the relevant business year." Article 19-2 (1) of the Enforcement Decree of the Corporate Tax Act provides that "the amount of claims which cannot be recovered due to reasons prescribed by Presidential Decree under Article 19-2 (1) of the Act refers to any of the following subparagraphs," "bonds which are determined as irrecoverable due to reasons prescribed by Presidential Decree" in each subparagraph or court's decision to grant authorization for the rehabilitation plan (Article 19-2 (1) of the Act), "bonds which cannot be recovered due to the debtor's bankruptcy (Article 8)," "bonds the amount of which is 200,000 won or less, and those which are clearly required by the Governor of the Financial Supervisory Service to be included in deductible expenses under the proviso to the main sentence of Article 61 (2)."

The fact that the Plaintiff reduced or exempted interest of approximately KRW 0,00,000,000 in total to 62 debtors from 2008 to 2011 and added the total amount to deductible expenses is no dispute between the parties. Although the Plaintiff asserts that the above 62 debtors’ recovery of principal through the reduction or exemption of interest constitutes an insolvent debtor who is judged to have practical benefits in managing the claims, there is no evidence to prove that the above debtors were insolvent debtors who have extremely low possibility of collecting the loan claims to the extent that they would have inevitably waived the whole or part of the interest claims to recover the loan claims. Therefore, it is not allowed to include the interest reduction or exemption in deductible expenses. Accordingly, the Plaintiff’s assertion on the different premise cannot be accepted without further review.

E. Determination as to the ground for disposition No. 3 of this case

1) Article 24(1)2(f) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002) defines development expenses, which are intangible assets subject to depreciation, as expenses incurred in connection with research or development activities of new and new products, which may expect future economic effects and benefits, and does not distinguish research expenses and development expenses.

However, Article 24 (1) 2 (f) of the Enforcement Decree of the Corporate Tax Act amended by Presidential Decree No. 17826 of Dec. 30, 2002 changed the definition of development cost, which is an intangible asset subject to depreciation, to create or significantly improve materials, devices, products, processes, systems, or services before commercial production or use, to "the definition of development cost, which is an intangible asset subject to depreciation, is added to the development cost of the relevant corporation, for the purpose of creating or substantially improving plans or designs to create materials, devices, products, processes, systems, or services, which are all required to meet the corporate accounting standards, and the tax accounting, which are consistent with corporate accounting standards that ensure that only the development cost meeting the requirements presented is recognized as intangible assets."

The amendment of the Enforcement Decree of the Corporate Tax Act is in accordance with the corporate accounting respect principle (Article 20 of the Framework Act on National Taxes and Article 43 of the Corporate Tax Act) that tax authorities shall respect corporate accounting when they apply corporate accounting standards generally deemed fair and reasonable in calculating the amount of income of a domestic corporation for each business year. Thus, unless there are special circumstances in which the domestic corporation fails to account development costs as development costs, and accounts for business costs as sales costs without any room for the theory, the tax authorities may not allow to arbitrarily appropriate them as development costs.

2) In the process of building the instant system, the Plaintiff organized the instant system development team comprised of the Plaintiff’s employees; the Plaintiff’s salary paid to the employees belonging to the system development team in the business year 2008, 2010, and 2011 was accounted for as business expenses; however, the Plaintiff’s accounting of part of the instant system construction work entrusted to an external information system development project entity and paid for the payment for it is an intangible asset development cost, not operating expenses. There is no dispute between the parties.

In light of the fact that the Plaintiff voluntarily entrusted an external information system development entity with part of the system construction work of this case and the service cost paid in return for the construction of the system is an intangible asset development cost, Article 66(1) and (2) of the sentence of the KS No. 1038 provides that “the employee benefits, etc. incurred for the creation of intangible assets” shall be recognized as the cost of intangible assets. In light of the fact that the Plaintiff directly accounts for the development cost of intangible assets, the payment paid to the employees belonging to the system development team of this case to the employees of the instant system development team shall also be deemed to be consistent with the K-IFRS.

However, Article 1038 (2) provides that "only if the cost of an intangible asset can be measured in a reliable manner, it shall be recognized as intangible asset." It is difficult to determine the cost of an intangible asset created inside the company. This is because there is a case where it is difficult to distinguish the cost of an intangible asset created inside the company from the cost of an intangible asset generated in daily business management activities. Therefore, the intangible asset generated from development activities can be recognized as intangible asset only if the company has an ability to measure the expenditure incurred in the development process in a reliable manner." The Defendant asserts that the system development team’s employees are unable to perform the system construction work in the business year 208, 2010, and 2011, and that it is not possible to establish a new system construction project within the pertinent period of 17 and 57 (6). However, it appears that the Plaintiff’s establishment of a new system construction project within the pertinent period of 3rd workers, other than the system development process, could not be recognized as unlawful.

F. Determination on the ground for Disposition No. 4 of this case

1) Article 19(2) of the Corporate Tax Act provides that "loss expenses shall be losses or expenses incurred in connection with the business of the corporation which are generally accepted as normal or directly related to profit." Here, "generally accepted expenses" means expenses that are deemed to have been disbursed under the same situation with respect to other corporations engaged in the same kind of business as taxpayers. Determination of whether such expenses constitute expenses must be made objectively by comprehensively taking into account the details, purpose, form, amount, effect, etc. of expenditures. Of the expenses paid by a corporation for a business, if the other party is a person related to the business and the purpose of disbursement is to promote friendship among the persons related to the business through entertainment, etc. and facilitate the transaction relationship, such expenses shall be deemed entertainment expenses under the Corporate Tax Act, but if the expenses are recognized as normally required in relation to sales in light of sound social norms or commercial practices, such expenses constitute losses under the Corporate Tax Act (see, e.g., Supreme Court Decision 2007Du12422, Nov. 12, 2009).

2) Comprehensively taking account of the overall purport of the pleadings as indicated in Gap evidence Nos. 3, 7 through 9, and 22, the following facts can be acknowledged: ① from 2009 to 201, the Plaintiff was established in a local union that did not hold approximately 000 public charges by acquiring approximately 000 public charges by means of financial lease from 2009 to 201; ② the Plaintiff entered into an agreement to operate a credit cooperative business with multiple local governments, including RRs, from 2009 to 2011; ③ the Plaintiff received public charges on behalf of the Plaintiff through the public charges received by the Plaintiff; ④ the amount received by the Plaintiff through a credit cooperative agreement with a local government is KRW 0 million in the case of 2009, 000,000 in the case of 2010,000,000 won in the case of 200,000 won in each case of 200,000 won.

In light of the amount received by the Plaintiff through an agreement with a local government for the handling of treasury affairs from 2009 to 2012, financial institutions that concluded an agreement with a local government for the handling of treasury affairs can obtain enormous exclusive profits by receiving a set of money of KRW 200,00, so financial institutions qualified to handle treasury affairs are competing to attract the treasury of the local government. However, Article 3 of the former Standards for the Designation of Treasury of the local government (amended by the Rules of the Ministry of Security and Public Administration No. 1 of March 25, 2013) of the former Standards for the Designation of Treasury of the local government (amended by the Rules of the Ministry of Security and Public Administration No. 1 of the same Act of March 25, 2013) provides that "where the Plaintiff intends to designate treasury by competitive methods, the convenience of the use of local residents is 15%, which means that the Plaintiff actually bears the burden of using public charges for the purpose of establishing local government's convenience in collecting local taxes (5%), local tax revenue (5%).

G. Determination on the grounds for disposition No. 5 of this case

1) Organization of issues

Article 93 subparag. 11(b) of the former Corporate Tax Act and Article 132(10) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010) provide that a foreign corporation is liable for damages that it receives due to a breach or termination of a contract on property rights in the Republic of Korea, and the money paid in excess of the compensation per se for payment itself under the original contract regardless of its title constitutes a domestic source income of a foreign corporation. Article 98(1)3 of the former Corporate Tax Act provides that "domestic source income under Article 93 subparag. 11 of the former Corporate Tax Act that is not actually related to a domestic place of business or is not attributed to a domestic place of business, shall be withheld at the tax office having jurisdiction over the place of tax payment, etc. by the tenth day of the month following the month in which the date of such withholding falls."

(2) If the additional dues of this case constitute damages paid due to the breach or cancellation of the shipbuilding contract of this case, then the additional dues of this case constitute damages paid due to the breach or termination of the shipbuilding contract of this case, the question is whether the additional dues constitute monetary compensation in excess of the original damages to the payment itself under the terms of the shipbuilding contract of this case.

2) The legal nature of the instant additional dues on refund

CCC entered into the instant shipbuilding contract with EE and received approximately KRW 0,00,000 in advance, and the Plaintiff was unable to deliver the vessel on the date set by the EE and CCC. The Plaintiff entered into an advance refund guarantee contract with the EE and issued an advance refund guarantee certificate with the effect that the Plaintiff would return additional dues on the advance payment received from EE and the refund to EE. On April 30, 2010, the instant shipbuilding contract was rescinded on or around April 30, 2010; the Plaintiff entered into the instant shipbuilding contract with the EE and paid approximately 0,000,000,000,000,000 in advance under the said advance refund guarantee contract; and the vessel refund contract with the parties to the instant case was not subject to any dispute between the parties to the instant shipbuilding agreement and the parties to the instant shipbuilding agreement, and the vessel refund agreement with the parties to the instant case was not subject to any other dispute between the parties to the instant shipbuilding agreement and the parties to the instant shipbuilding agreement.

In full view of the following circumstances revealed through the facts recognized as above and the purport of the entire pleadings, it is reasonable to deem that the instant additional payment on the refund paid by the Plaintiff to EE constitutes damages paid due to the cancellation of a contract, not the return of unjust enrichment paid for the purpose of restitution.

A) Under the instant exemption agreement, EE cannot claim additional damages against CCC if advance payment and additional dues are refunded from CCC or the Plaintiff. In cases where the legal nature of the instant additional dues is deemed to be restitution, the conclusion was reached that the parties to the instant contract agreed not to claim damages already incurred or anticipated damages that may arise in addition to restitution is very exceptional.

B) The instant additional refund is paid within the meaning of compensating for losses suffered by EE due to the causes attributable to the CCC, and thus, it cannot be deemed that the instant additional refund is a return of unjust enrichment for restitution purposes, regardless of the causes attributable thereto.

C) In order to ensure predictability in disputes that may arise in the future due to the nature of the shipbuilding contract that may cause unexpected damages and to resolve difficult proof, it is necessary to pre-determined the amount of damages when concluding the shipbuilding contract. The instant exemption agreement appears to have been concluded in accordance with the aforementioned needs.

3) Whether the instant additional payment on refund constitutes money paid in excess of the damages to the payment itself under the original terms of the contract

A) The meaning of losses exceeding the damages to the payment itself under the original contract

The intrinsic nature of domestic source income can be taxed only when income is generated, so even if penalty or compensation is paid due to a default or termination or cancellation of a contract, it is not imposed as other income, but it is imposed as other income only upon penalty or compensation paid in excess of the compensation for losses. Therefore, the "damage exceeding the damages to the payment itself, which is the contents of the present contract under Article 132 (10) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010)" is not the "affirmative damages, such as loss or reduction, etc. of existing profits arising from the nonperformance of the contractual party's obligation," but the "negative damages such as losses of opportunity to use the amount paid to the other party to the contract, etc." (see, e.g., Constitutional Court Order 2008Hun-Ba79, Feb. 25, 2010).

B) Specific determination

(1) EEE due to the cancellation of the shipbuilding contract of this case, (1) active damages in advance paid to CCC itself and (2) passive damages equivalent to interest accrued due to the failure to use the said advance payment in other places. The EE, out of the damages incurred by the cancellation of the shipbuilding contract of this case, was paid to CCC. The amount of the advance payment not refunded was paid by the Plaintiff, and was compensated by the Plaintiff.

Therefore, the instant additional refund is deemed to have been paid in order to compensate for damages equivalent to interest accrued due to failure to use the advance payment paid by EE to CCC in other places beyond such active damages. Thus, the instant additional refund constitutes the money paid in excess of the amount of compensation for the payment itself, which constitutes the original contract under Article 132(10) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010).

(2) As to this, the Plaintiff asserts that, in addition to the aforementioned active and passive damages, EE has suffered damages equivalent to the amount of all expenses incurred in trust in the instant shipbuilding contract, such as borrowing the advance payment to CCC from a foreign financial institution and paying interest at an interest rate of 3% to 4% per annum.

First of all, we examine the burden of proof of damages incurred by EE due to the cancellation of shipbuilding contract of this case. Considering that the existence of damages is favorable to the taxpayer and the facts related to such damages is within the control area of the taxpayer and that it is easy for the taxpayer to prove the existence of ordinary damages that can be known through the nature of the contract itself and the text of the contract, the existence of damages that may arise due to the special circumstances of the parties to the contract in addition to such ordinary damages is in need of proof by the taxpayer. Although the vessel owner borrowed advance payment from the financial institution or raised bonds through the issuance of new bonds, the vessel owner is also able to raise funds with net assets or additional capital increase with existing stocks, it cannot be deemed that the vessel owner is not required to borrow advance payment from the financial institution, etc. Therefore, even if the vessel owner merely borrowed advance payment from the financial institution to the shipbuilding company, etc., and there is no need to establish the Plaintiff’s practice to acknowledge the existence of damages due to the Plaintiff’s lack of interest rate of 3% or 4% as alleged in the above circumstances.

However, there is no evidence to acknowledge that the EE borrowed advance at an interest rate calculated by adding 3% or 4% per annum to the LCC by financial institutions, etc. in order to make advance payment, it cannot be deemed that the EE has suffered damages from the disbursement of interest at an interest rate calculated by adding 3% or 4% per annum to the LCC.

In addition, the Plaintiff did not specify what is the expenses incurred in claiming that EE has incurred losses equivalent to the total expenses incurred in trust in the shipbuilding contract of this case, in addition to the above interest loss incurred by EE, so it cannot be deemed that EE has suffered such losses.

Therefore, the Plaintiff’s assertion that EE has suffered damages equivalent to the total expenses incurred in trust in the shipbuilding contract of this case, such as borrowing advance payments to CCC from a foreign financial institution and paying interest at an interest rate of 3% to 4% per annum.

4) Sub-committee

The additional payment on refund of this case constitutes a domestic source income of EE under Article 93 subparag. 11 (b) of the former Corporate Tax Act, and thus, it is difficult to accept this part of the Plaintiff’s assertion on different premise.

H. Centrality

The issue of whether a disposition is lawful is determined depending on whether it exceeds a reasonable tax amount. The parties concerned may submit objective tax bases and materials supporting the tax amount until the closing of arguments in the fact-finding court. When computing the legitimate tax amount to be imposed lawfully based on such materials, only the portion exceeding the reasonable tax amount should be revoked. However, if not, the entire taxation disposition should be revoked, and in such a case, the court does not have the duty to calculate the reasonable tax amount to be imposed actively by its authority (see, e.g., Supreme Court Decisions 94Nu13527, Apr. 28, 1995; 2015Du622, Sept. 10, 2015).

As seen earlier, the non-deductible expenses related to the grounds for disposition in this case must be revoked illegally. However, the materials submitted to the court alone cannot be computed for the period from 2008 to 2011. As such, the entire disposition imposing corporate tax from 2008 to 2011 should be revoked for the period from November 5, 2013 to 0,000,000 won among the disposition imposing corporate tax on the Plaintiff on November 5, 2008, the portion exceeding KRW 0,000,000,000,000,000,000,000,000,000,000 or more of the disposition imposing corporate tax for the business year of 209 to the Plaintiff should be revoked for the business year of 200,000,000,000 won.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.