early 2013 Middle 0760 (24 April 24, 2013)

It is legitimate to distribute the amount of general sales revenue accrued in the reconstruction process to the members in their own income according to the distribution ratio.

The amount of income distributed according to the ratio of each member's distribution by deeming it as the amount of income from joint projects of members, instead of filing corporate tax on the amount of income from general sale accrued in the reconstruction process.

Article 104-7 of the Restriction of Special Taxation Act

2013Guhap4287 Disposition of revocation of refusal to correct global income tax

IsaA

Head of Si Tax Office

November 13, 2013

December 18, 2013

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

On December 26, 2012, the Defendant revoked the disposition rejecting correction of the income amount related to BB3 apartment housing reconstruction and improvement project cooperatives among the reported global income tax for the Plaintiff in December 26, 2010.

1. Details of the disposition;

A. BB3 complex, apartment housing reconstruction and rearrangement project association (hereinafter referred to as the "cooperative") shall obtain authorization for the establishment of a mining name market on August 27, 2002 pursuant to Article 44(1) of the former Housing Construction Promotion Act (amended by Act No. 6852, Dec. 30, 2002) for the reconstruction project of OO 3 and 5522 OO at O, and obtain authorization for the establishment from the mining name market on July 21, 2003, Article 18 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (hereinafter referred to as the "Urban Improvement Act"), Article 10(1) of the Addenda (Act No. 6852, Dec. 30, 202) of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, and the plaintiff is its members.

B. On December 21, 2005, the Mutual Association obtained the approval of the management and disposal plan including the contents of the rental apartment constructed and leased. The Mutual Association converted the rental apartment into the general sale, and finally, made 1,887 households to the members of the Mutual Association and 185 households to the general public, respectively. In the process of general sale in 2010, the Mutual Association distributed the amount of income (net profit) calculated by deducting the sales cost, etc. from the revenue amount, such as the sales amount, as shown below, to the members of the Mutual Association without reporting the income under the Corporate Tax Act.

(amount unit: Won)

Sales

Cost of sale

Sales and management expenses

Non-business profits

Net profit

OOO

OOO

OOO

OOO

OOO

C. On December 2005, the Plaintiff paid the amount of OOO in accordance with the initial management and disposal plan including the contents of constructing the rental apartment, but the Plaintiff distributed the amount of OOO won (hereinafter “distribution amount”) according to one’s shares among the amount of income from the general sale from the partnership, and reported and paid it as business income as follows.

Revenue amount

Necessary expenses

Amount of income;

OOOE

OOOE

OOOE

D. On October 30, 2012, the Plaintiff filed a claim for correction to exclude the amount of excess paid by the Plaintiff, a partner, from the amount of global income. However, on December 26, 2012, the Defendant dismissed the claim that the amount of income can not be excluded from the amount of income (hereinafter “instant disposition”). Since the amount of distribution on December 26, 201, a joint business proprietor association divided the income to the Plaintiff, a partner, and divided the income to the Plaintiff

E. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on January 23, 2013, but was dismissed on April 24, 2013.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 and 2 (including paper numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Distribution is merely a refund of the share paid by the Plaintiff as a result of the re-Adjustment of the Plaintiff’s right value in the process of supplying land and buildings on behalf of the Plaintiff who is a member of the association in accordance with the management and disposition plan while implementing the rearrangement project, and thus, it cannot be deemed business income pursuant to Article 104-7(2) of the former Restriction of Special Taxation Act (amended by Act No. 10406, Dec. 27, 2010; hereinafter “former Restriction of Special Taxation Act”) and Article 104-4 of the Enforcement Decree of the same Act. Thus, the instant disposition that was included in the Plaintiff’s global income is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) As seen earlier, a cooperative is deemed to be a converted business cooperative under Article 104-7 of the former Restriction of Special Taxation Act, since it obtained authorization for establishment under the Housing Construction Promotion Act and completed the registration of incorporation under the Urban Improvement Act. Thus, the cooperative is obligated to pay income tax on shares distributed pursuant to the proviso to Article 104-7(1) of the former Restriction of Special Taxation Act and Article 60 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010) unless it has reported the corporate tax on the income for the pertinent business year pursuant to the proviso to Article 104-7(1) of the former Restriction of Special Taxation Act and Article 87(1) and Article 43(2) of the former Income Tax Act (amended by Act No. 1146, Jan. 1, 2012).

2) The Plaintiff asserts that Article 104-7(2) of the former Restriction of Special Taxation Act and Article 104-4 of the Enforcement Decree of the same Act shall apply to the amount distributed. However, the said provisions are applied when corporate tax is paid by a converted rearrangement project association or a rearrangement project association established after the enforcement of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Areas. Moreover, considering the structure of the relevant statutes and the characteristics of the rearrangement project, deeming the same to be non-profit business among the projects of a rearrangement project association pursuant to the said provisions refers to the cases where the association supplies the land and buildings on behalf of the previous land to its members, and otherwise, it is reasonable to deem that the profit earned by the maintenance project association from supplying the land and buildings to the general public is subject to taxation (see Supreme Court Decision 2008Du17479, Jul. 4, 2011). Accordingly, the Plaintiff’s assertion on this issue

3) In addition, the Plaintiff asserts that the substance of the amount of excess contribution is not an income refund. However, since the association received profits from the sale in general, it is unreasonable to allocate profits directly to the association members instead of allocating profits to the association members by appropriating it for construction costs and other costs during the process of promoting the rearrangement project, and it is in essence a certain circumstance or it is deemed that the association distributes profits from profit-making business to the association members. Therefore, the Plaintiff’s assertion on this is groundless

3. Conclusion

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