In a case where the grounds for objection are recognized as justifiable in the appeal procedure regarding the taxation disposition and the necessary disposition was made accordingly, whether the previous disposition may be reversed without any special reasons (negative)

Article 81 of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013) provides that Article 65 of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 201) shall apply mutatis mutandis to a request for review. Article 80(1) and (2) provides that Article 65 of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 201); Article 80(1) and (2) provides that a decision pursuant to Article 65 as to the validity of a decision on a request for review shall be binding upon the relevant administrative agency; and when a decision on a request for review is made, the relevant administrative

In a case where the grounds for objection are recognized as justifiable in the appeal procedure relating to the taxation disposition, and accordingly the necessary disposition has been made, the previous disposition cannot be reversed without any justifiable grounds in light of the purport of the aforementioned legal provision that recognizes the objection system and the method of correction.

Articles 65(1)3, 80(1) and (2), and 81 of the former Framework Act on National Taxes (Amended by Act No. 11604, Jan. 1, 2013);

Supreme Court Decision 82Nu63 Decided July 26, 1983 (Gong1983, 1342) Supreme Court Decision 201Du1427 Decided July 24, 2014 (Gong2014Ha, 1685)

Plaintiff 1 and one other (Law Firm Shin, Attorneys Kim Yong-nam, Counsel for the plaintiff-appellant)

The head of Yangcheon Tax Office (Law Firm LLC, Attorneys Jeon Young-young et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2015Nu58807 decided May 26, 2016

All appeals are dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Article 81 of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013) provides that Article 65 of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 201) shall apply mutatis mutandis to a request for a trial; Article 80(1) and (2) provides that the decision pursuant to Article 65, which applies mutatis mutandis under Article 81, shall bind the relevant administrative agency; and when a decision is made with respect to a request for a trial, the relevant administrative agency shall immediately take necessary measures in accordance with the purport of the decision; and Article 65(1)3 of the same Act provides that when the request for a trial is deemed reasonable, a decision to revoke or correct the disposition

In a case where the grounds for objection are recognized as correct in the appeal procedure relating to a taxation disposition, and accordingly necessary disposition was made accordingly, in light of the purport of the aforementioned legal provision that recognizes the objection system and the method of correction, the previous disposition cannot be reversed and rescheduled without any justifiable grounds (see, e.g., Supreme Court Decisions 82Nu63, Jul. 26, 1983; 201Du14227, Jul. 24, 2014).

2. The reasoning of the lower judgment and the record reveal the following facts.

A. On December 5, 2005, the KOSDAQ-listed corporation (hereinafter “IBS”) acquired all the shares of BBS Co., Ltd. Co., Ltd. (hereinafter “BS”) and entered into an all-inclusive share swap contract (hereinafter “instant exchange contract”). Under the instant exchange contract, Plaintiff 1, the shareholders of BBS, U.S., as the shareholders of BBS, acquired 2,904,904 shares for temporary closure with the price for LBS 163,556 share exchange, and Plaintiff 2 acquired 204,605 shares for temporary closure with the price for the exchange of BBS 11,520 shares.

B. Based on Article 42(1)3(c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “Gift”), the Defendant deemed the profits that the Plaintiffs acquired under the instant exchange contract as the value of donated property and made the previous disposition that determines and notifies gift tax to the Plaintiffs.

C. On December 27, 2012, the Tax Tribunal rendered a decision to revoke the previous disposition imposing gift tax by applying Article 42 of the Inheritance and Gift Tax Act, separate from the application of the provision on donation of profits from a low-price and high-price transfer with respect to the comprehensive exchange of shares, such as the instant exchange contract, on the grounds that “the previous disposition imposing gift tax by applying Article 42 of the Inheritance and Gift Tax Act is unreasonable.”

D. Accordingly, on October 1, 2013, the Defendant issued the instant disposition imposing gift tax on the Plaintiffs on the basis of Article 35 of the Inheritance and Gift Tax Act. Accordingly, the Plaintiffs filed the instant lawsuit against the Tax Tribunal, but the dismissal decision was decided.

E. However, on April 24, 2014, the Supreme Court rendered a judgment that “for profits acquired by the shareholders of a company becoming a complete subsidiary through an all-inclusive share swap under the Commercial Act, a taxation must be made by applying Article 42(1)3 of the Inheritance and Gift Tax Act, not Article 35 of the Inheritance and Gift Tax Act” (Supreme Court Decision 2011Du23047 Decided April 24, 2014).

F. After that, the Defendant added the instant provision to the underlying provision of disposition in the instant lawsuit.

3. The lower court determined as follows. First, pursuant to the above Supreme Court Decision 2011Du23047, no gift tax may be imposed on the Plaintiffs on the basis of Article 35 of the Inheritance and Gift Tax Act. Next, even if there is no change in the circumstances that form the basis for the imposition of gift tax, the act of disposing the instant provision as the ground for disposition of the instant provision not only reverses the previous disposition that was revoked during the appeal process, but also reconcing it, but also conflicts with the binding force of the judgment of the tax court that revoked the previous disposition based on the instant provision, and is against the binding force of the judgment of the tax court that revoked the previous disposition based on the instant provision, and even if it was clearly declared by the Supreme Court decision, it cannot be allowed to exclude the binding force of the judgment or allow the repetition of the disposition, so the instant lawsuit cannot add the instant provision

The lower court’s determination is justifiable and did not err by misapprehending the legal doctrine regarding the restriction on re-disposition, the addition and modification of the grounds for disposition, or the binding force of the ruling, etc. after the revocation of taxation disposition.

4. Therefore, all appeals are 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 on the bench.

Justices Park Poe-young (Presiding Justice)