Plaintiff (Law Firm LLC, Attorneys Southern Dong-dong et al., Counsel for the plaintiff-appellant)

Head of the District Tax Office

September 2, 2016

1. The plaintiff's claim is dismissed.

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

The imposition of global income tax of 28,286,270 won (including additional tax of 10,713,147 won) for the year 2009, the Defendant imposed on the Plaintiff on May 10, 2015, the imposition of global income tax of 74,274,620 won (including additional tax of 24,90,391 won) for the year 2010, global income tax of 2011, global income tax of 64,480,040 (including additional tax of 18,341,264 won), global income tax of 29,869,540 won for the year 2012 (including additional tax of 6,522,68 won), global income tax of 21,341,580 won for the year 2013 (including additional tax of 6,522,688 won), and disposition of imposition of additional tax of 37,3737

1. Details of the disposition;

A. The Plaintiff was a member attorney-at-law of ○○○○○○○ (hereinafter “instant law firm”) and appointed as a trustee in bankruptcy regarding a number of bankruptcy cases from 2002 to 300, and performed his duties.

B. From 2009 to 2013, the Plaintiff performed the corporate bankruptcy trustee’s business regarding corporate bankruptcy and received a total of KRW 925,908,900 (hereinafter “instant remuneration”) with the remuneration. The Plaintiff considered it as other income under Article 21(1)19 of the Income Tax Act and Article 87 subparag. 1(b) of the Enforcement Decree of the Income Tax Act, and included it in the amount of income for each pertinent year, and filed a comprehensive income tax return and payment by applying 80% necessary expenses.

C. However, on the ground that the instant remuneration constitutes business income, the Defendant calculated the Plaintiff’s global income for the year 2009 through 2013 (including additional tax; KRW 28,286,270 (including additional tax 10,713,147) on May 10, 2015; KRW 74,274,620 (including additional tax 24,90,391) on global income for the year 2010; KRW 64,480,040 on global income for the year 2011 (including additional tax 18,341,264); KRW 29,869,540 on global income for the year 2012 (including additional tax 6,52,682,688); and KRW 371,371,4713 (including additional tax); and

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on June 22, 2015, but was dismissed on December 30, 2015.

[Ground of recognition] Facts without dispute, Gap evidence 20, 24 evidence, Eul evidence 1 to 5 (including various numbers for each type of evidence), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) In light of the fact that the Plaintiff has worked as a member attorney-at-law in the instant law firm and is not in a separate position to engage in business, and there is no separate business activities or regular employment of assistants to be appointed as a trustee in bankruptcy; that is, the Plaintiff is merely a temporary or incidental performance of duties as a trustee in bankruptcy only when appointed by the court; thus, the income continuity does not guarantee; at least, the court has introduced the candidate list system for the trustee in bankruptcy and has not guaranteed that the Plaintiff may continue to be appointed as a trustee in bankruptcy by the court before 2014; and the remuneration to the trustee in bankruptcy is merely a compensation for the public interest activities and thus denied for profit-making. Thus, the instant remuneration cannot be viewed as business income.

2) From 2002, the Plaintiff reported and paid the trustee’s remuneration as other income, and the tax authorities have authoritative interpretation that the trustee’s remuneration constitutes other income for a long time. Moreover, from 2011 to 2013, the tax authorities demanded the Plaintiff to submit explanatory materials on whether the trustee’s remuneration falls under other income and did not review the documents from the Plaintiff, and did not correct the taxation even. This is a tax practice established over a long period of time to indicate that the tax authority’s remuneration is considered as other income by the trustee in bankruptcy. As such, the instant disposition contrary to such public inspection and non-taxation practices goes against the principle of good faith and the principle of prohibition of retroactive taxation.

3) Even if the instant remuneration can be viewed as business income, since the Plaintiff’s justifiable grounds exist for classifying it as other income from 2009 to 2013 and filing and paying global income tax, the penalty tax portion out of the instant disposition is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the instant remuneration is other income

A) Whether a certain income constitutes a business income or a temporary income does not go through the form, name, and appearance of the transaction entered into between the parties, but rather is assessed according to the substance of the transaction. The determination shall be made according to social norms in light of the substance of the relevant taxpayer’s vocational activity, the period, frequency, mode, and the other party of the transaction, and whether the activity is for profit, and whether the activity is for profit, and whether the activity has continuity and repetition to the extent that it can be seen as business activity. The determination shall be made in consideration of not only the income but also all circumstances before and after the activity (see Supreme Court Decision 200Nu5210, Jun. 15, 2001, etc.).

B) In light of the above legal principles, even if the Plaintiff’s above-mentioned facts and circumstances were to be known by comprehensively taking into account the following facts, including Gap’s evidence 24 and Eul’s evidence 9 and 10, and to resolve various legal issues involving judicial proceedings and directly conduct a lawsuit against the bankrupt corporation, the Plaintiff, an attorney-at-law, was appointed as a trustee in bankruptcy for 11 years from 2009 to 2013, which is the year in which the bankruptcy disposition of this case was taken place, and 40 years from 202 to 2014, it is difficult to view that the Plaintiff, regardless of the above facts and circumstances that the Plaintiff would have been able to independently carry out the business of the above 200,000 won for the above 20,000 won for remuneration of the Plaintiff’s assistant to whom the Plaintiff would have carried out the business of the 201,000,000 won of the 205,000 won of the 205.

C) Therefore, the instant disposition that calculated the Plaintiff’s comprehensive income tax by deeming the instant remuneration as the business income is lawful, and the Plaintiff’s assertion is without merit.

2) Whether the principle of good faith and the principle of prohibition of retroactive taxation is violated

A) In general, in tax legal relations, in order to apply the principle of trust protection to the tax authority’s acts, the tax authority must name a public opinion statement that is the subject of trust to the taxpayer. In addition, in order to establish non-taxable practices under Article 18(3) of the Framework Act on National Taxes, the tax authority must have an intention not to impose taxes on the taxpayer for a considerable period of time, as well as on any special circumstance, with the knowledge that the tax authority can impose taxes on the matter. Such public opinion or opinion must be expressed explicitly or implicitly. However, in order to indicate implied expression of taxation, there must be circumstances that the tax authority expressed its intention not to impose taxes on the state of non-taxation for a considerable period of time, unlike mere omission of taxation. In such cases, the application of the above principle should be denied if the declaration of intention by the tax authority is merely a general opinion statement (see Supreme Court Decision 97Nu1065, Jan. 21, 200, etc.).

B) According to the evidence evidence evidence evidence Nos. 11 through 15, the director of the Seoul Regional Tax Office notified the Plaintiff, from October 27, 201 to October 201, 201, and from October 201 to October 2011, 2012 to October 201, 207 to 2011, the Plaintiff submitted explanatory data on the reported portion of the global income tax as other income, and the Plaintiff submitted explanatory data on November 9, 201 and October 19, 2012. The director of the distribution tax office informed the Plaintiff of the above part of the global income tax return from 2008 to 2012, and the Plaintiff submitted explanatory data on April 24, 2013.

C) In light of the above legal principles and the facts acknowledged, the established rules of February 11, 200 by the National Tax Service cited by the plaintiffs were merely an expression of the general view that the fees received by the attorney as a trustee in bankruptcy for providing "temporary" services as other income without relation to his/her business. The trustee in bankruptcy continuously and repeatedly accumulated the remuneration of the trustee in bankruptcy, and it should not be deemed that it would be imposed only on other income even if it has been accumulated in business feasibility (see subparagraphs A through 10). As seen above, the Seoul Director of the Regional Tax Office or the director of the distribution office requested the Plaintiff to release materials from 2011 to 2013, and it is not confirmed that the Plaintiff’s explanation of any public opinion on the Plaintiff’s explanatory name or that the remuneration of the case was other income (see Articles 7 to 10, 2012 and 2013). In light of the principle of good faith and good faith, it cannot be viewed that the Plaintiff’s tax payer’s tax return and payment procedure were unlawful.

3) Whether the imposition of additional tax is unlawful

A) Additional tax under tax law is an administrative sanction imposed under the conditions as prescribed by the Act in order to facilitate the exercise of the right to impose taxes and the realization of tax claims where a taxpayer violates various obligations, such as a return and tax payment, without justifiable grounds, and the taxpayer’s intention or negligence does not constitute a justifiable reason that does not cause any breach of his/her obligations (see, e.g., Supreme Court Decisions 2002Du10780, Jun. 24, 2004; 2005Du10545, Apr. 26, 2007; 2007Du3107, Apr. 23, 2009). Such a sanction is not merely beyond the scope of misunderstanding of laws, but also beyond the scope of misunderstanding of laws, and cannot be deemed as a justifiable reason where a taxpayer cannot be aware of his/her obligations due to conflict with a taxpayer’s negligence, etc. (see, e.g., Supreme Court Decision 2002Du31068, Feb. 26, 2002).

B) The Supreme Court precedents on the classification of income, business income, and other income have been consistent since 2001 until now, and it cannot be deemed that the plaintiff's act constitutes misunderstanding of laws and regulations and does not constitute a conflict of opinion due to a meaning in the interpretation of tax-related Acts and subordinate statutes, and it cannot be deemed that there was a public opinion of the tax authority that the remuneration of the trustee in bankruptcy should be imposed as other income or that such a practice has been established. Whether it is other income or not must be determined by taking into account not only the relevant activities including income but also all the circumstances before and after such activity, so it cannot be deemed that it constitutes the same income under the Income Tax Act at all times on the same name. As seen above, since the plaintiff was an attorney-at-law who is a legal expert but also has been continuously conducting the corporate restructuring from 2002 to 2014, at least since 209, the year to which the disposition in this case belongs, the plaintiff's duty to report and pay the global income tax cannot be properly asserted by the plaintiff.

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.

[Attachment]

Judges Kim Jong-Un (Presiding Judge)