[1] Whether a real estate dealer's land for sale constitutes "fixed business assets subject to construction funds and calculation" (negative)

[2] Whether a real estate dealer’s obligation to pay interest accrued to a seller at the time of purchasing land for sale is included in the acquisition value when calculating profit margin on the pertinent land (affirmative)

[1] The interest of construction funds under Article 48 subparagraph 9 of the former Income Tax Act (amended by Act No. 4520 of Dec. 8, 1992) and Article 98 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 13540 of Dec. 31, 1991) refers to the expenses of loans required for the construction of "fixed assets for business" or other similar expenses. The land for sales of real estate sales business operators is not used for the business of a company, and is merely classified as inventory assets which are owned for sale or production in the normal business process, and is acquired for the purpose of use in the normal business cycle of a company and do not constitute a fixed assets of a long-term and continuous nature, and thus, it is excluded from the object of calculating the interest of construction funds.

[2] In a case where a real estate dealer purchased land for sale and changed the initial purchase price by determining to take over the principal and interest of the seller’s collateral obligation on the land at issue between the seller and the seller, it is reasonable to deem that such interest obligation was succeeded to the buyer at the same time as the above assumption of obligation agreement, barring any special circumstance, barring any special circumstance, and thus, the amount equivalent to the interest obligation is included in the actual transaction price for acquiring the land, i.e., the acquisition price, and should be deducted in proportion to the taxable land at the time of calculating the profit margin.

[1] Article 48 subparagraph 9 of the former Income Tax Act (amended by Act No. 4520 of Dec. 8, 1992), Article 33 (1) 10 of the former Income Tax Act (amended by Presidential Decree No. 13540 of Dec. 31, 1991), Article 98 (1) of the former Enforcement Decree of Income Tax Act (amended by Presidential Decree No. 13540 of Dec. 31, 1991) (see Article 75 (1) of the current Income Tax Act) / [2] Article 48 subparagraph 9 of the former Income Tax Act (amended by Act No. 4520 of Dec. 8, 1992), Article 92 (1) (see Article 69 (3) of the current Income Tax Act), Article 98 (1) of the former Income Tax Act (amended by Presidential Decree No. 13540 of Dec. 31, 191) (see Article 75 (1) 2)

[2] Supreme Court Decision 92Nu15802 delivered on March 26, 1993 (Gong1993Sang, 1327)

Plaintiff (Attorney Kim Sang-won, Counsel for the plaintiff-appellant)

Gangwon-gu Director of the District Office

Seoul High Court Decision 94Gu24574 delivered on October 10, 1995

The judgment below is reversed and the case is remanded to Seoul High Court.

The Plaintiff’s attorney’s ground of appeal is examined.

According to the reasoning of the lower judgment, the lower court: (a) acquired four parcels of land, such as 6,221 square meters per square meter, etc., from Nonparty 2, etc. before the division for sale to Nonparty 1 on October 31, 1987; (b) 1,20,000 won per square meter; (c) on the ground that the Plaintiff, who is a real estate dealer, was not a party 3 and 1 other than the mortgagee 3; and (d) 53,00,000 won per square meter; and (e) on the ground that the principal amount of the secured debt No. 37,50,000, 198, 100 won and 10,000 won for each of the above principal and interest accrued on October 18, 1987; and (e) on the ground that the Plaintiff, etc. was not a party 40,000 won per square meter, 90,000 won for each of the above principal and interest accrued 10.

However, Article 48 subparagraph 9 of the former Income Tax Act (amended by Act No. 4019 of Dec. 26, 198 and enforced before the amendment by Act No. 4520 of Dec. 8, 1992; hereinafter the same shall apply) Article 98 (1) and (2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 12564 of Dec. 31, 1988 and enforced before the amendment by Presidential Decree No. 13540 of Dec. 31, 1991; hereinafter the same shall apply) provide that the interest paid for the business of purchasing, manufacturing, and constructing fixed assets for the purpose of the construction (excluding the extension and improvement of existing fixed assets; hereinafter referred to as "construction") shall be merely for the purpose of calculating the total amount of interest paid for the construction fund or expenses similar to the construction fund of the corporation for the purpose of calculating the total amount of fixed assets for the purpose of sale and purchase of the construction fund for the purpose of 19 years.

In addition, according to the reasoning of the judgment below and the records, the purchaser of the plaintiff et al. determined to take over the principal and interest of each of the above collateral security obligations between the seller and the seller on September 21, 1987 and changed the purchase price, and it can be found that the plaintiff et al. already acquired the interest obligation accrued during the period from February 18, 1987 to the date of the above underwriting agreement. Thus, it is reasonable to deem that such interest obligation was succeeded to the purchaser of the plaintiff et al. at the same time as the above underwriting agreement, barring any special circumstances, since the amount equivalent to the interest obligation is included in the actual transaction price required for the acquisition of the land of this case, i.e., the acquisition price, and it should be deducted separately

Therefore, the court below's rejection of the Plaintiff's assertion that the above obligation assumed by the Plaintiff et al. constitutes a construction fund, or that the interest obligation did not occur in the year to which the global income tax of this case was attributed, is erroneous in the misapprehension of legal principles as to the acquisition value or necessary expenses of the above land, and thus, affected the conclusion of the judgment. The ground for appeal assigning this error is with merit.

Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices.

Justices Song Jin-hun (Presiding Justice)