Mine Electronic Co., Ltd. (Law Firm Honam General Law Office, Attorneys Kim Sung-ro et al., Counsel for the plaintiff-appellant)

Isan Tax Office (Attorney Kim Yong-hwan et al., Counsel for the plaintiff-appellant)

March 16, 2006

Jeonju District Court Decision 2003Guhap1841 Delivered on September 1, 2005

1. The defendant's appeal is dismissed.

2. The costs of appeal are assessed against the defendant.

1. Purport of claim

The Defendant’s imposition of corporate tax of KRW 4,628,921,950 and special rural development tax of KRW 23,166,450 against the Plaintiff on August 16, 2001 shall be revoked, respectively.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the instant disposition

A. On June 5, 1999, the Plaintiff transferred 1,261,00 shares of broadband semiconductor Co., Ltd. (the trade name was changed to Gakdo Co., Ltd. on March 27, 200, hereinafter referred to as e-electronic semiconductor Co., Ltd.) (hereinafter referred to as e-electronic semiconductors) (the shares of this case) to 1,310 won per share to the mid-term (mid-term) having a special relationship under the Corporate Tax Act with the Plaintiff, and completed the return of the corporate tax base and tax amount for 199 business year.

B. On October 18, 199, which was within six months from the date of the transfer of the instant shares, the optical semiconductor reported securities to the Korea Securities Dealers Association, and the registered main company of the securities company (hereinafter “Treatment Securities”) determined the public offering price of the instant shares as KRW 10,000 per share in consultation with the optical semiconductor.

C. Accordingly, the defendant deemed the stocks of this case as the stocks of a corporation that reported to the Korea Securities Association for the purpose of over-the-counter trading under Article 63(2)2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6048 of Dec. 28, 1999; hereinafter the same shall apply) and the market price of this case is the same as 10,000 won per share under Article 57(2)1 of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1660 of Dec. 31, 199; hereinafter the same shall apply; hereinafter) and recognized that the tax burden has been unjustly reduced by transferring the stocks of this case at a price significantly lower than the market price x 10,000 won per share under Article 52 of the Corporate Tax Act, Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 16690, Dec. 31, 200; hereinafter the same shall apply) x 109080 won per share.

D. On October 11, 2001, the Plaintiff filed a request with the National Tax Tribunal for a trial against the instant disposition. However, the National Tax Tribunal dismissed the Plaintiff’s request on August 25, 2003.

[Reasons for Recognition] Facts without dispute, Gap evidence 1-1, 2-2-2-1, 4-5, evidence 5-1, 2-1, 13-1, Eul evidence 1-2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the parties' assertion

(1) Plaintiff

(A) Whether a person falls under the subject matter of the rejection of unfair act is determined as of the time of the act. The stock transfer date of the instant case was determined as of October 18, 199, which was subsequent to the date of the transfer of the stocks. Therefore, the instant stock constitutes the unlisted stock as provided by Article 63(1)1(c) of the Inheritance and Gift Tax Act, and does not constitute the stocks as provided by Article 63(2)2 of the Inheritance and Gift Tax Act, which is the requirement that the instant stock was reported as securities.

In addition, according to the provisions of Article 63 (2) of the Inheritance and Gift Tax Act, only the method of appraisal of shares was delegated to the Presidential Decree. Article 57 (2) 1 of the Enforcement Decree of the Inheritance and Gift Tax Act is not only the method of assessment but also the scope of the shares subject to application is more expanded than the provisions of the parent law.

Therefore, the instant disposition based on the provision of Article 63 (2) 2 of the Inheritance and Gift Act, Article 57 (2) 1 of the Enforcement Decree of the Inheritance and Gift Act, is an unlawful disposition, and thus, should be revoked.

(B) Even if the shares of this case are assessed in accordance with the provisions of Article 63(2)2 of the Inheritance and Gift Tax Act, and Article 57(2)1 of the Enforcement Decree of the Inheritance and Gift Tax Act, it shall be calculated on the basis of the time of transfer ( June 5, 199) rather than the publicly offered value, in assessing the shares of this case by applying mutatis mutandis the method of determining the value of securities analysis under the Securities and Exchange Act. However, at the time of transferring the shares of this case, it was impossible to find out the market price at a price freely traded between many and unspecified persons as an unlisted corporation. This is a case where the market price is unclear, and thus, it shall be assessed in accordance with the provisions of Article 89(2)2 of the Enforcement Decree of the Corporate Tax Act, Article 63(1)1 (c) of the Inheritance and Gift Tax Act, Article 54(1) of the Enforcement Decree of the Inheritance and Gift Tax Act, and it is justifiable to transfer the shares of this case to 310 won per share.

However, since estimated profits and losses for the two business years after the transfer cannot be specified, even if the stocks of this case are assessed in accordance with the provisions of Article 63(2)2 of the Inheritance and Gift Tax Act and Article 57(2)1 of the Enforcement Decree of the Inheritance and Gift Tax Act based on the actual profits and losses for the two business years after the transfer that can be specified at the present point of time, the appraised value shall be 4,636 won per share if it is increased in accordance with the provisions of Article 63(3) of the Inheritance and Gift Tax Act as of the date of transfer. Therefore, the part equivalent to the amount exceeding the above amount among the dispositions of this case shall be revoked because it is improper.

(2) Defendant

The disposition of this case, which was imposed on the shares of this case by deeming them as falling under the shares under Article 63 (2) 2 of the Inheritance and Gift Tax Act, is lawful in light of the combined purpose of taxation and related provisions.

If it is unreasonable to assess the shares of this case by deeming the publicly offered price as the market price in the disposition of this case, at least 5,000 won per share, which is the issuance price of the optically semiconductors ( June 29, 199), should be deemed as the market price. Therefore, the part corresponding to the above amount in the disposition of this case is justifiable.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Whether the instant shares are subject to Article 63(2)2 of the Inheritance and Gift Tax Act

Article 63 (2) of the Inheritance and Gift Tax Act provides that "the stocks falling under any of the following subparagraphs shall be appraised by the method prescribed by Presidential Decree in consideration of the business feasibility, transaction situation, etc. of the relevant corporation, notwithstanding paragraph (1) 1." Paragraph (2) 2 of the same Article provides that "the stocks of a corporation which reported to the Financial Supervisory Commission or the Korea Securities Exchange for over-the-counter trading under the Securities and Exchange Act among the stocks provided for in paragraph (1) 1 (c) shall be "the stocks of which have been reported to the Financial Supervisory Commission or the Korea Securities Association for the purpose of over-the-counter trading under the Securities and Exchange Act". Meanwhile, as Act No. 6780 of December 28, 2002, the part "stocks" under paragraph (2) of the same Article is "stocks or equity shares (hereinafter referred to as "stocks, etc.")" and subparagraph 2 of the same Article was revised as "the period prescribed by Presidential Decree to trade the stocks, etc. among the stocks, etc. provided for in subparagraph

In light of the principle of no taxation without law, or the requirements for non-taxation or tax exemption, and the interpretation of tax laws is strictly interpreted according to the text of the law, barring special circumstances, and it is not allowed to expand or analogically interpret without reasonable grounds (see Supreme Court Decision 2002Du6781, May 27, 2004, etc.).

However, Article 63(2)2 of the Inheritance and Gift Tax Act provides that the scope of taxation on the difference in the market price due to the listing of unlisted stocks shall be extended by applying the provision to increase the taxpayer’s tax burden. As can be seen from the literal difference before and after the amendment, the above provision is deemed to require that the stocks of the corporation that filed a securities return are already stocks of the corporation at the time of the establishment of taxation requirements. Unlike the statutory text, the above provision cannot be interpreted to expand the scope of taxation on the stocks of the corporation that filed a securities return for a considerable period prior to and after the establishment of taxation requirements.

Therefore, the shares of this case, which reported securities after the date of the transfer of the shares, are not subject to Article 63(2)2 of the Inheritance and Gift Tax Act, and are not traded in the Korea Stock Exchange (Article 63(1)1(a) of the Inheritance and Gift Tax Act) or registered with the Korea Securities Dealers Association (Article 63(1)1(b) of the same Act. Thus, the method of evaluation can only be subject to Article 63(1)1(c) of the Inheritance and Gift Tax Act in relation to the method of evaluation.

(2) Whether Article 57 (2) 1 of the Enforcement Decree of the Inheritance and Gift Tax Act is null and void beyond the scope of delegation by the mother law

Article 63(2)2 of the Inheritance and Gift Tax Act of the parent corporation under the above provision delegates only the method of appraisal to the Presidential Decree for the stocks of a corporation which reported to the Financial Supervisory Commission or the Securities Business Association.

However, Article 57 (2) of the Enforcement Decree of the Inheritance and Gift Tax delegated by the Korea Securities Dealers Association provides that "the stocks or equity shares under Article 62 (2) 2 of the Act, which fall under any of the following subparagraphs, shall be the larger of the value thereof and the value appraised under Article 63 (1) 1 (c) of the Act." Article 57 (2) 1 of the Enforcement Decree of the said Act provides that "the stocks or equity shares of a corporation that reported the securities to the Korea Securities Dealers Association for the purpose of registration, which are the stocks or equity shares of a corporation that reported the securities to the Korea Securities Dealers Association, shall be the value assessed under the provisions of paragraph (1) 1 as of the base date of appraisal (three months in case of the stocks or equity shares on which gift tax is levied) to the Korea Securities Dealers Association." In other words, not only the methods of calculating stocks, but also the scope of shares subject to appraisal. Even if the securities declaration was not made at the time of establishment of taxation requirements, the scope of stocks subject to appraisal shall be included in the stocks subject to appraisal.

This would be invalid because it would result in the increase of the taxpayer's tax burden beyond the delegation scope and purpose of the parent law.

(3) As such, this case’s stocks are not subject to Article 63(2)2 of the Inheritance and Gift Tax Act, and since Article 57(2)1 of the Enforcement Decree of the Inheritance and Gift Tax Act delegated by the above provision is null and void, it cannot be based on the above provisions in assessing the stocks of this case, and as seen earlier, it is not a corporation’s stocks traded in the Korea Stock Exchange or registered with the Korea Securities Dealers Association as of June 5, 199, the transfer date. Thus, the value should have been assessed by the method stipulated in Article 63(1)1(c) of the Inheritance and Gift Tax Act and Article 54(1) of the Enforcement Decree of the Inheritance and Gift Tax Act.

Nevertheless, the Defendant’s disposition of this case, which imposed corporate tax and special tax for rural development on the basis of the value assessed by the method under Article 63(2)2 of the Act and Article 57(2)1 of the Enforcement Decree, is unlawful without further review.

3. Conclusion

Therefore, the plaintiff's claim seeking the cancellation of the disposition of this case is justified, and the judgment of the court of first instance is just, and the defendant's appeal is dismissed, and it is so decided as per Disposition.

Judge Ohy-Appellee (Presiding Judge) Sentencing