Suwon District Court 2010Guhap796 (2010.07)

early 209 middle 2255 ( November 13, 2009)

Proceeds from the disposal of the shares of the merged corporation held by the succeeded merged corporation shall be excluded from gross income.

The disposal profit of the merged corporation's issued stocks of the merged corporation held by the merged corporation which acquired by succession due to the merger is related to the increase or decrease of capital, and is in the nature of the refund or payment of capital, and is subject to exclusion

2010Nu26133. Revocation of revocation of a revocation of tax base and claim for rectification of tax amount

○ Stock Company

○ Head of tax office

Suwon District Court Decision 2010Guhap796 Decided July 7, 2010

1. Revocation of a judgment of the first instance;

2. The defendant's disposition rejecting the correction of corporate tax for the year 2004 and corporate tax for the year 2005 against the plaintiff on February 20, 2009 shall be revoked.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

The court's reasoning concerning this part is as stated in Paragraph (1) of the judgment of the first instance except for the addition of "within three years pursuant to Article 45-2 of the Framework Act on National Taxes" to the last end of the second judgment of the first instance on March 28, 2008, and therefore, this part is identical to the reasons stated in Paragraph (1) of the judgment of the first instance. Thus, this part is cited in accordance with Paragraph (2) of Article 8 of the Administrative Litigation Act and the main sentence

2. Whether the disposition is lawful;

A. The parties' assertion

(1) The plaintiff's assertion

The disposal profit of the merged corporation's issued stocks of the merged corporation held by the merged corporation that acquired by succession due to the merger is related to the increase or decrease of capital, which is subject to the exclusion of inclusion in the "merger Marginal Profit" under the main sentence of Article 17 subparagraph 3 of the Corporate Tax Act. Thus, each disposition of this case is unlawful.

(2) The defendant's assertion

Where a merged corporation disposes of the stocks issued by a merged corporation held by a merged corporation due to the merger, the difference between the market price increase after the merger and the market price at the time of the merger is not different from the profits of disposal of general assets, and thus, the disposition of this case is legitimate as it is subject to inclusion in the calculation of earnings pursuant to Articles 15(1) and (3), 17(1)3 proviso of the Corporate Tax Act and Article 11(2) of the Enforcement Decree thereof.

B. Relevant statutes

Attached Form 3 is as listed in the "relevant Acts and subordinate statutes".

C. Determination

(1) Article 15 (1) of the former Corporate Tax Act (amended by Act No. 7838 of Dec. 31, 2005; hereinafter referred to as the "Act") provides that "the amount of profit shall be limited to the amount of profit generated from transactions which do not include capital or financing and the provisions of this Act and increase the net assets of the concerned corporation" and Article 15 (2) provides that "the scope and classification of profit under paragraph (1) shall be prescribed by Presidential Decree" and Article 11 of the Enforcement Decree of the Act (amended by Presidential Decree No. 18706 of Feb. 19, 2005; hereinafter the same shall apply) provides that "the amount of profit under subparagraph 2 of the same Article shall not be included in the calculation of earnings in the calculation of earnings under subparagraph 3 of the same Article, and Article 15 (1) provides that "the amount of profit acquired by succession from the corporation under subparagraph 1 of the same Article shall not be included in the calculation of earnings under subparagraph 3 of the same Article 2 of the Enforcement Decree."

According to the above provisions, the "transfer amount of treasury stocks" under Article 11 subparagraph 2 of the Enforcement Decree of the Act shall also be included in the scope of earnings under Article 15 of the Act. However, since profits provided for in Article 17 of the Act shall be excluded from the calculation of earnings, even if treasury stocks are transferred, if they fall under the "merger marginal profits" under Article 17 subparagraph 3 of the Act, they shall be excluded from the calculation of earnings: Provided, That if they fall under the "merger marginal profits as prescribed by the Presidential Decree" under Article 15 of the Act and Article 11 of the Enforcement Decree of the Act, they shall be excluded from the calculation of earnings, and if they constitute the merger marginal profits generated from capital transactions, they shall be excluded from the calculation of earnings, and if the acquisition and disposal of treasury stocks constitutes the transaction of increase or decrease of corporate net assets, such disposal profits shall be deemed to be included in the calculation of earnings. However, in case of a merger, the acquisition of treasury stocks, i.e., the original acquisition of treasury stocks by the merged corporation, but shall not be included in the calculation of 20.

When comprehensively considering the purport of the entire argument in this case, the health team, the above facts of recognition and the above macroscopic evidence, the plaintiff acquired the shares issued by the non-party company (the treasury shares) by succession at the book value while absorbing the non-party company, but disposed of in 2004 and 2005. Thus, this is a transaction related to the increase and decrease of capital, which should be considered as capital transaction, and therefore the disposal profit should be excluded from the inclusion of the merger profit as stipulated in Article 17 subparagraph 3 of the Act. Thus, each disposition of this case is unlawful.

(2) As to this, the defendant asserts that the merger evaluation marginal profit (for each of the dispositions of this case, the amount calculated by subtracting the market price at the time of registration of merger from the transfer value) arising from the acquisition and disposal of the stocks of the merged corporation held by the merged corporation by the merged corporation constitutes the object of profit industry under the proviso of Article 17 subparagraph 3 of the Act.

However, the proviso of Article 17 subparagraph 3 of the Act only excludes the capital transaction which is the object of the capital gain as prescribed by the Presidential Decree, not all the merger evaluation marginal profit. According to Article 15 (2) of the Enforcement Decree of the Act, the "merger evaluation marginal profit" means the value under Article 12 (1) 1 of the Enforcement Decree, i.e., the evaluation marginal profit at the time of the merger and the book value (the evaluation marginal profit until the time of the merger) corresponding to the difference between the appraisal marginal profit at the time of the merger and the book value, and this is understood as the same meaning as the "merger marginal profit generated by asset evaluation increase" under the proviso of Article 15 (1) 3 of the former Corporate Tax Act as amended by Act No. 5581 of Dec. 28, 1998. It can be seen that the above disposal marginal profit from the merger is not included in the calculation of earnings (the above provisions of Article 11-2 of the Enforcement Decree of the Commercial Act as amended by the Presidential Decree No. 21302 of Feb. 4, 200009 of the corporation's.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted on the grounds of its reasoning, and the judgment of the court of first instance shall be unfair on the grounds of its conclusion, so the judgment of the court of first instance shall be revoked and each disposition of this case shall be revoked as per Disposition.