Seocho 2012west 3256 (06.04)

The interest of this case collected by the Plaintiff in the taxable year prior to the occurrence of the cause for impossibility of recovery cannot be subject to the interest income tax.

Although the Plaintiff generated interest income from non-business proceeds, since the loan falls short of the principal and collected, the interest income of this case collected by the Plaintiff pursuant to Article 51 (7) of the Enforcement Decree of the Income Tax Act cannot be subject to taxation of interest income tax.

Article 51 (7) of the Enforcement Decree of the Income Tax Act / [Calculation of Gross Income Amount]

2013Guhap5710 global income and revocation of such disposition

LAA

○ Head of tax office

September 27, 2013

November 12, 2013

1. The Defendant’s imposition of global income tax for the Plaintiff, the global income tax for the year 2006, the global income tax for the year 2007, and the global income tax for the year 2008, shall be revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff leased the KRW 00 on October 10, 2005, KRW 00 on October 24, 2005, KRW 00 on November 3, 2005, KRW 00 on November 30, 2005, KRW 000 on KRW 2.5% per month to BB Capital Co., Ltd. (hereinafter referred to as “B Capital”). The Plaintiff was paid KRW 00 on the interest basis of KRW 006, KRW 00 on KRW 00,000, KRW 00 on September 30, 2008, including KRW 0,000, KRW 00,000, KRW 00,000, KRW 00,000, and KRW 0,000 on KRW 0,00,00,000 on KRW 0,00,00.

B. Since then, BB Capital closed around July 12, 201.

C. From March 12, 2012 to March 31, 2012, the Defendant conducted a personal tax integration investigation with the Plaintiff, and determined and notified the Plaintiff of the global income tax amount for global income tax for the year 2007 and the global income tax for the year 2008, on the ground that the instant interest out of the amount the Plaintiff received from BB Capital, was an interest income from the non-business loan, and the Plaintiff did not report the amount of tax.

D. Since then, the Defendant: (a) confirmed that when determining global income tax for the year 2006, the interest income amount was double calculated by the OOO members; (b) confirmed that each global income tax for the year 2007 and 2008 was not reflected; and (c) decided to reduce the global income tax for the year 2006, OO members of the global income tax for the year 2007, OOO members of the global income tax for the year 2007, and OO members of the global income tax for the year 208 (hereinafter “instant disposition”).

E. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on July 3, 2012, but the said claim was dismissed on June 4, 2013.

Facts without any dispute, Gap's evidence 1 through 3, Eul's evidence 1 through 6 (including family evidence able to prove) and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

B. The Plaintiff’s ground for non-collection of the loan claim against BB Capital was generated before the tax base and tax amount were corrected, and the total amount recovered by the Plaintiff is below the leased principal. Thus, even if there was interest income actually recovered from BB Capital during the taxable year before the Plaintiff’s grounds for non-collection occur, it cannot be subject to taxation. Accordingly, the Defendant’s disposition on different premise is unlawful.

(2) Defendant’s assertion

Income tax is the so-called "fixed-term taxation" and the amount of interest income generated from non-business loans is calculated as gross income amount in the corresponding year. Thus, in case where a partial recovery of claims is made and it becomes objectively clear that it is impossible to recover the remaining claims as of the time of recovery, it shall be deemed that there is no realization of the interest income that satisfies the taxation requirements in the pertinent taxable year as long as the recovered amount falls short of the principal amount. However, it shall not affect any obligation to pay the interest income that has already been specifically realized prior to the occurrence of impossible causes (see Supreme Court Decisions 2005Du5437, Oct. 28, 2005; 2001Du8490, May 27, 2003).

In addition, if the obligation to pay the interest income that has been interpreted as the Plaintiff is not subject to taxation retroactively, it would cause serious confusion in national tax enforcement by impairing the legal stability.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

Unlike the Corporate Tax Act, Article 51 (7) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034, Feb. 18, 2010) appears to be a provision to prevent unfair result in imposing interest income tax even though there is no institutional device to reflect the loss in the calculation item of the interest income even if the loss was incurred later due to the failure to recover the principal of the non-business loan. The above provision appears to be a provision to prevent unfair result in imposing interest income even though there is no institutional device to reflect the loss in the calculation item of the interest income as an item for deducting the interest income. The above provision does not apply to cases where the total amount recovered before a final return on tax base or tax base and tax amount were determined and corrected falls short of the principal amount, and there is no special exception, and it is difficult to discuss whether the interest income under the Income Tax Act can be recovered from the principal claim which is the source of the income. In full view of the following: (a) Where the amount recovered by the time falls short of the principal before the final return on tax base or the tax base amount, the amount and tax amount, the interest income collected.

On the other hand, Supreme Court Decisions 2005Du5437 Decided October 28, 2005 and 2001Du8490 Decided May 27, 2003, etc., which held that the income tax cited by the defendant is a so-called "fixed-term taxation" and the interest income generated from a non-business loan is calculated as gross income amount for the corresponding year, cannot affect any tax liability already realized on the grounds that it is not appropriate to be invoked in this case as it relates to a case before the enactment and enforcement of Article 51(7) of the former Enforcement Decree of the Income Tax Act. In addition, even if some difficulties arise in performing national tax administration, such circumstances cannot be deemed as impeding the aforementioned judgment.

Based on this premise, the instant case was closed on July 12, 201, before the determination and correction of the tax base and tax amount of the instant case, and there was a cause for not collecting the principal and interest claims under Article 55(2)1 of the former Enforcement Decree of the Income Tax Act. The amount recovered by the Plaintiff up to that time falls short of the principal and interest amount of OO won. Thus, the interest accrued by the Plaintiff in the taxable year prior to the occurrence of such a cause not to recover cannot be subject to the interest income tax.

Therefore, the instant disposition taken on a different premise is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.