(a) The case holding that in case where 1,380 shares are allocated in excess of 1,380 shares when the first capital increase has been made in accordance with the amendment of the Commercial Act concerning the minimum amount of capital and the second and third capital increase has been allocation in excess of 180 shares when the second and third capital increase has been made, it shall not be deemed that 180 shares, among 1,380 shares allocated in excess of the ratio of shares in the first capital increase, are acquired from a person with a special relationship and

(b) The method of calculating net profits and losses per stock for the last three years to evaluate the value of unlisted stocks;

(a) The case holding that in case where 1,380 shares are allocated in excess of 1,380 shares when the first capital increase has been made in accordance with the amendment of the Commercial Act concerning the minimum amount of capital, and the second and third capital increase has been allocated in excess of 180 shares when the second and third capital increase has been made, it cannot be deemed that 180 shares, among 1,380 shares allocated in excess of the ratio of shares in the first capital increase, are acquired from a person with a special relationship, and

B. In calculating the net profit and loss amount for the last three years per share of unlisted stocks pursuant to Article 5 (5) 1 (b) of the former Enforcement Decree of the Inheritance Tax Act (amended by Presidential Decree No. 13196 of Dec. 31, 190), the number of new shares issued as a result of the last day of each company’s fiscal year shall not be added to the number of new shares issued as a result of the increase in the number of shares issued as of the total issued as of the last day of each fiscal year, and the above calculated value exceeds the net asset value divided as

A. Article 34-4 of the former Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990); Article 41-3(b) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 13196, Dec. 31, 1990); Article 5(5) of the Enforcement Decree of the same Act; Article 5(5) of the Enforcement Decree of the Inheritance Tax Act

[Judgment of the court below]

B. Head of the District Tax Office

Seoul High Court Decision 91Gu19670 delivered on August 18, 1992

The judgment of the court below is reversed.

The case is remanded to Seoul High Court.

1. Summary of the reasoning of the judgment below

The court below held that, in light of the principle of 10,50,00 won (50,000 won) and the revised Commercial Act (No. 3724, 198) as stated in Article 4 (1) of the Addenda of the Inheritance Tax Act, the Plaintiff did not finally increase the capital by 50,000 won until 198,00,00,000 won for 10,000 won for 30,000,00 won and 40,000,000 won for 40,000,000,000 won for 40,000,000,000 won and 5,000,000,000 won and 10,000,00 won and 5,00,00 won and 10,000,00 won and 10,000,00 won, more than 5,01,000 shares and 5,00 shares.

2. Judgment on the ground of appeal No. 1 by the Plaintiff’s attorney

The main text of Article 34-4 of the Act provides that except for the cases of Articles 32 through 34-3, a person who has received profits as determined by the Presidential Decree at a remarkably low price from a person having a special relationship as determined by the Presidential Decree shall be deemed to have received such profits at the time of receiving the corresponding profits, and the term “gains as determined by the Presidential Decree” in Article 34-4 of the Act provides that when a corporation distributes stocks or shares (hereinafter “new stocks”) in order to increase the capital or amount of investment, a person who has a special relationship with a stockholder, etc. who has renounced his preemptive rights (hereinafter “shareholders, etc.”) has renounced all or part of the right to receive new stocks (hereinafter “pre-stock”) and has given such a allocation in excess of his share ratio, it refers to the difference between the amount of payment of new stocks allocated in excess and the value of new stocks pursuant to the provisions of Articles 5 through 7.

However, since the above company's capital increase was established on July 2, 1974 2 with 2,50,000 won (50 shares) for 30 percent shares originally distributed, and the Commercial Act was amended on August 31, 1987, the court below recognized that the above new shares were issued as 50,000 won (10,00 shares) because the company's capital increase cannot be increased by 40 percent (10 shares) for 10 percent shares originally issued by 30 percent shares, and there is no dispute over the establishment of 12 percent shares (12 shares) and witness's testimony of 8,9,00 shares for 4 percent shares above the original share increase by 10 percent shares, but only the remaining shares increase by 60 percent shares among the new shares so that the plaintiff and the above witness's share increase by 60 percent shares can be considered to have been allocated at the time of 100 percent shares above the original share increase by 40 percent shares.

Nevertheless, the court below did not consider the circumstances where the plaintiff renounced all or part of preemptive rights at the time of the second and third capital increase as above, and judged that the defendant's 1,380 shares allocated by the plaintiff in excess of his/her share ratio should be subject to the constructive gift under Article 34-4 of the "Act" based only on the first capital increase, and thus, it is legitimate to impose the tax in this case. Thus, the court below did not err by misapprehending the legal principles on the subject of constructive gift under Article 34-4 of the Act or by misapprehending the rules of evidence, or by misunderstanding the facts contrary to the rules of evidence, and it is clear that such illegality affected the conclusion of the judgment. Thus, there is a reason

3. Determination on the ground of appeal No. 2

In calculating the net profit and loss amount per share of the shares in this case under Article 5 (5) 1 (b) of the "Decree", the defendant's failure to add the number of new shares issued with capital increase as of the last day of each business year of the above company to the number of new shares issued with capital increase as of the total number of issued shares as of the last day of each business year of the above company is just and acceptable as it is in accordance with Article 5 (5) of the "Rules", and it cannot be deemed as a violation of the principle of substantial taxation, such as the lawsuit, on the ground that the value of the shares in this case calculated according to the above formula exceeds the net asset

4. Therefore, 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 Yoon-young (Presiding Justice)