Plaintiff

The head of Yangcheon Tax Office

April 2, 2009

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s disposition of imposing global income tax of KRW 105,618,400 on the Plaintiff on December 1, 2006 shall be revoked.

1. Details of the disposition;

A. It was established for the purpose of semiconductor design and manufacturing services, etc., and was closed on August 31, 2005. The Plaintiff was registered as the representative director on the corporate register from October 30, 2004 to October 30, 2004.

B. In 204, the instant company received 8 copies of purchase tax invoices of KRW 422,460,000 (hereinafter “instant tax invoice”) from the teoneonescher (hereinafter “teonescherscher”) as follows. Based on this, the instant company reported the tax base and tax amount of corporate tax for the year 2004 by adding the said KRW 42,460 to deductible expenses.

본문내 포함된 표 작성일 품목 공급가액(원) 세액(원) 매입금액(원) 2004.10.15. 모니터링 43,400,000 4,340,000 47,740,000 2004.10.20. 소프트웨어 35,100,000 3,510,000 38,610,000 2004.10.27. 하드웨어장비 75,000,000 7,500,000 82,500,000 2004.11.02. 모니터링 32,500,000 3,250,000 35,750,000 2004.11.19. 모니터링 55,800,000 5,580,000 61,380,000 2004.11.25. PCB납품 81,000,000 8,100,000 89,100,000 2004.12.06. 소프트웨어 44,200,000 4,420,000 48,620,000 2004.12.21. 소프트웨어 19,000,000 1,900,000 20,900,000 계 ？ 386,000,000 38,600,000 424,600,000

C. After confirming that the instant tax invoice is a processed purchase tax invoice without real transaction, the head of Seodaemun-gu Tax Office issued a prior notice of taxation to the effect that the purchase amount on the said tax invoice is non-deductible expenses, and that the purchase amount is deemed as non-deductible expenses, and that it is deemed as non-deductible 1, the former representative director of the instant company, and the disposal of the tax amount by recognizing the non-party 1, the former representative director of the instant company, and that the non-party 1 would impose a global income tax of KRW 163,976,00 on November 25, 2005. However, the actual manager of the instant company filed a prior notice of taxation on December 27, 2005 to the purport that the Plaintiff is the actual manager of the instant company, the head of Seodaemun-gu Tax Office accepted it and revoked the disposition for recognition as to the non-party 1, and notified the Plaintiff of the tax data on January 2, 2006.

D. On December 1, 2006, the Defendant notified the head of Seodaemun Tax Office of the aforementioned taxation data, and imposed global income tax of KRW 195,640,150 on the Plaintiff for the year 2004.

E. On August 7, 2007, the Plaintiff filed an appeal with the Tax Tribunal. On May 1, 2008, the Tax Tribunal decided on May 1, 2008 that “The Plaintiff should not dispose of the bonus of KRW 16850,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,0000,000,000,000,000,000,000,000,000

F. The Defendant reduced the amount of KRW 90,021,750 among the disposition imposing global income tax for the year 2004 upon the decision of the said Tax Tribunal (hereinafter “instant disposition”). (In the disposition imposing global income tax for the Plaintiff on December 1, 2006, the amount of KRW 105,618,400 remaining reduced as above among the disposition imposing global income tax for the Plaintiff for the year 2004 (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap 1, 7 and 12, 14, 15, and Eul 1 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The Plaintiff is registered as a representative director on the corporate register only formally upon Nonparty 1’s request, who actually operated the instant company, and the Plaintiff actually worked as a managing director and did not actually run the instant company. Thus, the instant disposition against the Plaintiff, which was merely a nominal representative director, is unlawful.

(2) It is true that the instant tax invoice is a processed purchase tax invoice issued without a real transaction. However, it cannot be deemed that 29,7220,000 won, which is included in the purchase obligation on the company’s balance sheet among the total purchase amount of 42,460,000 won under the said tax invoice, was out of the company. Nevertheless, the instant disposition based on the premise that 25,5750,000 won (the above 29,7220,000 won - 16,850,000 won reduced by the decision of the Tax Tribunal) was out of the company is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) The status, etc. of the Plaintiff in the instant company

(A) As the representative director of the instant company, Nonparty 1 owned approximately 29,980 shares out of approximately 116,313 shares of the instant company, which were about 26% of the total shares.

(B) On November 12, 2004, Nonparty 1 transferred 29,980 shares of the instant company owned by Nonparty 1 to the Plaintiff. On November 15, 2004, Nonparty 1 entered into a contract with Nonparty 1 (Evidence A24) with the following content.

○ From November 15, 2004 until the normalization of the instant company, the representative director temporarily (6 months to one year) shall be changed from November 15, 2004 to the Plaintiff from Nonparty 1. If the instant company is deemed to be normal, the representative director shall return to Nonparty 1.

○ 29,980 shares of the instant company owned by Nonparty 1 shall be transferred temporarily to the Plaintiff. When the instant company is normal, the said shares shall also be returned to the original state.

(C) The business registration certificate of the instant company was still written by Nonparty 1 as the representative, and Nonparty 1’s name was written in the name of the representative director and the management director in the Plaintiff’s name. However, from the end of October 2004 to the closure of the instant company, the Plaintiff was in charge of the instant company’s entry and withdrawal affairs while managing and keeping corporate seals, corporate deposit passbooks, corporate deposit passbooks, etc. from the end of the instant company to the time of its closure.

(D) From the end of October 2004, the Plaintiff received 3,275,00 won each month from the end of September 2004, Nonparty 1 received 1,575,000 won each month from the end of September 2004, and Nonparty 2, the wife of Nonparty 1, respectively, received 2,075,00 won from Nonparty 1.

(E) The Plaintiff appeared to be the processing tax invoice on April 18, 2005, and stated to the effect that “The instant company is the representative director, the Plaintiff is the management director, and the Plaintiff actually participated in the transaction of the processing purchase tax invoice. Although the Plaintiff intended to acquire the instant company, the Plaintiff merely borrowed the company at present due to its intention to do so, but actually has the management right of the instant company.”

(F) In filing a request for pre-assessment review, Nonparty 1 stated that “self-employed was in charge of technical parts related to the production of the product of the instant company (development, production, business, and export product establishment and A/S), and the Plaintiff was in charge of financial management, purchase, banking, and government offices’ work.”

(2) Entry, etc. in the account books of the instant company

(A) The balance sheet of the instant company’s 2004 settlement statement (part of the evidence No. 4) submitted by the Plaintiff included KRW 165.9 million for the purchase debt, KRW 29.6 billion for the accounts payable, and KRW 165.9 billion for the accounts payable. The credit purchase statement is indicated in the credit purchase statement of KRW 165.9 million for the accounts of the instant company, and the accounts payable at KRW 19,630,000 for the accounts payable at the Guatetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetratetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetetete

(B) Meanwhile, according to the balance sheet (Evidence 6) attached thereto, when Nonparty 1 reported corporate tax for the year 2005 of the instant company on August 29, 2006, Nonparty 1 stated that the purchase obligation of the instant company was 32,629,390, and that the payable amount is nonexistent (such disposition against the Plaintiff is legitimate, the Plaintiff is illegal as a report by a person who is not authorized to report corporate tax for the year 2005 of the instant company made by Nonparty 1 if the disposition against the Plaintiff is legitimate, the Plaintiff is illegal as a report by a person who is not authorized to report corporate tax for the year 2005. ② The instant disposition is related to corporate tax for the year 2004 of the instant company. However, the instant disposition is related to corporate tax for the year 2005, and there is no relation with corporate tax for the year 2005, ② The Plaintiff cannot accept the account books of the instant company from November 14, 2005.

[Grounds for recognition] Facts without dispute, Gap 4, 5, 7 and 15, 17 through 26, 28 and 34, Eul 1 and 6 (including each number), and the purport of the whole pleadings

D. Determination

(1) Whether the Plaintiff can be deemed the actual manager of the instant company

Article 106 (1) of the Enforcement Decree of the Corporate Tax Act does not provide that the representative shall be deemed as a bonus to a unconditional representative regardless of substance with respect to certain facts recognized as such in order to prevent an unfair act under tax law by a corporation, rather than based on the fact that such income has accrued to the representative. Thus, the representative shall be a de facto manager of the company. Thus, even if the representative is registered as the representative of the company in the corporate register, if it is not actually operated by the company, such recognized income shall not be attributed to the representative and shall not be imposed on the representative. However, since the representative of the company in the corporate register can be presumed that the person who is registered as the representative of the company in the corporate register actually operates the company, the representative shall prove that the representative has actually failed to operate the company.

As to whether the Plaintiff was in a nominal representative director who did not participate in the management of the company of this case, the evidence submitted by the Plaintiff alone, including evidence Nos. 22, 25, 26, 29 (including each number), is insufficient to recognize that only the Plaintiff was the only representative of the company of this case, and there is no other evidence to recognize that the business income or profits of the company of this case were entirely attributed to the non-party 1, but as seen above, the Plaintiff was in charge of the business of this case while keeping and managing the corporate deposit passbook and seal imprint etc. from the end of October 2004 to the closure of the company of this case. The Plaintiff was actively involved in the receipt of the tax invoice of this case, and the Plaintiff was merely a more or a similar level (in the case of adding up the wages paid to the non-party 2 representative director, who was the representative director of the company of this case) from the end of October 2004 to the end of December 2004, the Plaintiff was actually involved in the management of the company of this case.

(2) Whether the portion appropriated as debt, such as purchase debt on the balance sheet in 2004 of the instant company can be deemed to have been disclosed from the company

In general, the burden of proving the facts of taxation requirement in a lawsuit seeking revocation of disposition imposing tax shall be borne by the imposing authority. However, if it is proved that the facts in question were presumed to have been subject to the application of the empirical rule in light of the empirical rule in the specific litigation process, the other party cannot be readily concluded that the pertinent tax disposition was unlawful disposition lacking the taxation requirement (see Supreme Court Decision 2002Du6392, Nov. 13, 2002, etc.). Therefore, as a premise of the recognition of the above disposition, the defendant should in principle prove the fact that the non-deductible amount was out of the company as a premise of the recognition, but if the processed purchase tax invoice was received without real transaction and processed it with the processing expenses, the total amount appropriated as the processing expenses shall be deemed to have been out of the company, and in such case, special circumstances that can be seen as not being out of the amount should be proved by the person claiming it.

In light of the fact that the accounting of the instant case as the payment in cash exceeds the remaining credit purchase amount under the name of health account and credit purchase amount, and that the balance sheet submitted by Nonparty 1 at the time of filing the corporate tax return in 2005 does not have little purchase liabilities and accounts, it is difficult to recognize that the said amount was reserved to the instant company as at the end of the business year 2004, merely because some of the purchase amount under the tax invoice was appropriated as the debt on the balance sheet in 2004 of the instant company. Accordingly, the Plaintiff’s assertion on this portion is rejected.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment Form 5]

Judges Park Jong-dae (Presiding Judge)