The normal price of transferred assets before Article 16-2 of the Enforcement Rule of the Corporate Tax Act is newly established;

Even before Article 16-2 of the Enforcement Rule of the Corporate Tax Act is newly established, the market value assessed by the reliable appraisal institution may be considered as the arm's length price of the transferred property.

Article 40 (1) 2 of the Enforcement Decree of the Corporate Tax Act, Article 16-2 of the Enforcement Rule of the Corporate Tax Act

Korea Construction Limited Partnership Company

The director of Gwangju Tax Office

Gwangju High Court Decision 79Gu58 delivered on December 5, 1980

The appeal is dismissed.

The costs of appeal shall be borne by the plaintiff.

The plaintiff's grounds of appeal are also examined.

1. In Article 18(1) of the Corporate Tax Act, donations other than designated donations made by a domestic corporation for each business year shall not be included in deductible expenses in the calculation of income amount for the concerned business year. Article 40(1)2 of the Enforcement Decree of the same Act provides that where a corporation transfers assets at a price lower than the arm's length price or purchases assets at a price higher than the arm's length price without justifiable grounds, the difference shall be deemed as a donation under Article 18 of the same Act. Article 16-2 of the Enforcement Rule of the same Act newly incorporated by Ordinance of the Ministry of Finance and Economy No. 1385 of February 17, 1979, the normal price under Article 40(1) of the Decree shall be determined by applying the provisions of Article 5 of the Enforcement Decree of the Inheritance Tax Act mutatis mutandis.

Therefore, Article 16-2 of the above Enforcement Rule concerning the criteria for determining the arm's length price as above cannot be applied to the taxation disposition before February 17, 1979 newly established, but even before the establishment of the above provision, the arm's length price under Article 40 (1) 2 of the Enforcement Decree of the above Act shall be generally deemed to refer to the market price. The arm's length price under Article 40 (1) 2 of the above Enforcement Rule shall be deemed to be the normal price, and it shall be the most objective and reasonable to determine the price according to the market price at the reliable appraisal institution's market price. Accordingly, Article 16-2 of the above Enforcement Rule is merely an explicit provision

2. However, according to the reasoning of the judgment below, the court below found the following facts and evidence that the plaintiff company purchased real estate from the non-party 1 on September 11, 1975 with the price of 57 million won, and sold it to the non-party 2 and the non-party 5 on May 20, 1977. The Korea Appraisal Board's office accepted a request for appraisal from the plaintiff company on January 28, 1977 and assessed the market price of the real estate at 77,462,40 won at the time of the judgment. Accordingly, the defendant deemed the above appraisal amount as the normal price under Article 40 (1) of the Enforcement Decree of the Corporate Tax Act, and found that the difference between the above sale price and the above appraisal value is a donation other than the designated donation under Article 18 (1) of the same Act, and that the appraisal company did not add it to deductible expenses for the business year of 1977.

3. As seen above, the application of Article 16-2 of the Enforcement Rule of the same Act, which was newly established by the court below after the disposition, to this case, constitutes a violation of the principle of no payment in law. However, the content of Article 16-2 of the above Enforcement Rule is a legal doctrine that can be used as it is even before it is expressly defined, and therefore, it does not affect the conclusion of the judgment of the court below. Thus, there is no ground to charge that the judgment of the court below is erroneous.

4. In addition, as long as the above appraisal value is deemed to be the arm's length price at the time of ruling on the above appraisal value, the difference between the above arm's length price and the actual sale price shall be not included in deductible expenses as non-designated donations under Article 18 (1) of the Corporate Tax Act, but as a result, the disposition of taxation on it shall be deemed to be legitimate, and the court below's decision to the same purport is just, and there is no violation of law of application of tax law by violating the principle of no reason or national tax imposition,

Therefore, the appeal is dismissed, and the costs of the appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Young-ju (Presiding Justice)