District Court-2014-Gu Partnership-9238 (1.08, 2019)

Cho-2014-China-1979 (Law No. 16, 2014)

Whether the instant goodwill constitutes merger evaluation marginal profit

The value of goodwill appropriated by the plaintiff shall be recognized as property value of a punishment for excess profits, and it is difficult to deem that compensation has been paid by evaluating its business value.

Article 17 of the Corporate Tax Act and Article 24 of the Enforcement Decree

2019Nu35215 Revocation of Disposition of Corporate Tax Imposition

○ ○

○ Head of tax office

Suwon District Court Decision 2014Guhap9238 Decided January 8, 2019

July 8, 2019

August 14, 2019

1. Revocation of a judgment of the first instance;

2. The Defendant’s disposition of imposing corporate tax of KRW 1,104,790,540 (including additional tax) on the Plaintiff on August 1, 2013 shall be revoked.

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

See paragraphs 1 and 2.

1. Details of the disposition;

The reason why the court uses this part is the same as that stated in Paragraph (1) of the judgment of the court of first instance, and thus, this part is acceptable in accordance with Article 8(2) of the Administrative Litigation Act and the text of Article 420 of the Civil Procedure Act

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The instant goodwill appropriated by the Plaintiff at the time of the merger is merely a simple business license, which is calculated according to the merger ratio calculated by evaluating the succession assets of each of the instant corporations, and the difference between the succeeded assets and the proceeds of the merger according to the merger accounting rules, and does not include a business license separately from the succeeded assets. Therefore, the instant disposition based on the premise that the value of the instant goodwill falls under the merger evaluation marginal profit

2) In light of the fact that there was no clear determination of whether to include the instant goodwill in the assets or how to depreciation them through statutes or established rules, etc., it should be deemed that the Plaintiff, the taxpayer of the instant disposition, as a result of the conflict of opinion due to the significance of tax interpretation in the tax law interpretation, should be deemed as falling under the case where it is unreasonable for the Plaintiff, the taxpayer of the instant disposition, to be unaware of the duty. Therefore, the part concerning penalty tax in the instant disposition is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

1) “○○○○○” is a specialized driving school specialized in a special tree at the time of entering the ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○, which operated the ○○○○○○○○○○○○○○○○○○○, which operated the ○○○○○○○○○○○○○○○, which operated the ○○○○○○○○○○○, which operated the ○○○○○○○○○○○○○, and a stock company that operated the ○○○○○○○○○○○○○○○○○, which operated the ○○○○○○○○○○○○○○, which

2) After evaluating the net asset value succeeded from each of the instant corporations as fair value as stated below (Domark 1), the Plaintiff appropriated the difference between the price of the merger (the price of new shares 4,285,714 issued to the shareholders of each of the instant corporations, 6,68,570,984 won, and the price of the merger (the price of new shares issued to the shareholders of each of the instant corporations) as goodwill in the account

3) In relation to the instant goodwill, the details reported by the Plaintiff under tax adjustment from 2009 to 2012 are as listed below (Do Governor 2).

4) Meanwhile, the sales, sales and management expenses, operating profits, net income, and earned surplus of each of the instant corporations from 2006 to 2009 are as shown below [3] to 5].

5) Each of the instant corporations was incorporated into the Plaintiff’s branch after the merger. However, upon the division of a part of the Plaintiff Company on December 10, 2015, ○○○, a corporation, the head office of which is ○○○-dong, ○○-dong, was established, and ○○-dong, which operated ○○-dong, ○○○-dong, and ○○-dong, the head office of ○○-dong, which operated ○○○-dong, was incorporated into the said ○○-dong branch.

6) The Plaintiff did not recognize the instant goodwill as an asset subject to depreciation. However, regarding the goodwill generated by acquiring a private teaching institute operated by the private proprietor at the time of filing a corporate tax for the business year 2009, the Plaintiff recognized it as an asset subject to depreciation and dealt with depreciation costs in deductible expenses.

[Reasons for Recognition] Unsatisfy, Gap 2, 5, 6, Eul 3 through 5, respectively,

11. Each entry of evidence 1 to 3, Eul evidence 12-1 to 4, and the purport of the whole pleadings

D. Determination as to whether the value of the instant goodwill constitutes merger evaluation marginal profit

1) The premise for the determination

Where a merged corporation succeeds to the evaluation of assets from a merged corporation, the former Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009; hereinafter the same shall apply) provides that where the merged corporation succeeds to the evaluation of assets from the merged corporation, the portion in excess of the book value of the merged corporation shall be deemed a merger evaluation marginal profit [Article 17(1)3 proviso, Articles 15(2) and 12(1)1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22184, Jun. 8, 2010; hereinafter the same shall apply]. In the case of a merger, where the merged corporation evaluates and succeeds to the evaluation of assets of the merged corporation, the goodwill calculated by the merged corporation shall be deemed depreciable assets of the merged corporation only where the merged corporation pays consideration due to its business value due to its mutual name, transaction relationship, and other trade secrets, etc. (hereinafter “mutual name, etc.”) (Article 24(4) of the former Enforcement Decree of the Corporate Tax Act”).

2) Determination

In full view of all the following circumstances revealed in the facts as seen earlier, the evidence presented by the Defendant alone is not sufficient to deem that KRW 3,461,341,901, which the Plaintiff calculated as the value of the instant goodwill in the account book, recognized as intangible property value that the Plaintiff could obtain excess profits from the trade name, etc. of each of the instant corporations, and paid compensation by evaluating its business value, and there is no other evidence to support this. Therefore, the instant disposition based on the premise that the value of the instant goodwill was paid by evaluating the business value of the pertinent goodwill, and that it constitutes a merger evaluation under the former Corporate Tax Act (the Plaintiff’s disposition was unlawful)

Inasmuch as this part of the argument is justified, no further determination is made on the remainder of the plaintiff's assertion.

(2).

In general, in order to be evaluated as having business value, there must be intangible property value that makes it possible to increase excess earnings from other companies engaged in the same kind of business due to their business functions or characteristics, such as special skills, social credibility, and transactional relations. However, among each of the corporations of this case, the net income of ○○○○○ was KRW 226,326,387 among each of the corporations of this case, and the net income of ○○○○○○○○ was KRW -109,261,942, and the above corporations had a net loss at the time of the merger. Thus, it is difficult to conclude that each of the corporations of this case had an intangible property value that can make excess earnings than the ordinary income of the other companies engaged in the same kind of business. On the other hand, it is difficult to conclude that each of the corporations of this case had the earned income equivalent to the earned income of each of the corporations of this case at the time of the merger. However, it is not obvious that each of the corporations of this case had a relatively more tangible asset value.

The Plaintiff asserted to the effect that “the Plaintiff and each of the instant corporations were merged to reduce the cost of the instant merger through joint marketing, etc. after the merger, and that “the Plaintiff was divided into an original state on or around December 2015, because it did not have the effect of the merger, such as excessive cost, etc. even after the merger.” Unlike the Plaintiff’s assertion, the Plaintiff transferred the Plaintiff’s business rights as assets to improve the Plaintiff’s financial status and business activities.

No evidence exists to deem that the Plaintiff had guidance. On the other hand, the same trade name (○○○) as each of the instant corporations.

Since the Plaintiff was running a private teaching institute business by using it, it is not deemed that the Plaintiff’s merger of each of the instant corporations was due to the need to use his trade name, etc.

Even if the Plaintiff appropriated the balance after subtracting the net asset value of the extinguished corporation in the account book as the goodwill, it cannot be deemed that there was an assessment under the tax law on the goodwill immediately. This is because the concept of goodwill under the corporate accounting and the recognition requirements under the tax law should be distinguished, and the inclusion of goodwill in the account book is not immediately connected to the recognition of goodwill under the tax law. Meanwhile, there is no evidence to deem that the value of the instant goodwill is calculated by evaluating the intangible interest of the business, such as business law, such as operating law, credit, reputation, and transaction, such as comparison between the number of students and the relevant private teaching institute, and the size of the pertinent private teaching institute.

The details of the Plaintiff’s tax adjustment are premised on the premise that the instant business right has no asset value. In other words, the Plaintiff deemed that the instant business right falls under the business right without asset value and included the value of the business right in the gross income (income disposition and other income disposition) as stated in the above [Attachment 2], and also included it in the deductible expenses (income disposition) and the relevant depreciation amount in the deductible expenses (income reservation) and reported corporate tax. As such, in this case, where the Plaintiff did not recognize that the business right is a depreciation asset, the Plaintiff cannot be deemed to have succeeded to the Plaintiff by evaluating the instant business right as the asset of each of the instant corporations solely on the ground that the merger cost exceeds the net asset value of each

In addition to the merger of this case, even if the Plaintiff, separately from the merger of this case, recognized the right to operate a private teaching institute operated by a private proprietor as an asset subject to depreciation and appropriated the depreciation costs, it differs from the case where the merger between corporations is at issue, and its structure differs from the case where the merger between corporations, and whether it is included in the deductible expenses, at all different levels from the actual substance. Therefore, it can be deemed that the Plaintiff

section 20.

3. Conclusion

If so, the plaintiff's claim of this case is justified, and the judgment of the court of first instance is unfair with a different conclusion. Therefore, the judgment of the court of first instance shall be revoked, and the disposition of this case shall be revoked.

this decision is delivered with the judgment of the court.