[1] The meaning of "real estate, the use of which is prohibited or restricted by the provisions of law after acquiring the pertinent real estate" under Article 18 (4) 1 of the former Enforcement Rule of the Corporate Tax Act

[2] In a case where a restriction on use under the provisions of the Act was already taken at the time of land acquisition, but such restriction is limited to a certain period of time, whether a restriction on use newly commenced after the expiration of the period constitutes a restriction on use after land acquisition under Article 18 (4) 1 of the former Enforcement Decree of the Corporate Tax Act (affirmative)

[3] The meaning of personnel expenses and entertainment expenses under the Corporate Tax Act

[4] The case holding that a bank's work subsidy paid monthly to security guards, etc. who are employees of a service company that entered into a service contract for security and driving services is not labor expenses but entertainment expenses

[1] In determining whether the maintenance and management expenses of a loan, including interest paid and aggregate land tax, as a result of the acquisition and holding of assets under the Corporate Tax Act, constitute real estate for non-business use for which the non-business use expenses are excluded from deductible expenses, the "Prohibition or restriction of the use of land under the provisions of Acts and subordinate statutes after the acquisition of the relevant real estate" under Article 18 (4) 1 of the former Enforcement Rule of Corporate Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 1968 of March 12, 1994) includes not only the cases where the use of land is prohibited or restricted directly by the provisions of Acts and subordinate statutes, but also the cases where the administrative agency as part of its administrative action, as a result of permission for land use, such as building permission restriction under Article 44 (2) of the former Building Act (amended by Act No. 4381 of May 31, 1

[2] Even though there was already a measure to restrict land use under the provisions of laws at the time of land acquisition, if such measure is limited to a certain period of time, it shall not be an obstacle to deeming that a measure to restrict land use newly commenced after the expiration of that period is the restriction on land use after its acquisition.

[3] "Labor expenses" included in deductible expenses in the calculation of the income amount for the pertinent business year from among the expenses paid by a corporation for a business means expenses paid to an employee for a consideration for work, and "entertainment expenses" not included in deductible expenses in the calculation of the income amount for the pertinent business year means entertainment expenses, social expenses, secret expenses, recompense, and other expenses of a similar nature regardless of the pretext thereof, which are disbursed by the corporation in connection with its business, and they mean expenses disbursed without compensation in order to promote friendship among the persons related to the business by conducting a entertainment, etc. to facilitate transactional relations.

[4] The case holding that a bank's service contract for security and driving service is not entertainment expenses but entertainment expenses paid monthly to security guards, etc. who are employees of a service company which entered into a service contract for security and driving service

[1] Article 16 subparag. 7 (see current Article 27 subparag. 1) of the former Corporate Tax Act (amended by Act No. 464, Dec. 31, 193); Article 18-3 subparag. 1 (see current Article 28 subparag. 4(a)), Article 30 subparag. 1 (see current Article 49(3) and (3) of the former Corporate Tax Act (amended by Presidential Decree No. 1408, Dec. 31, 1993); Article 49 subparag. 1 (a) and (2) of the former Corporate Tax Act (amended by Act No. 1964, Mar. 12, 1994); Article 18 subparag. 2 of the former Enforcement Decree of the Corporate Tax Act (amended by Act No. 1964, Apr. 1, 197; see current Article 49(1)1 and (2) of the former Corporate Tax Act (amended by Presidential Decree No. 1968, Mar. 12, 1997)

[1] Supreme Court Decision 94Nu2503 delivered on November 22, 1994 (Gong1995Sang, 127), Supreme Court Decision 95Nu7918 delivered on June 11, 1996 (Gong1996Ha, 2242), Supreme Court Decision 97Nu12068 delivered on November 10, 1998 (Gong1998Ha, 2894) / [2] Supreme Court Decision 88Nu933 delivered on December 6, 198 (Gong1989, 107) (Gong192Nu16249 delivered on September 14, 1993)

New Bank of Korea (Attorney Lee Jae-soo et al., Counsel for defendant-appellee)

The director of the Nam-gu Tax Office (Attorney Go Young-deok, Counsel for defendant-appellant)

Seoul High Court Decision 96Gu640 delivered on July 11, 1997

All appeals are dismissed. The costs of appeal are assessed against each appellant.

The grounds of appeal are examined.

1. As to the Defendant’s ground of appeal

In determining whether or not the maintenance and management expenses of a loan, including interest and aggregate land tax, are non-business real estate, as a result of the acquisition and holding of assets under the Corporate Tax Act, the "Prohibition or restriction of the use of land under the provisions of Acts and subordinate statutes after the acquisition of the real estate concerned" under Article 18 (4) 1 of the former Enforcement Rule of the Corporate Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 1968 of Mar. 12, 1994), which is one of the reasons for exclusion from non-business real estate, includes not only cases where the use of land is directly prohibited or restricted by the provisions of Acts and subordinate statutes, but also cases where the administrative agency as part of the administrative action, as part of the administrative action, permits for land use such as building permission, etc. under Article 44 (2) of the former Building Act (amended by Act No. 4381 of May 31, 191) and its actual use is prohibited or restricted (see, e.g., Supreme Court Decision 94Nu258, Jun. 198, 196>

The court below held that since the Plaintiff bank acquired the instant land for the purpose of new construction on November 26, 1990 and applied for a building permit, but continued to take measures to restrict the building permit under the above Building Act which began from May 6, 191 until December 31, 1992, the use of the instant land was prohibited or restricted under Article 18 (4) 1 of the Enforcement Rule of the Corporate Tax Act because it failed to obtain a building permit during that period, it constitutes the prohibition or restriction of use under the above Act and subordinate statutes. This is justified in accordance with the above legal principles.

As alleged in the ground of appeal No. 1, since June 5, 190 to December 31 of the same year, the restriction on construction permission under the provisions of the Building Act has already been taken at the time of the acquisition of the land of this case, but such restriction is limited to a certain period of time, and it does not interfere with the view that the restriction on construction permission of this case is the restriction on construction permission of this case before the new commencement of the new commencement after the expiration of the period.

The precedents cited in the grounds of appeal are not appropriate to be invoked in the instant case, since all of the cases conflict with the instant case.

In addition, as long as the land of this case is excluded from non-business real estate due to the above restriction measures, the sale of the land of this case after the exclusion period was due to the internal circumstances of the Plaintiff bank, which is unrelated to the above restriction measures, as alleged in the ground of appeal No. 2, there is no legal basis to deem that the land of this case cannot be excluded from non-business real estate during the above taxation period, and it is not contrary to the precedents cited in the ground of appeal.

The defendant's ground of appeal cannot be accepted.

2. Plaintiff’s ground of appeal

Of the expenses paid by a corporation for a business, the term "labor expenses" (Article 9 (3) and Article 12 (2) 3 of the Corporate Tax Act of the previous year amended by Act No. 5581 of Dec. 28, 1998) that are included in the deductible expenses in the calculation of the income amount for the business year concerned means the expenses paid to an employee as a consideration for work, and the term "entertainment expenses" that are not included in the deductible expenses in the calculation of the income amount for the business year concerned means entertainment expenses, social expenses, secret expenses, recompense, and other expenses of a similar nature regardless of the pretext thereof, which are disbursed by a corporation in connection with its business (referring to the expenses disbursed by a business year in which the former is amended by Act No. 5981 of Dec. 31, 1998; Article 18-2 (1) and the main sentence of Article 12 (2) 3 of the Corporate Tax Act of the previous year as amended by Presidential Decree No. 15970 of Dec. 31, 1993).

The court below held that, with regard to the payment of a monthly amount to security guards, etc. who are employees of the service company that entered into a service contract for security and driving services, the Plaintiff bank unilaterally set up and paid by the Plaintiff bank instead of pre-agreement on the method and amount of payment between the Plaintiff bank and its security guards, etc.; the intent of the Plaintiff bank to pay work subsidies to the Plaintiff bank to boost the morale of security guards, etc. and to create a sense of unity with the Plaintiff bank employees; in light of the contents of the security guards, etc. in the service contract, the Plaintiff bank appears to have not requested the security guards, etc. to provide additional services with respect to the public affairs of the Plaintiff bank in addition to the duties stipulated in the service contract; in light of the fact that the Plaintiff bank, in the service contract, the Plaintiff bank did not directly and individually not pay remuneration and individual payment for overtime work, etc. to the operator of the Plaintiff bank, etc., it can be recognized that the above work subsidies constitute more smooth work relations than the above service contract by having the employment security guards, etc., who have no purpose of the above employment relationship with the Plaintiff bank employees.

In light of the record and the legal principles as seen earlier, the judgment is just, and there is no illegality of misunderstanding the legal principles as to entertainment expenses under the Corporate Tax Act. The ground of appeal that the above entertainment expenses should be considered as personnel expenses cannot be accepted.

3. The plaintiff filed an appeal against the remaining portion of the judgment below against the court below, but not only did the grounds of appeal be stated in the petition of appeal, but also did not submit a separate appellate brief within a legitimate period.

4. Therefore, all appeals are dismissed, and the costs of appeal are assessed against each appellant. It is so decided as per Disposition by the assent of all Justices who reviewed the appeal.

Justices Kim Jong-sik (Presiding Justice)