The judgment of the court below is reversed, and the case is remanded to Daejeon High Court.

The grounds of appeal are examined.

1. Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 13560, Dec. 15, 2015; hereinafter “former Special Taxation Act”) provides that capital gains tax shall be exempted on any income accruing from the transfer of land directly cultivated by a person who resides in a location of farmland for not less than eight years, while the proviso provides that capital gains tax shall be exempted only on the income accruing from the date of incorporation of the relevant land into a residential area, commercial area, and industrial area (hereinafter “residential area, etc.”) under the National Land Planning and Utilization Act (hereinafter “National Land Planning Act”) or on the income prescribed by the Presidential Decree, if the relevant land has been designated as a reserved land for replotting other than farmland prior to the disposition of replotting under the Urban Development Act and other Acts (hereinafter “Urban Development Act, etc.”).

As such, restricting the scope of exemption from capital gains tax under the proviso of Article 69(1) of the former Special Provision of the same Act is because, after farmland is incorporated into a residential area, etc. or was designated as a reserved land for replotting, the development gains begin with the occurrence of development gains and do not differ from land in fact other than farmland in economic value, and there is no need to grant a benefit

In addition, in cases where farmland has been successively designated as a planned land substitution pursuant to the Urban Development Act, etc. after being incorporated into a residential area, etc. pursuant to the National Land Planning and Utilization Act, the scope of exemption from capital gains tax may be deemed limited if only one of the requirements is satisfied, such as inclusion in a residential area, etc., and the designation of a planned land substitution pursuant to the proviso of Article 69 (1) of the former Special Act, and where it has been done after being incorporated into a residential area, etc.