[1] The scope of inclusion of contributions made by public organizations, etc. in deductible expenses

[2] Whether a contribution to the Communications Development Institute is a designated donation under Article 18(1) of the former Corporate Tax Act (affirmative)

[1] Article 18 of the former Corporate Tax Act (amended by Act No. 4282 of Dec. 31, 1993) separately provides for donations that allow inclusion in deductible expenses, and the scope of inclusion in deductible expenses of donations that are donated to the State or a local government in consideration of public interest, such as social welfare, culture, arts, education, religion, charity, etc., according to the degree of the public nature of such donations, and the scope of inclusion in deductible expenses of donations that are donated free of charge to the State or a local government is different. Thus, the scope of inclusion in deductible expenses of contributions made to public organizations, etc. shall be determined in accordance with the provisions of the above Act. The contribution made by the State shall be deemed as the party to the contribution or as the actual beneficiary, and it

[2] Contributions to the Communications Development Institute shall not be the value of money and valuables donated free to the State or a local government under Article 18 (3) 1 of the former Corporate Tax Act (amended by Act No. 4282 of Dec. 31, 1993), but shall be allowed to be included in deductible expenses only within the limit stipulated in paragraph (1) of the same Article.

[1] Article 18 of the former Corporate Tax Act (amended by Act No. 4282 of Dec. 31, 1993) / [2] Article 18 of the former Corporate Tax Act (amended by Act No. 4282 of Dec. 31, 1993)

[1] Supreme Court Decision 91Nu11285 delivered on July 14, 1992 (Gong1992, 2446)

Korea Mobile Communications Co., Ltd. (Attorney Lee Jae-soo et al., Counsel for the plaintiff-appellant)

The director of the tax office

Seoul High Court Decision 95Gu30590 delivered on May 22, 1996

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The Plaintiff’s attorney’s ground of appeal is examined.

The term "donation" is substantially a donation that is made free of charge to another person, regardless of whether it is a business, and is actually a donation that is made free of charge to the State or a local government. In that the donation reduces net assets, it cannot be viewed as a cost corresponding to profits because it does not fall under deductible expenses, regardless of whether it is directly related to business, and if it is recognized as deductible expenses, it would reduce tax burden and impair the rights and interests of shareholders, etc. or general creditors by impairing the balance of capital, and thus, Article 18 of the former Corporate Tax Act (amended by Act No. 4282 of Dec. 31, 1993) separately provides for the scope of inclusion of donations that are made free of charge to the State or a local government in consideration of public interest such as social welfare, culture, arts, education, religion, charity, etc. according to the degree of the public interest of such donations (see Supreme Court Decision 91Nu1285, Jul. 14, 192).

In the same purport, it is reasonable to view that the court below's contribution to the Korea Communications Development Institute of this case does not fall under the value of the money and valuables donated free of charge to the State or a local government under Article 18 (3) 1 of the Corporate Tax Act, and only within the limit prescribed in paragraph (1) of the same Article, as designated donation under paragraph (1) of the same Article, is allowed to be included in deductible expenses. In addition, there is no error of law by misunderstanding the legal principles on the meaning and scope of the statutory donation as pointed out in the theory of lawsuit

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

Justices Song Jin-hun (Presiding Justice)