Whether the act of demanding revocation of a tax disposition violates the principle of trust and good faith

It is difficult to say that the act of seeking revocation of the taxation disposition on the grounds of the window dressing accounting after filing a corporate tax return with a book by window dressing accounting is obviously contrary to the past speech and behavior, but it is against the principle of trust and good faith.

Article 15 (Good Faith and Fidelity of Framework Act on National Taxes)

Article 17 (Timing for Belonging Profits and Losses and Calculation of Acquisition Value)

1.The judgment of the first instance shall be modified as follows:

A. Each of the cited items in the separate sheet 1 of the disposition imposing corporate tax on the bankrupt ○ Construction Industry Co., Ltd. for the business year 1996, Nov. 3, 2000 and the disposition imposing corporate tax on the business year 1997, Feb. 1, 2003, shall be revoked.

B. The plaintiff's remaining claims are dismissed.

2. The total costs of the lawsuit shall be three minutes, and one of them shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

1. Purport of claim

The imposition of value-added tax as shown in Appendix I on the list of imposition of corporate tax and special rural development tax imposed by the Defendant against the bankrupt ○○ Construction Industry Co., Ltd. shall be revoked, and the imposition of value-added tax as stated in Appendix II on the list of imposition of imposition of imposition of corporate tax and special rural development tax shall be revoked.

2. Purport of appeal

The part against the defendant in the judgment of the first instance shall be revoked, and the plaintiff's claim corresponding to the above revocation shall be dismissed.

3. Purport of incidental appeal;

Of the judgment of the first instance court, the part against the plaintiff falling under the order of revocation is revoked. The disposition of imposition of KRW 8,290,974,833 of the corporate tax imposed by the defendant against the bankrupt ○○ Construction Industry Co., Ltd. of KRW 1996 shall be revoked.

1. Scope of the judgment of this court;

In the first instance court, the Plaintiff filed a claim for revocation of the imposition of corporate tax on the Defendant for the business year 195 through 1998, the imposition of special rural development tax for the business year 195, the imposition of income tax for the business year 195 through 199, the imposition of income tax for the business year 195 through 199, and the revocation of the imposition of value-added tax for the business year 195 through 199, respectively. The court of the first instance accepted the claim for revocation of the imposition of corporate tax for the business year 196, among the imposition of corporate tax for the business year 1996, 25, 91, 91, 91, 804, 714, among the imposition of corporate tax for the business year 1997, the Plaintiff’s claim for revocation of the imposition of corporate tax for the business year 37,820,960, or the Plaintiff’s claim for revocation of the imposition of corporate tax for the business year 196, excluding the remaining part of the business year 1996.

2. Details of the disposition;

The following facts are not disputed between the parties, or the purport of Gap evidence 1-1-2, Eul evidence 2-1 through 19, 42-2, Eul evidence 4-1 through 6, Gap evidence 4-1-5, Gap evidence 20, Gap evidence 21, 22-1-5, Gap evidence 23, 24-1-2, Eul evidence 9, Eul evidence 10, 11-1 through 5, Eul evidence 13-1-2, Eul evidence 32, 33-1 through 5, Eul evidence 40-1 through 5, 10-1, 51-2, 51-4, and 57-1 through 37, respectively.

A. The plaintiff's status

On May 1, 2001, while the bankrupt ○ Construction Industry Co., Ltd. (hereinafter referred to as ○○ Construction Co., Ltd.) was established on August 25, 1971 for the purpose of civil engineering and construction works, it was declared bankrupt by the Seoul District Court on May 11, 2001. The plaintiff was appointed from the above court on August 31, 2005, after the bankruptcy trustee of ○○ Construction was in bankruptcy, and the plaintiff was appointed as the bankruptcy trustee on August 31, 2005, while the lawsuit was in progress. On January 9, 2007, when the trial was in progress, the Seoul Central District Court decided to commence the rehabilitation procedure for ○○ Construction and the plaintiff was appointed as the administrator of ○○ Construction.

(b) Regular tax investigations, etc. on ○ Construction;

In April 200, the director of the Seoul Regional Tax Office conducted a regular tax investigation on ○ Construction and notified the Defendant, who is the competent tax authority, of the fact that there are items to be included in deductible expenses even though ○ Construction should be included in deductible expenses in the corporate tax return from 1995 to 1998, among the items settled by the tax return for corporate tax return from 1995 to 198. The fact that there are parts to be considered as the object of wrongful calculation because the transaction falls under the transaction with the largest ○○, a related party among the assets of ○ Construction leaked, and that the processing transaction amount should be deducted from the input tax amount, and that the amount

In addition, the director of the Seoul Regional Tax Office classified the Defendant's corporate tax imposition portion on ○○ Construction as the result of the audit on the Defendant's corporate tax imposition; the director of the Seoul Regional Tax Office discovered that ○○○-dong, Incheon ○○-dong, ○○-dong, ○○-dong, ○○-dong, ○○-dong, and 12,620,847 square meters (hereinafter referred to as "○○-do") which completed the registration of preservation of ownership in the name of ○○ Construction on January 14, 1980 after obtaining permission from the Minister of Agriculture and Fisheries for reclamation of public waters on February 28, 191, did not constitute non-business real estate; and discovered that the interest paid in relation to the above business was not farmland, but was reported to be included in the calculation of deductible expenses at the time of reporting

C. Defendant’s imposition of corporate tax of this case

The defendant, on the basis of the notification of the results of tax investigation from the director of Seoul Regional Tax Office, stated the items discovered for each business year of 200.6 (the notification date in the correction resolution shall be October 5, 200), but the tax payment notice shall be as stated in Gap evidence 2-1 through 3, and each tax disposition for which the notice of tax payment is not issued shall be regarded as the notification date stated in the correction resolution; hereinafter the imposition notice shall be regarded as 12,943, 21, 740 won as stated in the corresponding tax amount; 20.3.00 won as stated in the corresponding tax amount; 3.00 won as stated in the corresponding tax amount; 20.3.0 won as stated in the corresponding tax amount; 197.3.0 won as stated in the above list of corporate tax and the corresponding tax amount as 20.3 billion won for each business year, 200 won as stated in the corresponding tax amount; 3.1.6.4 billion won as stated in the above list of Seoul Regional Tax Office.

Afterward, the defendant reduced the amount of 7,647,477,200 won in total as stated in each corresponding part of the tax amount as of March 17, 2003, when the procedure of the judgment of the court below was in progress as of March 17, 2003 as of March 17, 2003 (However, in the business year 1998, there was a correction of increase as of November 3, 200, and evidence Nos. 3 and 4-5 as seen below, there was no separate disposition of imposition of the tax amount of KRW 37,820,960 as of October 6, 200).

[hereinafter referred to as "the imposition disposition of corporate tax in the separate sheet No. 1996 on Nov. 3, 2000" and "the imposition disposition of the corresponding corporate tax in the separate sheet No. 1996 on Mar. 17, 2003" and "the imposition disposition of the corresponding corporate tax in the separate sheet No. 1996 on Feb. 1, 1997 on Feb. 1, 2003 (Provided, That the part against which the plaintiff asserts the cancellation of the above imposition disposition on Nov. 3, 200 on Nov. 3, 200 on Nov. 1, 200 on the part concerning the tax base and tax amount absorption in the separate sheet No. 1, the imposition disposition of the corresponding corporate tax in the separate sheet No. 1, 200 on Nov. 3

(d) Procedures of the previous trial; and

○○ Construction filed a request with the National Tax Tribunal for a trial on December 30, 200 regarding the Defendant’s disposition of imposing corporate tax (excluding the part related to ○ reclaimed land). However, the National Tax Tribunal dismissed the said request on January 24, 2003, and filed the instant lawsuit on April 24, 200 of the same year. Of the disposition of imposing corporate tax, the part related to ○○ Reclaimed land (the part related to the disposition of imposing corporate tax for the business year 1997 due to the decision of November 3, 200), but the above part was also a major issue related to the disposition of imposing corporate tax for the business year 1997 upon the request of the National Tax Tribunal on February 2, 200, but the National Tax Tribunal dismissed the said request on August 17, 2005, and changed the purport of the request by reflecting the changed portion of the request on November 3, 200.

3. Whether the disposition of imposition of the corporate tax of this case is legitimate

A. The separate accounting portion covering the construction income amount in excess of the construction income amount, etc.

(1) The parties' assertion and relevant laws and regulations

(A) The plaintiff's assertion

1) In the case of 196 business year, ○○ Construction appropriated 59.1 billion won higher than the actual revenue amount of 3 construction sites outside of the due process power plant and 1997, and appropriated 80 billion won higher than the actual revenue amount of 7 construction sites outside the due process power plant for the business year 1997. However, since the above amount is an unexistent processing profit, it goes against the principle of substantial taxation even though the Defendant is naturally deducted from the profit of the business year 1996 and 197.

2) When ○○ Construction filed a corporate tax return for the business year 1996, 78 billion won out of the construction income amount was deducted from the amount of income in the course of adjusting the amount of income. Since 61.95 billion won out of the construction income amount in the course of adjusting the amount of income at the time of filing a corporate tax return for the business year 1997, ○○ Construction shall be deducted from the amount of income for each business year

(B) Defendant’s assertion

1) The Defendant imposed corporate tax on the basis of the filing of corporate tax by ○○ Construction based on the pertinent laws and regulations, and thereafter, the Plaintiff, the trustee in bankruptcy of ○○ Construction, operated the details of ○○ Construction’s settlement of accounts, and sought the revocation of the relevant corporate tax is contrary to the good faith and good faith that the taxpayer should observe, and thus, the Plaintiff’s claim of this case is unreasonable

2) Even if the window dressing accounting fact of ○○ Construction is recognized, with respect to the window dressing amount excessively appropriated for construction income, the amount of a legitimate tax should be calculated after calculating the window dressing accounting amount under the tax law through the adjustment of the amount of revenue under the Corporate Tax Act.

3) In addition, ○○ Construction reported a reduction of KRW 14,057,00,00 of the completed construction revenue at the corporate tax return for the business year 1996. Since ○ Construction reported a reduction of KRW 3,060,000 of the completed construction revenue at the corporate tax return for the business year 1997, it should be calculated by adding it to the income amount.

(C) Relevant statutes

Article 14 (Real Taxation under Framework Act on National Taxes)

Article 15 (Good Faith and Fidelity of Framework Act on National Taxes)

Article 17 (Timing for Belonging Profits and Losses and Calculation of Acquisition Value)

Article 36 (Business Year of Profit and Loss in Corporate Tax Act)

(2) Facts of recognition

The following facts do not conflict between the parties, or can be acknowledged in full view of the whole purport of the pleading in the descriptions of Gap evidence 16-1 to 5, Gap evidence 17, Gap evidence 21, 22-1 to 5, Gap evidence 23, 24-1, and 2, and Eul evidence 1 alone is insufficient to reverse the above recognition.

(A) In filing and paying the corporate tax for the business year 1996 and the business year 1997 to the Defendant, ○○ Construction excessively appropriated the following gains on long-term construction works during the process.

1) For the business year 1996, even though the revenue amount related to the construction site as follows is 104,891,70,000,000 won in total for the following construction site, a financial statement equivalent to 7,100,000,000 won in relation to the reclaimed land construction in the Seoul Metropolitan area, equivalent to 27,100,000,000 won in relation to the Mining Power Plant construction, and equivalent to 5,00,000,000 won in relation to the Mining Power Plant construction, and an excessive amount corresponding to 20,00,000,000 won in relation to the Ulsan Nuclear Power Plant construction, which is in total equivalent to 163,91,70,000,000 won in total, including a statement in the settlement of accounts (163,91,91,700,700,000 won in total).

2) For the business year 197, the following construction site revenue amount of KRW 191,456,410,810 in total, is KRW 10,00,000 in relation to the landfill construction, an amount equivalent to KRW 20,000,000 in relation to the Mining Power Plant construction, an amount equivalent to KRW 15,00,000 in relation to the Mining Power Plant construction, an amount equivalent to KRW 15,000,000 in relation to the Mining Power Plant construction, an amount equivalent to KRW 5,00,000 in relation to Ulsan Nuclear Power Plant construction, and an amount equivalent to KRW 7,00,000,000 in relation to Incheon ○dong, and an amount equivalent to KRW 10,00,000 in total, KRW 10,000 in relation to the New Airport Highway construction, an amount equivalent to KRW 100,00 in total, KRW 40810 in relation to the reconstruction construction work, KRW 1005,0000.

(B) Persons related to the above window dressing accounting, such as the largest ○○○○ Construction Chairperson, committed a violation of the Act on External Audit of Stock Companies by preparing and publicly announcing the false financial statements as above and publicly announcing the financial statements prepared through window dressing accounting to outside the public and thereby obtaining loans from financial institutions which believe that the financial statements were legitimate, or obtaining pecuniary benefits through fraud or obtaining payment guarantee on the company bonds issued by ○○ Construction, etc., and was convicted of the violation of the Act on External Audit of Stock Companies at the first instance and the second instance court in accordance with the purport of the Supreme Court’s transfer of the window dressing, the Defendant and the prosecutor appealeded the part of the above violation of the Act on External Audit of Stock Companies as the Supreme Court Decision 2004No1674, 3123 (merged). On July 15, 2005, the Defendant and the prosecutor appealed the judgment of acquittal on the grounds of the expiration of the statute of limitations on other criminal facts, on the other hand, by being acquitted of some other criminal facts and appealed the Supreme Court Decision 2005Do5668.

(C) In reporting and paying corporate tax for the business year 1996 and the business year 1997, ○ Construction included the amount of deduction in the statement of revenue amount settlement as follows.

1) In the course of adjusting and calculating the revenue amount of domestic construction and overseas works in the business year 196, the difference between the amount calculated according to the rate of work progress and the amount of the revenue appropriation amount of domestic construction and overseas works is 63,583,93,685 won, overseas works 49,670,673,633,632 won, and 113,254,767,317 won (including the amount in the above division) was deducted from the revenue amount of 35,254,767,317 won (the amount that should be deducted from the amount to be deducted from the actual deduction amount, 48 billion won among domestic construction, and 30 billion won among overseas works).

2) In the course of adjusting and calculating the revenue amount of domestic construction and overseas works in the business year 197, the difference between the amount of 151,609,69,698,813 won in domestic construction and the amount of 151,559,713,369 won in total, including 67,110,016,556 won in the business year 67,110,016,559,713,369 won in the revenue amount on the settlement of accounts (including the amount above) was deducted only 89,609,713,369 won in the revenue amount on the settlement of accounts (the amount of 41.95,000 won in domestic construction and the amount of 2,000 won out of the overseas construction from the amount of 1996 income amount to be deducted, and the amount to be excluded from the income amount in the business year 1997 was 30,4839,96385 won in the amount of 196396.385 billion won in the accounting amount in excess.

(D) In filing a return and paying corporate tax for the business year 1996 and the business year 1997 to the Defendant, ○ Construction omitted KRW 14,046,683,803, and 3,0606,244,413 in the business year 1997, among the revenue amount pertaining to the completed construction in the business year 1996.

(3) Determination

(A) In calculating the taxable income subject to corporate tax in light of the substance over form principle, the determination of the taxation fact that serves as the basis for applying specific tax laws must be based on the substance of the transaction, regardless of the entry, account title, and transaction name of the pertinent corporation (see, e.g., Supreme Court Decision 90Nu10384, Jul. 27, 1993). According to the above facts, the portion relating to the business year 196 and 1997, among the disposition imposing corporate tax, shall be calculated by adding it to the gross income on the basis of the construction income amount excessively appropriated in the Plaintiff’s corporate account book, and thus, the illegality shall not

(B) Whether the principle of good faith is applied

In regard to this, the Defendant asserts that the Plaintiff’s seeking revocation of the taxation based on the window dressing accounting of ○○ Construction is not permissible in light of the principle of trust and good faith. Accordingly, the application of the principle of trust and good faith in tax litigation can be divided into the application related to the procedural law of tax litigation and the substantive law. The application of the procedural law of tax litigation cannot be specially divided from that in civil litigation. However, the application of the substantive law, which strongly acts by the principle of trust and good faith, is limited rather than in the private autonomy doctrine under the principle of trust and the need to protect specific trust is recognized, even if the application of the substantive law, which strongly acts by the principle of trust and good faith, is more restrictive than in the private autonomy doctrine under the principle of trust and sacrifice. Furthermore, when a taxpayer commits an act contrary to his past speech and behavior, the tax authority should be subject to the imposition of additional tax, such as deprivation of benefits, such as tax reduction and exemption under the tax law, insincere reporting, poor entry, and poor submission of materials, etc., and the tax authority should exercise its superior authority in the field duty of tax investigation.

According to the above facts, it can be seen that ○○ Construction operated accounting books by means of window dressing accounting for the processing of construction income amount, and reported corporate tax for the pertinent taxable year calculated with the input book to the tax authority for the taxation year, claimed that the book was fabricated by itself, and sought the cancellation of the pertinent taxation portion through the Plaintiff’s lawsuit in this case by again calculating the tax base and tax amount. This can be seen as an act evidently contrary to the Plaintiff’s past speech and behavior. On the other hand, the provisions punishing wing for accounting books such as window dressing accounting, etc. are separately prescribed. On the other hand, when filing corporate tax returns and pays corporate tax based on accounting books, it would be subject to taxation laws such as sanction of tax base and tax amount due to bad faith or bad faith, and the Defendant, who is the tax authority, has superior tax status than that of ○○ Construction, a taxpayer, and when the Corporate Tax Act amended on Dec. 30, 2003, it is difficult to view that the Plaintiff’s claim for correction of tax base and tax amount pursuant to Article 706(2) of the Framework Act.

Therefore, the defendant's above assertion is without merit.

(C) Calculation of the amount of separate accounting under tax law

On the other hand, the amount of revenue reported by ○○ Construction Accounting shall be calculated as the amount of long-term construction income in order to calculate the amount of legitimate tax. Therefore, the amount of revenue from construction in the business year 1996, which was not deducted in the course of income adjustment, and the amount of 61.95 billion won out of the amount of revenue from construction in the business year 1997, which was omitted due to the error in applying the amount of revenue adjustment, is justifiable to apply the amount of legitimate adjustment, not the amount applied by mistake, to calculate the amount of legitimate tax. Therefore, when calculating the amount of revenue from construction in the business year 1996, the amount of revenue from construction in the business year shall be KRW 78 billion and the amount of tax division under the tax law of the business year 1997 shall be KRW 73,050,000,000 as follows.

(i)reasonable construction income amount under the Norms;

(1) Business year 196

No. 59.1 billion won = 1,667,627,627,538,305 won from construction revenue under the table without any provision of title 1,726,727,538,305

(2) Business year 1997

No. 2,297,645,55,493 Won - Amounting to KRW 80 billion in window dressing accounting =2,217,645,555,493 Won 2,297,645,493

(ii) due tax adjustment amount;

The amount of legitimate tax adjustment shall be calculated by subtracting the amount in the table of no tax adjustment from the fixed amount under the table of tax adjustment in accordance with the "Adjusted account statement of construction income by field" which ○○ Construction submitted at the initial time of tax return.

(1) Business year 196

“Adjusted account statement of construction income by field” - the fixed amount of 113,254,767,317 won under the “Adjusted account statement of construction income by site - 59.1 billion won = 54,154,767,317 won

(2) Business year 1997

“Adjusted account statement of construction income by field” - Fixed amount of 151,559,713,369 won under the “Adjusted account statement of construction income by field - 80 billion won = 71,559,713,369 won

3) Justifiable construction income amount under tax law

(1) Business year 196

No. 54,154,767, 767, 274, 078, 269 won in gross income + KRW 13,801,307,281 in gross income + KRW 54,154,767,317 = 1,627,274,078,269 won in gross income.

(2) Business year 1997

No. 2,217,645,55,493 Won in the calculation of earnings + 4,483,93,685 won in the calculation of earnings + 71,59,713,369 won in the calculation of earnings = 2,150,569,75,809 won in the calculation of earnings.

4) Amount of separate accounting under tax law

(1) Business year 196

Amount of construction income originally reported 1,705,274,078,269 - Amount of construction income under tax law 1,627,274,078,269 = 78 billion won

(2) Business year 1997

Amount of construction income originally reported 2,23,619,775,809 - Amount of construction income under tax law 2,150,569,775,809 = 73,050,000,000

(d)the addition of the revenue amount of the completed construction project reported;

○○ Construction reported a reduction of KRW 14,047,00,000 of the completed construction income at the corporate tax return for the business year 1996, and the fact that ○○ Construction reported a reduction of KRW 3,060,000 of the completed construction income at the corporate tax return for the business year 1997 is as seen earlier. Therefore, in calculating the legitimate tax amount, the amount reported above shall be added to the construction income amount of ○ Construction.

(E) Therefore, in calculating the legitimate tax amount on the disposition of imposition of the business year 196 and the business year 1997, the amount of 78 billion won for the business year 196, and 73,050,000 for the business year 197, which was excessively appropriated due to the window dressing accounting, shall be deducted from the pertinent tax base, and the amount of 14,047,000,000 for the business year 1996, the amount of 1996, and the amount of 13,060,000,000 for the business year 197, the amount of ever reported completed construction work shall be added.

B. The non-deductible part of the personnel expenses of overseas dispatch personnel, and the non-deductible part of the paid interest related to the building in Doina Minari Mina

The reasoning in this part of the judgment is as stated in the reasoning from 13th to 37th day of the judgment of the court of first instance. Thus, this part of the judgment is cited in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

(j) Justifiable tax amount;

As seen earlier, in the assessment basis of corporate tax for the business year 197 and the business year 1998, the amount of tax paid prior to the due date of increase or decrease shall be deducted from the calculation basis of corporate tax, and in this case, the amount of tax paid prior to the due date of increase or decrease shall be deducted from the amount of tax, as stated in the separate sheet of tax calculation (1996 and the business year 1997), as stated in the separate sheet of tax base (1,216,046,720, and the corporate tax for the business year 1997 shall be 23,550,99,477, as the corporate tax amount for the business year 1996, as stated in the separate sheet of tax calculation (196 and the business year 1997) if the Plaintiff re-calculated the tax base and tax amount for the business year to be borne by the Plaintiff, including the amount of tax already reported and paid, as seen in the separate sheet I.

Therefore, the disposition of imposition of the corporate tax of this case of KRW 28,538,316,706 (the current notified tax amount of KRW 79,754,362,726 - the legitimate tax amount of KRW 51,216,04,720), and KRW 27,784,527,768 (the current notified tax amount of KRW 51,35,527,245 - the legitimate tax amount of KRW 23,50,99,478) of the corporate tax of 1996, should be revoked.

4. Conclusion

Therefore, the plaintiff's claim of this case is justified within the above scope of recognition, and the remaining claim is dismissed as it is without merit. Since the judgment of the court of first instance is unfair with a different conclusion, it is so decided as per Disposition by changing the judgment of the court of first instance as stated in the order.