Plaintiff (Law Firm Rate, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Head of Yeongdeungpo Tax Office

September 5, 2007

1. The part of the rejection disposition against the plaintiff on September 24, 2004, excluding KRW 262,077, out of the amount of the claim for correction against corporate tax belonging to the business year from April 1, 2003 to March 31, 2004 (the reduction of KRW 1,108,145,350) is revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 15% is borne by the Plaintiff, and 85% is borne by the Defendant, respectively.

The defendant's disposition of imposition of corporate tax of 168,051,063 won from April 1, 1999 to March 31, 2000 against the plaintiff on May 10, 2004, and the disposition of rejection against the plaintiff on September 24, 2004 against the plaintiff on April 1, 2003 to March 31, 2004 (the reduction of KRW 1,108,145,350) shall be revoked.

1. Details of the disposition;

A. The plaintiff is a corporation with the purpose of selling, buying, selling, or taking over securities, and when the non-party 1 corporation (hereinafter referred to as the "non-party 1 corporation") whose trade name was changed to ○○○ on December 18, 2006, which was in the position of a related party under Article 20 of the former Corporate Tax Act (wholly amended by Act No. 5581 of Dec. 28, 1998), grants capital increase with 2 million weeks, the non-party 3 et al. transferred 70,000,000 shares, among the forfeited shares of 1,010,029, among the forfeited shares of 1,000,000 shares (hereinafter referred to as the "one shares of this case"), among the shares of this case, 310,000 won per share, 300,000 won per share, 30,0000 won per share, 196, 299, 19639.

B. In addition, when Nonparty 2 Co., Ltd. (the Seoul District Court Decision 2003Hahap65, Dec. 26, 2003; hereinafter Nonparty 2 Co., Ltd.) who was in the position of a specially related person was declared bankrupt on Dec. 26, 200, the Plaintiff acquired the forfeited share of 876,878 shares (hereinafter “instant 2 shares”) from Nonparty 4 Co., Ltd. and Nonparty 5 Co., Ltd., a major shareholder on Dec. 1, 199 to the forfeited share of 5,00 won per share, and transferred the instant 2 shares around March 2004.

C. The defendant acquired 1 shares of the non-party 1 corporation at the time the plaintiff acquired 3,094 won per share at the time of acquisition of 1 shares of this case, and the plaintiff acquired 5,000 won per share above the market price and unjustly reduced tax burden, it constitutes a wrongful calculation under Article 46 (2) 4 of the former Enforcement Decree of the Corporate Tax Act (wholly amended by Presidential Decree No. 15970, Dec. 31, 1998), based on the following factors: the number of forfeited shares and the shares acquired by the plaintiff among the non-party 3 (1,010,029/2,000,000) at the time of acquisition of 3,09 won per share; 673,790,060 won per share before the payment of capital; 3,000 won to the plaintiff during the business year of 19,390 won to 19,399 to 3,198.

D. On April 1, 2003 to March 31, 2004, the Plaintiff filed a revised request for correction by excluding KRW 4,104,242,036 from the acquisition value of shares and KRW 3,094 per share). On July 20, 2004, the Plaintiff rejected a request for correction of the difference between the acquisition value of shares and the appraised value of the 1,987,958 won per share and the 2nd share (321.75 won per share), among the difference between the acquisition value of the 1st share and the appraised value of the 2nd share and the appraised value of the 321.75 won per share (876,878 shares/906,878 shares). The Plaintiff filed a revised request for correction by excluding the above 4,104,242,036 won as deductible expenses, and the Defendant rejected a request for correction by excluding the difference between the acquisition value of shares and the 32014.4.531.4

E. On Aug. 9, 2004, the Plaintiff appealed to the National Tax Tribunal on Aug. 9, 2004. On Jan. 4, 2007, the National Tax Tribunal rendered a decision that the market price, which is the basis for calculating the denied amount of wrongful calculation due to high-priced acquisition of stocks of this case, should be the value immediately before the payment of the capital increase, not before the payment of the capital increase, should be the value of the stocks immediately after the payment of the capital increase. In applying the wrongful calculation among the dispositions of this case, in applying the provision of Article 29(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16682, Dec. 29, 200), the portion of the disposition of this case evaluated by applying mutatis mutandis the provision of Article 29(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16682, Dec. 16, 2007; the Defendant also rejected the remaining portion of the disposition of this case.

[Ground of recognition] Facts without dispute, Gap 1 to 8 evidence, Eul 1 to 12-6 evidence, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) Of the instant disposition of imposition and the instant refusal disposition of correction, the part on one stock of the instant case

① Since the acceptance price of the instant one stock is a market price, it is not subject to the avoidance of wrongful calculation under the Corporate Tax Act.

② Since the acceptance of the instant 1 share is recognized as economic rationality, it is not subject to the avoidance of wrongful calculation under the Corporate Tax Act.

③ Article 72(3)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002) does not provide for the provisions of Article 88(1)8(b) of the Enforcement Decree of the same Act, and there is no specific legal basis for the denial of wrongful calculation with respect to the instant disposition. Of the instant refusal of correction, the Enforcement Decree of the Corporate Tax Act was amended by Presidential Decree No. 17826, Dec. 30, 2002; however, Article 9 of the Addenda provides that the period of application of the amended provision shall apply from the first acquired after January 1, 2003, the acquisition of the instant one’s shares is not subject to the revocation of wrongful calculation under the Corporate Tax Act.

④ Of the disposition rejecting the correction of the instant case, the application of the appraised value per share on the basis of the total capital increase, not after the capital increase, is unlawful.

(2) The part of shares of this case in the refusal disposition of correction of this case

① Since the acquisition of the instant 2 shares is recognized as economic rationality, it is not subject to the avoidance of wrongful calculation under the Corporate Tax Act.

② Although Article 72(3)3 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002); however, Article 88(1)8(b) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826) provides that Article 9 of the Addenda provides that the period of application of the amended provision shall apply from the portion first acquired after January 1, 2003, the acquisition of the instant two shares is not subject to the application, and is not subject to the avoidance of wrongful calculation under the Corporate Tax Act.

③ The rejection of wrongful calculation under Article 88(1)8(b) of the former Enforcement Decree of the Corporate Tax Act (wholly amended by Presidential Decree No. 15970, Dec. 31, 1998) requires profit sharing. The Plaintiff did not allocate profits to the shareholders who renounced the subscription of new shares with respect to the acquisition of the two shares. Thus, the acquisition of the two shares in this case is not subject to the avoidance of wrongful calculation under the Corporate Tax Act.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Of the instant disposition of imposition and the instant refusal disposition of correction, the part on one stock of the instant case

① Whether the acceptance price of the shares of this case falls under the market price

Although the legal nature of the acquisition of new shares is recognized as a membership agreement aimed at the occurrence of membership relationship under the Commercial Act, and it is inevitable to acquire new shares at par value when it is intended to acquire them under Article 417 of the Commercial Act because the issuance of new shares falls under the purchase of investment assets, it shall be determined whether the new shares issued by another tax accounting firm is high-priced that is subject to avoidance of unfair acts by comparing the difference between the legitimate evaluation value of the assets of the issuing company at the time of the issuance of new shares with the appraisal value of the assets. Although the market value of the new shares issued by a person with a special relationship falls short of face value, it shall be subject to avoidance of wrongful calculation in light of sound social norms and commercial practice (see Supreme Court Decision 2002Du705, Feb. 13, 2004; Supreme Court Decision 2002Du7005, Dec. 31, 1998; Supreme Court Decision 2001Du9788, Nov. 16, 2008>

As to this case, since the Plaintiff’s securities are similar to the Plaintiff’s acquisition of KRW 600,00 per share of KRW 5,00 per share by taking over KRW 60,00 per share to the Plaintiff, the Plaintiff is asserting that KRW 5,000 per share of KRW 1 share of this case is the market price, and the market price refers to the objective exchange value formed through a general and ordinary transaction. If the purport of the whole pleading is added to the statement in subparagraphs 1 through 4 of the evidence No. 9, the Plaintiff’s acquisition of the 1 share of this case at the time of acquiring the 1 share of this case, it can be recognized that the 1 share of this case was traded with KRW 3,00 per share in the Association-registered market. In addition, considering this fact, the Plaintiff’s other than the Plaintiff’s 1 share of this case was merely a acquisition of KRW 600,00 per share of KRW 5,00 per share of this case, this part of the Plaintiff’s assertion cannot be accepted.

② Whether the acquisition of the instant 1 share constitutes a transaction with an economic rationality

Wrongful calculation means the calculation of a taxpayer’s act of reducing or excluding the tax burden incurred when a taxpayer takes a round-over act, multi-stage act and other abnormal transaction form without a reasonable transaction form. The purpose of the Corporate Tax Act’s wrongful calculation provision is to determine whether a transaction with a corporation and a related party constitutes a normal transaction form by abusing all the forms of transaction prescribed in the Enforcement Decree of the Corporate Tax Act, and thus disregarding economic rationality in terms of tax law, and to fair taxation and to prevent tax evasion by deeming that a taxpayer was objectively reasonable in terms of tax law. The determination of whether an economic rationality exists should be made based on whether the transaction is an abnormal transaction lacking economic rationality in light of sound social norms and commercial practices (see, e.g., Supreme Court Decision 2001Du7268, Sept. 4, 2002); and whether it is a normal transaction at the time of the transaction (see, e.g., Supreme Court Decision 2001Du7268, Mar. 8, 198).

As to the instant case, the Plaintiff is naturally admitted to the economic rationality of the acquisition price of new shares if the amount calculated by subtracting the acquisition price of the new shares from the market price at the time of the acquisition of the new shares from the future cash flow of the new shares that were acquired. Since the amount calculated by subtracting the acquisition price of the new shares from the acquisition price of the new shares was higher than the amount calculated by subtracting the market price at the time of the acquisition of the new shares from the acquisition price of the new shares, the Plaintiff asserts that the acquisition price of the new shares is recognized as economic rationality. However, as acknowledged in the foregoing, the existence of economic rationality in the rejection of unfair act is determined as at the time of the transaction, and in view of the fact that the value of the new shares traded in the Association registration market at the time of the acquisition of the new shares was about KRW 3,00,00 of the Plaintiff’s acquisition price of the new shares was about 60,000,000,0000 won, the Plaintiff’s acquisition price of the new shares was not equivalent to the sound social norm or practice after the acquisition.

(3) Whether Article 72(3)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002) is applicable

Article 72 (3) 3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826 of Dec. 30, 2002) provides that with respect to the high-priced acquisition of new stocks under Article 88 (1) 8 (b) of the Enforcement Decree of the same Act, Article 72 (3) 3 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826 of Dec. 30, 2002) does not include any provision that excludes the market value from the acquisition value. Article 88 (1) 8 (b) of the Enforcement Decree of the same Act provides that only Article 72 (3) 3 of the Corporate Tax Act amended by Presidential Decree No. 17826 of Dec. 30, 2002 shall exclude the high-priced acquisition of new stocks from the acquisition value, the applicable period under

However, in light of the fact that Article 37 of the former Enforcement Decree of the Corporate Tax Act (wholly amended by Presidential Decree No. 15970, Dec. 31, 1998) provides that the acquisition value of assets does not include the amount exceeding the market price due to the denial of wrongful calculation and the legal principle of wrongful calculation, it is reasonable in light of the legal principle that the amount in excess of the market price is not included in the acquisition value. Thus, Article 72 (3) 3 of the Enforcement Decree of the Corporate Tax Act amended by Presidential Decree No. 17826, Dec. 30, 202 is a declaration provision that clearly confirms the legal principles that have been applied from the past rather than a creative effect.

Therefore, Article 72(3)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002) shall also apply to the shares of this case acquired on June 30, 1997. Thus, the plaintiff's assertion against this cannot be accepted.

④ Time to assess 1 shares of this case

Unlike the purchase of general assets whose value is determined at the time of acquisition, in light of the fact that the underwriter acquires new stocks as a result of a change in the market value of the issuing corporation’s stocks by itself due to the payment of the price of the relevant stocks, the market value of the stocks, which serves as the basis for calculating the denied amount of unfair calculation due to the high-priced acquisition of new stocks, shall be deemed to be the value of the stocks immediately after the payment of the capital increase (see Supreme Court Decision 2002Du7005, Feb. 13, 20

With respect to this case, there is no dispute between the parties as to the facts that the appraisal value of the shares, which is the basis for calculating the denied amount of unfair calculation due to the high-priced acquisition of the shares of this case among the disposition rejecting the correction of this case, has been assessed on the basis of the pre-payment of the capital increase under the above legal principles. Thus, the plaintiff's assertion pointing this out has merit (as to the disposition imposing this case, the defendant included the difference before and after the payment of the capital increase in this case as deductible expenses according to the decision of the National Tax Tribunal, and reduced the initial disposition by the disposition of this case).

Furthermore, it can be seen that the difference between the par value and the par value (3,094 won) of the 1 stock of this case evaluated by the Plaintiff on the basis of the transfer of the 1 stock of this case on or before March 2004 in relation to the transfer of the 1 stock of this case is 1,987,958, while the difference between the par value and the value (4,024.5 won) of the 1 stock of this case assessed on the basis of the payment for the increase of the 1 stock is 970,654 won, and the reasonable tax amount is 262,077 won (=970,654 won x 27%).

(2) The part of shares of this case in the refusal disposition of correction of this case

① Whether the acquisition of the two shares of this case is a transaction with an economic rationality

With respect to the instant case, the Plaintiff acquired the instant 2 shares as a major shareholder of Nonparty 2 Company as part of efforts to normalize the management of Nonparty 2 Company. Since 196 due to Nonparty 2’s business normalization plan, the Plaintiff recorded 24.1 billion won at the time of settlement of accounts on March 31, 2000. As such, the Plaintiff asserted that the instant 2 shares were in an economic rationality transaction. However, in addition to the purport of the entire pleadings on the 10th evidence and 12th evidence, Nonparty 2 acquired the instant 2 shares in light of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1660 of Dec. 31, 199), it is reasonable to recognize that the Plaintiff acquired the instant 20th share shares in light of the economic rationality of the Plaintiff’s 20th share capital increase and net asset value before and after the issuance of the instant 2 shares in light of the circumstances of Nonparty 2’s capital increase and net asset value per share.

(2) Whether Article 72(3)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002) is applied

Article 72(3)3 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002) provides that Article 88(1)8(b) of the Enforcement Decree of the Corporate Tax Act excludes the high-priced acquisition of new stocks from the acquisition value, and Article 9 of the Addenda provides that Article 9 of the Enforcement Decree of the Corporate Tax Act shall apply from the first acquisition after January 1, 2003.

However, as seen above (1) 3, Article 72 (3) 3 of the Enforcement Decree of the Corporate Tax Act is not a provision with creative effect, but a declaration provision clearly confirmed by law and confirmed by law. Thus, the above provision shall also apply to the two shares acquired on December 1, 199. Accordingly, the plaintiff's assertion against this cannot be accepted.

③ Whether the act of acquiring shares constitutes a case in which profits have been distributed

In light of Articles 15(1) and 52(1) of the Corporate Tax Act, and Articles 88(1)8(b) and 89(6) of the former Enforcement Decree of the Corporate Tax Act (wholly amended by Presidential Decree No. 15970, Dec. 31, 198), where profits are distributed or distributed among the relevant corporation and its related shareholders due to capital transactions, such as acquiring new stocks at a price higher than the market price in the capital increase of a corporation, an amount equivalent to the profits should be included in gross income. The method of calculating such profits shall apply mutatis mutandis to Article 29(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828, Dec. 30, 2002). In addition, the rejection of wrongful calculation on the high-priced acquisition of new stocks requires that “the distribution of profits” under the Act and the proviso to Article 29(3) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, if a corporation renounces the rights to the new stocks after the increase.

In full view of the above provisions, even if the difference is calculated by the formula by acquiring new shares at a price higher than the market price, if the value of the shares before and after the capital increase is assessed as a negative figure, it shall not be deemed that there is a profit distributed by the purchaser of new shares to the shareholders who renounced the capital increase, and thus, it shall not be deemed that there is a profit that the purchaser of the new shares should divide the shares to the shareholders who renounced the capital increase (in principle of the tax law, the interpretation of the tax law must be strict, and the expanded interpretation or analogical interpretation shall not be permitted, so it shall not be allowed to interpret the provisions stipulated in the tax law by citing the purport of the system of wrongful calculation, so the proviso of Article 29 (3) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, which is applicable mutatis mutandis by the corporate tax law, is also a confirm provision rather than a creative provision. Accordingly, even if the above revised provisions of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provide that the above revised provisions shall also apply to the above transaction.

With respect to this case, if the public health team, the non-party 2 corporation was in a cumulative loss at the time of issuing the two shares, and the stock of the non-party 2 corporation is assessed based on net asset value pursuant to Articles 54(1) and 54(2)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16660 of Dec. 31, 1999), the facts of the cause of the △△△ 14,128 won, and the △△ 12,813 cause of the △△ 12,813 cause after the capital increase is made before and after the capital increase is made, so long as the value of the stock before and after the capital increase was made by the above facts, there is no profit that the plaintiff who acquired the two shares of this case distributes the new shares to other shareholders, etc. who renounced the acquisition of the new shares.

Therefore, the acquisition of the two shares in this case shall not be subject to the avoidance of wrongful calculation under the Corporate Tax Act. Therefore, the plaintiff's assertion pointing this out is with merit.

D. Sub-committee

Ultimately, the part of the disposition rejecting the correction of this case, excluding the legitimate tax amount of 262,077 won, calculated based on the evaluation of the basis after the payment of the capital increase of the 1 stock of this case, is unlawful, and the disposition imposing

3. Conclusion

Therefore, the plaintiff's claim is partially accepted and it is so decided as per Disposition.

Judges Lee Young-young (Presiding Judge)