The method of deduction, in cases where the undeductible loss incurred during the previous business year is deducted from the income of the next business year, although the corporate tax base and amount of tax have been determined in the taxable year;

The amount of losses under the Corporate Tax Act is naturally deemed to fall under losses if the total amount of losses for a business year exceeds the total amount of gross income at the time the final return of tax base of a corporation or the tax base is confirmed based on the investigation and determination of the government. Also, losses carried forward should be deducted in order from the first occurrence of losses within five years, which is the statutory deduction period, within the scope of five years, and if it is entrusted to the taxpayer's choice, it is reasonable to calculate losses objectively existing because there is a possibility of distortion of the tax base and tax amount for each business year as a taxpayer's income or a taxpayer's choice. In light of the above, even if the tax base and tax amount for the subsequent business year are determined, the losses to be deducted in the previous business year should be calculated on the premise that the legitimate losses that could have been deducted in the previous business

Article 8 subparag. 1 (see current Article 13 subparag. 1) of the former Corporate Tax Act (amended by Act No. 4803, Dec. 22, 1994); Article 9 (see current Article 14) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970, Dec. 31, 1998) (see current Article 18)

Supreme Court Decision 2001Du2652 Delivered on November 26, 2002 (Gong2003Sang, 247) Supreme Court Decision 2003Du13212 Delivered on June 11, 2004

UBD Ethror Urban Shore Ltd. (Law Firm Rate, Attorneys Shin Dong-ho et al., Counsel for defendant-appellant)

Head of Central Tax Office

Seoul High Court Decision 2002Nu9652 delivered on April 22, 2003

The judgment below is reversed and the case is remanded to Seoul High Court.

We examine the grounds of appeal.

1. According to the reasoning of the judgment below, the court below held that, where a corporation's calculation of earnings and losses for each business year and the determination of the tax base accordingly are not an administrative disposition that is the object of appeal litigation, and there was an error in the determination, it can be asserted in the procedure that contests the validity of the taxation disposition accordingly, and that the total amount of losses which belong or comes to belong to a certain business year exceeds the total amount of profits which would belong to the business year, and that only the amount which was investigated as losses at the time of the final return of tax base, etc. of the corporation or the determination of the tax base, etc. according to the government's investigation and determination constitutes losses under the Corporate Tax Act. Thus, even if the disposition of corporate tax for each business year was determined without deduction of losses, and the tax base or amount cannot be contested any longer after the determination of the tax base becomes final and conclusive after the determination of the tax base of the corporate tax for the subsequent business year, which is separate from the final and conclusive taxation disposition, the corporation liable to pay taxes can again assert that there was losses which could be deducted from the income under the relevant provisions of the Corporate Tax Act (see the plaintiff's from 1996Du.

12. Since the Seoul High Court Decision 95Gu27471 decided January 29, 199; 99Du3423 decided October 23, 2001; 260,839,839,390,396,394 were deducted from the amount of income for the remaining business year of 198,396,390,397,399,396,394,396,396,39,396,39,396,39,396,39,396,39,396,39,396, and49, which was the amount of income for the business year of 196,396,396,39,396,396, and49,39,396, and49,396, which was the amount of income for the carried forward of the business year of this case.

2. However, as above Supreme Court Decision 2001Du2652 Decided 201Du2652, losses under the Corporate Tax Act must be naturally deemed as losses in the event that the total amount of losses for a business year exceeds the total amount of gross income, not only the amount investigated as losses at the time of the final return of tax base of a corporation or the determination of tax base based on the investigation and determination of the government, but also the amount of losses for a business year is to be deducted in order from the first occurrence of losses within five years, the statutory deduction period. In addition, it is reasonable to calculate losses carried forward in any business year at the taxpayer's option because it is likely to distort the tax base and tax amount for each business year, and it is reasonable to calculate losses objectively existing in each business year, even if the tax base and tax amount for each business year were determined, in calculating the tax base of the previous business year, the losses to be deducted in the previous business year on the premise that the losses that the losses that could have been deducted in the previous business

Therefore, based on the facts established by the court below, if the amount of losses carried forward of the plaintiff for each business year that can be deducted within a five-year deduction period based on the above methods, the cumulative loss for each business year 1,505,438,262 won from 198 to 1990 (260,839,734 won for a business year 1988 + 59,373,292 won for a business year 59,373,292 + 645,225,236 won for a business year 1,584,61,869 won for a business year 1,584,669 won for a business year 192, the amount of losses that can be deducted for a business year 1,582 shall not be deducted for a business year 1,33,306,705 won for a business year 1936,522,520 won for a business year 1964,19636

Nevertheless, the court below held that among the plaintiff's losses incurred in the 1988 and the 1990 business year, the difference between the 232,384,927 won actually recognized by the defendant and 673,680,043 won (this includes 211,794,680 won of losses in 198 and 461,885,363 won of losses in 1990) shall not be presumed to have been further deducted from the income in the 1991 business year without premise that the losses incurred in the 1994 business year were deducted from the income in the next 1993 business year, and it shall be carried forward as a result of calculating the tax base for the 1,48,935,374 won of the corporate tax or the method of deducting losses carried forward, which affected the conclusion of the judgment. The ground of appeal assigning this error is with merit.

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-dam (Presiding Justice)