New Village Traffic Co., Ltd. (Attorney Obong-soo, Counsel for defendant-appellee)

Head of Seodaemun Tax Office

October 23, 2012

1. The disposition of imposition of value-added tax imposed on the Plaintiff on October 12, 201 by the Defendant for the second period of 8,012,950 won for the year 206, KRW 12,415,730 for the first period of 2007, KRW 12,194,380 for the year 207, KRW 8,271,940 for the year 208, KRW 8,484,510 for the second period of 208, KRW 3,738,360 for the year 209, KRW 3,727,820 for the year 209, KRW 3,820 for the year 209, KRW 3,50 for the year 20 years, KRW 3,807, KRW 720 for the year 2010, KRW 250 for the year 20, KRW 2016 for the year 30

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is a corporation that concurrently operates urban bus passenger transport business exempt from value-added tax (hereinafter “instant passenger transport business”) and advertising media business, which is a taxable business (hereinafter “instant advertising business”).

B. The Plaintiff reported the input tax amount of KRW 1,691,722,318 (hereinafter “instant input tax amount”) corresponding to the sales amount among the total input tax amount of KRW 1,691,72,318 (hereinafter “instant input tax amount”) on bus purchase cost, oil cost, and parts for repair when filing a value-added tax return for the second and second taxable periods from 2006 to 2011 as the input tax amount deducted from the output tax amount for the instant advertising business.

C. The Defendant: (a) considered the instant input tax amount as the input tax amount for the instant passenger transport business; and (b) deducted the input tax amount reported by the Plaintiff as the input tax amount for the instant passenger transport business; (c) on October 12, 201, the Plaintiff rendered a disposition of KRW 2,415,730 in 206, KRW 12,415,730 in 207, KRW 12,194,380 in 207, KRW 12,194,380 in 208, KRW 8,484,510 in 208, KRW 3,738,360 in 209, KRW 3,727,820 in 209, KRW 307, KRW 720 in 207, KRW 2010 in 206, KRW 3616, KRW 20630 in 205, KRW 2016.

D. On January 6, 2012, the Plaintiff dissatisfied with the instant disposition and filed a petition for an inquiry with the Tax Tribunal, but the said petition was dismissed on April 27, 2012.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3, Eul evidence Nos. 1 and 2 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

An advertisement that is conducted by attaching advertisements to inside and outside of the city bus can only be effective by using the urban bus “operation” as a medium, and the Seoul Newspapers Co., Ltd. (hereinafter “Seoul Newspapers”) also paid the advertising media user fee to the Plaintiff on the premise that it is. Therefore, the instant input tax amount is the common purchase tax for the passenger transport business and the advertising business. Therefore, the instant disposition made on a different premise is unlawful.

B. Relevant statutes

[Valued Tax]

Article 17 (Payable Tax Amount)

(1) The amount of value-added taxes payable by an entrepreneur (hereinafter referred to as "paid tax amount") shall be the amount computed by deducting the tax amount under the following subparagraphs (hereinafter referred to as "purchase tax amount") from the tax amount on the goods and services supplied by him/her (hereinafter referred to as "sales tax amount"): Provided, That where an input tax amount exceeds the output tax amount, it shall be a refundable tax amount (hereinafter referred to

1. The tax amount for the supply of goods or services used or to be used for his own business;

[Enforcement Decree of the Value-Added Tax]

Article 61 (Method of Calculating Purchase Tax Amount)

(1) Where an entrepreneur concurrently operates a taxable business and a tax-free business, the input tax amount related to the tax-free business shall be calculated according to the actual attribution, and an input tax amount which is commonly used for a taxable business and a tax-free business and thus the actual attribution is not distinguishable (hereinafter referred to as "common input tax amount") shall be calculated according to the following formula: Provided, That when a preliminary return is filed, it shall be calculated in accordance with the ratio of the total tax-

Purchase tax amount related to the marking duty-free business contained in the main sentence = Common purchase tax amount ¡¿ (tax-free supply price/total supply price)

(c) Fact of recognition;

The Seoul Metropolitan Government Transport Business Association, including the plaintiff, represented by bus transport business operators in Seoul Metropolitan Government, concluded an agency contract for urban bus advertising business with the Seoul newspaper company, and the main contents are as follows (No. 3).

The terms used in this Agreement are defined as follows. The bus transport business association (hereinafter referred to as the "association") shall enter into a contract on behalf of the company which delegates the matters concerning the use of the media for advertising business to the association and shall be jointly liable. 2-2. The term "advertising business agency" means the act of the Seoul National Assembly with the authority delegated by the Seoul National Assembly to obtain authorization and permission necessary for the advertising business, and the act of the Seoul National Assembly for the design, production, installation and management of advertisements, and attracting of sponsors. 2-3. The term "media use fee" means the amount specified in this Agreement by the Seoul National Assembly to pay to the association or the association designated by the association for the price for the advertising business. 5-1. The Seoul National Assembly shall obtain all authorization and permission necessary for the advertising business on its account at the 2-1. 5-2. 5-2. The Seoul National Assembly shall pay the fees for the use of advertisements, the place of installation and management of advertisements, the place of installation and management of the Seoul National Assembly, the Seoul National Assembly shall be held liable for 70.

D. Determination

1) Nature of the instant advertising business

The purpose of the instant advertising business operated by the Plaintiff is to provide services for bus passengers or drivers to be exposed advertisements by displaying advertisements to Seoul newspaper companies inside and outside the bus, and to receive the media user fee, which is the price for the use of the advertising business, from Seoul newspaper companies. Therefore, the media user fee is paid as the premise of the operation of the Plaintiff bus, and the instant advertising business is an essential relationship with the instant passenger transport business, which is a tax-free business, in that it acts as a broker for the operation of the bus.

2) The instant input tax amount related to bus operation

In light of the above nature of the advertising business, it is reasonable to interpret the instant input tax amount related to bus operation, including bus purchase cost, oil cost, and parts for repair, as well as the instant passenger transport business. However, since the two businesses are used as a means of bus operation at the same time, it cannot be distinguished from the actual attribution of the input tax amount related to the operation. Therefore, the input tax amount calculated by multiplying the instant input tax amount by the ratio of the supply value of the instant advertising business to the total supply value of the two businesses, should be deducted from the output tax amount of the said advertising business, and the value-added tax should be calculated by deducting the input tax amount from the output tax amount of the said advertising business, barring any special circumstance. Thus, the Plaintiff’

3) Judgment on the defendant's assertion

A) The Defendant asserts that the instant input tax amount, such as bus purchase cost, oil cost, and parts for repair, is an input tax amount for the instant passenger transport business, and that it is inevitable for the instant passenger transport business, and that there is no proximate causal relation with the passenger transport business, as the instant advertising business provides the right to simply display advertisements inside and outside the bus, and obtains the income therefrom. However, the instant advertising business is based on the premise of the operation of the bus as a natural premise for the operation of the bus (the Plaintiff is not exposed to the passengers or pedestrians, and thus the Seoul newspaper company does not pay the Plaintiff the user fee for the media), and it is difficult to view that there is no relevance between the two businesses, since it is difficult to view that the Plaintiff’s aforementioned assertion is not acceptable.

B) The Defendant asserts that both urban buses with no advertising revenue and urban buses with no advertising revenue operate the same distance as the same fuel cost, and that if the fuel cost, which is the input tax amount related to bus operation, is divided, the cost incurred in the tax-free business would be reduced to the extent that the cost would be not corresponding to the actual cost would occur. However, it is reasonable to interpret that the instant advertising business would result in the reduction of fuel cost that is incurred in operating the same distance by sharing the elements of the instant passenger transport business and bus operation, thereby causing more sales due to the same operation. Therefore, the Defendant’s above assertion is rejected.

C) The Defendant asserts that since the subject of the production, installation, maintenance, removal, and restoration of the advertising materials of this case is Seoul newspaper company, oil expenses, etc. do not occur as a result of the posting of the advertising materials, and there may not occur any additional costs corresponding to the advertising materials. However, as seen earlier, the content of the advertising business of this case is the essence of "operation of buses" by attaching the advertising materials of Seoul newspaper company, and it does not provide services such as the posting, maintenance, and management of the advertising materials. Accordingly, the Defendant’s assertion is rejected as it goes against the nature of the advertising business

3. Conclusion

Therefore, the plaintiff's claim of this case is justified and it is so decided as per Disposition.

Judges Lee Jae-hee (Presiding Judge)