Plaintiff (Law Firm Chuncheon, Attorney Yoon Tae-tae, Counsel for the plaintiff-appellant)

Head of Yongsan Tax Office

may 23, 2006

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the plaintiff.

The Defendant’s disposition of imposition of capital gains tax of KRW 497,735,740 for the Plaintiff on December 1, 2003 shall be revoked.

1. Details of the disposition;

On December 31, 200, the Plaintiff sold 50,233 shares of new CD-ROMs (hereinafter “instant transferred shares”) to 3,234,727,200 shares (hereinafter “instant transferred shares”) via the Association brokerage market via the Association brokerage market, and did not pay the transfer income tax. The Defendant issued a tax investigation with respect to the Plaintiff on December 1, 2003 on the ground that the Plaintiff owned the shares of a non-party company (11,050 shares, 110,50 shares, which fall under the major shareholder under the relevant Acts and subordinate statutes as of the end of the business year of the non-party company immediately preceding the date of the said transfer of shares, prior to the date of the said transfer of shares, and the Plaintiff did not pay the transfer income tax as stated in the relevant Acts and subordinate statutes. The Defendant imposed the transfer income tax on the Plaintiff on December 1, 2003.

[Grounds for recognition] The items of evidence Nos. 1 through 3, No. 1 and 2, and the purport of the whole pleadings.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

On September 16, 199, the Plaintiff entered into a share lending contract with 10,00 shares of new CDs (on November 13, 1999, at par value of 100,000 shares). However, as a loan for consumption with stock certificates, the above share lending contract is a loan for the purpose of stock certificates and the ownership of the lending shares is transferred to EL branch and transferred to EL branch. Thus, on December 31, 1999, the non-party company shares owned by the Plaintiff on December 1, 1950 shares (on November 13, 1999, at par value of 10,50 shares) and the total market value of 2,541,000 shares, and the above share lending contract is a loan for consumption with the above share certificates, and the ownership of the lending shares is transferred to EL branch and transferred to EL branch. Thus, the Defendant did not constitute the Plaintiff’s unlawful disposition under Article 415 of the Enforcement Decree of the Income Tax Act.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

(1) On September 16, 1999, the Plaintiff entered into a share lending contract (hereinafter “instant contract”) with respect to the non-party company’s shares owned by the Plaintiff, which owns 110,50 shares of the non-party company before par value split.

① The loan of 10,00 common shares of the non-party company owned by the Plaintiff (hereinafter “the loan shares of this case”) to ELD securities from September 20, 199 to March 20, 200.

② On September 20, 199, the Plaintiff delivered the actual share to EL branch securities. The Plaintiff received the share certificates and delivered the certificate to the Plaintiff, and the Plaintiff deliver the actual share certificates to the Plaintiff on the repayment date. The Plaintiff received the share certificates and issued the certificate to EL branch securities.

③ The Plaintiff cannot demand reimbursement of the instant loan and loan shares prior to the date of repayment of the instant loan and loan shares. If the Plaintiff requests early repayment prior to the date of repayment, the Plaintiff shall bear the expenses and losses incurred by the early repayment of the loan and loan shares.

④ In the event that shareholders’ rights, such as capital increase without compensation, stock dividends, cash dividend, merger, par value division, and exercise of voting rights, arise with respect to the lending and borrowing shares of this case during the lending period, the ELD securities shall exercise the shareholders’ rights under the direction of the Plaintiff and return to the Plaintiff the shares added by exercising the shareholders’ rights on the date of issuance of the share certificates, unless the relevant provisions are violated. In the event that the right to subscribe for capital increase is created during the lending period, the preemptive rights shall be transferred to the Plaintiff without compensation. Provided, That where the issuer does not issue the preemptive rights, the ELD securities shall receive the subscription price from the Plaintiff and return to the Plaintiff the new shares with compensation on the date of issuance of the share certificates. In this case, where the Plaintiff does not pay the subscription price to the ELD securities

(5) The EL branch securities shall pay 2% of the loan amount (the closing price x the number of loan shares) to the Plaintiff as commission for the loan shares of this case within 10 days from the date of loan.

6. The Plaintiff and ELD Securities shall not disclose to the public the terms and conditions of the instant contract, and shall not divulge to a third party any confidential information of the other party known to them in the course of negotiations and implementation of this contract. If any material or intangible damage occurs to the other party to the contract due to disclosure or divulgence, the contractual party shall be liable to the other party to

(7) Matters not otherwise provided for in this contract shall be governed by relevant Acts and subordinate statutes and commercial practices.

(2) Under the instant contract, on September 20, 1999, the Plaintiff sent 10,000 shares (securities No. 1 omitted) of the non-party company to the Plaintiff’s securities transaction account opened at the school Dong branch of the Seoul Securities Co., Ltd. to the EL branch (the transfer to the EL branch was made) and received KRW 11,360,000 from the EL branch as commission.

(3) Accordingly, on January 11, 200, before the date of redemption agreed upon by the Plaintiff, the ELD securities returned 100,000 shares of the non-party company (securities No. 2 omitted) whose par value was divided by redemption of 10,00 shares borrowed from the Plaintiff on January 11, 200, as agreed upon by the Plaintiff’s request.

(4) Meanwhile, at the time of December 31, 1999, the total market price of the non-party company’s shares, including the loan shares, owned by the Plaintiff, including the loan shares, was KRW 26,741,00,000 (24,200,000,000 of the market price of the loan shares in this case)

0 won + the sum total of 2,541,00,000 shares of 10,500 shares owned by the plaintiff.

[Identification Evidence] Facts without dispute, Gap evidence of No. 9, Gap evidence of No. 1, 2, Gap evidence of No. 10, Eul evidence of No. 3 through 7, the purport of the whole pleadings

D. Determination

On December 31, 199, the end of the business year immediately before the date of the transfer of the instant shares, the market price of the Nonparty Company’s shares, etc., owned by the Plaintiff, including the lending and borrowing shares of this case, shall be at least 10 billion won and the total market price of the shares, etc. owned is at least 10 billion won, and shall be examined as to whether it falls under the major shareholders of the Nonparty Company under Article 94 of the Income Tax

First, according to the above facts, although the Plaintiff borrowed the lending stocks of this case to the EL branch securities for a certain period of time, the EL branch securities have the authority to dispose of them as the owner of the lending stocks of this case during the lending period, and have the same kind and quantity of stocks returned after the expiration of the lending period, and thus, the borrower obtains additional fees for borrowing and lending through a loan for consumption loan contract for the purpose of share certificates, and the borrower can prevent the failure of payment due to the shortage of delivery in the spot market through the purchase of stocks, and perform the investment strategy through the transaction of marginal profits.

Although the ownership of the instant loan and loan shares was transferred to ELS securities under the instant contract, it is reasonable to view that the Plaintiff was entitled to early redemption of the loan and loan shares under the instant contract, so that the Plaintiff can exercise voting rights, which are public interest rights, for the purpose of participating in the operation of the instant loan and loan. (No later than the date of return of the agreement stipulated in the instant contract, ELS securities were returned) Furthermore, ELS securities, which are the lender, are still subject to taxation by exercising the rights of the Plaintiff under the Income Tax Act to return the same kind of loan and loan shares, because the Plaintiff still did not exercise the rights of the Plaintiff as a shareholder by exercising the rights of the lender under the instant contract, such as cash transfer, cash transfer, split, par value and consolidation, and thus, it is difficult to view that the ownership of the instant loan and loan shares was transferred to the Plaintiff for economic interest because the Plaintiff still did not transfer the ownership of the instant loan and loan shares to the lender for the purpose of returning the same kind of loan and loan shares to the Plaintiff.

Therefore, on December 31, 199, the end of the business year immediately before the date of the transfer of the instant shares, the disposition of this case imposing capital gains tax by considering the Plaintiff as a major shareholder of the non-party company under Article 94 of the Income Tax Act and Article 157 (4) 2 of the Enforcement Decree of the same Act by including the lending stocks of this case to the total market price of the non-party company owned by the Plaintiff as of December 31, 199.

3. Conclusion

Thus, the plaintiff's claim of this case seeking revocation on the premise that the disposition of this case is unlawful is dismissed as it is without merit.

Judges Lee Sung-soo