(1) The meaning of "justifiable cause" under Article 178 subparagraph 1 of the former Restriction of Special Local Taxation Act concerning the collection of acquisition tax reduced or exempted for the real estate acquired to be used for the free welfare facility for the aged, and the method of determining whether there is a justifiable reason.

(2) In a case where Party A entered into a real estate sales contract to operate a free welfare facility for the aged, and most payments of the price will substitute a seller’s loan to take over the relevant real estate, and as a result, the acquisition of a loan, which is an important part of the sales contract, was made in the name of Party A, and the acquisition of a loan becomes impossible due to a situation in which the acquisition of a loan, which is an important part of the sales contract, could not be performed under the tax law to cancel the contract and cancel the registration and directly use the relevant real estate for the relevant business, the case holding that the judgment below erred by misapprehending legal principles, even if Party A’s completion of the registration of transfer of real estate, on the ground that it was not used directly for the relevant purpose as a free welfare facility

Article 20 Subparag. 1 and Article 178 Subparag. 1 of the former Restriction of Special Local Taxation Act (Amended by Act No. 12955, Dec. 31, 2014); and Article 20 Subparag. 1 and Article 178 Subparag. 1 of the former Restriction of Special Local Taxation Act (Amended by Act No. 12955, Dec. 31, 2014)

[1] Supreme Court Decision 95Nu13104 Decided January 26, 1996 (Gong1996Sang, 825), Supreme Court Decision 2013Du18582 Decided February 13, 2014 (Gong2014Sang, 621)

Plaintiff (Law Firm Don, Attorney Lee Don-chul, Counsel for plaintiff-appellant)

The head of Nam-gu Incheon Metropolitan City

Seoul High Court Decision 2016Nu59609 decided April 7, 2017

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

The grounds of appeal are examined.

1. Subparagraph 1 of Article 20 and subparagraph 1 of Article 178 of the former Restriction of Special Local Taxation Act (Amended by Act No. 12955, Dec. 31, 2014; hereinafter the same shall apply) shall be exempted from acquisition tax on real estate acquired to use for free welfare facilities for the aged under Article 31 of the Welfare of the Aged Act, and where such real estate is not used for the relevant purpose without justifiable grounds, reduced or exempted acquisition tax shall be additionally collected, if such real estate is not used for the relevant purpose

“Justifiable cause” as stipulated in the above provision includes not only the external reason for which a taxpayer is unable to use for the pertinent purpose, but also the internal reason beyond the grace period because there is no time to do so. In determining whether there exists a justifiable reason, the determination shall be made on an individual basis on the basis of the specific case by taking into account, in full view of the legislative intent of not imposing acquisition tax in light of the public interest of the business performed by the taxpayer, the form of preparation period required for direct use for the intended purpose in light of the purpose of acquiring real estate in light of the purpose of acquisition, such as the length of preparation period, the statutes that cannot be used for the intended purpose, the de facto reason and degree of disability, and whether the taxpayer has made a serious effort to use for the intended purpose (see Supreme Court Decision 2013Du18582, Feb. 13, 2014

2. Review of the reasoning of the lower judgment and the record reveals the following facts.

A. On July 2, 2014, the Plaintiff entered into the instant sales contract with the Nonparty to purchase the instant real estate in KRW 1.95 million from the Nonparty to operate a free welfare facility for the aged. However, the amount of KRW 50 million out of the sales price shall be paid to the Nonparty, but the remainder KRW 1.9 billion should be substituted by the Plaintiff’s acceptance of the instant loan obligations against the Non-Party’s National Federation of Fisheries Cooperatives, which offered the instant real estate as security.

B. On July 2, 2014, the Plaintiff completed only the registration of ownership transfer in the name of the Plaintiff without having received the instant real estate for the purpose of accepting the instant loan obligations. At that time, the Plaintiff applied for the acquisition of the said loan obligations to the National Federation of Fisheries Cooperatives, which is the mortgagee of a collective security right equivalent to KRW 1,851,200,000, based on the instant sales contract.

C. However, the National Federation of Fisheries Cooperatives notified the Plaintiff that it is impossible for the Plaintiff to take over the obligation of the instant loan on the grounds that it does not meet the requirements to assume the obligation of the instant loan upon examining the credit information and the results of interview.

D. Accordingly, on July 22, 2014, the Plaintiff cancelled the instant sales contract and cancelled the registration of ownership transfer in its name on the grounds of cancellation of the agreement on the same day.

3. The following circumstances revealed through such factual basis: ① the Plaintiff acquired the instant real estate for the purpose of operating a facility for the elderly with no charge by acquiring all the facility for the elderly, including the instant real estate, and acquired the instant real estate for the purpose of operating the facility for the elderly with no charge; ② The instant sales contract provides that the Plaintiff, a purchaser, takes over the existing loan obligations of the seller. It appears that the parties to the instant sales contract is the important content of the sales contract, under the premise that there were no special obstacles to the acquisition of the instant loan obligations; ③ the Plaintiff applied for the acquisition of the instant loan obligations immediately after the completion of the registration of transfer of ownership in its name without the delivery of the subject matter to perform such obligation; ④ The National Federation of Fisheries Cooperatives notified the Plaintiff that the acquisition of the instant loan obligations was impossible, and the Plaintiff, etc., which could not easily expect such acquisition of the instant real estate, to immediately cancel the registration of transfer of ownership from the date of entering into the sales contract to the date of the instant agreement to use the instant real estate for the purpose of free use and profit-making of the instant real estate.

4. Nevertheless, the lower court determined otherwise by deeming that the Plaintiff cannot be deemed to have justifiable grounds to constitute grounds for additional collection under Article 178 subparag. 1 of the former Restriction of Special Local Taxation Act. In so determining, the lower court erred by misapprehending the legal doctrine on justifiable grounds under the foregoing provision, thereby adversely affecting the conclusion of the judgment. The Plaintiff’s ground of appeal pointing this out

5. Therefore, without further proceeding to decide on the remaining grounds of appeal, 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 Park Poe-young (Presiding Justice)