A. Whether the accumulation of a corporate rationalization reserve under Article 16 of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 3481 of Dec. 31, 1981) constitutes a prior requirement for the reduction and exemption of corporate tax

(b) Scope of the case where the reserve for business rationalization increases due to the tax adjustment under Article 65 (1) 2 of the Enforcement Decree of the Regulation of Tax Reduction and Exemption Act; and

A. The accumulation of a corporate rationalization reserve required by Article 16 of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 3481 of Dec. 31, 1981) is not a requirement to be first performed in order to obtain an income deduction for capital increase under Article 4-2 of the same Act, but a requirement for a person who was deducted after receiving the deduction to be performed at the time of disposing of profits in the business year in which the deduction was made, and is merely a requirement to exempt the collection of equivalent to the deducted tax amount.

(b) Where the reserve for corporate rationalization increases due to the tax adjustment under Article 65 (1) 2 of the Enforcement Decree of the Regulation of Tax Reduction and Exemption Act, it shall also include where the reserve for corporate rationalization accrues.

A. Article 16 of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 3481, Dec. 31, 1981); Article 17(b) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 3481, Dec. 31, 1981); Article 91(2) of the Regulation of Tax Reduction and Exemption Act; Article 65(3) of the Enforcement Decree of the Regulation of Tax Reduction and Exemption Act

Supreme Court Decision 79Nu403 delivered on February 10, 1981, 82Nu462 delivered on March 22, 1983, 82Nu84 delivered on November 22, 1983, 85Nu190 delivered on September 10, 1985

Attorney Kim Jae-sub and Lee Jae-sik, Counsel for the Central Investment Finance Corporation

Head of Central Tax Office

Seoul High Court Decision 84Gu155 delivered on November 15, 1984

The appeal is dismissed.

The costs of appeal shall be borne by the defendant.

We examine the grounds of appeal.

In light of the purport of Articles 16 and 17 of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 3481, Dec. 31, 1981) which was enforced at the time of the capital increase, the accumulation of the corporate rationalization reserve required by Article 16 of the same Act at the time of the capital increase is not the requirement to be performed first in order to obtain the income deduction for the capital increase under Article 4-2 of the same Act, but it is not the requirement to be performed first in order to obtain the income deduction for the income increase under Article 4-2 of the same Act, and it is only the requirement to exempt the additional collection of the tax amount deducted after the requirement to be performed at the time of disposing of the income for the business year for which the deduction was made (see Supreme Court Decision 79No403, Feb. 10, 1981). It is reasonable to view that there is no reason to deem otherwise even if the corporate tax payment method changed from the method of imposition to the method of tax

In the same purport, the disposition of imposing corporate tax on the business year to which the former Regulation of Tax Reduction and Exemption Act applies is just, and there is no error of law such as misapprehension of legal principles. As to the portion reverted to the business year on December 31, 1981, which is subject to the Specialized Regulation of Tax Reduction and Exemption Act (amended by Act No. 3481, Dec. 31, 1981), Article 91 (2) of the same Act provides that "where a person who is obliged to accumulate a reserve for corporate rationalization pursuant to paragraph (1) fails to do so, tax credit or income deduction shall not apply." However, the proviso to Article 65 (1) 2 and (3) of the same Act provides that this provision provides that this provision shall apply to cases prescribed by the Presidential Decree, and therefore, this provision shall apply to the case where a revised return is made for corporate rationalization to be accumulated in the taxable year after the closing date of the taxable year, it shall be deemed unlawful for the plaintiff to accumulate the amount corresponding to the above portion of the reserve for corporate rationalization as well as the tax base and tax adjustment.

Therefore, the appeal is dismissed, and the costs of the appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices O Sung-sung(Presiding Justice)