Seoul Administrative Court 2016-Gu Group-575 ( November 16, 2016)

The value assessed by an appraisal conducted retroactively at the time of acquisition shall not be that which can substitute for the actual transaction value at the time of acquisition.

The value assessed by an appraisal conducted retroactively at the time of acquisition shall not be the value determined to substitute the actual transaction value at the time of acquisition under Article 97 (1) 1 (b) of the former Income Tax Act.

Article 97 of the former Income Tax Act (Calculation of Necessary Expenses in Transfer Income)

Article 163 of the former Enforcement Decree of the Income Tax Act (Necessary Expenses for Transferred Assets)

2016Nu82586 Revocation of Disposition of Imposing capital gains tax

Ma-○

AA Head of the Tax Office

May 31, 2017

July 5, 2017

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The imposition of capital gains tax of KRW 61,546,117 (including additional tax) for the Plaintiff on December 1, 2015 shall be revoked.

1. Quotation of judgment of the first instance;

The court's explanation on this case is identical to the reasoning of the judgment of the court of first instance except for the addition to the part of the judgment of the court of first instance as follows. Thus, the court's explanation on this case is acceptable in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act

○ 61,546,117's "61,54,117" in Part 2, 13, shall be added to "61,546,117", and "any substantial fact to this court" shall be added to "the grounds for recognition."

○ “Supreme Court Decision 2011Du24286 Decided October 15, 2015 and 2015 Decided October 15, 2015”

In addition, in the case where ‘market price' is not ‘actual transaction price' but ‘actual transaction price', the appraisal price by the reliable appraisal institution's retroactive appraisal is different from that which can be seen as market price.

2. Conclusion

Therefore, the judgment of the first instance court is legitimate, and the plaintiff's appeal is dismissed as it is without merit.

It is so decided as per Disposition.

[Seoul Administrative Court 2016Gudan54575 ( October 5, 2016)]

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 61,511,906 against the Plaintiff on December 1, 2015 shall be revoked.

1. Details of the disposition;

A. On August 24, 200, the Plaintiff removed the building and constructed the commercial building (hereinafter referred to as the “instant building”) after purchasing 172.2 square meters of the building at ○○-dong, Seoul, ○○-dong, ○○-○○○○, 172.2 square meters of the above ground (hereinafter referred to as “instant land”). On October 22, 2001, the Plaintiff completed the registration of ownership preservation on the instant building on October 22, 2001.

B. On March 27, 2015, the Plaintiff sold the instant land and buildings in KRW 114,100,000 to Aa, and the acquisition price of the instant land to the Defendant is the actual transaction price; and the acquisition price of the instant land is the average price of the appraised prices by requesting two appraisal institutions around March 2015 to the Plaintiff.

C. On December 1, 2015, the Defendant notified the Plaintiff of KRW 61,546,117 of the transfer income tax reverted to the year 2015 (hereinafter “instant disposition”) by applying the conversion value to the effect that the retroactive appraisal value implemented after the lapse of 13 years from the time of completion of the instant building cannot be recognized.

D. The Plaintiff dissatisfied with the instant disposition and caused a request for examination to the Commissioner of the National Tax Service on January 11, 2016, and the Commissioner of the National Tax Service dismissed the said request for examination on March 11, 2016.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26982, Feb. 17, 2016; hereinafter the same shall apply)

Article 176-2(3)2 of the Enforcement Decree of this case(hereinafter referred to as "the Enforcement Decree of this case") is the actual transaction value.

(1) In cases where it is impossible to confirm the appraisal price applicable, three appraisal prices respectively before and after the date of transfer or the date of acquisition;

It provides that the appraisal value shall be assessed within the month. However, the Enforcement Decree of the instant case

Provisions exceeded the limit of delegation legislation of the mother law, and the principle of no taxation without law and substance over form.

The provision on the enforcement decree of this case is unlawful and invalid, as it excessively limits the freedom to exercise the people’s property rights. Even if the provision on the enforcement decree of this case is not invalid, the above enforcement decree provision is merely an exemplary provision, and thus, the appraisal value conducted after three months from the acquisition date should also be recognized as the appraisal value for the determination of acquisition value. Therefore, the disposition of this case

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Whether the instant provisions exceeded the bounds of delegated legislation, or restrict whether they violate the substance over form principle and the freedom of exercise of property rights

The former Income Tax Act (Amended by Act No. 13558, Dec. 15, 2015; hereinafter the same shall apply)

Article 97(1)1(b) of the Enforcement Decree of the Income Tax Act provides that “Where the actual transaction value at the time of acquisition is not verifiable, the value of transaction example, appraisal value, or conversion value prescribed by Presidential Decree.” According to delegation, Article 163(12) of the former Enforcement Decree of the Income Tax Act provides that “the value of transaction example, appraisal value, or conversion value prescribed by Presidential Decree” means the value pursuant to Article 176-2(2) through (4).” The Enforcement Decree of the instant case provides that “The value of the relevant asset (excluding stocks, etc.) is appraised by two or more appraisal business entities within three months before and after the date of transfer or acquisition (limited to those whose date of appraisal is within three months before and after the date of acquisition or before and after the date of acquisition) is deemed reliable. In light of the language and purport of the aforementioned provisions, it is difficult to view the provision of the Enforcement Decree of the instant case as the average value of real transaction value within the scope of appraisal value before and after the date of transfer or acquisition to the maximum extent of appraisal value.”

2) Whether it violates the principle of no taxation without law

Under the principle of no taxation without law, the interpretation of tax laws shall be interpreted in accordance with the text of the law unless there are special circumstances, and it shall not be permitted to expand or analogically interpret without any reasonable grounds. However, in the event that it is necessary to clarify the meaning through mutual interpretation between the laws and regulations, it is inevitable to make a combined interpretation in view of the legislative purport and purpose, etc. to the extent that it does not undermine the legal stability and predictability pursued by the principle of no taxation without law (see Supreme Court Decision 2007Du4438, Feb. 15, 2008). However, the provision of the Enforcement Decree of the instant case provides that the appraisal base date shall be limited to those within three months before and after the date of transfer or acquisition, and the Plaintiff’s preliminary return of capital gains tax based on the appraisal value calculated by requesting to an appraisal agency after the expiration of 13 years from the date of acquisition of the instant building is the same as seen earlier, the instant disposition, which did not recognize the appraisal value calculated by the Plaintiff,

(3) An appraiser for determining the acquisition value by appraisal value conducted after three months from the date of acquisition;

Whether the amount is recognized as the amount

Article 97 (1) 1 (b) of the former Income Tax Act provides that the actual transaction value at the time of acquisition shall be based on the transaction example, appraisal value, or conversion value as provided by the Presidential Decree in case where the actual transaction value at the time of acquisition is not confirmed in case where the acquisition value, which is one of the necessary expenses deducted from the transfer value in calculating transfer margin, is to be based on the actual transaction value at the time of acquisition. In addition, Article 163 (12) of the former Enforcement Decree of the Income Tax Act provides that "the transaction example, appraisal value, or conversion value as provided by the Presidential Decree" under Article 97 (1) 1 (b) of the former Income Tax Act refers to the value as provided by Article 176-2 (2) through (4) of the former Enforcement Decree, and the main sentence of Article 176-2 (3) of the former Enforcement Decree of the Income Tax Act provides that "in case where the transfer value or acquisition value is estimated or corrected, it shall be based on the value calculated by applying each method in sequential order."

(2) If there is a transaction example of assets, the value of such assets (as the sale value), the date of transfer under subparagraph (2), or

Not less than two appraisal corporations have appraised the relevant assets within 3 months before and after the date of acquisition;

Value deemed reliable as the appraisal value (transfer date or acquisition by the appraisal standard date);

In case there are three months or less before and after each day, the average value of the appraisal value is stipulated, and the acquisition value (the conversion value) converted under the provisions of paragraph (2) in subparagraph 3 is stipulated.

Article 97(1)1(b) of the former Income Tax Act and Article 163(12) of the Enforcement Decree of the former Income Tax Act, which provide for the substitution of the actual transaction price at the time of acquisition by transaction example, appraisal value, or conversion value, shall be construed as not only the general market price that reflects the objective exchange value, but also the actual transaction price at the time of acquisition by itself or at the time of transaction (see, e.g., Supreme Court Decision 2009Du19465, Feb. 10, 201). In light of such legal principles and the language, content, and purport of the aforementioned provisions, etc., it is reasonable to view that not only the actual transaction price but also the type of value that can replace the actual transaction price at the time of acquisition by means of transaction example, appraisal value, or conversion value does not constitute the appraisal price determined to substitute for the actual transaction price at the time of acquisition by the latter.

4) Therefore, the Plaintiff’s assertion is without merit.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.