Plaintiff 1 and one other (Attorney Park Yong-hoon, Counsel for the plaintiff-appellant)

Gangnam-gu tax secretary general

September 29, 2006

1. Of the plaintiffs' primary claims, each of the securities transaction tax of KRW 217,557,810 shall be dismissed.

2. The plaintiffs' remaining main claims and conjunctive claims are all dismissed.

3. The costs of lawsuit are assessed against the plaintiffs.

In the first place, the imposition of securities transaction tax against the plaintiffs on December 8, 2005 and its additional tax of KRW 289,346,785, respectively, shall be revoked.

Preliminaryly, confirming that the above disposition is null and void.

1. Details of the disposition;

A. As the non-party (Divisions) died on September 19, 2003, the Plaintiffs succeeded to 387,086 shares of ○○ Stock Co., Ltd. (hereinafter “instant shares”) owned by the Plaintiffs as non-listed shares.

B. Upon filing an inheritance tax base return on March 16, 2004, the Plaintiffs assessed 112,480 won per share as 133,851,773,390 won per share, and filed an application for payment in cash for the remaining 130,277,090,070 won, and filed an application for payment in kind with the head of Seongbuk Northern District Tax Office on May 11, 2004 for payment in kind. The Plaintiffs paid 1,158,966 shares of this case as inheritance tax on May 18, 2004, and paid 39,950 won in cash.

C. On May 14, 2004, where shares are paid in kind by the competent tax office, the Plaintiffs received a guidance that the securities transaction tax should be paid in advance, and paid the assessed value per share of 387,086 shares of the instant case at 112,480 won when filing a return on the tax base of inheritance tax, and paid each of the securities transaction tax by the Plaintiff at 217,557,810 won.

D. The Seoul Regional Tax Office assessed and notified the Defendant of the increase in the assessment amount per share of 387,086 shares of this case, which the Plaintiffs paid in kind as inheritance tax, to KRW 149,500. On December 8, 2005, the Seoul Regional Tax Office assessed the assessment amount per share of 149,500 won, and the Defendant issued the disposition of this case, which calculated the securities transaction tax at KRW 289,346,785 with the assessment amount per share of KRW 149,50,00, and deducted the remaining securities transaction tax amount of KRW 217,557,815 with the assessment amount per share of KRW 217,967,867 (including additional tax of KRW 7,178,897).

E. On January 3, 2006, the Plaintiffs filed a request for review with the National Tax Service for all of KRW 289,346,785 of the securities transaction tax calculated as above and its additional tax 7,178,897, but all of them were dismissed.

[Ground of Recognition] A, A 1, A 2-1, A 2, A 3, A 4-1, 2.

2. Whether a lawsuit covering KRW 217,557,810, respectively, is lawful, among the primary claims;

Article 22-2 (1) of the Framework Act on National Taxes provides that "any correction that increases the amount of tax initially determined under tax-related Acts shall not affect the rights and obligations under this Act or other tax-related Acts with respect to the amount of tax initially determined, and thus, the period of filing a lawsuit or a request for a trial shall be determined as of the date of the initial disposition, and the period of filing a lawsuit or a request for a trial shall be determined as of the date of the initial disposition, and the correction shall be determined as of the date of the initial disposition, and if the initial disposition becomes final and conclusive as the Do, such as

In addition, in a case where a request for administrative appeal, which is a prior trial procedure of an appeal seeking the revocation of an administrative disposition, is unlawful due to the lapse of the time limit, the administrative litigation also failed to satisfy the requirements of a prior trial, and thus is not dismissed as illegal. This does not change even if an administrative agency rendered a substantial adjudication on an illegal trial, which attempted the time limit for an administrative appeal, without any excessive restriction, against such unlawful trial (Supreme Court Decision 90Nu8091 delivered on June 25, 1991).

As seen earlier, the plaintiffs filed an appeal with the National Tax Service including this part, which was 90 days after the date when the plaintiffs returned and paid 217,57,810 won to the defendant on May 14, 2004, and the plaintiff filed an appeal with the National Tax Service on January 3, 2006, and the Commissioner of the National Tax Service did not consider the issue of illegality with the limit of the deadline for filing the above appeal, and dismissed the above appeal on the ground that the disposition in this case was legitimate, and it is evident that the plaintiffs filed the lawsuit in this case thereafter.

Therefore, even if the above dismissal ruling was rendered, as long as the appeal itself is illegal as it is a claim with the term of time, it is unlawful for the plaintiffs to have filed a lawsuit on the part of KRW 217,557,810, respectively, of the securities transaction tax, which became final and conclusive among the plaintiffs' primary claims, as it does not go through the procedure of the previous trial.

3. Determination as to the remaining main and conjunctive claims

A. The plaintiffs' assertion

In the event that inheritance tax is paid in kind with stocks, it cannot be deemed as a transfer of stocks under the Securities and Exchange Act, and thus, the disposition of this case imposing securities transaction tax is null and void or unlawful.

(b) Related statutes;

Basic Act

Article 22-2 (Effect of Revision, etc.) (1) Any correction, which increases the amount of tax initially finalized under tax-related Acts, shall not affect the rights and obligations under this Act or other tax-related Acts concerning the amount of tax initially finalized.

Securities Transaction Tax Act

Article 1 (Objects of Taxation) Securities transaction tax shall be imposed on a transfer of stock certificates or quotas (hereinafter referred to as “stock certificates, etc.”) under this Act: Provided, That in case where the transfer of stock certificates, etc. falls under any of the following subparagraphs, securities transaction tax shall not be imposed:

1. Where share certificates, etc. listed on a foreign market (limited to such a market as determined by the Presidential Decree; hereafter in this Article, referred to as the “foreign securities market”) similar to the securities market and Association brokerage market under the Securities and Exchange Act are transferred;

2. Where share certificates, etc. are transferred to the underwriter (referring to the underwriter under Article 2 (7) of the Securities and Exchange Act; hereinafter the same shall apply) to list the share certificates, etc. on a foreign securities market.

Article 2 (Definitions) (1) For the purpose of this Act, the term “share certificates” means those which fall under any of the following subparagraphs:

1. Stock certificates of a corporation established under the Commercial Act or special Acts;

2. Stock certificates or depository receipts which are listed or registered in the securities market, etc. issued by a foreign corporation.

(3) For the purpose of this Act, the term “transfer” means that the ownership is transferred at a cost by contract or legal causes.

Article 6 (Non-Taxable Transfer) Securities transaction tax shall not be levied in any of the following cases:

1. Where the State or local governments transfer share certificates, etc.;

2. Where a public offering of outstanding stock certificates is made in accordance with Article 8 of the Securities and Exchange Act (including the case where an underwriter accepts stock certificates whose total number of subscription falls short of the total number of subscription stock certificates intended for public offering); and

4. Where stock certificates, etc. prescribed by Presidential Decree other than subparagraphs 1 and 2 are transferred.

Article 7 (Tax Base of Securities Transaction Tax) (1) The tax base shall be as follows:

1. Where the share certificates as prescribed in the items of subparagraph 1 of Article 3 are transferred, the transfer value of the relevant share certificates;

2. Where stock certificates, etc. other than that referred to in subparagraph 1 are transferred:

(a) Where the transfer value of share certificates, etc. is known: The transfer value of relevant share certificates, etc.: Provided, That where it is deemed that the share certificates, etc. have been transferred at a price lower than the market value under Article 101 of the Income Tax Act, Article 52 of the Corporate Tax Act or Article 35 of the Inheritance Tax and Gift

(b) Where the transfer value of share certificates, etc. is unknown: Values appraised by the transfer value appraisal method as prescribed by the Presidential Decree.

(2) In applying the provisions of paragraph (1), matters necessary for the assessment of market price shall be prescribed by Presidential Decree.

Enforcement Decree of Act

Article 3 (Transfer not Subject to Taxation) (1) In any of the following cases, securities transaction tax shall not be levied pursuant to subparagraph 4 of Article 6 of the Act:

1. In case of a loan for consumption making an object of stock certificates:

9. Where stocks acquired by investing the Korea Development Bank under the Korea Development Bank Act or the Industrial Bank of Korea under the Industrial Bank of Korea Act in an insolvent financial institution in which the Government, etc. has made an investment at the request of the Financial Supervisory Commission pursuant to Article 12 (1) of the Act on the Structural Improvement of the Financial Industry are transferred not later than June 3

(c) Markets:

The remainder of the main claim and the conjunctive claim shall also be considered together.

First, in case of payment of inheritance tax in kind with stocks, the Securities Transaction Tax Act imposes securities transaction tax on the transfer of stocks (Article 1), and the term "transfer" in this Act means that the ownership is transferred at a cost due to contractual or legal reasons (Article 2): Provided, That in case where the transfer of stock certificates, etc. falls under certain cases, securities transaction tax shall not be imposed (proviso 1 and Article 6 of this Act and Article 3 of the Enforcement Decree of the Act).

Although transfer income tax is a tax imposed on income accrued from the onerous transfer of assets, for example, without any income, even if transfer of assets is made, it cannot be deemed that there is any income accrued from the restoration of ownership due to the transfer of assets, the restoration of ownership by means of transfer for security, the restoration of ownership by means of transfer for security, and the cancellation of transfer for security, or the transfer or expropriation of land by means of a division of common property and a merger, the payment in kind of inheritance tax or bankruptcy procedure for inheritance tax, etc. In such a case, it shall not be deemed the transfer of assets, and thus no transfer income tax shall be levied on it (see Supreme Court Decision 83Nu307 delivered on December 13, 1983). However, in the case of securities transaction tax, where the ownership is transferred for consideration, the legal nature of the transfer falls under the transfer of stocks by inheritance of the stocks imposed on the amount of transfer for payment in kind and the transfer of stocks constitutes a tax obligation equivalent to the inheritance tax paid in kind, and thus, it shall be deemed that the transfer of stocks constitutes a market price of non-listed stocks.

Therefore, the plaintiffs' remaining main claims and conjunctive claims are without merit.

4. Conclusion

Therefore, the plaintiffs' principal claim of KRW 217,557,810 of the Securities Transaction Tax Act shall be dismissed, and all of the plaintiffs' remaining main claims and conjunctive claims shall be dismissed.

Judges Lee Jung-young (Presiding Judge) (Presiding Justice)