[1] Whether the transfer income of reclaimed land made after the completion of the reclamation project of public waters constitutes business income arising from civil construction projects (negative)

[2] The case holding that where part of reclaimed land was transferred after the completion of the reclamation project for public waters after 29 years or more from the date on which the ownership of reclaimed land was acquired, the transfer cannot be deemed as business income generated from the reclamation project for public waters because the transfer was not directly related to the reclamation project for public waters

[1] Even in cases where a person who acquired the ownership of reclaimed land pursuant to the Public Waters Reclamation Act transfers the reclaimed land to another person, if it is deemed that such transfer is not directly related to the reclamation project, such as where the transfer takes place after the completion of the reclamation project of public waters, in light of various circumstances, such as the original purpose of reclamation, the circumstances of transfer, the object, the other party, the holding period, and the transfer period, income from such transfer

[2] The case holding that where part of reclaimed land is transferred after the completion of the reclamation project of public waters after 29 years or more from the date on which the ownership of reclaimed land was acquired, the transfer cannot be deemed as business income generated from the reclamation project of public waters on the ground that the transfer is not directly related to the reclamation project of public waters

[1] Article 20 (1) 5 and (3) (see current Article 19 (1) 6 and (3)) of the former Income Tax Act (amended by Act No. 4803, Dec. 22, 1994); Article 39 (see current Article 29) of the former Income Tax Act (amended by Presidential Decree No. 14467, Dec. 31, 1994); Article 20 (1) 5 and (3) (see current Article 19 (1) 6 and (3) of the former Income Tax Act (amended by Act No. 4803, Dec. 22, 1994); Article 39 (see current Article 29 (1) 6 and (3) of the former Income Tax Act (amended by Presidential Decree No. 1467, Dec. 31, 194); Article 39 (29) of the former Income Tax Act (see current Article 29 (3))

Plaintiff (Attorney Yoon Young-chul et al., Counsel for the plaintiff-appellant)

The director of the tax office.

Seoul High Court Decision 96Gu4855 delivered on August 28, 1997

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

The lower court: (a) acquired the ownership of 328,177 square meters (from 1 omitted) in Ansan-si (hereinafter “instant reclaimed land”) where the Plaintiff had completed reclamation work on May 196 with a license for reclamation of public waters around 1966; (b) acquired the ownership of the reclaimed land on September 2, 1966; and (c) held that the instant reclaimed land, which was transferred to the U.S. on November 16, 1984 with the permission for change of the form and quality of the reclaimed land around 16, 1984; and (d) transferred the instant reclaimed land to the Nonparty, etc. on December 16, 1988; and (e) acquired the ownership of the reclaimed land on September 1, 1985; and (e) acquired the ownership of the reclaimed land on September 19, 198; and (e) transferred the reclaimed land to the Nonparty, etc. on the instant reclaimed land on September 19, 1988.

However, even in cases where a person who acquired the ownership of reclaimed land pursuant to the Public Waters Reclamation Act transfers the reclaimed land to another person, if it is deemed that such transfer is not directly related to the reclamation project, such as taking place after the completion of the reclamation project of public waters in light of various circumstances, such as the original purpose of reclamation, transfer circumstance, object, counterpart, holding period, and transfer period, income accrued from such transfer cannot be deemed as income accrued from the reclamation project

In this case, the plaintiff completed the reclamation project of public waters on May 1, 1966 and owned 18 years or more after acquiring the ownership of the reclaimed land of this case. Since November 1, 1984, the change of the form and quality of the reclaimed land of this case began to be implemented again, and the land of this case was transferred to May 1, 1995. Thus, the transfer of the land of this case cannot be deemed to be directly related to the reclamation project of public waters, and the income from the transfer cannot be deemed to be the business income generated from the reclamation project of public waters.

Nevertheless, the lower court determined that the income accrued from the transfer of the instant land was the business income arising from the civil construction industry. In so doing, the lower court erred by misapprehending the legal doctrine on income, which led to the failure to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment.

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below. It is so decided as per Disposition.

Justices Shin Sung-sung (Presiding Justice)