Whether the substance over form principle pursuant to Article 170(2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 12767 of Aug. 1, 1989), which provides for the method of calculating capital gains by asset where the classification of each actual transaction price is unclear is confirmed through a collective transaction of several assets (affirmative), and whether the above provision can be applied only where a transaction party is a resident or a resident is confirmed in advance (negative)

Since the amount of capital gains should be calculated by transfer income, where several assets, such as land and buildings, are traded en bloc in a case where the amount of capital gains is to be calculated based on the actual transaction value, and the amount of capital gains by transfer is confirmed. However, if the classification of each actual transaction value is unclear, it becomes impossible to calculate the amount of capital gains by transfer, and even in such a case, Article 170 (2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 12767 of Aug. 1, 1989) of the Income Tax Act (amended by Presidential Decree No. 4281 of Dec. 31, 190) of the former Income Tax Act (amended by Presidential Decree No. 4281 of Dec. 31, 1990) provides that each actual transaction value shall be calculated by calculating the amount of capital gains in proportion to the standard market price by transfer asset. Thus, it cannot be deemed that the calculation of the transaction value under the above provision violates the principle of substantial taxation.

Article 23(6) of the former Income Tax Act (amended by Act No. 4281 of Dec. 13, 1990); Article 170(2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 12767 of Aug. 1, 1989)

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Gyeong, Attorneys Lee Dong-young et al., Counsel for plaintiff-appellant)

[Defendant-Appellee] Plaintiff 1 et al.

Head of the tax office

Seoul High Court Decision 91Gu5060 delivered on March 4, 1992

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

According to the reasoning of the judgment below, the court below found that the plaintiff acquired 249,00,000 won of the building site in Songpa-gu Seoul ( Address 1 omitted) on August 11, 198, and constructed 5 stories (the plaintiff's shares among them) on the above two sites by jointly investing 1/2 of the funds with the non-party 1 who is the owner of the building site ( Address 2 omitted) after converting the price into 249,00,000 won, the court below rejected the transfer value of the above building and its site into 1,320,00,000 won and the actual transaction value of the above building under the proviso of Article 20 of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 1981, Jun. 7, 1989; Presidential Decree No. 20000, May 31, 190; Presidential Decree No. 22814, Oct. 16, 197).

Since the transfer income amount shall be calculated by asset transfer, where several assets, such as land and buildings, are traded en bloc in the case of calculating the transfer income amount based on the actual transaction value, and it is confirmed as the whole actual transaction value. However, if the distinction of each actual transaction value is unclear, it becomes impossible to calculate the transfer income amount by asset transfer. In such a case, Article 170(2) of the Decree provides that each actual transaction value shall be calculated by calculating the actual transaction value in proportion to the standard market price by asset transfer (see Supreme Court Decision 91Nu10848 delivered on May 12, 192) by delegation under Article 23(6) of the Act in order to make it possible to reasonably calculate the transfer income amount, it cannot be deemed that the calculation of the transaction value under the above provision violates the principle of substantial taxation. In addition, the judgment below to this purport is justifiable, and it cannot be accepted from the opinion of opposing the judgment below, and it is not reasonable to discuss all precedents of this case and thus, it cannot be justified.

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