School Foundation Eul Private Teaching Institute (Attorney Han-young, Counsel for defendant-appellant)

Head of Nowon Tax Office

May 19, 2011

1. Of the ancillary claims of this case, the part demanding revocation of imposition of value-added tax shall be dismissed.

2. The plaintiff's primary claim and the remaining conjunctive claim are all dismissed.

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

In the first place, the Defendant confirmed that the imposition disposition of the principal tax and the additional tax stated in the attached Table 1 attached hereto against the Plaintiff on January 6, 2010 and February 8, 2010 is null and void, and the imposition disposition of each principal tax and the additional tax are revoked in the second place.

1. Details of the disposition;

A. On February 1, 2002, the Plaintiff leased and operated the funeral hall of a branch hospital in Seoul Special Metropolitan City, Nowon-gu (hereinafter “instant funeral hall”) from a medical corporation Eul Hospital on February 1, 2002 to the present day.

B. From January 2004 to February 2009, the Plaintiff provided food equivalent to KRW 5,771,061,920 of the supply price to residents and visitors (hereinafter “respondings, etc.”) during the value-added tax period, and reported the value-added tax exemption.

C. On January 6, 2010 and February 8, 2010, the Defendant notified the Plaintiff of the data that the said value of supply is subject to value-added tax, and determined and notified the principal tax and additional tax indicated in the separate taxation list (hereinafter “instant disposition”).

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 2, 5, 6, Eul evidence No. 1 (including each number), the purport of the whole pleadings

2. Whether the lawsuit is lawful;

The defendant asserts that the part of the conjunctive claim of this case seeking revocation of the principal tax of each value-added tax is unlawful, since it did not go through legitimate pre-trial procedure.

In full view of the purport of the entire argument in the statement of evidence No. 2, the Plaintiff filed an appeal with the Director of the Tax Tribunal around April 2010, and sought revocation of the principal tax without seeking revocation of the principal tax of the instant disposition, and only filed the instant lawsuit and sought revocation of the principal tax. Accordingly, the part of each of the ancillary claims of the instant lawsuit seeking revocation of the principal tax of the value-added tax is unlawful, since it did not go through a pre-trial procedure.

3. Judgment on the merits

A. The plaintiff's assertion

1) As to each principal value-added tax among main claims

The supply of food in the funeral hall of this case must be exempted from value-added tax, which is incidental to the supply of funeral services, which is the main transaction.

2) As to the penalty tax on each of the primary and conjunctive claims

The plaintiff did not know that the supply of food at the funeral hall of this case is subject to value-added tax, and there is a justifiable reason not to mislead the plaintiff into neglecting his duty.

B. Relevant statutes

Attached Table 2 shall be as stated in the relevant statutes.

(c) Fact of recognition;

1) On June 1, 200, a medical corporation Eul branch hospital established the funeral hall of this case and registered as a tax-free business operator, reported the value-added tax exemption on food provided to literature visitors, etc., and the Plaintiff also reported the value-added tax exemption on food provided to literature visitors, etc. as seen earlier.

2) On July 12, 2004, in relation to the funeral hall of this case, the Defendant sent to the Plaintiff a notice stating that “In the case of the funeral hall of this case, even if value-added tax is imposed, there is a case of omitting the report of value-added tax or filing a tax exemption despite the imposition of value-added tax on food provided to the literature, etc., the Defendant sent to the Plaintiff a notice stating that “In the case of the funeral hall of this case, the report of value-added tax is filed by reviewing the contents of the report from the commencing date of the business, it shall be accompanied by relevant evidence, and in the case of omission

3) On July 28, 2004, the Plaintiff sent to the Defendant a document stating “a vindication of a revised value-added tax return on food services provided to the visitors” (hereinafter “instant vindication”). The key contents are as follows.

In the main text, “Food sold at the funeral hall of this case is not for many unspecified persons unrelated to funeral ceremony, but for a commercial building, and there is a transaction practice in which a person requests food and drink, which are proceeds from the sale of food, together with the cost of funeral services, to be paid to a resident, without individually claiming the food and drinks who provide meals. According to Article 29 subparag. 6 of the Enforcement Decree of the Value-Added Tax Act, funeral service (lease of a funeral hall, installation of an empty space, rent of a funeral house, storage of a body, dysinging, burial of dys, etc.), and the provision of food and drink for literatures incidental thereto constitutes goods or services incidental to funeral services. The Plaintiff confirmed that part of food and drink provided at the funeral hall of this case at the time of the commencement of the business is exempt from taxes and conducted business so far after obtaining registration of the duty-free business entity.”

4) From 2005 to 2005, the Plaintiff filed a claim for food costs and funeral supplies as one invoice to residents who use the funeral hall of this case.

5) The total sales of the instant funeral hall during the taxable period of the instant disposition amounting to KRW 16,977,828,591, and sales related to the provision of food among them amounting to KRW 6,349,158,121.

6) Meanwhile, the Defendant notified the Plaintiff of the pre-announcement of taxation on October 10, 2006, regarding the Daejeon University Hospital funeral hall (hereinafter “the Daejeon Hospital funeral hall”) located in Seo-gu, Daejeon, which the Plaintiff operates, and notified the Plaintiff of the pre-announcement of taxation on January 12, 2006, that “tax shall be imposed on the portion of tax exemption on the provision of food to the Daejeon Hospital funeral hall.” The Plaintiff reported value-added tax on the provision of food to the Daejeon Hospital funeral hall for each relevant taxable period from October 25, 2005 to January 25, 2010, respectively.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3, 4, 6 through 10 (including paper numbers), Eul evidence Nos. 3 and 4, the purport of the whole pleadings

D. Determination

1) As to each principal value-added tax among main claims

The key issue of this case is whether the supply of food at a funeral hall is recognized as a transaction practice and is usually deemed as an incidental to the supply of funeral services.

The funeral service is to provide labor, such as the keeping of a body, the installation of a crepit and a set for example to the deceased, and the lease of a funeral hall for the articles, in the process of the burial and burial of the body.

In a funeral hall, it is clear that the above body’s provision of food to the literature room, etc. is not included in the original meaning of funeral service, such as storage, eating and burial of the body, provision of labor to have for example to the deceased, etc. It is hard to see that the provision of food is an ordinary supply of funeral services, since it is difficult to 37.49% of the total sales of the funeral hall of this case’s case’s case’s provision of food to the door room, etc., and it is difficult to see that the person who operates a funeral hall of this case’s provision of food to the door room, etc. is not incidental to the supply of food to the door room, etc., in light of the case’s provision of food and drink to the door room, etc., and that it is difficult to see that the provision of food to the door room, etc. is ordinarily incidental to the supply of food and drink services, and that the person who directly operates the funeral hall of this case’s provision of food and drink to the door room, etc., in light of the case’s provision of food and practice of the door room.

2) As to each of the main and conjunctive claims

Under the tax law, in order to facilitate the exercise of the right to impose taxes and the realization of tax claims, the taxpayer's intention or negligence is not considered in the case of violations of the duty to report and pay taxes under the law without justifiable grounds, and the taxpayer's intention or negligence is not considered in the case of violations of the duty to pay taxes, and the land or mistake in the law does not constitute justifiable grounds (see Supreme Court Decision 2000Du5944 delivered on April 12, 2002).

In light of the fact that the Plaintiff reported the provision of food to a funeral hall from around 2000 to around 2004, the Plaintiff reported the provision of food to a funeral hall as exempt from value-added tax, but around July 2004, upon receiving the instant notice from the Defendant, the Plaintiff was aware that the value-added tax was imposed on the provision of food to a gate, etc. in the case of a funeral hall, and that in relation to the funeral hall of Daejeon Hospital, the value-added tax was imposed on the provision of food to a gate, etc., as well as the Plaintiff reported the provision of food to a gate, etc., it cannot be said that there is a justifiable reason that the Plaintiff failed to report and pay value-added tax. It does not change on the ground that

3. Conclusion

Therefore, the part that seeks revocation of the principal tax of each of the conjunctive claims of this case is unlawful and dismissed. The plaintiff's main claim and the remainder of the conjunctive claims are dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Hah Jong-hee (Presiding Judge)