Whether the penalty paid to cancel the contract prior to the transfer act which is subject to taxation can be deducted from the transfer value.

The penalty paid to cancel a separate sales contract prior to the transfer act which is subject to the transfer income is not directly related to the transfer of this case, and it is not necessary expenses under Article 45 of the Income Tax Act, and it is not the gross income (transfer value) of the transfer of this case nor is it deducted from the gross income of this case or treated as losses.

Articles 23(1), 23(2), and 45 of the Income Tax Act (Law No. 2796, Dec. 22, 1975)

[Judgment of the court below]

Head of Daegu Tax Office

Daegu High Court Decision 79Gu25 delivered on October 30, 1979

The judgment of the court below is reversed, and the case is remanded to Daegu High Court.

The grounds of appeal by Defendant Litigation Performers are examined.

The court below held on May 29, 1976 that the plaintiff entered into a contract to sell the real estate of this case to the non-party 35,420,000 won and received 5,000,000 won as the down payment and deposited 5,000,000 won as the down payment that the plaintiff received by the non-party 6.25 of the same year in the future, and cancelled the above contract, and then sold 45,000,000 won to the non-party 28 of the same year to the non-party 35,420,000 won as penalty. However, the court below held that the transfer value of the real real estate of this case should not be deducted from the transfer value of the non-party 45,00,000 won as deductible expenses, even if the plaintiff paid 5,000,000 won as penalty, the transfer value of the real real estate of this case should not be deducted from the transfer value of the non-party 45,00,0000 won.

However, according to Article 23 (2) of the Income Tax Act at the time of the transfer of this case, the transfer income amount shall be the amount (transfer marginal profit) calculated by deducting necessary expenses under Article 45 of the same Act from the total amount of income from the transfer of this case's assets, and again the amount calculated by deducting the transfer income deduction amount under Article 23 (2) 1 of the same Act and the special transfer income deduction amount under Article 23 (2) 2 of the same Act. In this case, the court below has already decided that the same penalty as in this case is not recognized as necessary expenses under Article 45 of the same Act and Article 94 of the Enforcement Decree of the same Act, and the payment of penalty in this case is not directly related to the transfer of this case's separate contract prior to the transfer of this case's assets which are subject to taxation, so it shall not be deducted from the total amount of income (transfer value) due to the transfer of this case's assets, or it shall not be treated as losses due to the transfer of this case's real property.

Therefore, the judgment of the court below on the premise that the penalty of this case should be deducted from the transfer value or transfer income amount shall be ultimately affected by misunderstanding the legal principles of Articles 23(2) and 45 of the Income Tax Act, which affected the judgment.

Therefore, the lower judgment is reversed by accepting the Defendant’s grounds of appeal, and the case is remanded to the lower court. It is so decided as per Disposition by the assent of all participating judges.

Justices Jeong Tae-won (Presiding Justice)