Busan District Court 2016Guhap23432 (Law No. 16, 2017)

In calculating the net asset value at the time of stock evaluation, it shall not be deemed expenses that can be deducted from the assets.

A/S government contract was concluded before the evaluation base date of stocks, but the payment of the price under the contract was made after the evaluation base date of stocks. The price equivalent to the defect repair cost under A/S government contract cannot be deemed as the cost of the nature that can be deducted from the asset when calculating the net asset value for the appraisal of the value of stocks.

Article 52 of the Corporate Tax Act: Denial of Wrongful Calculation

2017Nu22572 Revocation of revocation of disposition of imposing corporate tax

○○○○ Corporation

Head of △ District Office

Busan District Court Decision 2016Guhap23432 Decided June 16, 2017

2018.03.09

2018.04.06

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The imposition of corporate tax of KRW 180,396,300 against the plaintiff on August 10, 2015 by the defendant shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning for the court's explanation concerning this case is as follows: Gap's evidence (including each number) which is not sufficient to acknowledge the plaintiff's assertion as evidence submitted in the court of first instance; Gap's evidence (including each number); part of the reasoning for the court of first instance is dismissed as follows; and the plaintiff's judgment as to new assertion in the court of first instance is identical to the part of the reasoning for the court of first instance, except for addition to Paragraph 2 below, and thus, it is consistent with Article 8 (2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

[Attachment]

○ “The average net asset value and the average amount of the judgment of the court of first instance” in Part 8 is deleted from the judgment of the court of second instance, and “the suspension of business” in Part 5 of the judgment of the court of first instance refers to the status in which a business operator temporarily suspends his/her main business activities, but intends to resume his/her future business activities, and “the maintenance, management, or improvement, etc. of his/her business” refers to the status in which the business operator continues to engage in the business and does not engage in any longer business activities. Whether the business is suspended or closed shall be determined by the substance of the relevant fact, regardless of whether registration or reporting is made

2. Judgment on the Plaintiff’s additional assertion

A. Summary of the plaintiff's assertion

If the Plaintiff was in a state of business suspension or closure at the time of acquiring the shares of the instant company on December 29, 2010, when the instant company was in a state of business suspension or closure, in assessing the net asset value of the instant company at the time of purchase of the said shares, KRW 809,068,950 equivalent to the cost of repairing defects paid under the facility AS agreement concluded between the instant company and the △△△△△△, which was concluded on November 30, 2010, should be deducted from the assets.

B. Determination

1) According to the overall purport of Gap evidence 3-2, Gap evidence 6-2, Gap evidence 6-2, Gap evidence 10-3, and Gap evidence 19, the company of this case entered into a contract with △△△△△△△△△ on November 30, 2010, the company of this case assessed the value of the above shares of this case as of December 30, 201, and the value of the above shares of this case on the basis of the assets evaluation of the above shares of this case, the company of this case was assessed as of December 30, 2010 that the company of this case was supplied to △△△△△△△△△△△△△△ for five years from 205 to 2009 with respect to the equipment maintenance responsibilities for five years from 2011 to 2015 with respect to the equipment maintenance responsibilities for 809,068,950 won.

Article 63 (1) 1 (c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015) provides that "any stocks and equity shares not listed on the Exchange shall be appraised by the method prescribed by Presidential Decree in consideration of the assets, profits, etc. of the relevant corporation." Article 54 (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 26960, Feb. 5, 2016; hereinafter referred to as the "Enforcement Decree of the former Inheritance Tax and Gift Tax Act") provides that "net asset value per share under paragraph (1) shall be appraised by the formula of "net asset value of the relevant corporation ± total number of issued stocks". Article 55 (1) provides that "the net asset value of the relevant corporation as of the base date of appraisal under Articles 60 through 66 of the Act shall be appraised by the method prescribed by Ordinance of the Ministry of Strategy and Finance."

Meanwhile, in principle, where the appraisal base date does not coincide with the end of the business year, the net asset value shall be calculated by increasing or decreasing the items of assets and liabilities based on the family account settlement balance sheet as of the evaluation base date. However, if there is no data to accurately verify assets and liabilities as of the evaluation base date, it shall be based on assets and liabilities on the family account settlement balance sheet at a point different from the evaluation base date or on the balance sheet as of the end of the immediately preceding business year, but it shall not be deemed unlawful to calculate the net asset

In this case, there is no evidence to accurately verify the assets and liabilities of the company of this case as of the appraisal base date of the shares of this case ( December 29, 2010), the defendant seems to have been bound to trust the current status of assets and liabilities on the balance sheet as of June 30, 2010, which was used as the basis for the appraisal of the value of the shares of this case as of June 30, 2010. Since the plaintiff thereafter raised an objection against the assets and liabilities on the balance sheet as of June 30, 2010, the defendant did not consider the price equivalent to the cost of defect repair paid under A/S agreement of this case from the assets and liabilities on the balance sheet as of June 30, 2010, it cannot be said that the appraisal of the value of the shares of this case based on the assets and liabilities on the balance sheet is unlawful.

2) Even if the price equivalent to the cost of defect repair paid under the instant A/S agreement ought to be considered in the appraisal of the stock value of the instant case, it is reasonable to deem that the price equivalent to the cost of defect repair as seen below is not deducted from the company’s assets.

First, according to the above facts, the above payment paid under the instant A/S transfer contract is the prepaid cost equivalent to the cost of repairing defects paid for the services not yet provided in relation to the provision of facility A/S business from 2011 to 2015, which was after the above contract. However, Article 17-2 subparagraph 2 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 223, Jul. 26, 201) delegated under Article 54(2) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 223, Jul. 26, 201)

In light of the purport of the aforementioned relevant statutes and the fact that the substitution of the liabilities with assets that are not the balance sheet is based on the fact that the service as consideration for the disbursement was not provided as of the closing date, and thus, it is not perceived as the current cost, and thus, it is difficult to view the net asset value of the relevant corporation in order to assess the value of unlisted stocks, in principle, the advance payment cost that is deducted from the assets refers to the case where the service as consideration for the advance payment of expenses as of the base date of appraisal and its consideration is completely lost

As seen earlier, as to the instant case, the instant A/S agreement was concluded on November 30, 2010, prior to the appraisal base date of the instant shares, but the payment under the instant agreement was made only on December 30, 2010, which was the date of the appraisal base date of the said shares, and was made only on December 30, 2010, after the date of the appraisal base date of the said shares, to the △△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△ in consideration of the expenses for defect repair. Accordingly, it is difficult to view that the payment under the instant agreement was made only on December 30, 2010, after the date of appraisal base date of the said shares.

3) Therefore, the price equivalent to the cost of repairing defects under the instant A/S agreement shall not be deemed the cost of the nature that can be deducted from the company’s assets in calculating the net asset value of the instant company for the appraisal of the value of the instant shares. Therefore, the Plaintiff’s assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.