Daegu District Court 2014Guhap21235 (Law No. 27 May 27, 2015)

The reduction or exemption of farmland in lieu of farmland shall be directly cultivated at the time of transfer.

The disposition of this case denying the application of the provision on reduction and exemption of farmland on the transfer of this case by deeming that the transfer did not directly cultivate the land at the time of transfer is legitimate.

2015Nu5536 Revocation of Disposition of Imposing capital gains tax

○ ○

○ Head of tax office

Daegu District Court Decision 2014Guhap21235 Decided May 27, 2015

April 1, 2016

April 29, 2016

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

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

1. Purport of claim

The Defendant’s disposition of imposition of capital gains tax of KRW 113,267,540 for the Plaintiff on July 1, 2013 is revoked.

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. On December 30, 199, the Plaintiff completed the registration of ownership transfer in the name of the Plaintiff with respect to ○○○○○○○○, ○○○, 857-3 orchard 13,486 square meters. Since then, on June 30, 201, the land was divided into 857-3 square meters in the same Ri, 6,874 square meters in the same Ri, and 857-11 square meters in the same Ri, 6,612 square meters in the same Ri (hereinafter “instant land”).

B. On May 30, 201, the Plaintiff entered into a sales contract with 500 million won with respect to the instant land (Evidence 2-3), and completed the registration of ownership transfer in the name of Ma○○ and Ma○○○ on July 6, 201 (hereinafter “instant transfer”).

C. On September 30, 201, the Plaintiff calculated the tax amount by applying the provisions on reduction and exemption of farmland pursuant to Article 70 of the Restriction of Special Taxation Act and Article 67 of the Enforcement Decree of the same Act while filing a preliminary return and payment of capital gains tax on the transfer of this case to the Defendant (No. 2-2).

D. On November 28, 2011, the Plaintiff completed the registration of ownership transfer in the name of the Plaintiff, on the ground of sale on the 21st day of the same month, with respect to ○○○○○○○○, ○○○, ○○, ○○, ○○, ○○, ○○, ○○, 350 square meters of the instant land.

E. On April 2013, the Defendant issued a prior notice of taxation that the Plaintiff did not directly cultivate the instant land at the time of the instant transfer, that the lessee Kim○○ was deemed to have cultivated Ma in the instant land, and denied the application of the provisions on reduction and exemption of farmland on the determination that the lessee Kim○ would have cultivated Ma in the instant land, and that on April 30, 2013, the Defendant imposed KRW 113,267,540 on the Plaintiff for the capital gains tax attributed to the year 2011.

F. Accordingly, the Plaintiff filed a request for pre-assessment review on May 27, 2013, but the Defendant rendered a non-adopted decision on June 21, 2013, and issued a correction and notification of capital gains tax amounting to KRW 113,267,540 (including additional tax) for the Plaintiff on July 1, 2013 according to the pre-announcement of taxation (i.e., evidence No. 2, evidence No. 5, hereinafter referred to as “instant disposition”).

G. The Plaintiff filed an objection on July 23, 2013, but was dismissed on August 28, 2013. The Plaintiff filed an appeal on November 19, 2013, but the Tax Tribunal decided to dismiss the application on March 4, 2014.

[Ground of recognition] Unsatisfy, Gap evidence Nos. 1 through 3, 9, Eul evidence Nos. 1, 2, 4 through 8, 11

Each entry, the purport of the whole pleading, including the number

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff leased the instant land to Kim○, ○, for the purpose of farming, from January 1, 2007 to December 31, 2009, the Plaintiff directly cultivated and harvested the horses from the instant land from the expiration of the said lease term to November 201, 201. The Plaintiff borrowed agricultural machinery, etc. necessary for marina farming from Kim○○, obtained information on the methods of marina farming, and sold the seeds cultivated by the Plaintiff to Kim○, ○○, new ○, etc. Nevertheless, without recognizing the Plaintiff’s direct cultivation, the Defendant’s disposition denying the application of the farmland reduction and exemption provision against the instant transfer is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Relevant regulations and legal principles

A) Article 70(1) of the Restriction of Special Taxation Act provides that the amount of tax equivalent to 100/100 of capital gains tax shall be reduced or exempted for income accruing from substitute land as farmland falling under cases prescribed by Presidential Decree by a resident prescribed by Presidential Decree residing in the seat of farmland due to necessity for cultivation. Article 67(2) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 24368, Feb. 15, 2013; hereinafter the same shall apply) provides that "self-Cultivating in the manner prescribed by Presidential Decree" means that a resident engages in cultivating or cultivating crops or perennial plants on his/her own farmland at all times or by cultivating or cultivating 1/2 or more of the farmland with his/her own labor. Article 70(3)1 of the Enforcement Decree provides that "cases prescribed by Presidential Decree" means cases where a person who newly cultivates farmland in the seat of farmland for at least three years while residing in the new farmland for at least three years and transfers the area of farmland to another person (referring to cases where farmland is newly acquired at least 1/3/1/1/1/2 of farmland).

B) Meanwhile, the burden of proving the direct cultivation of the transferred land as the requirement for reduction or exemption of capital gains tax on self-arable land is against a taxpayer who asserts reduction or exemption of capital gains tax (see, e.g., Supreme Court Decisions 92Nu11893, Jul. 13, 1993; 2002Du7074, Nov. 22, 2002).

2) Whether the Plaintiff directly cultivated the instant land at the time of the instant transfer

A) As evidence consistent with the plaintiff's assertion that the plaintiff cultivated Ma directly on the land of this case at the time of the transfer of this case, the former tenant of the land of this case and testimony of the first instance court on April 12, 2013 (No. 11, No. 11, No. 11) and testimony of the first instance court, ○○○○, ○○○, ○○○○○, ○○○○, and ○○○○, the head of the village of this case, who is the former tenant of the land of this case, testified at the highest ○○○, the head of the village of this case

(1) A certificate of Kim○-○

The Plaintiff leased the instant land from January 2007 to March 30, 2007 on the condition that the lessee remove the pine trees located therein, setting the rent at KRW 200,000 per maat, and returned the said land on December 30, 2009.

(2) Witness at the first instance of Kim○-○.

From the Plaintiff on January 1, 2007 to December 31, 2009, the term of the lease expires, and thereafter, the land was returned to the Plaintiff. At the time of leasing the instant land, trees were planted on the said land. After the expiration of the term of the lease, the Plaintiff appeared to grow directly in the instant land, and notified the Plaintiff of the method of cultivation, and the Plaintiff was also lent equipment such as a high-priced Track for cultivating the horse in the following year at late 201. In ○○○○○○○, a location of the instant land, there is a very large number of farmers engaged in growing the instant land on a small scale, such as the Plaintiff. On December 2, 2011, there was a fact that around the end of the term of the lease, the Plaintiff purchased a seed box 200, such as a seed box cultivated by the Plaintiff, and paid KRW 98 million after deducting the amount of 90,000,000,000 for the equipment, etc. for the instant land.

3. Testimony of the first instance court of new ○○

It is known that ○○ Kim, Inc. leased the instant land from the Plaintiff and returned to the Plaintiff at the end of 2009. After that, the Plaintiff was trying to grow the Plaintiff’s horse on several occasions, such as dry field or cutting down fry and cutting down frys. On November 201, 201, the Plaintiff purchased 50,000 won of wages, deducting 50,000 won of wages, and paid 1,50,000 won of seeds. ○○○ is also aware that the Plaintiff purchased the seed horse from the Plaintiff. The ○○○○ is also aware that he purchased the seeds horse from the Plaintiff. There are several households with the Plaintiff who grow fy on a small scale by leasing equipment.

(4) The testimony of the highest ○○ in the first instance.

From the land of this case, Kim ○-○ cultivated Ma, and thereafter the Plaintiff was a marina farmer directly thereafter. In ○○○, many farmers who lend equipment and grow Ma in a small scale are growing, and most individuals are aware that they were sold.

5. Witness of ○○○’s first instance trial

In order to purchase the land of this case, when the plaintiff started to find it once, there is a letter that the plaintiff will conduct the first work.

B) However, in full view of the following circumstances, Gap evidence 9-2, Eul evidence 2-6, Eul evidence 9 through 11, Eul evidence 21, Eul evidence 24, Eul evidence 29, Eul evidence 30-2, Eul evidence 49-2, Eul evidence 50, and Eul evidence 53 through 55, and the overall purport of the arguments and images of Eul evidence 50, Eul evidence 53 through 55, it is difficult to believe that the testimony of the first instance court at the time of the transfer of this case is all of these statements and images, and there is no other evidence to acknowledge that the plaintiff directly cultivated this case at the time of the transfer of this case.

① Although the Plaintiff asserted that he directly cultivated Ma on the instant land from around 2010, the Plaintiff did not submit objective and adequate documentary evidence regarding the purchase of raw materials and equipment necessary for cultivation, lease of equipment, personnel expenses, shipping and sales details, etc. [The Plaintiff asserts to the effect that the agrochemicals and fertilizers listed in subparagraphs 8-1 through 3 (Book No. 8-3), 8-4, 5 (Agricultural Chemicals and Fertilizer Trade Details) were used for the Plaintiff’s cultivation, but in light of the following circumstances, Eul’s evidence No. 35-2, 36-2, 37-4, and 37-44 square meters, the above agrochemicals and fertilizers are located adjacent to the instant land.

It seems that it was used to cultivate pine trees.

② Along with the Plaintiff, ○○ and ○○○ had been aware of at least 20 years, and Kim○ is a professional farmer who leases another person’s farmland and needs to maintain a friendly relationship with the Plaintiff with the owner of the same farmland as the Plaintiff. The ○○○○ purchased the instant land from the Plaintiff and then up to the day he purchased the instant land. As seen earlier, in view of the following: (a) the Plaintiff’s growing tree orchard, and the size of the instant transfer income tax is relatively large in light of the level of the ordinary farmers’ income; and (b) the motive for the Plaintiff to make a false statement in relation to the Plaintiff’s cultivation of the instant land is sufficient.

③ Examining the satellite photograph (No. 53 No. 53) on the instant land, it can be confirmed with the land that around May 2005, 2005, prior to the lease of the instant land by Kim○○, was already removed the trees on the instant land. Therefore, it is difficult to accept the written confirmation of Kim○’s possession that, at the time of lease of the instant land, the trees were planted on the instant land, and that the rent was set on the condition that he would remove the said trees, and the testimony of the first instance court was set on the condition that he would remove the said trees.

④ In addition, at the court of first instance at the latest in 2011, Kim ○ testified that the Plaintiff lent high-priced Trackter and other equipment to grow the horse in the following year, and around December 201, the Plaintiff purchased 200 boxes for ornamental seed farming cultivated by the Plaintiff and paid 9.8 million won after deducting the equipment use fee for the above Tracker and others. As seen above, the Plaintiff appeared to have been assigned the instant land to YO and ○○○○○ on July 6, 201, as seen earlier, from 2012 to 2012, no reason exists to borrow equipment such as Track for cultivating the horse in the following year from Kim ○○ around late 2011.

⑤ From around 2010 to 2010, the Plaintiff asserted that he borrowed agricultural machinery from Kim○○ while growing ma in the instant land (2-3 pages of the complaint). As such, Kim○○ testified that he borrowed agricultural machinery from the first instance court to the Plaintiff at the latest in 2011, the Plaintiff reversed his claim that he borrowed agricultural machinery from new ○○○ and other villages before he borrowed the agricultural machinery from Kim○○○ and other villages (6-7 pages of the preparatory brief dated January 5, 2015). However, at the first instance court, new ○○ had the Plaintiff cultivated ma and had 50,000,000 won after having tried the Plaintiff to grow ma, and had not been given a statement to the Plaintiff that he paid the fees for using the agricultural machinery to the Plaintiff.

④ On April 13, 2013, 201, the largest ○○ prepared a confirmation document (No. 9) that ○○○, at the time of the sale and purchase of the instant land, he/she cultivated Ma by leasing and cultivating the said land (the maximum ○○ was given testimony in the court of first instance that the said confirmation document had already been confirmed by a tax official who was on-site investigation in the village to ○○○, but it is difficult to easily understand that ○○, who was in the position of the president of the farming industry, prepared the said confirmation document in a false manner by a tax official who was in the position of the president of the farming industry).

7) On or after December 31, 2009, around March 12, 2010, 2010, ○○○ Kim returned the instant land to the Plaintiff, he/she cultivated the instant land, and applied for the supply of land improvement chemicals to the said land on or around 2012 (No. 24, 29, No. 30-1, No. 30-2, No. 49-2). As to this, the Plaintiff asserted that, in order for Kim○○○ to receive a large amount of supply of improvement chemicals at the time, the Plaintiff filed a false application for supply, including the instant land, even though he/she was not actually cultivated, it is difficult for Kim○○ to believe that he/she actually stated the remainder of the instant land, except for the instant land, in light of the fact that he/she had made a statement on October 23, 2015 in the process of investigation by the suspect in the instant case, such as the above evidence.

④ From May 201, 201 in the course of investigating the transfer income tax on the Plaintiff, Y○○, the transferee of the instant land, prepared a confirmation letter that the Plaintiff agreed to have the Plaintiff harvested ma and that the said Ma would have harvested Ma,” and it does not need to be determined that the Plaintiff would have harvested ma if the Plaintiff actually cultivated Ma on the instant land at the time of entering into the said sales contract.

9. As seen earlier, Kim○-○ stated that the land of this case was cultivated by leasing it from the Plaintiff through the above confirmation document and testimony at the first instance court from January 1, 2007 to December 31, 2009. However, the farmland ledger (No. 2-6) on the land of this case stated the term of lease from January 1, 2007 to December 31, 2010, the above Kim○-○’s statement on the term of lease is difficult to have a strong credibility [Ma○-○ was reported at the first instance court to obtain certification of environment-friendly agricultural products, so it was difficult to find that the above contents on the lease of the farmland of this case were reported to the Plaintiff at the time of the report and did not talk about the expiry year, but it was difficult to find that the public official in charge of the above 00-party 20-party 20-party 20-party 20-party 20-party 20-party 20-party 20-party 2.

(C) In light of the fact that when Kim ○○ renewed the farmland lease contract in the process of the investigation of the suspect, he stated that there is a lot of cases in which he pays the rent without preparing the lease contract (No. 55 No. 15 pages), there is a strong doubt as to whether the previous lease contract between the Plaintiff and Kim ○ at the time of the transfer of the instant case was not implicitly renewed due to the remittance of money, etc.

C) Therefore, the Defendant’s disposition denying the application of the farmland reduction and exemption provision on the transfer of this case by deeming that the Plaintiff did not directly cultivate the land at the time of the transfer of this case is lawful. Therefore, the Plaintiff’s above assertion cannot be accepted.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is unfair with different conclusions, so the defendant's appeal is accepted, and the judgment of the court of first instance is revoked, and the plaintiff's claim is dismissed as per Disposition.