[1] Whether Article 66 (12) of the former Enforcement Decree of the Restriction of Special Taxation Act does not stipulate any ground for delegation or it is invalid as it goes beyond the limit of delegated legislation (negative)

[2] Whether Article 168-8 (2) of the former Enforcement Decree of the Income Tax Act is invalid beyond the scope of delegation by this mother law (negative)

[3] The case holding that in a case where an application for capital gains tax reduction or exemption was made under Article 69 (1) of the former Restriction of Special Taxation Act by directly cultivating the above land for not less than eight years upon filing a preliminary return of the tax base of capital gains tax on the transfer of land, the above farmland is ordinarily engaged in cultivating crops or growing perennial plants or not less than 1/2 of farming work with their own labor

[1] Article 69 (1) of the former Restriction of Special Taxation Act (amended by Act No. 9276 of Dec. 29, 2008), Article 66 (4) and (12) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21307 of Feb. 4, 2009), Article 2 subparagraph 5 of the Farmland Act / [2] Article 104 (1) 2-7 of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009), Article 104 (1) 1 (a) of the Income Tax Act, Article 104-3 (2) 1 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21307 of Feb. 22, 2009), Article 204 (1) 1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 21680 of the Farmland Act)

Plaintiff (Attorney Park Jong-jin et al., Counsel for the plaintiff-appellant)

The director of the Southern Incheon District Office

Seoul High Court Decision 2009Nu15366 decided April 14, 2010

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).

1. Regarding ground of appeal No. 1

A. Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 9276, Dec. 29, 2008; hereinafter the same) provides that “The tax amount equivalent to 100/100 of the transfer income tax shall be reduced or exempted for the income accruing from the transfer of land prescribed by the Presidential Decree, among the land which is subject to the taxation of agricultural income tax, which is directly cultivated by the resident prescribed by the Presidential Decree for not less than eight years, and Article 66(12) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by the Presidential Decree No. 19329, Feb. 9, 2006; hereinafter the same shall apply) provides that “The direct cultivation of farmland in Article 69(1) of the Act means that a resident engages in cultivating crops or growing perennial plants on his own farmland or growing plants on his own, or that a farmer owns or owns plants on his own, for at least 1/2 of the farmland in Article 29(1) of the Farmland Act.”

B. As above, Article 69(1) of the former Enforcement Decree of the Restriction of Special Taxation Act delegates a specific scope to the Presidential Decree by declaring the land directly cultivated for not less than eight years from Article 69(1) to the exemption from capital gains tax. Article 66(4) to 8 years from the delegated Enforcement Decree of the same Act provides for the subject of exclusion from the farmland cultivated by himself/herself for not less than eight years, and Article 2(12) provides for the same content as the self-defense provision of Article 2 subparag. 5 of the Farmland Act. Thus, it cannot be said that there is no ground for delegation of Article 66(12) of the former Enforcement Decree of the Restriction of Special Taxation Act,

In the same purport, the court below is just in rejecting the Plaintiff’s assertion that it violates the principle of no taxation without law by prescribing the matters beyond the scope delegated by Article 66(12) of the former Enforcement Decree of the Restriction of Special Taxation Act, and there is no error in the misapprehension of legal principles as to the principle of no taxation without law and the limitation of delegated legislation as otherwise

2. Regarding ground of appeal No. 2

A. Article 104(1)2-7 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005, Act No. 9897 of Dec. 31, 2009; hereinafter the same shall apply) and Article 104-3(1)1(a) of the Income Tax Act provide that "in cases of farmland the owner of which does not reside in the location of such farmland under the conditions as prescribed by Presidential Decree, or which is not cultivated by himself/herself, it shall be deemed 60/10 of the tax base of capital gains tax as farmland for non-business use," and the purport of Article 168-8(2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254 of Dec. 31, 2005, which is newly established and used as a means of speculation in the land for non-business purpose of which the owner of such farmland does not use the farmland for the same purpose as farmland for non-business use or for the same purpose as the owner of farmland.

B. As above, Article 104-3 (1) 1 (a) of the former Income Tax Act delegates to the Presidential Decree the specific scope of the farmland for non-business use, where capital gains tax is heavily imposed, by presenting the generally accepted criteria for judgment by stating that “the owner does not reside in the location of the farmland or does not cultivate himself/herself.” As such, Article 168-8 (2) of the Enforcement Decree of the said Act specifies and clarify the meaning of “resident in the location of the farmland” and “self-Cultivating.” In particular, with respect to “self-Cultivating,” it is merely a specification of the same content as that of “self-Cultivating” under subparagraph 5 of Article 2 of the former Enforcement Decree of the Income Tax Act, and thus, it cannot be said that it goes beyond the scope of invalidation under Article 168-8 (

As the grounds of appeal, the plaintiff asserts that the concept of self-defluence related to non-business land under Article 168-8 (2) of the former Enforcement Decree of the Income Tax Act is invalid by limiting the scope of the object delegated by the Act to the self-defluence under Article 2 subparagraph 5 of the Farmland Act without reasonable grounds. However, as seen earlier, the above Enforcement Decree provision cannot be deemed to exceed the scope of delegation

3. Regarding ground of appeal No. 3

A. According to the reasoning of the judgment below, the court below held that the Plaintiff is liable to pay the capital gains tax of this case in accordance with Article 104-3 (1) 1 (a) of the former Income Tax Act on the ground that it is insufficient to recognize that the Plaintiff had cultivated the farmland of this case directly.

B. In general, the tax authority bears the burden of proving the facts of taxation requirements in a lawsuit seeking revocation of taxation. Since the tax authority bears the burden of proving the requirements of land for non-business use whose transfer income tax is excessive, the court below erred by misapprehending the burden of proving the requirements of self-reliance on transfer income tax.

Meanwhile, according to the reasoning of the judgment below and the record, the plaintiff is constantly engaged in the cultivation of crops or the growing of perennial plants in the farmland in this case or did not cultivate or cultivate 1/2 or more of farming work with his own labor during the period prescribed in Article 168-6 of the Enforcement Decree of the Income Tax Act. Thus, the above error of the court below did not affect the conclusion of the judgment

4. Regarding ground of appeal No. 4

Article 66 (12) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "The direct cultivation of Article 69 (1) of the Act refers to the cultivation or cultivation of not less than 1/2 of the farming work with his own labor". The court below is just in interpreting the meaning of "one-half or more own labor force" in the same purport, and it is not erroneous in the misapprehension of legal principles as to the interpretation of direct cultivation under Article 66 (12) of the former Enforcement Decree of the Restriction of Special Taxation Act, the violation of the rules of evidence, and the incomplete hearing.

5. Conclusion

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

Justices Lee Hong-hoon (Presiding Justice)