Suwon District Court 2007Guhap710 (2007.05)

Examination Income 2006-0074 ( October 23, 2006)

Whether the cost of installing the film museum facilities can be considered as the necessary expenses for the commercial sales business

Even if the sales business of the 10th and the 2nd floor building depends on the success of the film board in the 89th and the same building, this is merely an indirect and economic effect, and the cost of installing the film board facility cannot be deemed as the necessary expenses for the sales business of the 10th and the 2nd floor building.

The contents of the decision shall be the same as attached.

Article 18 (Real Estate Rental Income)

Article 27 (Calculation of Necessary Expenses)

The plaintiff's appeal is dismissed.

Expenses for appeal shall be borne by the plaintiff.

The decision of the first instance is revoked. The defendant's disposition of imposition of KRW 5,440,560 on December 1, 2005 against the plaintiff on December 1, 2005, of KRW 1,179,835,370 on global income for the year 2002 ("1,435,131,94" stated in the complaint appears to be erroneous) and the disposition of imposition of KRW 98,870,760 on global income for the year 203 shall be revoked.

1. Details of the disposition;

A. Around November 26, 1999, the ○○○ Industries Development Co., Ltd. (hereinafter referred to as “○○○○○ Industries Development”) entered into a sales contract with the Korea Land Corporation at KRW 372,90,000,000 with regard to ○○○○○○○○○-dong ○○○○○○○○○○○○○○, ○○○○○, ○36 square meters (hereinafter referred to as “instant land”) and paid KRW 372,90,00 as the down payment to the Korea Land Corporation. On January 28, 2000, the 372,90,90,000 won was paid to the Korea Land Corporation (hereinafter referred to as “○○○○ Construction Co., Ltd.”) by investing KRW 200,000,000,000 in the instant land and investing the status of the purchaser of the instant land in the aggregate of KRW 350,000,00.

B. On May 18, 2001, the Plaintiff entered into a joint business agreement between Kim Jong-sik and the Plaintiff’s acquisition of shares in the instant project and implementation of the instant project at a rate of 50%, and paid KRW 800 million to Kim Jong-sik in relation to the instant project on May 21, 2001. In addition, the Plaintiff came to have the status of debtor as to KRW 2.6 billion borrowed from the National Agricultural Cooperative Federation to pay the purchase price of the instant land by the said contract. After that, the Plaintiff and Kim Jong-sik completed the registration of transfer of ownership on May 23, 2001, the Plaintiff and the Plaintiff completed the registration of transfer of ownership on the instant land on 1/2 shares on 9th floor of the instant land (hereinafter “the instant building”). On July 5, 2001, the Plaintiff obtained a construction permit for new construction of the building on 9th floor of the instant land (hereinafter “the instant building”).

C. On July 7, 2001, the Plaintiff, the husband of the instant case, transferred his share in the Kim Il-sik’s business to KRW 400 million. After that, the dispute occurred between the Plaintiff, Cho Jong-sik and Kim Jong-sik on the implementation of the said transfer contract, and the Plaintiff notified the termination of the contract and filed a criminal complaint against the Plaintiff. On December 19, 2001, the Plaintiff agreed on the Plaintiff on December 19, 2001, Kim Jong-sik transferred all rights related to the instant business to the Plaintiff with an exemption from the obligation borne by Kim Il-sik in relation to the instant business and paid KRW 600 million to Kim Il-sik. Accordingly, the Plaintiff acquired the right and duty related to the sales price received from the buyers of the first and second floors of the instant building.

D. Meanwhile, at the time of promoting the instant business jointly with the Plaintiff, Kim Jong-sik concluded a management consignment agreement with the Plaintiff on the 8 and 9th floor of the instant building with respect to the movie theater’s ○○ Film (hereinafter “○○ Film”) and agreed to bear the cost of the movie theater’s facility on the ○○ Film. The Plaintiff and Kim Jong-sik agreed to bear the cost of the movie theater’s facility on July 16, 2001 between the Plaintiff and the Plaintiff’s movie and the movie theater’s facility cost on the wind delayed. Accordingly, the Plaintiff spent KRW 4,463,126,00 as the cost of the movie theater’s facility construction.

E. On December 27, 2001, the Plaintiff completed a report on the change of construction participants who unilaterally changed the name of the owner of the instant building from the previous Plaintiff and Kim○-type. The Plaintiff constructed the instant building on September 11, 2002 and completed the registration of ownership preservation in the future of the Plaintiff on September 11, 2002, and then sold the first and second floors of the instant building to a commercial building, and leased the 8 and nine floors to a film museum, and the 3-7th floor is operated as a parking lot.

F. In filing a final report on the tax base of global income tax for the fiscal year 2001 through 2003 with respect to the instant business, the Plaintiff shall include KRW 4,463,126,00 in the expenses for the film museum facility construction. ② ② KRW 1,952,441,50 [80 million paid by the Plaintiff to Kim Jong-sik on May 21, 2001 + KRW 1,716,941,500 acquired by the Plaintiff + (the purchase price of the instant land - KRW 3,729,00,000 - KRW 2.6 billion with the National Agricultural Cooperative Federation’s loan - the Plaintiff’s one-half share] 】 The Plaintiff considered the total amount of KRW 350,000 paid by the Plaintiff to Kim Jong-sik on July 7, 201 under the said contract, and considered the Plaintiff as the necessary expenses for the instant business: KRW 400,500,000.

G. On December 1, 2005, the Defendant recognized only KRW 4,463,126,00 as necessary expenses for the facility construction cost of a film museum as necessary expenses for a commercial building sales business, and on the grounds that the total amount of KRW 2,902,441,50 as above is not KRW 831,110,00 among the total amount of KRW 2,902,441,50 as necessary expenses for a commercial building sales business (+ KRW 327,10,000 out of the total amount of KRW 880,000 invested by the Plaintiff + the contract of July 7, 200 and the contract of December 19, 201 as mentioned above, KRW 54,00 out of the total amount of KRW 951,31,500,000 among the total amount of KRW 2,071,331,500,000 as necessary expenses, the Defendant imposed the Plaintiff’s global income tax for the year 2008,37.

H. On February 27, 2006, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service against the instant disposition. However, on October 23, 2006, the request for examination was dismissed.

[Ground of Recognition] A without dispute, Gap evidence 1-1, 2, 3, Gap evidence 2-9, Gap evidence 11-1 through 6, Gap evidence 13-1, 2, 3, Eul evidence 1-1, 2, 3, Eul evidence 2-2, Eul evidence 3-1, 3-2, Eul evidence 4-1, 4-2, Eul evidence 4-2, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) In the so-called ○○ building, such as the instant building, the principal use of the building, the degree of designation of the main shop occupants, and the effect of publicity, etc., may considerably affect the business of the entire commercial building. In the instant building, the film board of ○○ film is a key business point in the instant building, and other stores expect the brand effects of the film board, and the promotion of the film board is directly affected by the business of other stores. As such, the sales business of the 1st and the 2nd commercial buildings among the instant buildings ought to be deemed necessary expenses for the 8th, the 9th film board facilities construction cost, 463, 126,00 won, depending on whether the film board is confined or not.

(2) The Plaintiff did not conclude a partnership agreement with Kim○-type regarding the implementation of the instant project, but did not acquire the instant land in several stages from Kim○-type and Kim Young-chul Construction. The said KRW 2,071,331,50, which the Defendant did not recognize as necessary expenses, is a debt that the Plaintiff acquired the instant land from Kim○-type by dividing it into several stages, and paid or acquired in compensation therefor, and thus, it should be deemed as the necessary expense for the instant project.

(b) Related statutes;

Article 18 (Real Estate Rental Income)

Article 27 (Calculation of Necessary Expenses)

Article 55 (Calculation of Necessary Expenses for Real Estate Rental Income, etc.)

C. Determination

(1) As to the assertion that the movie theater facility cost should be deemed as the necessary expenses for the sales business of the first and second commercial buildings

According to Article 27 (1) of the Income Tax Act, when calculating real estate rental income and business income, the amount to be included in necessary expenses shall be the sum of expenses corresponding to the total amount of income in the year concerned, which is generally accepted.

Even if the sales business of the 1,200 commercial buildings among the instant buildings had a success in attracting film theaterss on the 8,9th and the 89th and the 9th floor of the instant building, it merely is an indirect and economic effect that the film theater enters the 8,9th and the 89th and the building of the instant building, and thus, the movie theater facility construction cost can only be the cost corresponding to the rental income of the film theater, and it is reasonable to view that the film theater facility construction cost is not an ordinary cost that is generally accepted as the cost corresponding to the sales income of the 1,200 commercial buildings among the instant buildings. Therefore, the film theater facility construction cost of 4,463,126,00 won is not the expense for the business selling the 1,200 commercial buildings among the instant

(2) As to the assertion that the above KRW 2,071,331,50 should be deemed necessary expenses for the instant project, since the Plaintiff acquired the instant land from Kim○-type by dividing it into several stages, and the Plaintiff paid or acquired the instant money in return therefor.

There is no evidence to acknowledge that the Plaintiff acquired the instant land by dividing it into several stages from Kim Jong-sik, not from concluding a club business contract with regard to the implementation of the instant project. Rather, as seen earlier, the Plaintiff entered into a joint business contract with Kim Jong-sik on May 18, 2001, where the Plaintiff acquired the Plaintiff’s shares in the instant project and jointly implemented the instant project at a rate of 50%, with the Plaintiff’s shares as 50%. According to the witness Kim Sung-sik’s testimony, the Plaintiff Kim Jong-sik first started the business in relation to the instant project, and the Plaintiff appears to have been difficult to start the business, and the Plaintiff’s shares were exceeded. According to the above facts of recognition, it is reasonable to deem that the Plaintiff entered into the same business contract with Kim Jong-sik on May 18, 2001.

As above, inasmuch as the Plaintiff entered into a partnership agreement with Kim ○ on May 18, 2001 with the instant business implementation, 80 million won that the Plaintiff paid to Kim ○ on May 21, 2001 is an investment under the partnership agreement, and the Plaintiff paid to Kim ○ on July 7, 2001 under the said agreement and the total amount of KRW 950 million paid to Kim ○ under the said agreement on December 19, 2001 is the settlement amount paid by the Plaintiff to Kim ○ who withdraws from the partnership relationship, and it is reasonable to view that the said amount is the sales amount of KRW 1,716,941,50 as the sales amount acquired under the said agreement on December 19, 201, and therefore, it cannot be deemed that the Plaintiff acquired the instant land by dividing it into several stages from Kim ○, etc. and paid or acquired it in return.

Therefore, the plaintiff's above assertion is without merit, premised on the fact that the plaintiff did not conclude a partnership agreement with regard to the implementation of the project of this case, but merely acquired the land of this case by dividing it into several stages from Kim ○-type, etc.

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

[Insuwon District Court 2007Guhap710 (2007.05)]

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of global income tax of KRW 5,440,560 for the year 2001, global income tax of KRW 1,179,835,370 for the year 2002, and global income tax of KRW 98,870,760 for the year 203 (in the description of the complaint’s claim, the amount of KRW 1,435,131,94 for the year 2002 is added to the amount of KRW 25,296,618 for the original return, and the amount of the Plaintiff’s claim for cancellation in this case appears to be a clerical error in the same amount).

1. Details of the disposition;

A. The Plaintiff newly constructed a 9-story building (hereinafter “instant building”) on the 4,346m2 (hereinafter “instant land”) located in ○○○○-dong, △△-dong, △△△-dong (hereinafter “△△△-dong”) and sold the 1 and 2-story to a commercial building. The 8 and 9-story leased the 8 and 9-story to a film museum, and the remaining 3-7m2 are operated as a parking lot.

B. The Plaintiff filed a final report on the tax base of global income tax for the year 2001 through 2003 with respect to the sale of the above commercial buildings and the lease business of the film theater. On June 20, 2005, the ○○○ Regional Tax Office: (a) deemed that the Plaintiff’s sales cost of the commercial building was the acquisition cost of the film theater, which is a real estate for rent, and denied from the necessary expenses for the commercial building sales business, by deeming the Plaintiff as the acquisition cost of the film theater, which is the real estate for rent; and (b) notified the Plaintiff of the results of tax investigation to deny the acquisition cost of the land by deeming that the Plaintiff’s additional appropriation for the acquisition cost of the commercial building for the business year 2,902,41,31,31,000 won as the land acquisition cost for the business year 20

C. Accordingly, on December 1, 2005, the Defendant issued the instant disposition that additionally revised and notified the Plaintiff KRW 5,440,560 of global income tax for the year 2001, global income tax for the year 2002, KRW 1,179,835,370 of global income tax for the year 202, and KRW 98,870,760 of global income tax for the year 2003.

D. On February 27, 2006, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service against the instant disposition. However, on October 23, 2006, the Plaintiff received a decision of dismissal, and the written decision was served on the Plaintiff on November 2, 2006, and the Plaintiff filed the instant lawsuit on January 25, 2007.

[Ground of recognition] Facts without dispute, Gap evidence 1-1 to 3, Gap evidence 2, 6, 7, Eul evidence 1-1 to 3, Eul evidence 4-1 and Eul evidence 4-2, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. Summary of the plaintiff's assertion

For the following reasons, the instant disposition is unlawful.

(1) In calculating the amount of income under the Income Tax Act, the necessary expenses deducted from the total amount of income in the year concerned are generally accepted as expenses corresponding to the total amount of income in the year concerned, and the sales business of the first and second commercial buildings among the buildings in this case, among the buildings in this case, the sales business of the first and second commercial buildings in the 8,99-story film theater facility construction cost, 4,463,126,00 won should be deemed necessary expenses for the sales business of the second and second commercial buildings

(2) 원고가 ●●건설 주식회사(이하 '●●건설'이라 한다) 및 김◎◎으로부터 이 사건 사업에 대한 지분을 인수하면서 지급한 인수대금 및 김◎◎이 이미 수령한 분양대금의 인수금액 1,716,941,500원 등 합계 2,902,441,000원 가운데 피고가 토지 취득원가로 인정한 831,110,000원{①원고가 ●●건설 지분의 인수대금으로 지급한 금원 중 ◇◇◇산업개발 주식회사(이하 '◇◇◇산업'이라 한다)의 양도차익 127,100,000원(500,000,000원 - 372,900,000원), ②김◎◎이 ●●건설과 공동으로 ◇◇◇산업개발로부터 이 사건 토지를 양수함에 있어서 부담한 출자금 200,000,000원, ③김◎◎이 원고로부터 수령한 지분양도대금 629,000,000원 중 최초 출자금 200,000,000원으로 초과하는 429,000,000원, ④원고가 김◎◎의 채무를 인수하여 정◆◆에게 대위변제한 사채이자 40,000,000원, ⑤□□건설 토지공사비 35,000,000원}을 제외한 나머지 2,071,331,000원도 이 사건 토지를 취득하는 과정에서 양도자인 전 사업자에게 대가로 지급한 금원이나 인수한 채무의 부담액으로 이 사건 토지의 취득원가로 인정되어야 한다.

(b) Related statutes;

(1) Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005)

Article 18 (Real Estate Rental Income)

(1) Real estate rental income shall be the following income generated in the current year:

1. Income accruing from a lease of any real estate or right to the real estate;

2. Income accruing from a lease of a factory or mining foundation; and

3. Income accruing from renting a mining right by a mining right holder, mining concession holder, or virtue;

(2) The real estate rental income amount shall be the amount obtained by deducting the necessary expenses required therefor from the gross income amount.

(3) “Lease” in paragraph (1) means establishment of a right to lease on a deposit basis or other rights, payment for consideration, and receipt of consideration for the use of or benefit from the things or rights by lease, reservation, or other methods and payment for consideration.

(4) Necessary matters concerning the scope of real estate rental income shall be determined by Presidential Decree.

Article 27 (Calculation of Necessary Expenses)

(1) In calculating the real estate rental income amount, business income amount, temporary property income amount, other income amount, or forest income amount, the necessary expenses to be included shall be the sum of the expenses corresponding to the total income amount in the current year and accepted generally

(2) The expenses corresponding to the gross amount of incomes before the current year, which are not appropriated as the necessary expenses prior to the current year, shall be considered the necessary expenses.

(3) Necessary matters for the calculation of necessary expenses shall be prescribed by Presidential Decree.

(1) Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254 of Dec. 31, 2005)

Article 55 (Calculation of Necessary Expenses for Real Estate Rental Income, etc.)

(1) The necessary expenses corresponding to the total amount of real estate rental income and business income in each year shall be as follows:

1. Purchase price (excluding a purchase reduction or a purchase discount) of the raw materials for the commodities or products sold and the incidental expenses thereto. In this case, the original purchase price and incidental expenses thereto shall be applicable, if the relevant business operator has consumed such ones for a business use, as have been purchased for other purposes;

(c) Fact of recognition;

The following facts are not disputed between the parties, or acknowledged by comprehensively taking account of the whole purport of the pleadings in each entry in Gap evidence 2 through 6, Gap evidence 8, 9, Gap evidence 10-1, Gap evidence 11-1 through 6, Eul evidence 13-1 through 3, Eul evidence 3-1, Eul evidence 3-2, Eul evidence 4-1 and 2.

(1) The development of the industry at the place of residence in Korea, between the Korea Land Corporation and the Korea Land Corporation, set the price of the instant land as KRW 3,729,00,000, and concluded a sales contract and paid KRW 372,90,000 as the down payment to the Korea Land Corporation.

(2) In order to carry out the business of newly constructing and selling (lease) the sales and neighborhood living facilities, film pipes, etc. on the instant land (hereinafter “the instant business”), Kim Madle 200 million won in total, including Kim Madle 200 million won in Madle Madle 200 million in the construction of Bult Madle Madle Madle Madle Madb

(3) On May 18, 2001, the Plaintiff acquired the share of the construction of Bult Construction on the instant project, and distributed the rights and obligations at the same rate, and entered into a joint agreement with the National Agricultural Cooperative Federation of Korea to the effect that the Plaintiff shall be exempted from the obligations of Bult Construction on the loans of 2.6 billion won. Accordingly, on May 23, 2001, the Plaintiff made a registration of ownership transfer on the instant land under the joint name of the National Agricultural Cooperative Federation of Korea on the same day after having paid the maximum debt amount of 3,380,000,000 won as to the instant land, and the Plaintiff paid the land price and damages for delay, etc. due to the loan granted by establishing a collateral security in the future of the National Agricultural Cooperative Federation of Korea. Thereafter, on July 5, 2001, Kim Wil and the Plaintiff obtained a construction permit on the construction of the instant building, and started the construction work around that day.

(4) 원고의 남편인 조■■는 2001. 7. 7. 김◎◎과 사이에 이 사건 사업에 대한 동인의 지분을 대금 4억 원에 양수하되, 이 사건 사업과 관련하여 동인이 부담하고 있던 채무도 함께 인수하기로 약정하였는데, 그 후 원고 및 조□□와 김◎◎ 사이에 계약의 이행을 둘러싸고 분쟁이 발생하여 김◎◎이 계약해제를 통보하는 한편, 원고를 상대로 형사고소를 제기하자, 원고는 2001. 12. 19. 김◎◎과 사이에 동인에게 6억 원을 지급하고, 김◎◎은 이 사건 사업과 관련한 일체의 권리를 원고에게 양도하며, 원고는 이 사건 사업과 관련하여 김◎◎이 부담한 채무를 면책적으로 인수하기로 최종 합의를 하면서 이로써 기존의 계약을 대체하기로 하였다. 이에 따라 원고는 김◎◎이 수분양자들로부터 지급받은 분양대금 1,716,941,500원을 인정하고 이를 그대로 안게 되었다.

(5) Meanwhile, at the time of promoting the instant project jointly with the Plaintiff, the Kim Mandong Co., Ltd. entered into a management consignment agreement with the Plaintiff on the 8,9th floor of the new building, and concluded the management consignment agreement with the Plaintiff on the movie theater, and the equipment cost of the Plaintiff as the movie theater was borne by the said company. Since the construction was notified of the termination of the agreement with the said company on the wind delayed, the Plaintiff and Kim Mandong Co., Ltd. entered into a management consignment agreement on July 16, 2001 on condition that the cost of the movie theater equipment cost is borne by the Plaintiff on the part of the Plaintiff. Accordingly, the Plaintiff spent KRW 4,463,126,00 as the cost of the movie theater equipment cost to the movie theater facility cost. After entering into a recontract with the Gangnam △△△, the total sales value of the commercial building increased from KRW 20,071,865,00 to KRW 23,86,735,00,00.

(6) On December 27, 2001, the Plaintiff completed the report on the change of the construction participant who unilaterally changed the name of the building owner from the previous Plaintiff and Kim Mandong, and on September 11, 2002, the Plaintiff completed the registration of ownership preservation on the instant building.

D. Determination

(1) According to the provision of paragraph (1), in calculating real estate rental income and business income, the amount to be included in necessary expenses shall be the sum of expenses corresponding to the total amount of income in the year concerned, which is generally accepted as normal.

First of all, the plaintiff's assertion that the sales business of the first and second floors among the building of this case had been caused by the failure of attracting a movie theater on the 80th and nine floors is insufficient. Even if the plaintiff's assertion is true, it is difficult to view that the construction cost of the facility construction of the movie theater of 8,9 floors is generally accepted as the cost of the sales business of 1,20th and second floors, not the 8,9 rental business, and the construction cost of the facility construction of the movie theater of 8,9 floors as the cost of the sales business of 20,071,865,00 won from 23,86,735,000 won from 20,794,870,000 won after the conclusion of the movie theater management consignment contract, it is merely an indirect and economic effect of entering the movie theater of the same building, and therefore, there is no evidence to acknowledge that the construction cost of the movie theater of 8,99 immediately falls under the cost of the sales business of 1 and 2nd floors.

Therefore, this part of the plaintiff's assertion is without merit.

(2) Paragraph (1)1 of this Article provides that "the purchase price of the raw materials for the commodities or products sold" and the incidental expenses, among necessary expenses corresponding to the total amount of income from real estate rental and business income in each year.

As seen earlier, the Plaintiff first acquired shares in the construction of Bult Construction among the instant projects, which were conducted by the joint investment of Kim Manung Construction and Bult Construction, and jointly carried on the business at the rate of 50:50,00 shares, and completed the registration of ownership transfer in the name of Kim Manung Construction and joint with Kim Manung, and later paid 600,000,000,000,000 won for the last settlement of accounts. In relation to the instant project, the Plaintiff decided to take over all debts and incidental expenses received by the Dong in relation to the instant project, including 1,716,941,50 won, and the Plaintiff did not have the right to transfer ownership or registration of ownership transfer in the name of the sole owner of the instant land and building. Thus, it is difficult to view that the Plaintiff had the right to acquire shares in the same business as the sale price of the instant land and the sale price of the instant land to be considered as necessary expenses, and thus, it cannot be viewed that the Plaintiff had the right to purchase price of the land to receive 160.

Therefore, this part of the plaintiff's assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.