Plaintiff 1 and one other (Law Firm Pacific, Attorneys Kim Jong-ho et al., Counsel for the plaintiff-appellant)

Head of Central Tax Office and one other

June 4, 2003

1. On February 5, 2002, the disposition of imposition of KRW 66,209,447 of the corporate tax belonging to the business year 1999 against Plaintiff 1 corporation and the disposition of imposition of KRW 66,209,447 of the corporate tax belonging to the business year 199 as well as the disposition of imposition of KRW 662,61,560 of the gift tax imposed against Plaintiff 2 on May 21, 2002 by the head of Sungbuk Tax Office shall be revoked.

2. The remainder of the claim against the Defendant Heavy Tax Director of the Plaintiff Company is dismissed.

3. Of the costs of lawsuit, the part arising between the plaintiff 1 corporation and the vice-director of the District Tax Office shall be four minutes, and the remainder shall be borne by the above plaintiff, while the above defendant's portion arising between the plaintiff 2 and the defendant 2 shall be borne by the above defendant.

On February 5, 2002, the head of the defendant Jung-gu Tax Office (63,611,560 won as stated in the purport of the complaint seems to be a clerical error in the amount of 662,61,560 won) of gift tax imposed on the plaintiff 1 corporation for the business year of 1999, the corporate tax of 673,93,000 won for the business year belonging to the plaintiff 1 corporation, and on May 21, 2009 by the head of Seongbuk-gu Tax Office for the defendant Sung-gu Tax Office for the plaintiff 2 on May 21, 200.

1. Details of the disposition;

A. On October 31, 1997, the non-party corporation decided to issue new shares and pay new shares for new shares as follows at the board of directors.

The number of issued shares shall be 1,519,144 shares of registered ordinary shares, and the ratio of 0.5273238 shares per share of the shareholders listed in the register of shareholders as of November 17, 1997 shall be allocated proportionally to the shareholders listed in the register of shareholders, and the disposal of forfeited shares due to the waiver of shareholders' subscription shall be delegated to the representative director.

Value per share shall be 5,00 won per face value.

The subscription date for new shares shall be December 1, 1997.

The date of payment on December 2, 1997

On the other hand, as of November 17, 1997, the shares issued by the non-party company were all 4,30,31 shares. The non-party company held 1,419,479 shares (self-stocks), 2 shares 1,061,872 shares, 1,224,287 shares, and 594,693 shares among other shareholders.

B. The non-party company, except for the non-party company holding its own shares in accordance with the decision of the board of directors, assigned 59,952 share to the plaintiff 2, 645,596 share to the plaintiff company, 313,596 share to other shareholders, and notified them to subscribe new shares.

C. On December 1, 1997, the Plaintiff Company made an offer to subscribe new shares with respect to 645,596 shares allotted as above, while Plaintiff 2 renounced each subscription with respect to 559,952 shares allotted as above, the remaining shareholders renounced each subscription with respect to 313,596 shares allotted as above.

D. On December 2, 1997, the Plaintiff Company: (a) and other shareholders cultivated the forfeited stocks that have waived acceptance; (b) made an subscription for new stocks with respect to total of KRW 1,519,144; and (c) paid KRW 7,595,720,000 with the price therefor (hereinafter “instant capital increase”); and (d) thereby, on December 3, 1997, the Plaintiff Company acquired the status of the shareholder of the Nonparty Company as to the said new stocks of KRW 1,519,144 on December 3, 1997.

E. At the time of December 2, 1997, Plaintiff 2 owned 24.46% of the Plaintiff Company’s shares, and was in a special relationship with the Plaintiff Company under Article 20 of the former Corporate Tax Act (amended by Act No. 5581, Dec. 28, 1998; hereinafter the same shall apply) and Article 46(1) of the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 15970, Dec. 31, 1998; hereinafter the same shall apply).

F. On February 6, 1999, the non-party company decided to retire 4,203,274 shares including 2,743,431 shares owned by the Plaintiff company at the general meeting of shareholders of the non-party company without compensation, and reduced capital of KRW 21,016,370,000.

(g) The director of the tax office of the defendant shall evaluate the value of the shares of the non-party company before its capital increase as 9.3 billion won under Article 63 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 5582 of Dec. 28, 1998; hereinafter the same shall apply), Article 54 (1) of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 15971 of Dec. 31, 1998; hereinafter the same shall apply) 95 won per share (refer to the evidence No. 20). The value of the shares after the capital increase shall be 9.3 billion won per share under Article 31-2 (1) 1 and 29 (2) of the former Inheritance Tax and Gift Tax Act; 20 billion won per share under Article 9.37 of the same Act; 30 billion won per share under subparagraph 97 of the same Article; 30 of the same Act shall be deemed to be subject to the imposition of the difference between the plaintiff company's forfeited and its new shares; 250 billion won per share

H. On April 18, 2002, the Plaintiff Company filed an appeal with the National Tax Tribunal to revoke the above employment income tax collection disposition and the pertinent corporate tax imposition disposition. The Defendant Heavy Tax Office revoked the employment income tax collection disposition ex officio, and the National Tax Tribunal dismissed the Plaintiff Company’s appeal seeking revocation of the pertinent corporate tax imposition disposition on July 30, 2002.

I. Meanwhile, as seen earlier, the director of the Sungbuk District Tax Office: (a) deemed that the Plaintiff Company received the instant forfeited shares by cultivating them and deemed that it donated the instant benefits to Plaintiff 2; and (b) imposed KRW 662,61,560 on May 21, 2002 on Plaintiff 2 (hereinafter “instant disposition imposing gift tax”).

【Ground of recognition】 The fact that there exists no dispute, Gap evidence 1-1-3, Gap evidence 5, 6, 9, 10, 20, 22, Eul evidence 1-7, and the purport of the whole pleadings

2. Relevant statutes;

(a) regulations related to corporate tax;

【former Corporate Tax Act (amended by Act No. 5581, Dec. 28, 1998; hereinafter the same)】

Article 20 (Disliability of Evaluation of Wrongful Acts)

Under the conditions as prescribed by the Presidential Decree, where it is deemed that any act of a domestic corporation or the calculation of income amount has unjustly reduced the tax burden on the income of the corporation in the transaction with a related party as prescribed by the Presidential Decree, the Government may calculate the income amount for each business year of the concerned corporation notwithstanding the calculation of the income

[The former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970, Dec. 31, 1998; hereinafter the same shall apply)]

Article 46 (Unfair Conduct or Calculation of Juristic Person)

(2) The term "if it is deemed that the tax burden has been unjustly reduced" in Article 20 of the Act means cases falling under any of the following subparagraphs:

1. Where an investment is made in kind at the price exceeding the market price or the assets are excessively depreciated;

2. Where non-profitable assets are invested or expenses are borne for the assets;

3. When they purchase non-profitable assets from investors and other persons in a special relationship (hereinafter referred to as "investorss, etc.") or bear expenses incurred in the assets;

4. Where assets are purchased from investors, etc. in excess of the market price, or assets are transferred to investors, etc.

5. When an investor, etc. has refunded inferior assets or acquired bad debts by transfer;

6. Bearing contributions from investors, etc.;

7. Where money and other assets or services are provided to investors, etc. free of charge or at a low interest rate, tariff, or rental rate: Provided, That this shall not apply where a corporation lends money (limited to the amount determined by the Ordinance of the Ministry of Finance and Economy) required for the acquisition or lease of a house not smaller than the scale of national housing (including the land attached to the house) to homeless employees;

7-2. Where he/she provides a private house to an investor, an contributing executive of a corporation, or his/her relatives at an amount less than the reasonable rental fee;

8. When he receives money and other assets or services from investors, etc. at an interest rate, tariff, or rental rate;

9. Other cases in which it is deemed to distribute the profits of the juristic person to the investors, etc.

[Enforcement Rule of the former Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 12 of March 21, 1998; hereinafter the same)]

Article 16-2 (Market Price)

In applying Article 12(1)10 of the Decree, Article 37-3(9), Article 40(1), Article 41(1), Article 46 of the Decree, and Article 116(2) and (4) of the Decree, where the market price is unclear, it shall be based on the appraised value by a certified public appraisal corporation under the Public Notice of Values and Appraisal of Lands, etc. Act, and where there is no appraised value, it shall be based on the values appraised by applying mutatis mutandis Articles 61 through 64 of the Inheritance Tax and Gift Tax Act: Provided, That stocks not listed on the Stock Exchange shall be based on the values appraised by applying mutatis mutandis Article 63 of the Inheritance Tax and Gift Tax Act.

[The former Inheritance Tax and Gift Tax Act (amended by Act No. 5193 of Dec. 30, 1996 and amended by Act No. 5582 of Dec. 28, 1998; hereinafter the same)]

Article 63 (Evaluation of Securities, etc.)

(1) The appraisal of securities, etc. shall be conducted by the following methods:

1. Appraisal of stocks and investment shares:

(c) Stocks and equity shares not listed on the Korea Stock Exchange other than those under item (b) shall be appraised according to the methods prescribed by Presidential Decree in consideration of corporation assets and profits;

[The Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 15509 of Nov. 10, 1997 and amended by Presidential Decree No. 15971 of Dec. 31, 1998; hereinafter the same shall apply)]

Article 54 (Appraisal of Unlisted Stocks)

(1) Stocks and investment shares not listed on the Korea Stock Exchange (hereinafter referred to as "non-listed stocks" in this Article) under Article 63 (1) 1 (c) of the Act shall, except in the case of paragraph (2), be the value assessed by the following formula:

Value per share = [The net asset value of the relevant corporation / the total number of issued stocks (hereafter in this Article, referred to as the “net asset value”) + (the rate as determined by the Ordinance of the Prime Minister in consideration of the weighted average amount of net profits and losses per share in the last three years) ± 2].

(2) Where any unlisted stocks fall under any of the following subparagraphs, the appraised value according to the net asset value shall govern:

2. The stocks or equity shares of a corporation that has losses exceeding the total amount of earnings which belong or comes to belong to each business year under the Corporate Tax Act continuously from the business year that ends on the day before the base date of appraisal in the business year that falls within three years before the base date of appraisal;

(4) In applying the provisions of paragraph (1), "total number of stocks issued" shall be determined by the total number of stocks issued as of the evaluation base date.

B. Provisions pertaining to gift tax

[former Inheritance Tax and Gift Tax Act]

Article 39 (Presumption of Donation at Time of Capital Increase or Capital Reduction)

(1) In the event that the capital or amount of investment of a corporation is increased or decreased, the person who receives the benefits falling under any of the following subparagraphs, shall be deemed to have received the benefits, as a donation:

1. In case where a shareholder of the relevant corporation (including an investor; hereafter the same shall apply in this Article) has renounced in whole or in part the right to receive new stocks for the purpose of increasing the capital or investment amount of the relevant corporation (hereafter referred to as “new stocks” in this paragraph), benefits under the provisions of the following items (in case where there are not less than 2 minor shareholders who have renounced in whole or in part the right to receive new stocks, it means the benefits which are calculated by deeming that one minor shareholder has renounced his right:

(a) In case where such renounced new stocks (hereafter in this paragraph, referred to as the “beneficial stocks”), are again allocated (excluding the case where allocating such forfeited stocks by the method of public offering of new stocks under Article 2 (3) of the Securities and Exchange Act), the benefits prescribed by the Presidential Decree from among the benefits acquired by the person who received the allocation of forfeited stocks, by obtaining such allocation

Article 42 (Presumption of Donation of Other Benefits)

(1) Where, as similar to the cases of Articles 32 through 41 and 43 through 45, property having economic value is, without going through a normal transaction, transferred without compensation through a transaction between parties in a special relationship as prescribed by the Presidential Decree, the amount equivalent to profits as prescribed by the Presidential Decree shall be considered to have been donated among the persons in a special relationship.

(2) The calculation of persons and profits under a special relationship under paragraph (1) shall be prescribed by Presidential Decree.

【Gu Inheritance Tax】

Article 29 (Calculation Method, etc. of Value Deemed Donation upon Capital Increase or Capital Reduction)

(2) The term “interest prescribed by the Presidential Decree” in Article 39 (1) 1 (a) of the Act means the amount calculated by multiplying the value calculated under the provisions of subparagraph 1 minus the value under the provisions of subparagraph 2, by the number of new stocks under the provisions of subparagraph 3:

1. [The appraised value per stock before capital increase 】 (the total number of outstanding stocks issued before capital increase 】 the number of new stocks 】 the number of stocks increased by capital increase 】 the number of stocks issued before capital increase 】 the number of stocks increased by capital increase);

2. The acceptance price per stock of new stocks;

3. The number of new stocks for those who have been allocated in excess of the number of new stocks to be allocated under equal conditions; and

Article 31-2 (Presumption of Donation for Allotment of Real Rights Principle, etc.)

(1) In a case falling under any of the following subparagraphs, the relevant profits shall be deemed to be the profits derived from the similar products under Article 39 (1) 1 of the Act, and shall be deemed to be donated from the persons having a special relationship, or the controlling stockholders, etc., pursuant to Article 42 of the Act:

1. In case where, in allocating forfeited stocks under Article 39 (1) 1 (a) of the Act, a stockholder who has renounced wholly or partially the right to receive new stocks, and a person having a special relationship with a stockholder who has renounced such right acquires profits by accepting the forfeited stocks: The amount calculated by the following formula:

(Value under Article 29 (2) 2- Value of Article 29 (2) - Value under Article 29 (2) 1) 】 Number of forfeited stocks of stockholders who have renounced new stocks 】 Total number of forfeited stocks or forfeited stocks which are acquired by persons in a special relationship with the lost stockholders)

3. The plaintiffs' assertion

A. The plaintiff company's assertion on illegality of the disposition of the corporate tax of this case

(1) The Plaintiff Company did not accept forfeited shares from the Nonparty Company, but did not accept forfeited shares from Plaintiff 2, who is a related party, as well as Plaintiff 2 is not obligated to accept forfeited shares under the principle of shareholder limited liability. Therefore, even if the Plaintiff Company accepted forfeited shares of this case, it cannot be deemed that the Plaintiff Company’s share the instant forfeited shares to reduce the Plaintiff Company’s tax burden unfairly by allocating the forfeited shares to Plaintiff 2.

(2) The meaning of Article 46(2)9 of the former Enforcement Decree of the Corporate Tax Act “where it is deemed that there was a distribution of corporate profits to other investors, etc.” refers to a transaction corresponding to transactional acts as provided in subparagraphs 1 through 8, and where it cannot be deemed that there was an equivalent transaction as provided in subparagraphs 1 through 8, it shall not be deemed that the act falls under subparagraph 9. However, Article 46(2)1 through 8 of the former Enforcement Decree of the Corporate Tax Act does not stipulate any type of act regarding the provision of profits to shareholders, who are related parties, for the waiver of the subscription of new stocks and the acquisition of forfeited stocks. Accordingly, Article 46(2)1 through 8 of the former Enforcement Decree of the Corporate Tax Act does not stipulate any type of act regarding the provision of profits to shareholders, who are related parties. Accordingly, the Plaintiff Company waivers the subscription of the new stocks in this case to Nonparty Company, and thus, cannot apply subparagraphs 1 through 8 to the act of acquiring the forfeited stocks

(3) Even if the Plaintiff Company’s acquisition of forfeited stocks of this case constitutes Article 46(2)9 of the former Enforcement Decree of the Corporate Tax Act, the act of acquiring the forfeited stocks of this case constitutes an economic rationality, and does not constitute the subject of avoidance of wrongful calculation.

In other words, the Plaintiff Company was under the mutual guarantee of payment with another affiliated company, and in particular, it was under the guarantee of payment for approximately KRW 259.3 billion of the Nonparty Company’s debt, and when the Nonparty Company becomes insolvent, the Plaintiff Company was also faced with a crisis that would be facing the chain of bankruptcy. Therefore, in order to prevent the subsidiaries, including Nonparty Company, and its insolvency, the Plaintiff Company was fully accepted the forfeited stocks in order to prevent such an act from being subject to the avoidance of wrongful calculation and calculation.

(4) There is no provision on how to calculate the amount of income for the pertinent business year related to the acquisition of forfeited stocks under the former Enforcement Decree of the Corporate Tax Act, which is applicable to the instant disposition. Therefore, the calculation of the instant profit as the tax base pursuant to Article 31-2(1)1 of the former Inheritance and Gift Tax Act is unlawful as it is in violation of the no-founded Taxation Act, since there is no basis

B. Plaintiff 2’s assertion on illegality of the imposition of gift tax of this case

(1) Article 42(1) of the former Inheritance Tax and Gift Tax Act (hereinafter “instant legal provision”) only provides that the subject matter of gift tax or taxable object is deemed donation and is similar to the case of Articles 32 through 41 and 43 through 45, and only the amount equivalent to the gains prescribed by the Presidential Decree in the event an asset having economic value is actually gratuitously transferred without going through a normal transaction and a transaction between related parties, as prescribed by the Presidential Decree, is delegated to the Presidential Decree, which is wholly subordinate laws, and the specific contents are entirely delegated to the Presidential Decree, which is wholly subordinate laws. Therefore, it is impossible to reasonably predict what benefit the general public is subject to gift tax on any act. Accordingly, the instant legal provision is in violation of Article 59 of the Constitution of the Republic of Korea, which provides that it is difficult to deem that the subject matter of gift tax or taxable object of gift tax is specified in the law, and is delegated to the Presidential Decree, which is a subordinate law, by deviating from the limit of delegated legislation, and thus, is null and void.

(2) Even if the legal provision of this case is not unconstitutional, the legal provision of this case focuses on the increase in the value of stocks due to the cultivation of forfeited stocks. On the other hand, Article 31-2(1)1 of the former Inheritance and Gift Tax Act (hereinafter “Enforcement Decree provision of this case”) stipulates that the taxable provision of this case is subject to taxation by taking advantage of the profits gained by the waiver of the acquisition of new stocks incurred by a stockholder who is a preemptive right holder in the event that a stock company had a duty to acquire new stocks under the Commercial Act and the remaining stockholder has acquired new stocks. Therefore, since the Enforcement Decree provision of this case completely differs from the taxable object of this case’s legal provision of this case’s legal provision of this case, the provision of this case’s legal provision of this case is null and void by expanding the taxable object beyond the scope delegated by the provision of this case’s legal provision of this case’s legal provision of this case

(3) The chief of the Defendant’s Jung-gu Tax Office renounced preemptive rights, and deemed that the Plaintiff Company distributed the difference between the issue price and the market price per share after the capital increase to Plaintiff 2 by receiving the waiver of the forfeited stocks of this case, and determined it as a wrongful calculation subject to the forfeited high-value purchase. The Plaintiff Company notified the changes in the amount of income arising from bonus disposal on December 19, 201, and issued a disposition of collecting wage and salary income tax of KRW 736,671,530 on February 1, 202 to the National Tax Tribunal. The Plaintiff Company filed an appeal seeking the cancellation of the above collection disposition on February 1, 2002. The Defendant Jung-gu Tax Office revoked the above collection disposition ex officio on the premise that the benefit from the waiver of the preemptive rights is not attributed to Plaintiff 2. Accordingly, the disposition of imposition of gift tax of this case is inconsistent with the Defendant’s preceding act. Therefore, the disposition of imposition of gift tax of this case is unlawful because it violates the binding force of disposal other than the preceding act.

(4) On the other hand, if the tax authority made a wrongful calculation panel under the Corporate Tax Act and corrected the corporate tax after adding it to the tax base of the corporate tax, it is determined as bonus, dividend income, and other outflow of income according to the person to whom the profits accrue, and if the person to whom the income accrues is an individual, the classification of income as earned income or dividend income pursuant to the Income Tax Act is determined. Therefore, in cases where the income is disposed of in the course of inclusion in the calculation of income as an object of the avoidance of wrongful calculation in the calculation of income, it is only an issue of imposing income tax if the person to whom the income accrues is an individual, and there is no room for imposing gift tax. The imposition of gift tax without claiming the income tax on the subject of such income tax is contrary to the principle of equality, which

(5) The non-party company had non-performing loans of 22 billion won in the business year of 1997, and reflected this in the net asset value before and after the non-party company's capital increase, the net asset value is not more than "0 won" and accordingly, the value per share is not more than "0 won". Therefore, the value per share before and after the non-party company's capital increase constitutes a case where the value per share before and after the non-party company's capital increase under the proviso of Article 29 (3) of the current Inheritance Tax and Gift Tax Act does not exceed "0 won" and there is no benefit to be donated

4. In the case of the capital increase in this case, analysis of the waiver of the subscription of new shares by Plaintiff 2 and the economic profits and losses from the subscription of new shares by Plaintiff Company

A. As to the shares value of the nonparty company before and after the capital increase

According to the contents of Gap evidence Nos. 19 through 22 and the relevant Acts and subordinate statutes, it is legitimate to assess the value per share of the non-party company's shares before the capital increase in this case under Article 63 of the former Inheritance Tax and Gift Tax Act, and Article 54 (1) of the former Inheritance Tax and Gift Tax Act, by assessing the value per share of the non-party company's shares after the capital increase in this case as KRW 2,010 per share.

Since the plaintiff 2's above 3.b. (5) Note 2 is related to this, if non-performing loans of 22.2 billion won to the non-party company were reflected in the net asset value of the non-party company before and after the capital increase in this case, the net asset value of the non-party company is below the "0 won" in all of the net asset value of the non-party company before and after the capital increase in this case, it is insufficient to recognize it only by the descriptions of the evidence No. 16, 17, and 18, and there is no other evidence to recognize it. Thus, the plaintiff 2's above assertion

B. As to the capital increase of this case, analysis of the waiver of the acquisition of new shares by Plaintiff 2 and the economic profit and loss from the acquisition of new shares by Plaintiff Company

앞서 본 바에 의하면, 이 사건 증자 당시 소외 회사의 1주당 가치는 955원이었는데, 소외 회사는 액면가인 주당 5,000원으로 이 사건 증자를 하여 이는 이른바 고가발행에 해당한다. 고가발행의 경우에 신주를 인수하면 인수하는 주식 수에 비례하여 경제적으로 손해가 발생한다. 그러나 고가발행의 경우 인수로 인한 손해액이 바로 인수한 신주 1주당 발행가액과 증자 전 주식 가액의 차액이라고 볼 수 없고, 또한 인수한 신주 1주당 발행가액과 증자 후 주식 가액의 차액{이 사건의 경우 신주 1주당 2,990원(= 5,000원 - 2,010원). 피고들의 견해는 바로 이것이다}이라고 볼 수도 없다. 인수한 신주를 기준으로 보게 되면, 인수 후 가치가 2,010원이고, 인수에 소요되는 비용은 5,000원이므로 그 자체만으로 보면 신주 1주의 인수를 포기하게 되면 2,990원의 손실을 면하게 되고, 신주 1주를 인수하게 되면 2,990원의 손실을 보게 되는 것이지만, 신주 인수를 위하여 납입한 대금은 소외 회사의 자본금이 되어 증자 전에 발행된 모든 주식의 가치를 높이는 작용을 하게 되어 증자 전의 각 주주가 보유하고 있었던 주식의 가치가 955원에서 2,010원으로 커지기 때문이다. 즉, 원고 회사가 신주를 인수함으로써 원고 2가 보유하고 있었던 주식뿐 아니라 원고 회사가 보유하고 있었던 주식도 그 가치가 2,010원까지 올라간 것이다. 이와 같은 이치를 염두에 두고 이 사건 증자( 원고 2와 기타 주주들은 신주의 인수를 포기하고, 원고 회사가 이를 모두 인수한 것)에 따른 경제적 손익을 따져 보면 별지 1. “증자 전후의 주식 현황 등” 기재와 같이 그로 인하여 소외 회사는 1,497,550,345원, 원고 2는 1,120,274,960원, 기타 주주들은 627,401,115원의 각 이익을 보고, 원고 회사는 3,250,617,775원의 손해를 보게 된 것이다. 즉, 소외 회사는 증자 전에 자기주식 1,419,479주를 보유하고 있었고, 그 가치는 1,355,602,445원(= 955원 x 1,419,479)이었는데, 증자 후에는 보유 주식의 수에는 변함이 없이 그 가치가 2,853,152,790원(= 2,010원 x 1,419,479)이 되었다. 원고 2는 증자 전에 1,061,872주를 보유하고 있었고, 그 가치는 1,014,087,760원(= 955원 x 1,061,872)이었는데, 증자 후에는 보유 주식의 수에는 변함이 없이 그 가치가 2,134,362,720원(= 2,010원 x 1,061,872)이 되었다. 원고 회사는 증자 전에 1,224,287주를 보유하고 있었고, 그 가치는 1,169,194,085원(= 955원 x 1,224,287)이었는데, 신주 1,519,144주를 7,595,720,000원(= 5,000원 x 1,519,144)에 인수하였으므로 증자 전 주식가치와 주식 인수 대금의 합계액은 8,764,914,085원(= 1,169,194,085원 + 7,595,720,000원)인데, 증자 후에는 보유 주식은 2,743,431주가 되고 그 가치는 5,514,296,310원(= 2,010원 x 2,743,431)이 되었다. 한편, 기타 주주들은 증자 전에 594,693주를 보유하고 있었고, 그 가치는 567,931,815원(= 955원 x 594,693)이었는데, 증자 후에는 보유 주식의 수에는 변함이 없이 그 가치가 1,195,332,930원(= 2,010원 x 594,693)이 되었다.

On the other hand, the profit accrued to Plaintiff 2 can be deemed to have accrued from the acquisition of new shares by the Plaintiff Company. Among the profits of Plaintiff 2, the profit accrued from the Plaintiff Company’s waiver of the acquisition of new shares and the acquisition of the new shares by the Plaintiff Company is 412,930,047 won (= KRW 559,952/1,519,144), equivalent to the ratio of the number of shares acquired by the Plaintiff Company that Plaintiff 2 gave up the acquisition of the new shares (= KRW 1,20,274,960), among the total profits of Plaintiff 2, the remaining amount of KRW 707,34,913 (= KRW 1,20,274,960 - KRW 412,930,047). Of the profits of the Plaintiff 2 from the capital increase in this case, the causal relationship between the Plaintiff Company and the part of the acquisition of the new shares can not be deemed to have accrued from the acquisition of the Plaintiff Company.

I would like to examine the above recognition on the premise of such recognition.

5. Whether the imposition disposition of the corporate tax of this case is legitimate

A. The purport of and criteria for determining the denial of wrongful calculation

Wrongful calculation refers to the calculation of the act of reducing or excluding the tax burden incurred when a taxpayer takes a round-over act, a multi-stage act and other abnormal transaction form without a reasonable transaction form of a normal economic person. The purport of Article 20 of the former Corporate Tax Act, which is the provision of the wrongful calculation panel, is as follows: (a) it is recognized that a transaction with a corporation and a related party has neglected the economic rationality by abusing all the forms of transactions under each subparagraph of Article 46(2) of the Enforcement Decree of the Corporate Tax Act; and (b) it is deemed unfair in terms of tax law by deeming that the person having the authority to impose tax was objectively reasonable in terms of tax law; (c) it is intended to ensure the fairness of taxation and to prevent tax avoidance by imposing the income deemed reasonable; and (d) the determination of whether an economic rationality exists shall be made based on whether the transaction lacks economic rationality in light of sound social norms or commercial practices, taking into account all the circumstances (see Supreme Court Decision 201Du7268, Sept. 4, 2002).

B. Judgment on the Plaintiff Company 3. A. (1) argument

When a stock company issues new shares, there is no obligation of shareholders to accept the new shares, and the fact that the plaintiff company did not directly acquire the forfeited shares from the plaintiff 2, as alleged by the plaintiff company.

However, in full view of the evidence mentioned above and evidence No. 7-1, the plaintiff company and the non-party company are affiliates of ○○ Group and hold 24.46% of the shares issued by the plaintiff company, the main company of the above affiliates at the time of the capital increase, and held 36.86% of the shares issued by the non-party company, and the non-party company attempted to issue new shares at 5,000 won at par value, and the non-party company attempted to increase the capital by issuing new shares at 5,00 won at par value. The other shareholders including the plaintiff 2 renounced the acquisition of the new shares allocated to the plaintiff company, while the other shareholders including the plaintiff 2 gave up the new shares transferred to the non-party company, and acquired all new shares issued by the non-party 2 and the non-party 2 after cultivating forfeited shares. In light of the relationship between the plaintiffs and the non-party company, the details of the new shares issued and the disposal of new shares, the economic profits and losses of the plaintiff company following the capital increase in this case, the plaintiff 2 and the non-party 2.

C. Judgment on the Plaintiff Company 3. A.2

Article 46 (2) of the former Enforcement Decree of the Corporate Tax Act provides for an overall form of act by stipulating an individual and specific type of act in subparagraph 1 through 8 with regard to a case where it is deemed that a corporation distributes the profits of the corporation to other investors. Thus, the meaning of subparagraph 9 refers to a case where a certain amount of act is acknowledged as an act corresponding to the transaction under subparagraphs 1 through 8, which is equivalent to the transaction under subparagraphs 1 through 8, in addition to the transaction under subparagraphs 95Nu18697, May 28, 1997, and 95Nu5301, May 10, 1996, etc.). Since Article 46 (2) 1 through 8 of the former Enforcement Decree of the Corporate Tax Act provides for an offering of the profits of the corporation to the shareholders who are related parties of the corporation without compensation in relation to the waiver of new stocks and the acquisition of the forfeited stocks, it does not constitute a case where the forfeited stocks and the forfeited stocks are purchased by the corporation more than the market price of the corporation.

D. Determination as to the Plaintiff Company 3. A. (3) argument

As seen earlier, the facts that both the Plaintiff Company and the Nonparty Company were affiliated with the Plaintiff Company’s ○○ Group controlled by all Plaintiff 2 are as seen earlier. According to the evidence No. 7, as of September 14, 1998, the Plaintiff Company guaranteed the Nonparty Company’s debt amounting to KRW 259.3 billion, and the Nonparty Company guaranteed the Plaintiff Company’s debt amounting to KRW 27.2 billion. At the time of the capital increase, the fact that the foreign exchange crisis occurred, and most of the domestic companies’ financial resources have deteriorated, is significant in this court. However, the Plaintiff Company’s acceptance of the forfeited stocks of this case may be exempted from bankruptcy in the event of the Nonparty Company’s bankruptcy. On the contrary, if the Plaintiff Company did not accept the forfeited stocks of this case, the Nonparty Company becomes bankrupt, and accordingly, the Plaintiff Company could not be exempt from bankruptcy, and there is no evidence to prove that the Plaintiff Company did not have any economic interest, such as the Plaintiff Company’s debt amounting to KRW 27.29.

E. Judgment on the Plaintiff Company 3. A.4

(1) Relevant statutes

[Enforcement Rule of the former Corporate Tax Act]

Article 16-2 (Market Price)

In applying Article 12(1)10 of the Decree, Article 37-3(9), Article 40(1), Article 41(1), Article 46 of the Decree, and Article 116(2) and (4) of the Decree, where the market price is unclear, it shall be based on the appraised value by a certified public appraisal corporation under the Public Notice of Values and Appraisal of Lands, etc. Act, and where there is no appraised value, it shall be based on the values appraised by applying mutatis mutandis Articles 61 through 64 of the Inheritance Tax and Gift Tax Act: Provided, That stocks not listed on the Stock Exchange shall be based on the values appraised by applying mutatis mutandis Article 63 of the Inheritance Tax and Gift Tax Act.

[former Inheritance Tax and Gift Tax Act]

Article 63 (Evaluation of Securities, etc.)

(1) The appraisal of securities, etc. shall be conducted by the following methods:

1. Appraisal of stocks and investment shares:

(c) Stocks and equity shares not listed on the Korea Stock Exchange other than those under item (b) shall be appraised according to the methods prescribed by Presidential Decree in consideration of corporation assets and profits;

【Gu Inheritance Tax】

Article 54 (Appraisal of Unlisted Stocks)

(1) Stocks and investment shares not listed on the Korea Stock Exchange (hereinafter referred to as "non-listed stocks" in this Article) under Article 63 (1) 1 (c) of the Act shall, except in the case of paragraph (2), be the value assessed by the following formula:

Value per share = [The net asset value/total number of issued stocks (hereafter in this Article, referred to as the “net asset value”) of the relevant corporation + The average amount of net profit and loss per share during the latest three years/the average interest rate formed in the financial market as determined by the Ordinance of the Prime Minister] ¡À2

(2) According to the above-mentioned laws and regulations, where the market price is unclear in applying Article 46 of the Enforcement Decree of the Corporate Tax Act, the appraisal corporation under the Public Notice of Values and Appraisal of Lands, etc. Act shall appraise the appraised value, and where there is no appraised value, the appraised value shall be based on the appraised value by applying mutatis mutandis the provisions of Articles 61 through 64 of the Inheritance Tax and Gift Tax Act. However, stocks not listed on the Korea Stock Exchange shall be based on the appraised value by applying mutatis mutandis the provisions of Article 63 of the Inheritance Tax and Gift Tax Act. However, even if the aforementioned provisions can be a legal basis for calculating the price before and after the instant capital increase, it cannot be a basis for calculating the value of profits distributed by the Plaintiff Company to the Plaintiff Company due to Plaintiff 2’s refusal of acceptance of forfeited shares and acquisition of forfeited shares by the Plaintiff Company’s forfeited shares. In light of the provisions of the former Corporate Tax Act and Article 46(2)9 of the Enforcement Decree thereof, it cannot be deemed that there is no reasonable ground for calculating the amount of profits based on the unlawful calculation based on the rejection of unjust calculation.

However, in calculating the profit distributed by the Plaintiff corporation to Plaintiff 2 through the capital increase in this case, the head of Jung-gu Tax Office applied the provision of Article 31-2 (1) 1 of the former Inheritance and Gift Tax Act by analogy. As a result, the amount of profit by distribution calculated by the Head of Jung-gu Tax Office for the Defendant exceeds the amount to be considered in the analysis as to which Plaintiff 2 and the Plaintiff Company incurred any profit and loss through the capital increase in this case. Thus, as seen earlier, the provision of Article 31-2 (1) 1 of the former Inheritance and Gift Tax Act is applied even though the provision of Article 31-2 (1) 1 of the former Inheritance and Gift Tax Act is a provision which is entirely unreasonable as to the method of calculating the profit by calculating the profit by the share offering among the shareholders who renounced the acquisition of new shares and the shareholders who acquired the forfeited share in this case. Therefore, the calculation

6. Whether the imposition of gift tax of this case is lawful

A. Determination as to the Plaintiff 2’s assertion

(1) Article 38 of the Constitution provides that “All citizens shall have the duty to pay taxes under the conditions as prescribed by Act” and Article 59 provides that “types and rates of taxes shall be determined by Act” and declares the principle of no taxation without representation.

The principle of no taxation without the law is the core of the principle of no taxation without the law and the principle of clarity of taxation requirements. First, the legal principle of taxation requirements refers to the principle that all the taxation requirements, such as taxpayers, taxable goods, tax bases, taxable periods, tax rates, etc. which establish tax liability, and the procedures for the imposition and collection of taxes, should be stipulated by the law enacted by the National Assembly as the representative body of the people. Meanwhile, even if the provisions of the law stipulate the taxation requirements, if the provisions of the law are too abstract and unclear, they may cause arbitrary interpretation and enforcement by the tax authorities. Thus, the contents of the law should be clear and personal.

However, since economic phenomenon subject to the regulation of the tax law is complicated, diverse, and continuous changes, fair taxation can be made in line with the economic reality, and even if it is related to the important matters or essential matters of the tax liability in order to cope with the unlawful act of tax avoidance, it is necessary to delegate it to subordinate laws such as Presidential Decree with shotba40 on Nov. 30, 1995, which is more active than the formal law enacted by the National Assembly (see Constitutional Court Order 94HunBa40 on Nov. 30, 1995, etc.).

On the other hand, Article 75 of the Constitution provides that "the President may issue Presidential Decrees with regard to the matters to be delegated with the specific scope of the Act and those necessary for enforcing the Act". As such, since general and comprehensive delegation in delegated legislation does not differ from blank delegation of legislative power, it would be sufficient to deny the principle of parliamentary legislation or the rule of law, and there is a risk that fundamental rights may be infringed upon due to administrative authority. Therefore, Article 75 of the Constitution provides that "the specific scope of delegation shall be determined in accordance with the delegation legislation," and that general and comprehensive delegation shall not be permitted." Article 75 of the Constitution provides that "the specific scope of delegation shall be determined by Presidential Decree and other subordinate regulations, such as Presidential Decree, and the basic matters of the scope of delegation shall be determined by Presidential Decree, as specific and clear as possible (Article 75 of the Constitution provides that even if anyone can do so, it shall be determined with a comprehensive review of the legislative intent of each Act, and that it shall not be determined with the specific scope of delegation of the Act as a whole.

(2) With respect to the legal provision of this case, in light of the above determination criteria, the legal provision of this case provides that "in case where an asset having economic value is actually gratuitously transferred without going through normal transactions and transactions between related parties prescribed by the Presidential Decree, it shall be deemed that an amount equivalent to the gains prescribed by the Presidential Decree is a donation between related parties." Although the legal fiction or presumption of a donation under the former Inheritance Tax and Gift Tax Act is impossible until the cause of the transfer of the asset is the donation legally, it shall not be deemed that the cause of the transfer of the asset acquired through the donation is the donation. But because there is no difference between the asset acquired through the donation and its actual aspect, it shall be presumed that the donation was made if the legal fiction or a certain premise is proved. In light of the legal system, the right to receive the donation under Article 32 of the former Inheritance Tax and Gift Tax Act shall be deemed as a donation, (1) the right to receive the donation, (2) the deemed donation of the property under Article 33, (3) the deemed donation and gift of the property under Article 4, and (4) the presumption of donation.

The legal provision of this case is made in preparation for the appearance of a new means of tax avoidance, and it is problematic that this provision is subject to taxation: ① It is not a normal transaction but ② it is actually gratuitously transferred property with economic value through a transaction between related parties; ④ It does not correspond to a donation with a strict meaning, but ① it is similar to the above legal provision on the constructive gift of 1 through 200, and thus, it is deemed that a donation is made free of charge, and it is not different from a donation, so it cannot be said that there is no specific standard for the subject of taxation (On the other hand, the legal provision on the presumption of donation under the legal system, which is similar to the case of Articles 43 through 45 of the former Inheritance Tax and Gift Tax Act, which is similar to the case of Article 39(1)(a) of the former Inheritance Tax and Gift Tax Act, and thus, it cannot be said that the legal provision of this case is unconstitutional on the ground that the distribution of profits in this case is limited to a donation under the conditions similar to that of Articles 43 through 45 of the former Inheritance Tax Act.

Indeed, Article 39(1)1 (a) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that “In allocating forfeited stocks under the provisions of Article 39(1)1 (a) of the Act, the benefit acquired by a person who has renounced all or part of the right to receive new stocks shall be subject to the taxation of “the benefit acquired by a stockholder who has renounced such right by accepting forfeited stocks.” This is the case where, in allocating new stocks or equity shares (hereinafter “new stocks”) to increase the corporation’s capital or investment amount, the shareholder of the relevant corporation renounces all or part of the right to receive new stocks, and where such renounced new stocks (hereinafter “new stocks”) are again allocated, the benefit prescribed by the Presidential Decree among the benefits acquired by obtaining forfeited stocks is subject to the taxation of “the benefit acquired by obtaining forfeited stocks,” and on the other hand, Article 39(1)1 (a) of the former Inheritance Tax and Gift Tax Act provides that the issuance price of new stocks shall not be different from the market price of the relevant case without consideration from the market price of the new stocks.

Furthermore, as seen above, the legal provision of this case is similar to the other deemed donation (or presumption) provision under the former Inheritance Tax and Gift Tax Act, and it is deemed that in the event an asset of economic value is actually gratuitously transferred through transaction between parties with a special relationship without going through a normal transaction, the amount equivalent to such profit was donated. Since it is delegated only to the subordinate law as to the calculation of the profit and the person with a special relationship and the calculation of the profit, it cannot be deemed as a comprehensive delegation, and therefore, it cannot be deemed as a violation of Article 75 of the Constitution

(3) Therefore, the plaintiff 2's above assertion that the legal provision of this case is unconstitutional and null and void is without merit.

B. Judgment on Plaintiff 2-3. b. (2) argument

In relation to the assessment of the gift tax of this case, the legal provision of this case is subject to the taxation of "in case where, as seen earlier, assets having economic value are similar to those under Article 39 (1) 1 (a) of the former Inheritance Tax and Gift Tax Act and are actually gratuitously transferred without going through a normal transaction between related parties as prescribed by the Presidential Decree, the amount equivalent to the gains prescribed by the Presidential Decree." Therefore, the delegated Presidential Decree is similar to that under Article 39 (1) 1 (a) of the former Inheritance Tax and Gift Tax Act, and it can be determined that "in fact gratuitously transferred assets having economic value through transactions between related parties as prescribed by the Presidential Decree without going through a normal transaction," and if it exceeds such scope, it is different from those under Article 39 (1) 1 (a) of the former Inheritance Tax and Gift Tax Act and it is evaluated that it deviates from the delegation limit of the mother law.

Under the same premise, the provision of this case provides that the value of new stocks per stock (i.e., value of one stock before increase x (number of new stocks x number of new stocks increased by increase) ± (the value of one stock before increase x the total number of stocks before increase x the number of new stocks) calculated by the formula of the (i.e., increase in total number of issued stocks before increase x the number of new stocks) increase in the value of new stocks x (i.e., the value of 2,010 won before increase in the value of new stocks) before increase in the value of new stocks 】 (the value of forfeited stocks per stock before increase in the value of new stocks x the value of forfeited stocks x the value of forfeited stocks per stock before increase in the value of new stocks x the value of forfeited stocks per stock calculated by the formula of the total number of new stocks issued before increase in the value of new stocks x the value of forfeited stocks per stock x the value of forfeited stocks per stock before increase in the number of new stocks per stock).

According to the above analysis, in the case of high-priced issuance, the term “property with economic value gratuitously transferred” to a shareholder who renounced the acceptance of new shares from a person with a special relationship is understood as losses incurred when a shareholder who renounced the acceptance of new shares has made the acceptance of new shares. However, even in the case of the right to underwrite new shares, a shareholder under the Commercial Act does not have any obligation to accept the new shares. Therefore, even if a shareholder renounced the acceptance of new shares, the loss arising therefrom cannot be deemed as “property with economic value gratuitously transferred” to a shareholder who renounced the acceptance of new shares from a person with a special relationship. Rather, according to the above analysis on April 1, 200, in the case of high-priced issuance, the term “property with economic value gratuitously transferred from a person with a special relationship” should be deemed as the increase in the value of the existing shares held by the shareholder who renounced the acceptance of new shares by acquiring the new shares issued

Ultimately, the enforcement decree of this case is based on the gift amount subject to taxation, which is the same as the profits earned by the waiver of the loss incurred by a shareholder who is a preemptive right holder in the event that the shareholder of a stock company is liable to underwrite new shares under the Commercial Act. Therefore, the enforcement decree of this case is extended beyond the scope of taxable objects scheduled under the law of this case, and is thus null and void as an illegal provision infringing on the taxpayer’s property beyond the scope delegated by the mother law.

However, the legal provision of this case is deemed to have been donated by the amount equivalent to the “profit prescribed by the Presidential Decree.” As long as the provision of the Presidential Decree to compute such profit is null and void, imposing gift tax pursuant to the legal provision of this case is illegal and not permissible. Ultimately, Plaintiff 2’s assertion on this point is with merit.

C. Plaintiff 2-3.b. (3) and 3.b. (4) argument need not be further determined.

7. Calculation of reasonable corporate tax amount for the Plaintiff Company;

According to the above results, the profit distributed by the Plaintiff Company to Plaintiff 2 by accepting forfeited stocks which the Plaintiff Company, a person with a special relationship, renounced acceptance shall be KRW 412,930,047. Thus, when calculating the income and the reasonable corporate tax amount of the business year 1999 by including it in gross income, it shall be KRW 166,209,447, such as the entry “justifiable Tax Amount” in attached Form 2.

8. Conclusion

Therefore, since the part of the disposition imposing the gift tax of this case against the plaintiff company exceeds 166,209,447 won among the disposition imposing the corporate tax of this case against the plaintiff company of this case, the claim of the plaintiff company seeking the revocation of this part is justified, and the remaining claim of the plaintiff company of this case is dismissed as without merit. It is so decided as per Disposition by the assent of all participating Justices who reviewed the disposition imposing the gift tax of this case against the plaintiff 2.

[Attachment 1 and 2]

Judge Han-sung (Presiding Judge)