Plaintiff (Law Firm Dakon, Attorneys Seo Jong-ho et al., Counsel for the plaintiff-appellant)

The director of the tax office.

April 7, 2016

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of global income tax of KRW 2,690,793,130 against the Plaintiff on September 24, 2013 is revoked.

1. Details of the disposition;

A. While the Plaintiff worked as the purchasing team of Nonparty 1’s ○ Information System Co., Ltd. (hereinafter “Nonindicted Company”), from March 2008 to June 2009, was under detention investigation and criminal trial against Nonparty 1, the substantial largest shareholder of Nonparty 1, the Plaintiff performed the duties of contact between Nonparty 1 and his/her family members, data collection necessary for criminal trial, and support for Nonparty 1’s detention house and hospital life.

B. On June 12, 2009, a written agreement was concluded between the Plaintiff and Nonparty 1 to transfer 2,157,922 shares of Nonparty Company (hereinafter “instant shares”) owned by Nonparty 1 to the Plaintiff.

C. After that, there was a dispute over the transfer of the instant shares between the Plaintiff and Nonparty 1, and on December 21, 2012 in the process of civil litigation, the decision of recommending settlement (Seoul High Court Decision 2012Na7641, 2012Na7658, hereinafter “the decision of recommending settlement of this case”) was rendered to receive KRW 7.5 billion in lieu of the instant shares (hereinafter “the decision of recommending settlement of this case”) and became final and conclusive around that time.

D. According to the instant decision on recommending reconciliation, the Plaintiff received from Nonparty 1 the payment of KRW 3 billion on January 30, 2013, KRW 4.5 billion on June 28, 2013, and KRW 7.5 billion on a total of KRW 7.5 billion (hereinafter “instant dispute”).

E. On September 24, 2013, the Defendant deemed that the key issue amount falls under the “rewards” under Article 21(1)17 of the former Income Tax Act (amended by Act No. 12852, Dec. 23, 2014; hereinafter “former Income Tax Act”), and notified the Plaintiff of the rectification and notification of KRW 2,690,793,130 of the global income tax in 2013 (hereinafter “instant disposition”).

F. The Plaintiff, who was dissatisfied with the instant disposition, filed an objection on December 6, 2013 and filed an appeal with the Tax Tribunal on April 18, 2014, but was dismissed on February 13, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3, Gap evidence No. 4-1, 2, Eul evidence Nos. 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

While Nonparty 1 lives in a prison, the Plaintiff agreed with Nonparty 1 to assist Nonparty 1’s counsel in a criminal trial and to receive the instant shares in return. In fact, the Plaintiff provided personal services pursuant to the above agreement and received the amount of issues in lieu of the instant shares. As such, it constitutes other income, which is the price of personal services under Article 21(1)19 of the former Income Tax Act.

Therefore, even though 80% of the issue amount is recognized as necessary expenses by Article 87 subparagraph 1 (b) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 24823, Nov. 5, 2013; hereinafter the same), it is unlawful that the Defendant excluded the application of the above provision from the application of the Enforcement Decree and did not recognize 80% of the issue amount as necessary expenses by deeming that the issue amount falls under a honorarium under Article 21 (1) 17 of the former Income Tax Act.

B. Relevant statutes

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

(c) Markets:

Article 21(1) of the former Income Tax Act provides for “an honorarium” in subparagraph 17 of the same Article as the type of other income. In addition, Article 19 of the former Enforcement Decree of the Income Tax Act provides for “the remuneration for temporary provision of personal services” in subparagraph 19 of the same Article, the said personal services include lecture provided to many people without an employment relationship in item (a) from the personal services; explanation, enlightenment, or screening of performances conducted through broadcast media in item (b) through (c); (c) provides services provided by attorneys-at-law, certified public accountants, tax accountants, certified tax accountants, appraisers, appraisers, patent attorneys, and other persons with professional knowledge or special skills using their knowledge or skills; and (d) provides services provided without an employment relationship for allowances or other similar costs. Article 87 subparag. 1 of the former Enforcement Decree of the Income Tax Act provides for a special provision that 80% of the amount received by a resident with respect to other income in subparagraph 19 of the same Article includes other income in subparagraph 17 of the same Article.

In full view of the language and purport of the above provisions, and the purport of the above provisions, as well as the fact that the honorariums under subparagraph 17 of the above provision are paid as cases concerning the provision of services, etc., and even though the provision of temporary personal services can be included in the provision of services, it does not apply the special provisions under subparagraph 17 of Article 87 of the former Enforcement Decree of the Income Tax Act, unlike the above subparagraph 19, and the above special rule appears to have been selected as legislative policy in consideration of the social contribution of the person who acquired other income, the amount of income and the relationship between inputs, etc., even if it is the price of temporary personal services, unless the service falls under the special service under subparagraph 19- Item (a) and (b) above or the qualification or the degree of expertise and special character equivalent thereto, unless the person with the above degree of expertise and special character falls under the service based on the above provision, it shall be deemed that the payment constitutes not the price of temporary personal services under subparagraph 19, but the reward under subparagraph 17 of the above provision.

Comprehensively taking account of the statements in the evidence Nos. 3-1, 2, and 4-2 and the purport of the entire argument in the testimony by Nonparty 2, it is recognized that the Plaintiff was exempt from considerable part of the previous duties of the purchasing team as the head of the purchasing team during the performance of Nonparty 1’s criminal trial support duties, etc., and the Plaintiff maintained the remuneration as it was. Rather, the Plaintiff was promoted to the head of the headquarters on February 1, 2009, and the annual salary was increased from KRW 60 million to KRW 80 million. During the criminal trial against Nonparty 1, the Plaintiff was released from the detention house to Nonparty 1, and the Plaintiff was in charge of collecting related materials from Nonparty 1 and delivering them to the defense counsel or collecting applications from Nonparty 1.

According to these facts and the circumstances leading up to the above disposition, the service provided by the plaintiff is mainly based on the relationship between the plaintiff and the non-party 1, or it is merely a delivery of data, etc. necessary for the trial between the plaintiff's counsel and the non-party company, and it cannot be deemed that it constitutes a personal service with expertise or special characteristics. In addition, the plaintiff was provided with benefits and personnel expenses in the course of providing the above service, and the plaintiff did not appear to have invested a large amount of expenses for that service. The issue amount is a large amount to the extent that it exceeds the objective value of the service provided by the plaintiff, and it seems that the relationship between the plaintiff and

Examining these circumstances in light of the aforementioned legal principles, it is reasonable to view that the issue amount falls under the category of honorariums as stipulated in Article 21 (1) 17 of the former Income Tax Act, not the price of temporary personal services under Article 21 (1) 19 of the same Act, and therefore, the instant disposition that did not apply the special provisions under Article 87 (1) 1 of the former Enforcement Decree of the Income Tax Act is lawful,

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment]

Justices Kang Jong-hee (Presiding Justice) (Presiding Justice)