Seoul Administrative Court 2009Guhap2504 ( July 16, 2009)

National High Court Decision 2007west3512 ( October 22, 2008)

Whether the input tax amount for removal expenses for the lease of land acquired is deducted.

If a building is removed to lease land after the acquisition of the land, the construction cost required for the removal falls under the capital expenditure for the creation of the land under the provisions of the Value-Added Tax Act and it cannot be deducted from the input tax amount.

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

1. All appeals by the plaintiff and the defendant are dismissed.

2.The costs of appeal shall be borne by each party.

1. The purport of the plaintiff's claim and appeal

A. Purport of claim

The defendant imposed corporate tax of 4,346,270 won for the plaintiff on June 1, 2007, value-added tax of 10,920,620 won for the first term of 200, value-added tax of 4,736,310 won for the first term of 203, value-added tax of 13,892,380 won for the second term of 2005, and each imposed disposition of 1,406,195,590 won for the plaintiff on November 6, 2008 (hereinafter referred to as "each disposition of this case").

B. Purport of appeal

The part against the plaintiff in the judgment of the court of first instance shall be revoked. Among each of the dispositions in this case, the remaining dispositions except the imposition of corporate tax of KRW 4,346,270 against the plaintiff on June 1, 2007 shall be revoked.

2. The defendant's purport of appeal

The part against the defendant in the judgment of the court of first instance shall be revoked, and the plaintiff's claim corresponding to the revocation shall be dismissed.

1. Quotation of judgment of the first instance;

A. The reasons for this Court concerning this case are as stated in the reasoning of the judgment of the court of first instance except for the portion to be determined in addition to the following sub-paragraph (b). Thus, this case is cited in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure

B. Additional determination

(1) Judgment on the plaintiff's assertion

(A) With respect to the corporate tax and special rural development tax in 2004, the standard for the occurrence of profit and loss under the corporate accounting standards (No. 4A3.) provides that "if a seller is obligated to perform an additional act even after the ownership is transferred or ownership is transferred or the risks and benefits from the ownership are substantially transferred to a buyer, the Plaintiff shall recognize the profit at the time of the completion of the pertinent act." However, the Plaintiff was paid a compensation for expropriation on June 15, 2006, and the ownership transfer registration was completed on July 13, 2006. Thus, even if the ownership transfer registration for the remaining 12 parcels was completed on December 30, 2004, the time of completion of the act is the time of June 2006, and therefore, it is reasonable to assert that the Plaintiff should recognize the profit from June 6, 2006.

As long as Article 68(1)3 of the Enforcement Decree of the Corporate Tax Act clearly provides for the business year to which profits and losses accrue due to the transfer of fixed assets, it is unnecessary to adopt the standards for the accrual of profits and losses under the corporate accounting standards and determine the attribution of profits and losses. Since corporate tax and special agricultural and fishing villages tax in 2004 are related to the remaining 12 parcels, the reasons asserted by the Plaintiff alone do not require to determine the business year to which the remaining 12 parcels accrue in relation to the time of registration of fixed assets or the time of payment of compensation for expropriation.

Therefore, the plaintiff's above assertion is without merit.

(B)In addition, with respect to the corporate tax and special tax for rural development in 2004, the plaintiff has the characteristics of technical and difficult determination of the time of attribution of profit and loss. In particular, if there are no difference in the total profit or total amount of tax over several business years, such as this case, and there are only differences in the method of distribution, it cannot be caused by the plaintiff's failure to perform his duties because the plaintiff made a wrong determination of the business year to which part of corporate tax in 2003 belongs, and the defendant, who is the tax authority, has made a wrong determination of the business year to which part of corporate tax in 2003 belongs and received the decision of correction of the business year to which it reverts in 204, it shall be argued that the imposition of each additional tax is illegal.

As long as Article 68(1)3 of the Enforcement Decree of the Corporate Tax Act clearly provides for the business year to which profits and losses accrue due to the transfer, etc. of fixed assets, the grounds alleged by the Plaintiff cannot be deemed as justifiable grounds under Article 68(1)3 of the Enforcement Decree of the Corporate Tax Act. The same applies to cases where the Defendant, who is the tax authority, erroneously determines the business year to which

Therefore, the plaintiff's above assertion is without merit.

(2) On the Defendant’s assertion

(A) The judgment of the court of first instance held that the application of Article 76 (9) 1 and 2 of the Corporate Tax Act prior to the amendment in 2001 to the land or a building is in violation of the excessive prohibition principle, on the grounds that the corporate tax against the plaintiff in 2000 was issued "the other tax invoice that is different from the fact", and thus, the above judgment was erroneous.

(b)However, the corporate tax of 200 against the plaintiff is imposed in accordance with Article 76, Paragraph 9, Item 1 and 2, because it is obvious that the tax invoice has not been issued in accordance with Article 121, Paragraph 1, of the Corporate Tax Act before the amendment in 2001, or because it falls under the case where the list of total tax invoices by purchase and sale is not submitted in accordance with paragraph 3, of Article 121, paragraph 9.

2. Conclusion

Therefore, the judgment of the court of first instance is just and the appeal of both the plaintiff and the defendant is without merit, and it is so decided as per Disposition with the decision of both the plaintiff and the defendant.