In a case where: (a) the tax authority imposed gift tax on Party A on the grounds that the acquisition fund was presumed to have been donated pursuant to Article 45(1) of the former Inheritance Tax and Gift Tax Act in acquiring Company B’s shares; and (b) the tax authority added Party B’s actual operator of Party B’s company (“B”) as a donation for the said shares under title trust to Party A in a revocation lawsuit filed by Party B; and (c) added Party A as a preliminary disposition, the case holding that the lower court erred by misapprehending the legal principles on the grounds that adding the grounds for disposition to the extent that it is permitted for the addition and modification of the grounds for disposition made within the scope that maintains the identity

Articles 41-2(1) (current Deletion) and 45(1) of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 7010, Dec. 30, 2003);

Plaintiff (Law Firm Jeong, Attorneys Jeon-soo et al., Counsel for the plaintiff-appellant)

Head of Yeongdeungpo Tax Office

Seoul High Court Decision 2009Nu26250 decided March 25, 2010

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Article 45(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter “former Inheritance Tax Act”) provides that “In cases where it is difficult to recognize that a person who acquired the pertinent property has acquired the property by his own means in view of his occupation, age, income, property status, etc., as prescribed by the Presidential Decree, the person who acquired the relevant property shall be presumed to have received a donation of the acquisition fund from another person at the time of the acquisition of the said property.” Article 41-2(1) of the same Act provides that “In cases where the actual owner of the property (excluding land and buildings) is different from the actual owner of the property that requires a registration, etc. on the transfer or exercise of the right, the value of the relevant property shall be deemed to have been donated

2. In full view of the evidence duly admitted, the lower court acknowledged the following facts: (a) on April 6, 2007, the Defendant imposed gift tax of KRW 672,00,000 on the Plaintiff; (b) on June 21, 2002, the Plaintiff acquired the instant shares issued under the name of the Plaintiff (hereinafter “Nonindicted Company”) on the Plaintiff; (c) on June 21, 2002, the Plaintiff failed to present the source of the acquisition fund; (d) thus, the Plaintiff was presumed to have received donation of the acquisition fund from another person pursuant to Article 45(1) of the former Inheritance Tax and Gift Tax Act; and (b) on the other hand, the lower court determined that the instant shares were not acquired the ownership of the instant shares; (b) on the ground that the Nonparty, a de facto operator of the Nonparty Company, was merely the fact that the Nonparty, as the actual owner of the instant shares, was a new title trust to the employees, and thus, did not change the Plaintiff’s basic grounds for disposal of the instant shares under title trust or other grounds for disposal of the instant shares.

3. However, we cannot agree with the judgment of the court below for the following reasons.

Since the subject matter of a taxation disposition lawsuit is objective existence of the tax amount determined by the tax authority, the tax authority may submit new data that can support the legitimacy of the tax base or amount of tax recognized in the relevant disposition, or exchange and change the reasons to the extent that the identity of the disposition is maintained during the course of the lawsuit, and the tax authority shall not necessarily be able to determine the legitimacy of the disposition by only the data at the time of the disposition or to claim only the reasons for the disposition at the time of the disposition (see Supreme Court Decisions 2001Du1994, Oct. 11, 2002; 2009Du1617, Jan. 27, 201, etc.).

According to the reasoning of the judgment below, the ground for disposition added as a preliminary reason for the original reason for disposition of this case is only different from the composition of taxation requirements and legal evaluation of an objective fact by which a transfer of holders in the future of the plaintiff with respect to the stocks of this case, and it does not change the basic facts that constitute a taxation ground. Thus, the defendant's addition of a preliminary reason for disposition constitutes an addition or alteration of the reason for disposition conducted within the scope that maintains the identity of disposition (see Supreme Court Decision 85Nu677 delivered on November 25, 1986).

Nevertheless, the lower court determined that the instant disposition is unlawful without examining whether the Defendant’s addition of the ancillary disposition goes beyond the scope of identity of the basic factual relations and the grounds for the ancillary disposition are acknowledged. In so doing, the lower court erred by misapprehending the legal doctrine on changes in the grounds for disposition, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit.

4. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Young-chul (Presiding Justice)