Seoul Administrative Court-2014-Gu 6554 ( October 16, 2015)

The court of first instance 2010 Swiss316, 317 (Joint)

In the event that the total amount of the guaranteed obligation is specified as principal and interest, the order of appropriation of the obligation is not an issue.

In the case of this case, there is no room to apply the provision on appropriation of obligation since the total amount of the guaranteed obligation to be repaid by a credit guarantee agency, etc. is clearly divided into principal and interest, and it is clearly specified.

In the second instance, 100% of the judgment of the first instance is accepted, and the contents of the judgment are the contents of the judgment of the first instance.

2015Nu4208 Revocation of Disposition of Imposing Corporate Tax, etc.

1. A stock company: 000 bank2. 000 financial branch stock company;

AA Head of the Tax Office

The second instance decision

National Flag

November 6, 2015

December 4, 2015

1. On September 16, 2013, the Defendant’s disposition of imposition of the corporate tax for the business year 2008 against the Plaintiff AAA Bank (including additional tax), the portion exceeding the OOOOO won in the disposition of imposition of the corporate tax for the business year 2008, the portion exceeding the OOO won in the disposition of imposition of the corporate tax for the business year 2010, the portion exceeding the OOOO won in the disposition of imposition of the corporate tax for the business year 2011, and the portion exceeding the OOO won in the disposition of imposition of the OOO (including additional tax) of the corporate tax for the business year 2012, shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. As a financial holding company under Article 2(1) of the former Financial Holding Companies Act (amended by Act No. 12099, Aug. 13, 2013), Plaintiff AAA financial branch company (hereinafter referred to as “Plaintiff financial holding company”) holds 100% of the shares of the Plaintiff AAA bank (hereinafter referred to as “Plaintiff bank”), and the Plaintiffs shall file a return on and pay consolidated corporate tax from the business year 2010 by applying the consolidated tax return system pursuant to Article 76-8 of the former Corporate Tax Act (amended by Act No. 11607, Jan. 1, 2013).

B. The Plaintiff bank provides credit guarantee in accordance with the credit guarantee agreement issued by BB Fund, CCC Fund, DD Foundation, EE Trade Insurance Corporation, FH Insurance Corporation (hereinafter referred to as “GG agency”) and HH insurance company (hereinafter referred to as “HHH insurance,” including GG agency and HHH insurance), and provides credit guarantee to the Plaintiff bank’s customer pursuant to the basic terms and conditions for bank credit transactions as collateral. If a credit guarantee event occurs, such as the debtor’s default on payment, etc., the Plaintiff bank notifies the GG agency, etc. of the validity of the above claim and the result thereof is notified to the Plaintiff bank. Upon receipt of the above notification, the Plaintiff bank will provide documents such as a certificate of subrogation to the GG agency, etc. and receive the principal and interest of the credit.

C. As a result of the consolidated investigation of corporate tax against the Plaintiffs from February 22, 2013 to August 10, 2013, the Director of the Regional Tax Office: (a) determined that, despite the fact that the Plaintiffs did not have agreed on the order of appropriation, it omitted the interest income that could have been additionally accrued if the accounts were to be kept by first collecting the total amount of interest in violation of Article 56 of the Enforcement Rule of the Corporate Tax Act; and (b) notified the Defendant of the aforementioned taxation data.

D. Accordingly, on September 16, 2013, the Defendant: (a) included the amount of interest income omitted (hereinafter “the interest income omitted”) notified as above in the gross income of the Plaintiff in the business year 2008; (b) adjusted the amount of income generated in the business year 2010; (c) adjusted the amount of other entertainment expenses, personnel expenses, remuneration, audit expenses, bad debts, etc. in the business year 201; (d) adjusted the amount of income generated in the gross income or non-deductible expenses; and (e) notified the Plaintiff financial holding company of corporate tax for the business year 2008; and (c) notified the Plaintiff financial holding company of the correction of corporate tax for the business year 2010, corporate tax for the business year 2011, corporate tax for the corporate tax (including additional tax); (d) and (e) corporate tax for the business year 2012 (including additional tax) and corporate tax for the business year 2012 (hereinafter “instant disposition”).

E. The Plaintiffs were dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal, but received a decision of dismissal on May 21, 2014.

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

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

1) The credit guarantee agreement applicable to the instant case includes (i) the balance of the guaranteed loan multiplied by the guarantee ratio, and (ii) the principal which does not exceed the guaranteed amount, and (iii) the balance of the paid amount under the said paragraph shall be paid as the guaranteed obligation with the agreed interest rate up to the date of the performance of the guaranteed obligation.

According to the above terms and conditions, GG institutions, etc. guarantees the principal and interest obligations among the entire obligations (Provided, That in the case of HH insurance, only the principal and the principal obligation are guaranteed), respectively, within a certain limit, and thus, there is no room for the issue of the order of appropriation of performance since the nature of the repayment is specified from the beginning.

2) Even if the above provision cannot be interpreted as a separate guarantee of principal and interest obligations, it shall be deemed that the above provision constitutes a "special agreement" under Article 56 of the Enforcement Rule of the Corporate Tax Act, which prescribes the method of securing the repayment of the guaranteed obligation.

3) Even if the above two interpretations are entirely impossible, the Plaintiff bank appropriated the subrogated payment of GGG institutions, etc., to the extent no less favorable to the obligor according to the basic terms and conditions for the loan transaction, with priority over the principal and corresponding interest, which ought to be recognized as an effective appropriation under the Corporate Tax Act.

B. Relevant statutes

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

(c) Fact of recognition;

The process in which the bank receives the repayment of the guaranteed obligation from the GG agency, etc. and appropriates the repayment of the guaranteed obligation shall normally proceed as follows:

1) Conclusion of credit transaction agreements

The plaintiff bank shall prepare a credit transaction agreement in case of lending money to the customer (the principal debtor), and the agreement shall contain that the principal and the calculation method of interest rates of the lending principal and the basic terms and conditions of banking loan transactions shall apply.

(ii)the receipt of a credit guarantee certificate;

The Plaintiff bank shall receive a credit guarantee from the customers in order to secure the collection of principal and interest of the loan. The credit guarantee letter includes the estimated amount of the loan and the rate of guarantee. The main contents of the terms and conditions of the GG agency, etc. (hereinafter referred to as the "credit guarantee terms and conditions") applicable to the above credit guarantee are as follows:

Article 18 (Extent of Performance of Guaranteed Obligations)

(1) BB Fund shall discharge a guaranteed obligation the sum of the following amounts:

1. The principal which does not exceed the amount guaranteed by multiplying the balance of the guaranteed loan by the rate of guarantee: Provided, That where the substitute payment of the payment guarantee occurs, the substitute payment within the scope of the guaranteed amount by multiplying the amount of the payment

2. The accrued interest on the amount discharged under subparagraph 1 according to the agreed interest rate (excluding the overdue interest rate which is applied on the date of payment of interest) between the date on which the guaranteed liability is discharged: Provided, That with respect to the substitute payment under the proviso of subparagraph 1, the accrued interest at the interest rate calculated by adding 2% to the rate of 91-day negotiable certificates of deposit circulation (based on the closing price before the date of performance

3. The amount prescribed by the BB Fund Act and subordinate statutes from among the expenses paid by the creditor to collect the debt for the guarantee loan.

Article 14 (Extent of Performance of Guaranteed Obligations)

(1) The CCC Fund shall perform its surety obligation with the aggregate of the following amounts:

1. The lesser of the share of liability of the CCC Fund and the balance of guarantee in the unpaid amount of the incidental application made pursuant to Article 10 after preferential appropriation of the collection money provided for in Article 10: Provided, That where a substitute payment for a payment guarantee has occurred, the lesser of the share of liability of the CCC Fund and the balance of guarantee;

2. Interest accrued at the rate applied (excluding deferred interest rates) in cases where the period during which collateral loans are due has not yet arrived until the date on which the guaranteed obligation is discharged with respect to the amount discharged under subparagraph 1: Provided, That with respect to the substitute payment under the proviso to subparagraph 1, the interest accrued at the rate calculated by adding 2% to the rate of return on distribution of negotiable certificates of deposit of 91 days publicly announced by the JJ Association (based on closing price before the date

3. The amount obtained by multiplying the amount prescribed by the CCC fund-related Acts and subordinate statutes by the guarantee ratio, among the expenses paid by a creditor to recover the guarantee side loan (excluding the excess enforcement portion);

Article 16 (Extent of Performance of Guaranteed Obligations)

(1) The Foundation shall discharge guaranteed obligations in the sum of the following amounts:

1. The lesser of the share of liability of a foundation and the balance of guarantee in the unclaimed incidental application money which has been appropriated preferentially for the recovery money prescribed in Article 13: Provided, That where substitute payments for a payment guarantee have occurred, the lesser of the share of liability of a foundation and the balance of guarantee in the unclaimed substitute payments;

2. The accrued interest on the amount discharged under subparagraph 1 according to the agreed interest rate (excluding the overdue interest rate which is applied on the date of payment of interest) from the date prior to the performance of the guaranteed liability: Provided, That with respect to the substitute payment under the proviso of subparagraph 1, the accrued interest at the rate calculated by adding 2% to the rate of 91-day negotiable certificates of deposit circulation (based on the closing price on the date prior to the performance

3. The amount obtained by multiplying the amount determined by the Acts and subordinate statutes of the Local Diplomatic Foundation by the rate of guarantee, among the expenses paid by the creditor for recovery of claims for the guarantee side loan (excluding excess enforcement

Article 5 (Extent of Guaranteed Obligations)

(1) The amount of debts guaranteed by the Corporation shall be the aggregate of the following amounts:

1. Principal of loan with a credit guarantee side within the scope of the credit guarantee limit stated on the front of the letter of credit guarantee multiplied by the amount of credit guarantee ratio: Provided, That where substitute payment for a payment guarantee occurs, substitute payment within the scope of the credit guarantee limit by multiplying the amount of

2. Unclaimed interest on the guarantee amount under subparagraph 1 based on the agreed interest rate (excluding the interest rate applied on the repayment date and the credit plus interest rate on the part in charge of works) up to the date of discharge of the guaranteed liability: Provided, That with respect to substitute payment under the proviso to subparagraph 1, the accrued interest on the rate calculated by adding 2% to the rate of 91-day negotiable certificates of deposit circulation (based on the closing price on the day before performing the guaranteed obligation) announced by the

Article 14 (Extent of Performance of Guaranteed Obligations)

(1) The Corporation shall discharge the aggregate of the following amounts as surety obligations:

1. The principal that does not exceed the guaranteed amount by multiplying the unpaid amount by the guarantee ratio among the amount of guaranteed side loans;

2. With respect to the amount discharged under subparagraph 1, the accrued interest at an interest rate which shall apply in cases where the period during which the loan is to be met has not yet arrived by the date on which the guaranteed obligation is discharged.

3. The amount obtained by multiplying the amount recognized by the president of the Corporation from among the expenses paid by a creditor for the recovery of guaranteed loan by the rate of guarantee.

Article 17 (Payment of Insurance Money)

(1) Insurance proceeds that a water guarantee insurance contract pays to the Plaintiff bank shall be the principal balance of the amount of losses not recovered from the debtor under the principal contract as of the date of payment of insurance proceeds.

3) Claim for the discharge of guaranteed liability

If the principal obligor is unable to repay his/her obligation, the Plaintiff bank claims the performance of the guaranteed obligation to the GG agency, etc. according to the form set by the GG agency, etc., and the claim for performance is clearly divided into the amount of principal and interest calculated according to the terms and conditions of credit guarantee.

4) Delivery of certificate of subrogation, etc.

When receiving the performance of the guaranteed obligation from the GG agency, the Plaintiff bank shall deliver documents such as a certificate of subrogation to the GG agency, etc., and the amount of the principal and interest repaid is divided.

5) Notice to the principal obligor

After that, the Plaintiff bank shall notify the principal debtor of the receipt of the subrogated repayment from GG agency, etc. due to the delinquency, and shall then notify the remaining amount of the principal and interest separately.

6) Accounting;

A bank shall account the balance notified to the principal debtor in installments of the principal and interest.

[Ground of Recognition] Facts without dispute, Gap evidence 3-1 to 5, Gap evidence 4-1 to 4-5, Gap evidence 6-1 to 5, Gap evidence 9-1 to 6, Gap evidence 10-1 to 5, Gap evidence 11-1 to 8, Gap evidence 12-1 to 5, Gap evidence 13-1 through 6, the purport of the whole pleadings, and the purport of the whole pleadings

D. Determination

1) Whether the provisions governing appropriation of performance apply

Article 56 of the Enforcement Rule of the Corporate Tax Act, which is the basis of the instant disposition, provides that in calculating the interest income amount subject to withholding, in the event that a debt and a part of the amount equivalent to the interest on the loan have been repaid without any special agreement on the repayment of the loan and the interest on the loan, the repayment of the interest shall be deemed to have been made first. Article 479(1) of the Civil Act provides that “If an obligor pays expenses and interest on one or more obligations, and the obligor pays the entire amount of the debt, the payment shall be made in the order of the expenses, the interest and the principal.”

In order to apply the order of appropriation for performance (interest ? principal) under each of the above provisions, ‘the person who has performed the obligation must pay only the money corresponding to the part of principal and interest.' In full view of the following circumstances, which can be acknowledged by adding the above facts of recognition and the whole purport of the arguments, it cannot be deemed that the above conditions of application of the above provisions on appropriation for performance are satisfied.

In a credit guarantee letter issued by the Plaintiff bank from the primary debtor, the estimated amount of loan and the rate of guarantee are stated, and if the loan ratio and the balance are replaced by the formula prescribed in the credit guarantee terms and conditions, the total amount of guarantee obligations to be borne by the GG agency, etc. may be classified into the principal and interest.

The Plaintiff bank claimed the total amount of the specified principal and interest as above to the GGG agency, etc., and the GG agency also paid the total amount of the claim to the Plaintiff bank.

The purpose of the Enforcement Rule of the Corporate Tax Act and the Civil Act regarding the order of appropriation of claims is that, in a case where the person performing the obligation pays money that does not reach all the principal and interest, there is a concern that conflict between the person liable for tax payment and the tax authority, the person performing the obligation, and the person receiving the repayment, may not specify which amount is appropriated for the obligation. In this case, the total amount of the guaranteed obligation to be repaid by the GG agency, etc. is clearly divided into principal and interest, and it is clearly specified that the total amount of the guaranteed obligation to

Therefore, the Defendant’s disposition that included the omission of interest income of this case additionally in gross income is unlawful on a different premise.

2) Agreement on the appropriation of performance (preliminary determination)

Furthermore, in the instant case, it is reasonable to deem that there was an agreement among the two agencies on the order of appropriation of debt, as seen earlier, that the Plaintiff bank and the GG agency had undergone the process of determining the amount of principal and interest repayment over several occasions as follows.

The plaintiff bank and the GG institutions, etc. have concluded in advance the agreement on the scope of principal and interest to be held liable for guarantee by the GG institutions through the credit guarantee terms and conditions.

The Plaintiff bank calculated the principal and interest in accordance with the terms and conditions of the agreement and entered them in the form of a request for the performance of guaranteed obligations (which differs from the calculation details of principal and interest) presented by the GG agency, etc. and delivered them to the GG agency, etc.

GGG agency, etc. confirmed the calculation details of the principal and interest stated in the above claim, and paid all of the claim amount to the Plaintiff bank.

After receiving the payment of the above guaranteed liability, the Plaintiff bank finally determined the amount of the principal and interest repaid (the interest shall be additionally paid from the date following the date of the request for performance of ordinary guaranteed liability to the date of actual payment), and delivered it to the GG agency, etc. by entering it in

Therefore, in this case, since there is a special agreement on the repayment of loans and interest under Article 56 of the Enforcement Rule of the Corporate Tax Act, the order of appropriation for payment under the above provision should not be applied. In this regard, the defendant's disposition of this case is unlawful.

3) Partial revocation of the instant disposition

In a litigation seeking revocation of a taxation, even where it is deemed that a taxation disposition is unlawful because it was erroneous in the process of calculating the amount of tax, when the amount of tax to be imposed lawfully is calculated based on the data submitted by the time the argument in the fact-finding trial is concluded, the court shall not revoke the entire amount of the taxation disposition as unlawful, but shall regard only the portion exceeding the reasonable amount of tax assessment as unlawful (see, e.g., Supreme Court Decision 97Nu19496, Sept.

Original notified Tax Amount

Justifiable Tax Amount

208 Business year

000 won

000 won

2010 Business year

000 won

000 won

2011 Business year

000 won

000 won

2012 Business year

000 won

000 won

In full view of each of the statements in Eul evidence Nos. 1 through 4, since the portion omitted from interest income of this case is not included in the gross income, and the corporate tax amount so re-determined is recognized as follows, the disposition of this case shall be revoked only for the portion exceeding the "justifiable tax amount" below.

3. Conclusion

If so, the plaintiffs' claims of this case are justified and they are accepted. It is so decided as per Disposition.