Cho High Court Decision 2010Du3460 ( October 25, 2011)

In the discount transaction of bills, the transaction price means the discount of bill itself.

The standard expense rate applicable to the investment company (trust company) cannot be applied to a personal business operator who runs the financial and credit business, and the price for the transaction in discount transaction refers to the discount of the bill, which is deposited and withdrawn through the bank account, so it is legitimate to assess the additional tax on the unuse of the business account based on the total discount of the bill.

2011Guhap13170 global income and revocation of such disposition

Hongx

O Head of tax office

August 26, 2011

September 9, 2011

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 423,070,362 on June 8, 2010, in excess of KRW 265,381,891, shall be revoked.

1. Circumstances of dispositions;

The following facts are either disputed between the parties, or acknowledged in full view of the purport of the entire pleadings in each of the statements in subparagraphs 1 through 3, Eul evidence in subparagraphs 1 and 2, Eul evidence in subparagraphs 3-1 and 2, and Eul evidence in subparagraphs 3-2:

A. From July 1, 2005, the Plaintiff is an individual entrepreneur who runs a financial business under the trade name of the Seoul XX-Gu from 0000 to 000 of the XX building, and jointly with the OO-Gu O-dong from 22 November 2005 to 00-00.

B. After investigating the tax offense of the Plaintiff from November 17, 2009 to April 23, 2010, the director of the Seoul Regional Tax Office omitted the import of discount charges equivalent to KRW 543,898,826 in relation to the financial credit business by means of deposit and withdrawal of discount charges through his/her wife and his/her employee’s deposit account, and omitted cash sales equivalent to KRW 68,18,00 in relation to accommodation, and reported excessive amount of KRW 37,084,926 in terms of interest expenses.

C. On April 8, 2010, the director of the Seoul Regional Tax Office notified the Defendant of the aforementioned results of the investigation. On June 8, 2010, the Defendant imposed and notified the Plaintiff of the global income tax of KRW 490,936,380 for the global income tax of 2008.

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on August 30, 2010. On January 25, 2011, the Defendant’s imposition of KRW 490,936,380 against the Plaintiff on June 8, 2010 by the Tax Tribunal was estimated under the proviso to Article 80 (3) of the Income Tax Act and Article 143 (3) of the Enforcement Decree of the Income Tax Act. The Plaintiff’s imposition of KRW 490,936,380 against the Plaintiff on June 8, 2010 is estimated under the proviso to Article 80 (3) of the Income Tax Act and Article 143 (3) of the Enforcement Decree of the Income Tax Act. Of the enterprise’s bill discount charge, the Plaintiff’s share of KRW 107,090,844 and the Plaintiff’s share of KRW 68,188,00 were excluded from the subject of unfair tax return and was dismissed.

E. On February 16, 2011, the Defendant corrected the reduction to KRW 423,070,362 (including penalty tax of KRW 125,771,972) of the Plaintiff’s total income tax for the year 2008 (including penalty tax of KRW 125,771,972) (hereinafter “instant tax disposition”).

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The Plaintiff’s operation is an enterprise specialized in the commercial bill discount business. Since such a commercial bill discount business falls under the factoring business, it is necessary to estimate the Plaintiff’s income by applying the standard expense rate set forth in the business type code 000000 of the National Tax Service Notice No. 2009-8 (hereinafter “Notification”). However, the Defendant calculated the amount of income by applying the standard expense rate set forth in the Notice No. 659203 of this case’s Notice No. 659203, and then imposed the instant disposition, it should be revoked.

(2) The Plaintiff’s act of discount of bills does not constitute a transaction of supplying goods or services, and even if the act of discount of notes constitutes such act, the amount of bills itself cannot be the transaction price, and the Defendant’s disposition of imposing penalty taxes based on the failure to use the business account on the basis of discount fees, which are the price for the service, is unlawful.

B. Relevant statutes

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

C. Determination

(1) Judgment on the Plaintiff’s first argument

The notice of this case sets the expense rate for each type of business to be applied in case of the estimation, determination or correction of income amount under the provisions of Article 143 (3) of the Enforcement Decree of the Income Tax Act, and among which the business code 659203 provides that the name of the type of business shall be "price business", "15.7 and "25.7", "659900", "investment company, trust company," and "17.3" and "73.2", respectively.

In full view of the contents, form, etc. of the above relevant provisions, the standard expense rate of 17.3 under the "65990 Code" can only be applied to investment companies or trust companies, and there is no room to apply the above standard expense rate to individual entrepreneurs who are not investment companies or trust companies. However, in this case where the plaintiff claims that they operate financial and credit business as individual entrepreneurs, there is no error of law in the disposition of this case where the plaintiff estimated the amount of income by considering the name of the business type of the plaintiff as the price business as the type of the business as the price business (the plaintiff's Association of Certified Public Association has listed the scope and the standard of application of the "659900 of the standard expense rate and the simple expense explanatory statement number of 2008" which was issued by the Association of Certified Public Association in 209, the above theory merely explains that the above standard expense rate of this case should be applied to the above business type of investment companies or trust companies, and therefore, it does not seem that the plaintiff's claim that the above business type of investment companies is listed in the above business type of investment companies.

(2) Judgment on the second argument by the Plaintiff

(A) Whether the sale of bill discount or bill discount constitutes an act of trading goods or services

In full view of the purport of each statement in the evidence No. 9-1 to No. 3, the plaintiff purchased a promissory note with interest on the date of maturity, and then the plaintiff re-purchaseed it to other bond companies or financial institutions before maturity or presented a direct payment at maturity. The discount rate of a bill is set in consideration of the credit rating, interest, and expenses of the issuing company. Among them, the rate of the discount of a bill is 0.5%-0.7% of the issuing company, and the monthly discount rate of a bill of class A with an intermediate credit rating is 0.8%-1.5%, and the monthly discount rate of a bill of class B with an bad credit rating is 0.5% or more, and the monthly discount rate of a bill of class C with an bad credit rating is 1.5% or more. According to the above facts, the plaintiff's purchase of a bill of exchange or sale business conducted by the plaintiff prior to maturity considering the credit rating, expenses, etc. of the bill from the holder of the bill of exchange prior to maturity, and there is no reason for the plaintiff's assertion between the issuer and the third party.

(B) Whether the amount of bill itself constitutes an amount that does not use a business account

Article 81 (9) 1 of the Income Tax Act provides that the amount of transactions under Article 81 (9) 1 shall be paid or settled through a financial company, etc., and personnel expenses and rent shall be paid or received, if a business account is not used, an amount equivalent to 2/1,00 of the amount for which the business account is not used shall be added to the final tax amount for the relevant taxable period. Article 81 (9) 2 of the Income Tax Act provides that when a person subject to double-entry bookkeeping fails to report his/her business account to the head of the competent tax office within five months from the commencement date of the taxable period corresponding to the person subject to double-entry bookkeeping, the amount of income during the relevant taxable period for which the business account is not established or reported ( = the amount of income for the relevant taxable period 】 Unestablished period / 365) or the amount equivalent to 2/1,000 of the total amount of transactions under each subparagraph of Article 160-5 (1) shall be added to the final tax amount for the relevant taxable period. In light of the language meaning of the relevant provisions, form and purpose of the Income Tax Act, it refers to the following circumstances:

Furthermore, according to the evidence Nos. 9-2, 3, and 10 of the evidence Nos. 9-2, 9-3, and 10, the plaintiff filed a report with the head of the competent tax office on December 10, 2007 on the freedom of enterprise of the HA bank to the business account in XX, and the plaintiff deposited and withdrawn from each of the discounted bills through his wife and employees, KimCC, Kim-D bank, BB bank, and HB bank passbook in the name of ED around 2008. Accordingly, the amount of the bill discount deposited and withdrawn under the above passbook No. 81-9(1) of the Income Tax Act, which is not a business account, constitutes an amount for which the business account is not used. Accordingly, this part of the plaintiff's assertion is without merit.

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.