Early High Court Decision 201Du1875 ( October 23, 2011)

The portion exceeding principal among the dividend paid by the Plaintiff constitutes interest income, and thus the initial tax disposition is legitimate.

Since the amount exceeding the principal of the Plaintiff’s loan claim out of the amount distributed in the auction procedure is considered to constitute “profit from non-business loan, which is interest income under the Income Tax Act,” it is legitimate to impose global income tax.

2011Guhap14358 global income and revocation of disposition

XX

The director of the tax office

October 12, 2012

November 2, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposing global income tax of KRW 000 on the Plaintiff on January 10, 201 is revoked.

1. Details of the disposition;

A. On March 2005, the Plaintiff lent KRW 000 to Nonparty XX Co., Ltd. (hereinafter referred to as “Nonindicted Co., Ltd.”). On March 18, 2005, in order to secure the above loan claims, the Plaintiff completed the establishment of a right to collateral security, etc. of a maximum debt amount of KRW 16,600 with respect to a factory site of the PW Eup 42-2 square meters and its ground buildings owned by Nonparty Co., Ltd. (hereinafter referred to as “each of the instant real property”).

B. Since then, when the non-party company delayed the performance of the above loan loan obligation, the plaintiff filed an application for voluntary auction of each of the real estate of this case with the claim amount of KRW 000 and interest KRW 000,000,000. On April 7, 2006, the Cheongju District Court Decision No. 2006ta1397, which entered into the auction procedure for each of the above real estate. The plaintiff received the highest bid price of KRW 000,000 and was decided to permit the sale from the above court on October 23, 2006. The plaintiff was paid the above sale price on December 4, 2006 to acquire the ownership of the real estate of this case by paying the above sale price, and received 00 won out of the above claim amount through the distribution procedure on the same day.

C. On January 10, 201, the Defendant deemed the amount exceeding the principal amount of loan claims against the Plaintiff against the Nonparty Company (=00 won - 000 won) as the interest income of non-business loans under Article 16(1)12 of the former Income Tax Act (amended by Act No. 8144, Dec. 30, 2006; hereinafter the same), and notified the Plaintiff of the correction and notification of KRW 000 of the global income tax for the year 2006 (hereinafter the “instant disposition”).

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on August 23, 201, but the said claim was dismissed.

[Ground of recognition] Facts without dispute, Gap evidence 1, 3, 4, Eul evidence 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Although the market price of each real estate of this case at the time of the above auction was approximately KRW 70 million, the plaintiff was awarded the above real estate in excess of the market price to reduce capital gains from the sale of the above real estate by raising the acquisition price of each real estate. Therefore, since the above successful bid price cannot be deemed as the normal transaction amount of each real estate of this case, even if the plaintiff received dividends in excess of the principal amount of loan claims against the non-party company during the above auction procedure, such dividends cannot be deemed as interest income under the former Income Tax Act. Nevertheless, the defendant's disposition of this case, which corrected the comprehensive income tax increase against the plaintiff by deeming the above dividend amount of the plaintiff as an interest income under Article 16 (1) 12 of the former Income Tax Act, is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

Article 16(1)12 of the former Income Tax Act provides for interest on non-business loans generated in the year concerned as interest income, and Article 16(2) of the same Act provides that "interest income amount shall be the gross income of the year concerned." Here, "interest on non-business loans" refers to the interest or commission that a person who does not engage in the business of lending money temporarily or alternatively receives by lending money temporarily (see, e.g., Supreme Court Decision 2002Du5931, Feb. 13, 2004).

In addition, Article 39(1) of the former Income Tax Act provides that “the year to which the total amount of income and necessary expenses of a resident are reverted shall be the year in which the total amount of income and the necessary expenses thereof are determined.” Article 24(3) of the same Act provides that matters necessary for the scope, calculation, or the period of determination of the amount received or to be determined in the calculation of the total amount of income shall be prescribed by Presidential Decree. Furthermore, Article 45(9)2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19890, Feb. 28, 2007; hereinafter the same shall apply) delegated by the former Enforcement Decree of the Income Tax Act shall be the date of payment of interest pursuant to an agreement: Provided, That in cases where there is no agreement on the date of payment of interest, or where interest is paid prior to the date of payment of interest pursuant to

In light of the above legal principles and the provisions of the Acts and subordinate statutes, the Plaintiff’s construction of mortgage on each real estate of this case was completed in order to lend KRW 000 to Nonparty Company and secure the above loan claims. Since then, the Plaintiff applied for voluntary auction on each real estate of this case with the claim amount of KRW 000 and interest KRW 000,000, and accordingly, the voluntary auction procedure on April 7, 2006 was commenced. The Plaintiff acquired each real estate of this case at the above auction procedure on December 4, 2006, and received KRW 00 from the claim amount of KRW 1,3,4, Eul’s certificate, and KRW 2, and KRW 1,00,00 from the auction procedure of this case to secure the above loan claims. The Plaintiff did not appear to have been forced to purchase each real estate of this case with the bid price of KRW 10 and KRW 20,000 from the auction price of each of the above real estate of this case, and there was no reasonable difference between the bid price of each of this case and KRW 00.

3. Conclusion

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