District Court-2017-Gu Partnership-1171 ( December 05, 2017)

An omission in sales of a corporation shall be deemed to have been discharged from the company, except in extenuating circumstances.

Where a corporation fails to enter the revenue in the account book despite the revenue from sales, transfer of assets, etc., the full amount of such revenue shall be deemed leaked, except in extenuating circumstances.

Article 67 (Disposal of Income)

2017Nu89768. Revocation of notice of change in income amount

OOOOOO

OO Head of the tax office

Suwon District Court Decision 2017Guhap1171 Decided December 5, 2017

April 3, 2018

April 24, 2018

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. On August 13, 2014, the defendant revoked the notification of change in the amount of income for the business year 2011 against the plaintiff.

1. Details of the disposition;

On April 8, 2011, the Plaintiff entered into a sales contract for selling OO-dong 46-3 and 3 parcels and above-ground buildings at the time of OOO, and was paid a down payment of KRW 500 million (hereinafter referred to as “inter-O”) by bothOs. After which bothOs did not pay part payments and any balance, the said sales contract was terminated, and the Plaintiff confiscated the key amount.

On May 2, 2014, when the Plaintiff filed a corporate tax for the business year 2011, the Defendant confirmed the omission of the key source in gross income and demanded the Plaintiff to vindicate the omission of the key source. Accordingly, on May 27, 2014, the Plaintiff: (a) refrained from the representative’s receipt amount as the key source; (b) disposed of income as reservation; (c) make a disposition of income; and (d) filed a revised return of the corporate tax for the business year 228,347,200, which occurred in the course of dispute over the said real estate with AAAA (hereinafter referred to as “AAA”); and (c) made a revised return of the corporate tax for the business year 2011, which included the registration tax of 228,347,200 won

However, the Defendant included the issue amount in the calculation of earnings, and deemed that it was attributed to the Plaintiff’s representative director, disposed of the income as a bonus, denied the inclusion of the registration tax in the calculation of deductible expenses on the ground that the period of attribution differs from that of the registration tax. On August 13, 2014, the Defendant issued a notice of change in the amount of income for the business year 2011 (hereinafter “instant disposition”).

The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on December 16, 2014, but the Tax Tribunal dismissed the appeal on January 9, 2017.

[Ground of recognition] Facts without dispute, Gap 1, 2 evidence, Eul 1 and 3 evidence (including paper numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The key issue source was used in the return of the representative's senior director's funds accumulated in the course of the plaintiff's operation. However, the key issue source should be deemed to have been appropriated for KRW 228,347,200 of the plaintiff's extra expense as the registration tax and the interest cost of KRW 104,267,391 of the plaintiff's extra expense, the disbursement of which is certain, or to have been lent to BBB of the corporation BB (hereinafter "BB") which the plaintiff temporarily operated for financing. Therefore, the instant disposition based on the premise that the key issue source was out of the company and reverted to the senior director's office is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Where a corporation fails to enter the revenue in the account book despite the receipt of revenue from sales, transfer of assets, etc., the total amount of revenue shall be deemed to have been leaked to the company, barring any special circumstances. The revenue of a corporation that was released from the company shall be deemed to have been disposed of as a bonus for the representative, unless it is clear that the revenue accrues from the company, and (Article 106(1)1 (b) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 23589, Feb. 2, 2012). In such a case, the special circumstance that the revenue is not leaked to the company or it is obvious that the revenue is not distributed to the company from the company or it is attributed to the company is the taxpayer who asserts it (see, e.g., Supreme Court Decisions 2007Du3855, Jun. 26, 2008; 2013Du611, May 2

2) The Plaintiff, while there was no particular operating funds or sales, should refrain from the cost borne by the representative’s senior director individually. Thus, the Plaintiff’s failure to account as a counter-book of the amount in question is merely an omission in the entry, and submitted a separate account ledger, etc. (Evidence A4, 8, and 10) for the amount in question of the representative’s senior director’s provisional revenue by asserting that it was merely an omission in the entry. However, it cannot be readily concluded that the key member naturally used such provisional revenue in half of the amount solely on the ground that there was a provisional payment against the representative’s senior director, and there is no other evidence to acknowledge that there was no other evidence (in addition, the documents can be prepared by the Plaintiff at will, regardless of the time, since there is no objective evidence on the contents of the statement, it is also unclear whether there was the amount in question, such as the content of the statement, or whether it was merely an omission in the processing).

3) In addition, among the Plaintiff’s extra expense, KRW 228,347,20 of the above registration tax was incurred in the process of dispute between the Plaintiff and AAA around 2010 with respect to the above real estate, and the business year to which the interest accrued in the year 2011 belongs. However, barring any particular circumstance, it is not revealed that the extra expense finalized by the business year can only be recognized as deductible expenses for the pertinent business year, and that the above registration tax was disposed of as losses carried forward. Therefore, it is difficult for the key party to view that the above registration tax exists as an extra expense, and it is difficult for the Plaintiff’s assertion that the above expense was used for such expenses. Moreover, the above interest expense of KRW 104,267,391 of the Plaintiff’s claim is 104,267,391 of the above interest expense received from the KOO bank on July 2, 2009, there is no data to recognize that the above loan was used by the Plaintiff.

4) Meanwhile, according to the evidence evidence Nos. 2 and 2, it is acknowledged that the Plaintiff transferred KRW 120 million from the account under the name of BB to the Plaintiff’s account in the name of BB on May 201, 201, but solely on such circumstance, it is difficult to conclude that the Plaintiff lent KRW 200 million out of the key money to BBB or transferred the said KRW 120 million to the said account as repayment, and there is no other evidence to acknowledge otherwise (or the Plaintiff accounts as “the instant KRW 120 million,” not “payment”).

5) Ultimately, the Plaintiff’s assertion disputing the illegality of the instant disposition is without merit to the purport that the issue source, whose entry in the account book was omitted, does not leak out to the private company or its attribution is clear.

3. Conclusion

Therefore, the judgment of the court of first instance dismissing the plaintiff's claim is legitimate, and the plaintiff's appeal is groundless.

The dismissal is dismissed.