early trial 2014west 4381 (2015.06)

Land acquired by the ownership of another person in payment in kind in the course of helping the winning of the other person in a lawsuit shall be applicable to the honorarium.

In full view of the circumstances such as the fact that the Plaintiff’s land received was not explained if the Plaintiff did not have contributed to winning the previous lawsuit, it can be said that it was the primary purpose of paying money and valuables to the Plaintiff who only holds a claim for the remaining amount of money to the Plaintiff, as the case of contribution to winning the Nonparty in the previous lawsuit.

Article 21 (Other Incomes)

2015Guhap57932 global income and revocation of disposition

IsaA

BB Director of the Tax Office

August 18, 2016

October 13, 2016

1. On October 7, 2013, the part of the Defendant’s imposition of global income tax (including additional tax) of KRW 553,518,324 against the Plaintiff on global income in 2009, which exceeds KRW 465,604,29, shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 85% is assessed against the Plaintiff, and the remainder is assessed against the Defendant, respectively.

Cheong-gu Office

The Defendant’s imposition of global income tax (including additional tax) of KRW 553,518,324 against the Plaintiff on October 7, 2013 is revoked.

1. Details of the disposition;

A. On November 6, 2009, the Plaintiff completed the registration of ownership transfer in its name with respect to the total amount of 00,000 Do-dong 0029,4030 Do-dong 4029,4030 m2,407.38 m2,403, and 758.45 m2 (a total of 4034 m2 and 758.45 m2) on the same day.

B. In imposing tax on the Plaintiff’s acquisition of the pertinent land, the Defendant: (a) deemed that the Plaintiff acquired the pertinent land under the pretext of honorarium for the Plaintiff to assist the Plaintiff in the litigant in filing a claim for ownership transfer registration (Seoul High Court Decision 82Na1359, 83Na4261; hereinafter “previous lawsuit”) on the 00 Dong-nam-si 111 and 10 m26,617.8m2 (hereinafter “owned land”) that thisCC filed against the Plaintiff et al.; (b) on October 7, 2013, the Defendant classified the above sales price of KRW 4,590,000 (hereinafter “point income”) as other income and notified the Plaintiff of the rectification and notification of KRW 2,439,668,440 in global income tax in 209.

C. On January 7, 2014, the Plaintiff dissatisfied with the above disposition and filed an objection against the Defendant on January 7, 2014. In the above objection, the Plaintiff rendered a decision to deduct KRW 1,426,227,396 that the Plaintiff paid to E in the process of acquiring the pertinent land, and KRW 2,100,000,000 that the Plaintiff paid to EF in the process of acquiring the pertinent land, as necessary expenses. According to the result of the above objection, the Defendant corrected the amount of the Plaintiff’s comprehensive income tax of KRW 553,518,324 (Deduction of the amount of tax payable) for the Plaintiff in 209 (hereinafter “instant disposition”).

D. On May 26, 2014, the Plaintiff filed a request for review with the Commissioner of the National Tax Service on the instant disposition, but was dismissed on December 15, 2014.

[Ground of recognition] Facts without dispute, Gap evidence 9-2, Gap evidence 10-1 through 5, Gap evidence 11-1, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

First, the Plaintiff acquired the cause land through joint investment with the DaF, etc. (28.9% of the Plaintiff’s investment shares) and sold it to thisCC, but the remaining 82 million won remains, and the Plaintiff agreed with thisCC to receive transfer of 25% shares of the cause land during the said lawsuit but thisCC did not implement the said agreement, but acquired the land as compensation for the damages to it. Therefore, this shall not be evaluated as “hume”. Even if otherwise, the Plaintiff’s share 28.9% of the unpaid balance corresponding to the legitimate interest that the Plaintiff should have received, the Plaintiff’s share 28.9% of the outstanding interest, the price increase for each of the above amounts, and the statutory interest should be excluded from the honorarium.

Second, the time of attribution of the key income should be October 11, 1996 when the compensatory damages judgment, which caused it, became final and conclusive.

Third, the actual leading of the previous lawsuit is the FF, and most of the sales price of the land at issue belongs to the changed F and the GG Distribution Co., Ltd. (hereinafter referred to as "GG Distribution"), the creditor, so the key income also corresponds to the substance over form principle.

Fourth, the amount of income at issue should be additionally deducted from the necessary expenses of KRW 2,407,05,430 in total among the following items. ① On November 26, 2009, KRW 990,000,000,000 paid to the changedF, ② acquisition tax, registration tax, certified judicial scrivener, fees for the transfer of ownership of the land at issue, ③ total amount of KRW 317,098,340,000, such as comprehensive real estate tax imposed on the land at issue, ③ total of KRW 116,792,090, ④ KRW 90,090,000 paid to GG distribution on November 30, 200, ⑤ KRW 83,115,000 paid to Jinyang on February 3, 2010.

B. Relevant statutes

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

C. Determination

1) Whether the land at issue was paid as a “compensation”

A) Facts of recognition

① Around April 1968, the Plaintiff purchased the underlying land along with EH, changedF, and Kim II (hereinafter collectively referred to as “Plaintiff, etc.”), and completed the registration of ownership transfer in the name of the Plaintiff. The investment shares ratio of the Plaintiff, etc. at the time are as follows.

H

F. F.

II Kim

Total

Investment Funds

4.2 million won

9 million won

1 million won

30,000 won

14.5 million won

Ratio of Shares

28.9%

62.0%

6.8% by mass

2.0% by mass

100%

② On January 29, 1976, the Plaintiff et al. concluded a sales contract with the effect that the land price was to be sold at KRW 137 million. However, when the remaining price was not paid at KRW 82 million, disputes arose between the Plaintiff et al. in the course of the previous lawsuit (which was accepted by the final appeal of thisCC as Supreme Court Decision 81Da785, 81Meu166, March 9, 1982). In the course of the previous lawsuit, there was a dispute over whether the agreement with thisCC was reached between the Plaintiff, DaF and HaH.

③ On January 21, 1987, in a previous lawsuit, the Plaintiff and NF agreed to assist thisCC by acquiring witnesses so that the previous lawsuit may proceed in favor of thisCC. On January 21, 1987, the Plaintiff and NF agreed to allocate 25% of the share in the land (hereinafter “instant agreement”).

④ On May 16, 1988, the Plaintiff rendered a final judgment in the previous lawsuit to the effect that, at the same time as receiving the remaining price of KRW 82 million, the ownership of the underlying land should be transferred to thisCC. However, thisCC sold the underlying land to a third party, without complying with the instant agreement, from February 13, 1990 to October 30, 1991.

⑤ Accordingly, the Plaintiff filed a lawsuit against thisCC on partial claim for compensatory damages for nonperformance of the instant agreement (Seoul Seoul District Court 89 Gohap64038) and the judgment in favor of the Plaintiff on July 24, 1992. In the said judgment, the amount of compensatory damages to the Plaintiff was determined as KRW 17,251,95,50, the market price of which is 25% equivalent to KRW 4,312,98,875 at the time of nonperformance of land.

(6) On November 20, 199 and January 12, 200, the Plaintiff agreed to take over 1,250 of the land at Sungnam-si, Sungnam-si, 00 Dong 016, 4117, 4029, 4030, 4032, 4033, and 404, instead of the share in the land or the amount of compensatory damages caused by which the agreement of this case was scheduled to be paid. The issues of the land are part of the above land.

[Ground of recognition] Facts without dispute, Gap evidence 1-1, 2, Gap evidence 2-1 to 4, Gap evidence 3-1 to 3, the purport of the whole pleadings

B) Determination

Article 21 (1) 17 of the former Income Tax Act (amended by Act No. 9785, Jul. 31, 2009; hereinafter the same) refers to money and valuables provided as one of other income in relation to administrative affairs or provision of services. Whether it constitutes such money and valuables ought to be determined by comprehensively taking into account the motive and purpose of receiving the relevant money and valuables, relationship with the other party, amount, etc. (see, e.g., Supreme Court Decision 2010Du27288, Sept. 13, 2013).

According to the above facts, where the previous lawsuit becomes final and conclusive in favor of thisCC, thisCC could have acquired the ownership of the cause land if only the remaining 82 million won was paid to the plaintiff et al. (as to the plaintiff's share, approximately KRW 23.7 million), and the dispute arising in connection with the cause land between the plaintiff et al. and thisCC was caused by a sudden increase in the price of the land after the conclusion of the sales contract. In the relevant civil judgment, in light of the fact that the compensatory damages for 25% of the above land were determined as about KRW 4.3 billion, the above share value at the time of the agreement in this case seems to be similar or less than the above amount. Nevertheless, thisCC transferred the above large amount of land share to the plaintiff who only held a claim for remaining 23.7 million won, which is not explained that the plaintiff contributed to the winning of the previous lawsuit, the case held that the plaintiff made a separate agreement with the plaintiff in this case, rather than the amount of the plaintiff's share in this case's investment.

Therefore, since the share in the underlying land and the issues, which are the modified objects, to be paid by the agreement of this case, fall under all “rewards”, it is legitimate for the Defendant to classify them from the disposition of this case as other income, and the Plaintiff’s assertion disputing this is without merit.

2) The time of attribution of other incomes

Article 39 of the former Income Tax Act and Article 50(1)3 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 22034, Feb. 18, 2010) stipulate the time when other incomes accrue as “the date on which the other income is paid.” However, in cases where other benefits are realized in lieu of the original obligation, payment in kind is to be made only after the completion of the registration of ownership transfer, and the existing obligation is extinguished due to the establishment of payment in kind, so the real estate is transferred and its payment is to be made when the ownership transfer registration is completed (see, e.g., Supreme Court Decision 91Nu8432, Nov. 12, 1991). Accordingly, the time when the income in question reverts should be seen as November 6, 2009 when the Plaintiff actually acquired the registration of ownership transfer of the land.

The Plaintiff’s assertion on this part is without merit.

3) Whether the substance over form principle is violated

Comprehensively taking account of the overall purport of the arguments in the evidence Nos. 5-1 and 6-1 through 3, evidence Nos. 7-1, 5, and 7-7, the Plaintiff drafted a waiver and a written transfer of rights to the land at issue to the TransitionF on September 27, 2002; the Plaintiff drafted an agreement to the effect that on December 12, 2000, the Plaintiff transferred the right to 150 square meters out of the land at issue to the GG distribution; the Plaintiff’s agreement to the effect that on November 26, 2009 to transfer the right to 1,973,115,000 won out of the total purchase price of the land at issue from November 26, 2009 to February 3, 2010 is recognized that the Plaintiff transferred the changed amount of KRW 210,100,000 to the DaF and GG distribution.

However, as seen earlier, the Plaintiff initially held shares in the cause land separate from the CC, and the shares at the time of the NAF were 6.8% of the shares at the time of the changeF, as seen earlier. According to the evidence No. 2, it is acknowledged that the Plaintiff asserted that the changeF had a right to 1/2 shares in the pertinent land in the relevant civil lawsuit, which was in 2003, after the Plaintiff agreed to transfer the right to the land at issue to the NAF in full. In light of such factual relations, it may be deemed that the Plaintiff contributed to the part of the changeF in favor of the previous lawsuit and that the Plaintiff distributed part of the case received from the CC to the changedF. However, the objective contribution ratio to the previous lawsuit was larger than the changeF. Nevertheless, if the Plaintiff transferred the case that the Plaintiff received from the CC to the DaF, it is difficult to conclude that the Plaintiff’s compensation income was disposed of at will after the change from the Plaintiff and the FF after the fact that there is no room to deem it as a change in the Plaintiff’s income or distribution of GF.

4) Whether necessary expenses are deducted

Article 27 (1) of the former Income Tax Act provides that "the amount to be included in necessary expenses shall be the sum of expenses corresponding to the total amount of income of the year concerned that are generally accepted as ordinary expenses." The term "general expenses" refers to the expenses recognized as having been disbursed if a person in the same situation as the person liable for tax payment is in the same situation. Whether such expenses are included shall be determined objectively by comprehensively taking into account the details, purpose, form, amount, effect, etc. of the expenditure (see, e.g., Supreme Court Decision 2007Du12422, Nov. 12, 2009).

However, as seen earlier, it is difficult to view that the amount paid by the Plaintiff to the changedF or GG distribution is likely to have been paid based on a separate claim and obligation between the Plaintiff and the changedF and GG distribution, and that it is normally required to acquire the pertinent land. Comprehensive real estate holding tax and property tax, etc. claimed by the Plaintiff that the Plaintiff should be deducted as necessary expenses after acquiring the relevant land in light of its legal nature, is the holding tax paid by the Plaintiff as the owner after acquiring the land, and it is inappropriate to regard

However, in full view of the purport of the argument in the statement No. 6-4, the Plaintiff’s payment of KRW 95,980,620 in total, and KRW 69,311,100 in total, acquisition tax and special rural development tax to acquire the land at issue, and KRW 165,291,720 in total, should be deducted from the income at issue as necessary expenses. Thus, if the amount of reasonable tax is calculated based on this reflect, the Plaintiff’s payment of KRW 465,604,294 in total, as indicated in the reference document written by the Defendant’s submission of the tax base for October 6, 2016, should be revoked as it is unlawful in the imposition disposition of global income tax of KRW 553,518,324 (including additional tax) in 209.

3. Conclusion

Therefore, the plaintiff's claim of this case is accepted within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.