Daegu District Court 2010Guhap1073 ( November 17, 2010)

early 209Gu2276 (2010.05)

Since it appears to be a loan rather than investment money, it is legitimate to impose tax on global income tax originally.

In light of the fact that the Plaintiff received a loan by specifically stipulating the interest, interest, maturity period, security provision, etc. each time it pays the money, the amount paid by the Plaintiff appears to be a loan, not a loan, and therefore, it is legitimate to impose global income tax

2010Nu2792 Revocation of Disposition of Imposing global income tax, etc.

right XX

Head of the Gu Tax Office

Daegu District Court Decision 2010Guhap1073 Decided November 17, 2010

September 14, 2012

September 28, 2012

1. The Plaintiff’s claim on the imposition of global income tax for the year 2007, which was changed in exchange at the trial, is dismissed.

2. The Plaintiff’s appeal on imposition of global income tax for the year 2006 is dismissed.

3. The total costs of the lawsuit shall be ten equal costs and nine out of them shall be borne by the Plaintiff, and the remainder by the Defendant respectively.

The judgment of the first instance court is revoked. On March 1, 2009, the Defendant revoked each disposition of KRW 000 of the global income tax for 2006 and KRW 000 of the global income tax for 2007 against the Plaintiff on January 5, 2010 (the Plaintiff changed the claim for the disposition of global income tax for 2007 from the trial to the trial).

1. Details of the disposition;

A. In the course of investigating KimA as a person suspected of evading the amount of delinquent tax, the commissioner of the Daegu Regional Tax Office confirmed that the Plaintiff loaned KRW 000 to the KimA four times from April 26, 2004 to December 28, 2004, and KRW 000 to the consignorB once from August 22, 2006 to December 11, 2007, and notified the Defendant of the omission of taxation by deeming that the Plaintiff reported part of the amount of interest income from 00 won from August 2004 to 2007 pursuant to Article 45 subparagraph 9-2 of the Enforcement Decree of the Income Tax Act (Seoul:0 won ( KRW 00 in 200 in 204, KRW 00 in 200 in 200, KRW 200 in 200 in 207) and part of the amount of tax returned to the Defendant.

B. The Defendant, on March 1, 2009, corrected and notified the Plaintiff on March 1, 2009 - 000 global income tax (00 won for the year 2004, 000 won for the year 2004, 000 won for the year 2005, 000 won for the year 2006, and 000 won for the year 2007).

C. On May 25, 2009, the Plaintiff appealed to the Tax Tribunal. The Tax Tribunal recognized that the Plaintiff received KRW 000 from KimA and KRW 000 from SongB were all interest income on the loan, and determined that the interest on the loan of KimA cannot be deemed to have occurred since it constitutes an irrecoverable claim due to the obligor’s business discontinuation, etc., and that the interest on the loan of KimA cannot be deemed to have been paid interest income, and that the tax base and tax amount shall be corrected by deducting KRW 000 agreed upon by the agreement of KRW 000 on the loan of KimA (the above decision made by the Plaintiff was invalidated in the imposition disposition of global income tax for 2004 and global income tax for 2005 reverted to the Plaintiff, and the claim for the remaining portion was dismissed.

D. On the other hand, on January 5, 2010, upon notification of the data on income recognized in XX located, the Defendant imposed upon the Plaintiff the global income tax amount for the year 2007, after adding and correcting the total amount of the global income tax for the year 007 to 000 won, and then imposed upon the Plaintiff the global income tax amount for 00 won (00 won - 000 won), deducting the amount of the tax already paid from the total amount of tax for the year 2007 as the payable tax amount. On August 9, 2012, the Defendant adjusted the said global income tax amount for 200 won (0 won - 000 won) after deducting the amount of the tax already paid from the total amount of tax for the Plaintiff (hereinafter referred to as the “disposition tax for 200 won for each of the years 200 and 000 won reverted to the Plaintiff through the above reduction and exemption”).

[Ground of recognition] Facts without dispute, Gap evidence 1, 11, Eul evidence 1, 12 through 15 (including virtual numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition is unlawful on the following grounds.

① Since the amount that the Plaintiff paid to SongB (SCC) is an investment loan, not a loan, the amount collected from SongB is only the recovery of the investment principal, not interest income.

② Even if the money paid as above was the loan, 000 won, which was deducted as prior interest did not actually receive the interest, and thus, it is not an interest income. The Defendant’s loan claim prior to the instant disposition fell under an irrecoverable claim under Article 51(7) of the Enforcement Decree of the Income Tax Act, and thus, it was impossible to recover the principal and interest income, and even if the principal and interest were not collected thereafter, it shall be deemed that there was no interest income pursuant to the above Enforcement Decree.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

(1) When the Plaintiff paid the amount of KRW 000 (hereinafter referred to as “the instant money”) over 11 times as stated in the statement of the amount of the instant money and the loan certificate to SongCC, which is an actual manager of the OO Housing Construction Co., Ltd. (the representative director BB; hereinafter referred to as “OO housing”), the Plaintiff received the Plaintiff as the Plaintiff, the debtor as BB, and the joint guarantor as the OO housing. The loan certificate is as follows.

(2) With respect to the provision of each of the above loans offered as security, the Plaintiff was provided as security the building completed at the Chang-si, Chang-gu, Daegu-si and 1006, and 17, and on its ground (hereinafter referred to as the “instant buildings and buildings”) and the Puri 1270, and 26, respectively (hereinafter referred to as the “Pri land”) at the Chang-si, Daegu-si, Daegu-si, Daegu-si.

(3) On the other hand, on August 23, 2006, the Plaintiff drafted an investment contract for the business owner to BB with the SongCC, and to implement the investment contract for the housing project of the PP unit on the ground of the land of the case where the Plaintiff is an investor, and the main contents are as follows (hereinafter referred to as “A” under the terms and conditions of the said investment contract refers to the business owner, and “B” refers to the Plaintiff.

【Main Contents of Investment Contract】

Article 3 (Distribution of Profits)

By entering into an investment contract with B, A distributes 20% of the profit of A to B. In this regard, A and B will discuss the distribution of profit after accurate settlement.

Article VI(1) (Investment Amount in First Instance)

B shall pay from August 23, 2006 to the first invested amount for the electric power resource housing business of Party A, and the date of payment shall be determined by mutual agreement.

Article VI(2) (Investment Amount in Second Instance)

Eul recognizes the material cost imported from Canada as secondary investment, and pays 000 won for the secondary investment from August 31, 2006 to L/C OPEN in order, and the date of payment shall be determined by mutual agreement in accordance with the material import schedule.

Article VI(3) (Investment Amount in Third Instance)

B shall be recognized as a third-party investment, with the exception of the investment amount of the first and second investments (00 won), and the amount required for the cost of the home-related facility XX is supported by A, and the date of payment shall be determined by mutual agreement.

Article 7 (Compensation for Damages)

When Gap and Eul are unable to pay the profit distribution amount to Eul due to the failure to pay the profit distribution amount to Eul due to the occurrence of the profit in the electric source housing business, Gap and Eul shall settle their accounts, and when the profit distribution is not made as a result of the settlement of accounts, Eul shall not distribute the profit to Eul, Eul shall not be responsible for it, and Eul shall not be requested to compensate and compensate for all of them.

Provided, That the return of the amount of investment may be requested.

(4) With respect to the instant claim from SongCC, the Plaintiff recovered KRW 000 on March 28, 2007, and KRW 00 on June 15, 2007, respectively.

(5) On December 27, 2007, SongCC, as the Plaintiff’s intermediary, sold the instant XX land with KRW 000,000 to the Plaintiff-type KimD, the Plaintiff entered into a sales contract with the content that, out of KRW 000, 1.3 billion of the purchase price, KimD succeeded to a bank loan and shall be paid in lieu of the Plaintiff, and the remainder shall be paid in lieu of the Plaintiff. The SongCC concluded a sales contract with the content that the Plaintiff would cancel the remaining rights established on the said real estate.

(6) The agreement of the above sales contract with respect to the instant XX land (Evidence No. 7-2) states as follows: (a) between August 23, 2006 to June 15, 2007, that “ SongB borrowed money from the Plaintiff during the construction of the instant tree house on the instant land from the Plaintiff (see tea). (b) The payment of KRW 00 on March 28, 2007 and KRW 00 on June 15, 2007, which is a part of the said money, was made in cash, and the remainder of the money shall be repaid on behalf of the said money.

(7) However, in order for SongCC to not cancel the remaining rights established in XX land of this case, the Plaintiff applied for voluntary auction on March 20, 2008, and received dividends of KRW 000 on April 27, 2009.

(8) At the time of March 1, 2009 when the Defendant rendered the instant disposition, SongCC actually owned and operated the O’s housing, and the Daegu Dong-gu and Daegu Dong-dong and 1006-34 and 7 lots of ground East Building (hereinafter referred to as “ XX building”).

(9) Around October 16, 2008, the application for creditors treatment Capital Co., Ltd. with respect to XX building was initiated on and around November 18, 2008 upon the application of creditors EE, and each compulsory auction was withdrawn on May 1, 2009 and on the 6th of that month.

(10) Thereafter, around May 13, 2009, the creditor’s voluntary auction was initiated at the creditor’s request and around April 23, 2010 with respect to the building, and there was no money distributed to the Plaintiff during the auction procedure.

(11) The Plaintiff sold most of the instant land and buildings offered as security with respect to the instant claim to a third party during the auction process from January 2008 to June 2010, but there was no money distributed to the Plaintiff during the auction process.

(12) AO house was closed on March 23, 2010, after receiving monetary pressure from the wind to purchase XX buildings around January 2007.

(13) Meanwhile, prior to March 1, 2009, the Defendant issued to the Plaintiff the comprehensive income tax of KRW 000,000, and KRW 000,000, belonging to the year 2007, respectively, on the interest income on the entire amount of the instant money and the loan certificate No. 1 or 11, prior to which March 1, 2009 had been corrected and imposed on the Plaintiff. On August 9, 2012, the Defendant took measures such as deducting the interest income tax on the instant money No. 9,10, and 11 from the interest income tax on the amount exceeding the interest rate prescribed by the Interest Limitation Act, and then reduced and imposed the said comprehensive income tax for the year 2007.

[Ground of recognition] Facts without dispute, Gap's evidence Nos. 2, 3, 4, 6, 12, 18 through 27, 29, Eul's evidence Nos. 2 through 15, and the purport of the whole pleadings and arguments by the first instance court and the party witness No. 1

D. Judgment as to the plaintiff's proposal No. 1

In determining the nature of the funds of this case paid by the Plaintiff to SongCC, the terms and conditions of the loan agreement and the details of the loan return should be determined by actual terms and conditions. In order to regard the funds of this case as the investment fund, the Plaintiff must agree to share losses or benefits arising from the investment in the project after the Plaintiff invested in the project of SongCC. In other words, the following circumstances revealed by the fact of the recognition of paragraph (c) and the aforementioned evidence are as follows: ① the Plaintiff received a loan by specifying the interest rate, interest rate, period of repayment, provision of collateral, etc. ② the SongCC actually offered the loan to the Plaintiff according to the loan certificate, ③ there was no procedure such as settlement of profits and losses of the business before returning the funds to the Plaintiff; ④ the Plaintiff prepared a loan certificate as to the pre-paid interest and deduction portion, but it is difficult to view the funds of this case to have been distributed to the Plaintiff as a collateral for the investment fund of this case, and there is no reason to request the return of the funds of this case to the Plaintiff under Article 7 of the Investment Agreement.

E. Judgment as to the plaintiff's proposal B

(1) Whether the instant disposition was an irrecoverable claim

(A) In calculating the gross income from non-business loans under Article 16(1)12 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19890 of Feb. 28, 2007; hereinafter referred to as the "former Enforcement Decree of the Income Tax Act"), Article 51(7) of the former Enforcement Decree of the Income Tax Act provides that in cases where the relevant non-business loan falls under the bonds under Article 55(2)1 or 2 of the Income Tax Act before the final return on tax base under Article 70 of the Income Tax Act or the tax base and tax amount under Article 80 of the Income Tax Act are determined and corrected, and where the whole or part of the principal and interest cannot be recovered from the debtor or a third party, the gross income amount shall be calculated by preferentially subtracting the principal from the recovered amount. Article 55(2)1 of the former Enforcement Decree of the Income Tax Act provides that "bonds which cannot be recovered due to the debtor's bankruptcy, compulsory execution, execution of punishment, or discontinuation of business," and subparagraph 2 of the debtor's missing.

Unlike the Corporate Tax Act, Article 51(7) of the former Enforcement Decree of the Income Tax Act does not provide an institutional device to reflect the amount of interest income in the calculation item even if the amount of loss was incurred due to the failure to recover the principal of non-business income later, and therefore, it appears to be a provision to prevent unjust result in imposing interest income tax, even though there was no institutional device to reflect the amount of loss in the calculation item of interest income. The above provision appears to be a provision to prevent unfair result in imposing interest income tax in the language and text of the provision, where the total amount recovered until a certain cause for recovery occurs before the final return on tax base or the determination and correction of tax base and tax amount is below the principal amount, and there is no special exception. Whether interest income exists under the Income Tax Act is difficult to discuss the possibility of recovering the principal claim, which is the source of income from non-business income, regardless of whether the final return on tax base of the non-business income or the final return on tax base and tax amount on the non-business income, even if there was an interest income collected in the taxable year before such recovery was made (see Supreme Court Decision 2030Du39Du.

Meanwhile, in light of the principle of no taxation without law, the requirements for taxation, non-taxation, or tax reduction or exemption should be avoided, and the interpretation of tax laws should be in accordance with the text of the law, barring special circumstances, and it is not allowed to expand or analogically interpret without reasonable grounds (see, e.g., Supreme Court Decision 2001Du5521, Jul. 26, 2002

(B) In the instant case, considering the following circumstances: (a) it is difficult for the Plaintiff to collect only KRW 00 out of the total principal amount of loans to SongCC, which was closed on March 23, 2010 after the instant disposition; (b) KRW 200 (prepaid interest 00 + KRW 000 on March 28, 2007 + KRW 000 on April 15, 2007 + KRW 000 on April 27, 2009; and (c) even if the collected amount falls short of the principal amount, it is difficult to view that the Plaintiff had collected part of the instant bonds prior to the instant auction procedure under paragraph (c) and each of the aforementioned evidence, even if the compulsory auction procedure was in progress for the obligor’s building at the time of the instant disposition, and there was no other evidence to acknowledge that the instant bonds were subject to compulsory auction before the completion of each of the instant auction procedure under Article XX 9 of the Enforcement Decree of the Income Tax Act.

(2) Whether interest income is realized

(A) The income tax is the so-called "fixed-term taxation" that imposes tax on the income amount for one year from January 1 to December 31 of each year, and the interest income from non-business loans is calculated as the gross income amount for the pertinent year. Thus, in a case where a part of a claim is recovered, if it becomes objectively obvious that the collection of the remaining claims is impossible as of the time of recovery, it shall be deemed that the relevant taxable year does not realize the interest income that satisfies the taxation requirement, but it shall not affect the duty to pay the interest income that has already been specifically realized prior to the occurrence of a cause not to recover (see Supreme Court Decision 2005Du5437, Oct. 28, 2005).

(B) In the instant case, the Plaintiff’s lending of the instant interest to SongCC only paid the remainder after deducting the interest of KRW 000.0 billion. As seen earlier, the lender and the borrower shall be deemed to have entered into a loan agreement on the loan principal inasmuch as the lender and the borrower have gained the same economic benefit as the number of the instant interest in fact, and thus, the lender and the borrower have gained the same economic benefit with the same amount of the interest in fact. Furthermore, such prior interest agreement shall be deemed valid under the principle of freedom of contract, and thus, it shall be deemed that the actual interest has been paid at the time when the prior interest was deducted (Article 45-9-2 of the former Enforcement Decree of the Income Tax Act provides that the interest income should be received as of the date of payment of interest if the Plaintiff received the interest prior to the date of payment under the agreement with respect to interest income on non-business loans to SongCC. Accordingly, it shall be deemed that the Plaintiff’s delivery of the remainder of the interest income at the time of delivery after deducting the interest income from the Plaintiff.

Furthermore, among the instant funds, the interest income on loans extended eight times from August 22, 2006 to February 1, 2007 by the Plaintiff was partially realized when the Plaintiff received KRW 000 (00 - 000) - 000 (000 won - 000 won) excluding the interest on the loans, and the remaining interest income was also realized by receiving KRW 000 on March 28, 2007.

Therefore, before it becomes objectively clear that the collection of the instant claim is impossible, the Defendant’s disposition of correction of interest income tax on the instant interest income tax was fully realized prior to March 1, 2009, and the remainder of the instant claim was impossible due to the discontinuation of the business after which the SongCC rendered a disposition of correction on the instant interest income tax, and the amount recovered thereafter is less than the principal of the instant claim, even if the amount recovered earlier is the principal of the instant claim, the instant disposition that imposed the comprehensive income tax on each of the said interest income is lawful.

(3) Therefore, there is no reason to believe that the Plaintiff’s proposal for B was made on a different premise.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed in its entirety due to the lack of reasonable grounds, and the judgment of the court of first instance on the part of the revocation claim for the imposition of global income tax for the year 2006 is justified as above. Thus, all of the plaintiff's appeal and the claim for revocation of the imposition of global income tax for the year 2007, which is changed in exchange in the trial, are dismissed.