Whether there was an actual transaction equivalent to a processed tax invoice

Although the actual purchase is asserted based on the statement of withdrawal from the head of the Tong, it is insufficient to recognize the actual purchase only when the actual transaction partner presents the false statement of transaction partner, and the fact that the material cost compared to the sales is lower than the other business year if the amount of the tax invoice is excluded from the loss.

Article 19 (Scope of Deductible Expenses)

Article 66 (Determination and Correction)

1. Revocation of a judgment of the first instance;

2. Each of the instant lawsuits sought revocation of the disposition of corporate tax for the business year 2003.

3. The plaintiff's remaining claims are dismissed.

4. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The imposition of corporate tax of 116,310,750 won, corporate tax of 2002 and corporate tax of 140,322,390 won against the plaintiff on August 1, 2005 (the plaintiff's "the plaintiff's "the plaintiff's " August 2, 2005" seems to be erroneous) shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the disposition;

A. The Plaintiff is a corporation that runs the business of manufacturing and installing wired/ wireless telecommunications equipment and image monitoring equipment, etc. The Plaintiff received three copies of the purchase tax invoice (total supply value of KRW 300,178,000) and three copies of the purchase tax invoice (total supply value of KRW 320,490,000) in the name of ○○○ Information and Communications Co., Ltd. (hereinafter referred to as “○○○○○”). The Plaintiff received one copy of the purchase tax invoice (value of KRW 70,000,000) in the name of ○net Co., Ltd. in 2003, and filed a corporate tax for the pertinent business year by including the above amount as deductible expenses.

B. Accordingly, on August 1, 2005, the Defendant issued the instant disposition to rectify and notify the Plaintiff of KRW 116,310,750 of the corporate tax for the business year 2002, and KRW 140,322,390 of the corporate tax for the business year 2003, on the ground that each of the above purchase tax invoices (hereinafter “the instant tax invoice”) was data, and the transaction equivalent to the above amount was conducted.

[Reasons for Recognition] Unsatisfy, Gap evidence 5, Eul evidence 1 and 2

2. Whether the disposition is lawful;

A. Summary of the plaintiff's assertion

It was true that the Plaintiff, not the actual supplier, received the instant tax invoice under the name of data. However, the instant tax invoice is sufficiently proved through the Plaintiff’s production and supply of the video monitoring device (Evidence No. 8 through 16) that the Plaintiff actually purchased and delivered data for computer peripheral devices, including DVR, from the in-house dumping seller, and that such fact is consistent with the Plaintiff’s disbursement resolution and the details of withdrawal of passbook. ② If the amount of the instant tax invoice received by the Plaintiff is excluded from the Plaintiff’s deductible expenses for each taxable year, the Plaintiff’s purchase cost ratio compared to the Plaintiff’s sales cost ratio for the pertinent business year is considerably lower than that for other years. ③ If the Plaintiff received the instant tax invoice, and the Plaintiff’s actual purchaser was confirmed to have been used for the production and supply of the video monitoring device (each entry in the evidence No. 8 through No. 16). Therefore, the amount of the instant tax invoice should be recognized as deductible expenses, and thus the instant disposition should be revoked.

(b) Related statutes;

Article 19 (Scope of Deductible Expenses)

Article 66 (Determination and Correction)

C. Determination

(1) Claim for revocation of imposition of corporate tax for the business year 2002

(A) In a lawsuit seeking revocation on the grounds of illegality of taxation disposition, the tax authority has the burden of proving the legality of disposition and the existence of the taxation requirement fact. Therefore, in principle, the tax authority bears the burden of proving the amount of expenses to be included in deductible expenses, which are the basis for determining the amount of income as corporate tax base. However, in a case where the taxpayer asserts that some of the expenses reported by the taxpayer are false or that the taxpayer himself/herself is the other party to the return amount or the payment of the expenses is false and the other party to the tax payment requires other expenses of the same amount, the taxpayer needs to prove such other expenses (see, e.g., Supreme Court Decision 96Nu8192, Sept. 26, 1997). Thus, in this case where the Plaintiff voluntarily pays the other party to the disbursement of expenses reported to the Defendant to the Defendant as the other party to the tax invoice, it is necessary to prove it.

(B) According to the statements in Gap's evidence Nos. 5 through 16, it can be acknowledged that each amount of the tax invoice in the name of ○○○○, as shown in the statement of transactions in attached Table 1. The amount of cash withdrawal and real transaction recorded in the disbursement resolution prepared by the plaintiff, the amount of actual withdrawal in the plaintiff's passbook, and the amount of actual withdrawal in the plaintiff's passbook correspond to substitute. The items and quantity of purchased materials listed in the statement (Evidence No. 5) asserted by the plaintiff that the plaintiff was received together with the tax invoice in this case correspond to the items and quantity of the materials used by the plaintiff

(C) However, the following circumstances are (i) the Plaintiff’s demand to explain the expenses recognized as losses from the tax office’s name on April 204, 204, and paid the purchase price in cash at the head of the Tong, but the Plaintiff’s representative did not make any transaction with the Plaintiff and submitted to the tax office for the statement that the Plaintiff would not receive the purchase price in cash, and (ii) the Plaintiff’s assertion that the Plaintiff would have paid the purchase price to the ○○ integrated system was not related to the transaction of the goods, and it is difficult to find that the Plaintiff would have paid the purchase price as stated in the 0-year sales statement and the 0-year sales statement that was not related to the transaction of the goods. However, even if the Plaintiff’s purchase price was not indicated in the 0-year sales statement and the 0-year sales statement, the Plaintiff’s assertion that the purchase price was not indicated in the 0-year sales statement or the 0-year sales statement was not indicated in the 0-year sales statement, and thus, the Plaintiff’s assertion that the purchase price was not indicated in cash.

(D) Therefore, the Plaintiff’s claim on this part is without merit.

(2) Claim for revocation of imposition of corporate tax for the business year 2003

As to the legitimacy of this part ex officio, comprehensively taking account of the overall purport of the pleadings in the statement No. 13, the following facts: (a) After the instant disposition, the purchase tax invoice received by the Plaintiff from 003 KEENo Co., Ltd. was revealed as a tax invoice for processing without real transactions; and (b) the Defendant issued a notice of increased or decreased corporate tax amount of KRW 163,232,220 on February 1, 2007 to the Plaintiff on February 1, 2007. In a case where an increase or decrease is made after a tax disposition was issued, the revised disposition does not include only the original tax base and tax amount in the initial disposition, but it is not an additional determination on the parts exceeding the tax base and tax amount in the initial disposition, and it is naturally extinguished by absorbing the revised disposition, and only one tax base and tax amount in the initial disposition becomes the object of litigation (see Supreme Court Decision 98Du16149, Sep. 8, 200).

3. Conclusion

Therefore, the part of the plaintiff's lawsuit of this case seeking revocation of the disposition of imposition of corporate tax for the business year 2003 is inappropriate, and the remaining claims of the plaintiff are dismissed as it is without merit. Since the judgment of the court of first instance is unfair with different conclusions, it is revoked and the part seeking revocation of the disposition of imposition of corporate tax for the business year 2003 among the lawsuit of this case is dismissed, and it is so decided as per Disposition.

[Seoul Administrative Court 2007Guu10532 ( October 26, 2007)]

1. The Defendant’s imposition of KRW 116,310,750 of corporate tax for the business year 2002 against the Plaintiff on August 2, 2005 and corporate tax of KRW 140,322,390 of corporate tax for the business year 2003 is revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is running the business of manufacturing oil, radio communication equipment, CCTV, etc.. The Plaintiff received three copies of the purchase tax invoice (a total of 300,178,000 won) in the name of ○○ Information and Communications Co., Ltd. and three copies of the purchase tax invoice in 2003 (a total of 320,490,000 won), and reported corporate tax for the pertinent business year by adding the amount equivalent to the above amount to deductible expenses.

B. Accordingly, on August 2, 2005, the Defendant issued the instant disposition imposing corporate tax of KRW 116,310,750 on the Plaintiff for the business year 2002, and KRW 140,322,390 for the business year 2003 on the grounds that each of the above purchase tax invoices (hereinafter “the instant tax invoice”) was the data processor and the transaction equivalent to the above amount constituted a processing transaction.

[Reasons for Recognition] Unsatisfy, Gap evidence 5, Eul evidence 1 and 2 (including each number)

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The Plaintiff received the instant tax invoice in the name of data. However, the said tax invoice must be recognized as losses on the grounds that the Plaintiff actually purchased and received raw materials, such as computer peripheral devices (DVR, etc.) put into the production of the video monitoring device (hereinafter the “raw materials of this case”) from the dumping-sellers in the name of Yongsan-si and Round. This can be confirmed through the details of cash withdrawal from the Plaintiff passbook and the ratio of the sales cost to the sales cost or the ratio of the materials cost, etc. compared to the sales amount before and after the taxable business year.

B. Relevant statutes

Corporate Tax Act (amended by Act No. 7005 of Dec. 30, 2003)

Article 19 (Scope of Deductible Expenses)

(1) Deductible expenses shall be the amount of losses incurred by transactions which reduce the net assets of the concerned corporation, excluding return of capital or financing, disposition of surplus funds, and what is provided in this Act.

(2) The losses under the provisions of paragraph (1) shall be losses or expenses generated in connection with the business of a corporation which are generally accepted as normal or directly related to profit, except as otherwise prescribed by this Act and other Acts and subordinate statutes.

(3) Matters necessary for the scope and types of losses under the provisions of paragraphs (1) and (2) shall be prescribed by the Presidential Decree.

Article 66 (Settlement and Correction)

(2) Where a domestic corporation makes a report under Article 60 falls under any of the following subparagraphs, the superintendent of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall correct the tax base and

1. Where there are errors or omissions in the contents of the report;

(c) Fact of recognition;

(1) The Plaintiff, a small-scale company established on February 17, 1993, whose capital is 700 million won or more, was designed and developed to design and develop CCTV, building automation and integration systems, road weight reduction systems, and remote video systems, and supplied them to government offices, government-invested institutions, etc. In order to secure the performance for expanding a business mainly operated by government offices and government-invested institutions in around 2002, the Plaintiff offered the lowest bid to the private company at a price lower than the purchase price.

(2) Accordingly, the Plaintiff, under the initiative of Kim○-○, a financial management director, purchased computers, peripheralss, etc. put into a video monitoring device, which is a product for the Plaintiff’s business, from November 5, 2002 to April 29, 2003, through the abnormal distribution channel from the Round. However, as seen earlier, the Plaintiff prepared a tax invoice for processing under the name of ○○○ Information and Communications Co., Ltd and ○○○○○○○○○○○○, as seen earlier, for the purpose of disguised the normal transaction. The details of the instant tax invoice received by the Plaintiff, the details of the Plaintiff’s disbursement resolution, and the details of cash withdrawn from the Plaintiff’s passbook are as shown in attached Table 1.

(3) Where the Plaintiff claims that the purchase cost of the instant tax invoice was actually paid for the instant raw material, and excludes the amount equivalent to the instant tax invoice from the deductible expenses for each taxable business year, the Plaintiff’s taxation rate for the taxable year and the ratio of the cost of materials to the sales amount are as shown in attached Form 2.

(4) At the time of each receipt of the instant tax invoice, the Plaintiff entered into or was scheduled to enter into a construction contract with local governments and public institutions, etc., and accordingly, the details of the Plaintiff’s performance of the said contract are as stated in attached Form 3. The details of the supply are as stated in attached Table 3. There is no evidence to deem that the Plaintiff prepared the goods required for performing the said contract with funds other than the transaction price related to the instant tax invoice.

[Ground of recognition] Each entry of Gap evidence Nos. 4 through 14 (including more than one number), testimony of witness Kim Jong-chul, purport of the whole pleadings

D. Determination

(1) In a lawsuit seeking revocation of a taxation disposition on the grounds of its illegality, the tax authority bears the burden of proving the legality of the disposition and the existence of the taxation fact. Therefore, in principle, the tax authority bears the burden of proving the amount of expenses to be included in deductible expenses, which serve as the basis for determining the amount of corporate tax income. However, in a case where the taxpayer argues that some of the expenses reported by the taxpayer are actual expenses or is false or that the reported amount is required for other expenses of the same amount, the taxpayer needs to prove the existence and amount of other expenses (see, e.g., Supreme Court Decision 96Nu8192, Sept. 26, 1997).

(2) According to the above facts, if the amount equivalent to the tax invoice of this case is excluded from the deductible expenses of each taxable business year without finding any special change in the part price or settlement situation of the raw materials of this case alleged to have been purchased by the plaintiff, the amount of the tax invoice of this case, which the plaintiff received, appears to have been performing the above contract as shown in the attached Form 3, through the raw materials of this case that the plaintiff actually purchased by the time of receipt of the tax invoice of this case, as shown in the attached Table 2, is deemed to have been actually purchased by the plaintiff as shown in the supply details of this case 3. Although there is time interval between the date on which the plaintiff purchased the raw materials of this case and the date on which the contract was implemented by using them, it is reasonable to deem that the plaintiff actually purchased the raw materials of this case, taking into account the above facts, the amount equivalent to the amount of the tax invoice of this case is to be secured at a price significantly lower than the market price at the time of purchase.

(3) Accordingly, each disposition of this case that deemed the processing transaction equivalent to the tax invoice of this case as a processing transaction is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified and it is so decided as per Disposition.