early 201J 0289 ( October 30, 2011)

act of granting a patent license is a kind of business and falls under business income.

The act of granting a patent right under a patent use contract is not temporary but a type of business under the Income Tax Act, and the income paid therefrom also constitutes business income other than other income.

2011Guhap14068 global income and revocation of disposition

UnionA

Head of Sungnam Tax Office

April 27, 2012

June 8, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of KRW 000 of global income tax for the year 2008 and KRW 000 of global income tax for the year 2009 against the Plaintiff on November 1, 2010 is revoked.

1. Details of the disposition;

A. The Plaintiff, a patentee in the construction method of bridges, entered into a patent agreement with a limited company BB soil andCC Construction Co., Ltd., and received a patent fee (hereinafter referred to as “point income”) from the said company, and filed a final tax return on global income tax for the year 2008 and the year 2009.

B. However, on November 1, 2010, the Defendant deemed that the above issues income constituted business income, not other income, and notified the Plaintiff of KRW 103,375,200 for global income tax for the year 2008 and KRW 154,084,320 for global income tax for the year 2009 (hereinafter “instant disposition”).

C. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on September 30, 201.

The above claim was dismissed.

[Grounds for Recognition] The non-contentious facts, Gap evidence 1 to 2 (including household numbers), Eul evidence 1, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 21 (1) 7 of the Income Tax Act provides for the income generated from the transfer or lending of industrial property rights as other income, such as the key income, and does not limit that the above income should be temporary income. Thus, the key income falls under other income regardless of continuity and return. Even if not, the key income is income under a single contract, and it cannot be viewed as business income since it does not constitute income due to continuous and repetitive activities. Nevertheless, the Defendant’s disposition to correct the comprehensive income tax against the Plaintiff by deeming the key income as business income is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

According to the overall purport of Gap evidence 3 and Eul evidence l through 3, and according to the whole purport of the arguments, each of the following subparagraphs:

fact may be recognized.

(1) The Plaintiff, as a patentee with respect to the method of manufacturing and installing bridge structures, concluded a patent use agreement with limited company BB cases andCC Construction Co., Ltd on a total of seven occasions from August 30, 2004 to January 30, 2007, and the details and main terms of the agreement are as follows.

(2) From 2008 to 2009, CC Construction Co., Ltd. ordered total of 97 construction works and paid to the Plaintiff a patent fee of 2-3% of the total construction cost during the pertinent period, and the payment details are as listed below.

D. Determination

(1) "Business income" under Article 19(1) of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter the same) means income generated from a business that continues and repeatedly conducted on an independent basis for profit-making purposes (see, e.g., Supreme Court Decision 2010Du25633, Mar. 24, 201). Whether the income transferred or lent an industrial property right, such as patent rights, constitutes business income shall be determined in light of social norms by taking into account various circumstances, such as transfer or lending of the industrial property right, existence of continuity and reflectness of profit-making, length of transaction period, and amount of money provided (see, e.g., Supreme Court Decisions 97Nu368, Sept. 8, 199; 2003Du14505, Aug. 19, 205).

(2) Based on the above legal principles, comprehensively taking account of the following circumstances revealed by the facts and evidence revealed in relation to the instant case, and the Plaintiff’s granting patent rights to the said company under the above patent use contract is not temporary but a type of business under the Income Tax Act, and falls under “other types of finance and insurance business” under Article 19(1)10 of the former Income Tax Act before February 1, 2008, and “a type of non-property right lease business” under Article 11 of the same Act from February 1, 2008, and the issues that the Plaintiff received from the said company also constitute business income, not other income.

① From August 30, 2004 to January 30, 2007, the Plaintiff entered into a long-term patent use agreement with the above company for a total of seven years to extend the patent term (20 years from the filing date of the patent application) on seven occasions.

② Since then, the Plaintiff received from the above companies the amount equivalent to 2-3% of the total construction contract amount each year as patent usage fees, and the total amount of patent usage fees that the Plaintiff received from 2008 to 2009 reaches or exceeds 00 won.

(3) The former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034, Feb. 18, 2010)

Article 29, and the scope of businesses under each subparagraph of Article 19 of the Income Tax Act shall be based on the Korean Standard Industrial Classification except as otherwise provided in the Enforcement Decree.

(3) Therefore, the Defendant’s instant disposition based on the premise that the Plaintiff’s key income constitutes business income is lawful.

3. Conclusion

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