Appellate Court 2017west 1165 ( October 18, 2017)

A unilateral act by which a taxpayer who is the debtor has deleted the outstanding loan stated in the statement of financial position shall not be exempted from the liability.

A unilateral act by which the Plaintiff, the debtor, deleted the key debt stated in the statement of financial position, can not be exempted from the obligation, and there is no evidence to deem that there is the intent to waive the obligation by the obligee.

Articles 19 and 25 of the Corporate Tax Act; Articles 43 and 45 of the Enforcement Decree of the Corporate Tax Act

2018Guhap319 The imposition of corporate tax and the revocation of the disposition of notice of change in income amount.

AA Commercial Corporation

BB Director of the Tax Office

April 26, 2019

May 17, 2019

1. On December 1, 2016, the Defendant’s disposition imposing corporate tax on the Plaintiff for the 2012 business year (from July 1, 2011 to June 30, 201) is revoked in excess of KRW 35,253,138 (including additional tax).

2. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 20% is borne by the Plaintiff, and the remainder is borne by the Defendant, respectively.

Cheong-gu Office

The defendant's disposition on December 1, 2016 against the plaintiff (attached Form 1) shall be revoked.

1. Details of the disposition;

A. From 197 to 597, the Plaintiff owned a building with a size of 6th and 24th above ground (hereinafter referred to as “instant land and building”) from Seoul 00-gu and 5th above, and is a corporation settling accounts at the end of six months, which operates a real estate rental business.

B. Around October 1995, the LLL (hereinafter “LL”) (hereinafter “the deceased”) acquired and managed the Plaintiff and died, and thereafter, the MM (from September 28, 2010 to February 11, 201) and the JJ (from February 11, 201) held office as the representative director of each Plaintiff.

C. The Plaintiff, at the time of the settlement of accounts for the period of 40 business years (from July 1, 2011 to June 30, 2012), deleted loans and accrued interest included in the settlement of accounts for the period of 39 business years (from July 11, 2010 to June 30, 201) from the total amount of loans and accrued interest, which are KRW 57,271,669,318 (hereinafter referred to as “re-written loans in dispute”) and re-written the financial statements for the period of 39 business years retroactively.

D. 00 regional tax office (hereinafter “Investigation Office”) conducted a tax investigation of the Plaintiff (hereinafter “tax investigation of this case”) around August 2016 with the period of investigation from July 1, 2011 to June 2015, 2015. ① The Plaintiff’s borrowing of the issue in books was exempted from the liability equivalent to the loan amount of the issue at issue to GGG JJ, CCC, and MM (hereinafter “heirs”)’s wife. ② CCC did not enter the Republic of Korea for the period subject to the tax investigation of this case, and did not confirm the fact that it did not process the Plaintiff’s business, as indicated below, 200 won were totaled 474,234,730 won as personnel expenses, 30 won as stated in the list of entertainment expenses, welfare expenses and travel expenses incurred by the Plaintiff / [2 table / [3] the Plaintiff’s total number of entertainment expenses and travel expenses / 1000 won as stated in the list / 2] / 18196181,28160

E. Upon receipt of a notice of taxation data from the Investigative Agency, the Defendant included the borrowed amount from the books in the gross income for the pertinent business year of 2012 and included the borrowed amount in the calculation of KRW 20,960,38,89 among them in the calculation of losses, and included the total of KRW 474,234,730 (hereinafter “the instant personnel expenses”) paid to CCC in the calculation of losses in the pertinent business year. ③ The above entertainment expenses are included in the calculation of losses in the calculation of losses in the corresponding business year; ③ the total of KRW 802,131,289; the total of the above entertainment expenses; KRW 16,867,134; the total of the welfare expenses; the travel expenses and transportation expenses; KRW 11,15,490 (hereinafter “each of the instant entertainment expenses”; the instant welfare expenses; and ④ the amount of the bonus as the representative director’s bonus in the calculation of losses; and also the said funds are disposed of as bonus.

In relation to leakage, KRW 1,385,741,483, total amount of recognized interest, shall be included in the gross income, and on December 1, 2016, corporate tax (including additional tax) shall be corrected and notified to the Plaintiff for each business year as follows, and the representative of the Plaintiff shall be the Plaintiff:

GJ notified changes in the amount of income to the sum of KRW 4,040,778,343 (= KRW 802,131,289 + KRW 16,867,134 + KRW 11,115,490 + KRW 1,703,796,400 + 1,703,796,400) disposed of as a bonus from the JJ (hereinafter referred to as “the initial disposition”). Specific details for each business year of the initial disposition are as follows:

○ Details of corporate tax

(1) Business year 2012 (from July 1, 2011 to June 30, 2012): 12,594,786,140 won (including additional taxes)

(2) Business year 2013 (from July 1, 2012 to June 30, 2013): 651,418,000 won (including additional taxes)

(3) Business year 2015 (from July 1, 2014 to June 30, 2015): 1,180,500,230 won (including additional taxes)

○ Details of JJ's notice of change in income amount

(1) 744,403,255 won reverting to the year 2012

: 712,910,121 won related to the business year 2012 + 31,493,134 won related to the business year 2013

(2) KRW 2,561,608,902 for the year 2013

: 2,482,175,462 won related to the business year 2013 + 79,43,440 won related to the business year 2014

(3) 435,790,343 won reverting to the year 2014

: 216,51,560 won related to the business year 2014 + 219,238,783 won related to the business year 2015

(4) 298,975,843 won reverting to the year 2015

: 298,975,843 won related to the business year 2015

F. On February 24, 2017, the Plaintiff appealed and filed an appeal with the Tax Tribunal. On October 18, 2017, the Tax Tribunal accepted the Plaintiff’s assertion, and revoked the disposition imposing corporate tax, etc. and the notice of change in the amount of income related to the loss on the investment assets related to a certain stock company, and ordered the re-inspection to confirm the obligee’s intent to discharge the obligation by confirming the obligee’s actual confirmation of the relevant loan. ③ The remainder of the Plaintiff’s claim was dismissed.

G. On November 1, 2017, the Defendant issued a notice of change in the amount of income to the Plaintiff, as to the part on the loss on the disposal of the investment assets, the amount of KRW 244,085,986 and corporate tax of KRW 618,813,80 for the business year 2012, and the amount of KRW 712,910,121 for the business year 2012 for the JJ, and the amount of income belonging to the JJ in 2013 was reduced to KRW 2,376,627,762 for the business year 2013. On December 2017, the Defendant notified the Plaintiff that there was no correction in relation to the loan on the issue at issue as above. The details remaining after reduction (hereinafter referred to as the “instant disposition”).

○ Details of corporate tax

(1) Business year 2012 (from July 1, 2011 to June 30, 2012): 12,350,700,154 (including additional taxes)

(2) Business year 2013 (from July 1, 2012 to June 30, 2013): 32,604,193 (including additional taxes)

(3) Business year 2015 (from July 1, 2014 to June 30, 2015): 1,180,500,230 won (including additional taxes)

○ Details of JJ's notice of change in income amount

(1) 31,493,134 won reverted to year 2012

(2) 184,981,140 won reverting to the year 2013.

(3) 435,790,343 won reverting to the year 2014

(4) 298,975,843 won reverting to the year 2015

Facts without dispute over the basis of recognition, Gap evidence Nos. 1, 2, 4, 14, Eul evidence Nos. 1 to 7 (including each number), and the purport of the whole pleadings

2. The plaintiff's assertion

A. Major borrowed money

The deceased, who established and managed four companies such as a certain company in the Z state (hereinafter referred to as "company in the Z state"), and accumulated large profits, took over the plaintiff who was a dormant corporation in 1995, and the plaintiff acquired real estate from the companies in the Z state and engaged in real estate sale and lease business in Korea. As such, the obligee of the key loan is the company in the Z state. However, upon the death of the deceased, the obligee of the key loan is the heir after taking office as the representative director, and the obligee of the key loan is the heir, and the obligee of the key loan was expressed as the obligation to the related party in the account book and appropriated the interest amount of KRW 5 billion annually. The ZJJ, which became aware of this, intended to delete the obligee's financial statements through the ZM's declaration of intention to resign from the representative director, and replaced the obligee with the external auditor after taking office as the direct representative director, and the Plaintiff did not have any obligation to recover the loan borrowed from the Z state. Therefore, the obligee's debt exemption issue is not clear.

B. Labor cost of this case

The J and CCC jointly operated the Plaintiff and the companies located in the Z, and with respect to the operation of the Plaintiff, the JJ periodically entered Korea and took charge of employee management and administrative affairs, and the CCC mainly remains in the Z State due to the operation of the company in the Z State and mainly took charge of the management of the Plaintiff’s funds.CCC has been working in the manner of reporting documents and accompanying documents stating the Plaintiff’s monthly settlement of funds and face-to-face reporting to the CCC. As such, the CCC personnel expenses for the CCC should be recognized as losses.

C. Entertainment expenses, welfare expenses and travel expenses and transportation expenses of the instant case

The instant entertainment expenses are not private expenses of the representative director, since the JJ inviting 00 National Assembly members of the Z, interest organizations personnel, and Z state projects to Korea to bear aviation charges, accommodation expenses, gift expenses, etc. The Plaintiff’s entertainment expenses should be recognized as entertainment expenses. Of the instant welfare expenses and travel expenses, from October 2012 to June 2013, the portion spent from October 2013 to June 2013 is actually the said entertainment expenses as the above entertainment expenses, and the welfare expenses for the business year 2015 were classified as entertainment expenses as the above entertainment expenses. The employees’ meeting expenses and clothes for employees on July 23, 2014 and July 24, 2014, were not private expenses of the representative director who was paid to purchase women’s uniforms as of October 2, 2014.

3. Relevant statutes;

[Attachment 2] The entry is as follows.

4. Determination

A. Part of the loan in question

1) Facts of recognition

A) Progress of a prior suit relating to the borrowed issue

(1) From November 7, 201 to March 30, 2012, the Investigation Agency conducted an inheritance tax investigation following the deceased’s death (hereinafter “prior tax investigation”), and thereafter, “the aggregate of KRW 169,872,800,408, including the total amount of deposits in the name of the heir, KRW 17.1 billion, and KRW 52.7 billion, to the Plaintiff’s loan claims against the Plaintiff, shall be included in the inherited property as it is the name of the deceased’s borrowed property. At the time of the Plaintiff’s capital increase issued on July 7, 2005 and June 2006, the Investigation Agency reported the deceased’s advance donation to the other heir except JJ, and accordingly, notified the Director of the Tax Office of BB of the taxation data, and accordingly, the Director of the Tax Office imposed gift tax and penalty tax (including penalty tax) on the heir on April 13, 2012 and November 1, 2012.

(2) The tax Tribunal filed a request for a re-audit on January 23, 2014 with the claim that “MM’s deposit and loan, etc. are the heir’s proprietary property because the heir carried in the territory of the Z and managed the money received from the deceased in the Republic of Korea, and paid the loan to the plaintiff in the deposit account.” The Tax Tribunal rendered a decision on January 23, 2014 on re-audit on the ground that the data submitted by the disposition authority alone cannot be deemed as the deceased’s borrowed assets. Since the BB head of the tax office maintained the preceding disposition, the Seoul Administrative Court filed a lawsuit seeking cancellation of the preceding disposition (2014Guhap000), and the above court recognized the following facts, and determined that the money deposited in the account of the heir from 1991 to 2001 cannot be excluded from the possibility that the deceased would be donated to the heir, such as the heir’s assertion, and thus, the judgment of the appellate court revoked the first disposition on the inheritance tax and the inherited property.

“○○” managed money more than once in the name of a third party in the Z state while operating the business in the Z state, and brought to the Republic of Korea. From 1991 to 2001, the Deceased and GG, CCC, and MM shared the said money in their own name and deposited it into the Republic of Korea.

Since January 2007, the account of MM and the deceased applied for the opening of an account by using his own seal imprint, and the account in the name of the remaining inheritors was opened by using a certified copy of family register certifying family relations without a separate power of attorney between MM and the deceased. The deposit was managed by means of new term deposit upon maturity, and was used only as loans and capital increase payments for the Plaintiff.

In 195, the Deceased accepted the Plaintiff who was a Dormant Corporation for the purpose of running the real estate leasing business. For the Plaintiff’s operation, the Deceased and his heir lent money to the Plaintiff, and the Deceased determined the amount of the borrowed money and withdrawn money from the heir’s account.

○ The Plaintiff offered capital increase on June 2005 and June 2006. The Plaintiff’s share ratio of the deceased, GG, CCC, and MM, the shareholder of the Plaintiff, was 15%, 15%, 40%, and 30%, respectively, over the period before and after the above capital increase. The deceased determined the capital increase for each shareholder, and withdrawn and paid it from the heir’s account.

On May 12, 2008, the Deceased, GG, andCC donated the Plaintiff’s shares to MM and JJ on May 12, 2008. On May 3, 201, CCC filed a lawsuit against MM on May 12, 2008 on the grounds that the share donation contract was forged, and then withdrawn.

(3) On February 11, 2011, the JJ made the Plaintiff’s representative director resign, and took office as representative director on February 11, 201, and on January 2, 2012, the investigator belonging to the ICJ made the following statements regarding the key borrowed money:

○ around 1997, South Eastern CCC brought about the amount of 22 billion UN (Korean approximately KRW 150 billion) that was evaded by its father at the time of the 1997 company to Korea by dividing the amount of 15 billion in the name of two times and four times. The Deceased had been unable to work for more than ten years, and he had been in Korea for the first time on January 5, 201.

○ The Plaintiff’s long-term loan was processed and appropriated as the loan to the Plaintiff, instead of the WT’s certified public accountant in charge of the Plaintiff’s entry, in which the female and female MM, who was actually involved in the Plaintiff’s operation, lent the loan to the Plaintiff.

○○ MM was settled by lending KRW 50 billion on the settlement of accounts, and was receiving KRW 5 billion each year under its interest, and it was this issue, which was dismissed by the KK accountant in order to make it normal from this issue.

○○M, in its own mind, treated 11% of the CCC’s shares in 40% as a donation to the Plaintiff and increased its shares to 51%, and the shares in CCC have decreased to 29%.

The contents of the Plaintiff’s long-term loan are all female and male and female, and I or South East CCC was not known. CCC knew that it was known in the process of 2010 that it was aware that it exceeded the Plaintiff’s stock and the Plaintiff’s power of representation, and it was aware that the deposit in the name of CCC and CCC was in a domestic bank at that time.

(4) Around January 2012, 2012, at the time of the preceding tax investigation, MM made the following statements to the investigators belonging to the Investigation Agency:

In 1986, ○○ was a father’s business. All family members, including the Deceased, resided in the Zeast of the Z State, and visit to Korea mainly because they are related to the Plaintiff. From 2004, the Deceased was in operation directly of the companies in the Z state, and was involved in the important decision-making of the said companies from the time of recovery to the time of death.

The JJ was almost short of the time of high school. The J was 25 years in 25 years in 20 years in 200 and 10 years in 10 years in 200 in 209 in 2009 in 2009 in 25 years in 25 years in 200 and in 2000 in 10 years in 200.

At the time of taking over the Plaintiff, JJ failed to secure the documents necessary for the composition of shareholders, such as passport, and the Deceased anticipated that CCC would assist in the work in Korea, and 40% of CCC shares were 40%, but CCC did not actively participate in the project in Korea and participated therein.

On May 12, 2008, both the Plaintiff’s shares owned by the deceased, GG, and CCC were donated to MM and J on the direction of the deceased, and there was no agreement among their family members. The gift tax was paid around August 2008 in the Z state. At the time when the deceased and GG’s disease were deteriorated, the principal prepared documents and paid gift tax to each shareholder’s account with the assistance of the employees belonging to the Plaintiff. The JJ did not know of the situation of changes in stocks. Of the Plaintiff’s shares registered under the name of the principal, 794,924 out of the Plaintiff’s shares were registered under the name of the JJ as the shares of W Accounting Firm, and the principal was registered in the name of the custodian of W CJ for share management with the KK Accounting Firm of W Accounting Firm.

(5) GGG, J, J, and CCC have been dissatisfied with the preceding disposition and filed a request for a trial with the Tax Tribunal on or around November 2012. At the time, the agents of the Tax Tribunal, including local lawyers and certified public accountants, have extended the hearing to the Tax Tribunal on April 3, 2013. The petitioners in the Z State are expected to attend and make a statement at the Council of Judges." At the time of 1991, the UN funds brought in under the names of heirs were presented to the ZZ in the name of heir at the time of 1991, stating that it is difficult for the Tribunal to conclude that the heir and heir were the source of the funds of the deceased, not the next owner of the deceased’s property, but the heir’s property and heir’s property, not the second owner of the funds of the Z. The Z is not the funds accumulated in the name of the National Tax Tribunal on October 2, 2013.

(6) As the director of the BB Tax Office did not change the preceding disposition, GG, JJ, and CCC filed a lawsuit seeking revocation of the preceding disposition with the Seoul Administrative Court. After remanding the case, the first instance court (Seoul Administrative Court 2015Guhap000), GG and JJ 4, around January 2017, submitted a preparatory document containing the following details.

In around 2010, the JJ became aware of domestic deposits in the name of the deceased and their successors. Since the time when theJ was in place due to the personal circumstances at the time of the entry into the Republic of Korea, it was impossible for the deceased, except for the JJ, to enter the Republic of Korea or to open a deposit account. While the deceased’s work could not inevitably inform the JJ of the foreign currency funds in the Republic of Korea, foreign currency funds brought into the Republic of Korea were owned by the companies in the territory of the Z, and the JJ was to participate in the management of the companies in the territory of the territory of the Z, and later, the deposit in the name of the JJ is also opened.

The source of domestic deposits in the name of the deceased is not the personal property of the deceased, but the profits of the companies in the Z State, a family company, and the above deposits are the borrowed property of the companies in the Z State. The deceased’s Day reserved part of the profits of the companies in the Z State through the tax evasion of corporate taxes. The deceased’s Day reserved part of the profits of the companies in the Z State through the tax evasion of corporate taxes, and deposited in the domestic bank in the name of the deceased’s day in the manner of storing the funds owned by the companies in the Z State upon entrustment. The deceased’s arbitrary consumption of such withdrawal without permission is an embezzlement for the companies in the

Since 2006, when the deceased’s day ceased entry due to the management and health problems of the companies in the Z, the deceased’s day was returned the Plaintiff’s loan from 2006 to Z’s own account. The MF expressed the intent of unlawful acquisition by asserting that it was donated in the Z even though it was aware that the above deposit and loan claims were owned by the companies in the ZZ, and that it was given a donation in the ZZ.

On May 12, 2008, when acquiring the Plaintiff, the Deceased’s Day set the shareholding ratio of the deceased as 15%, GG 15%, CCC 40%, and MM 30%. On May 12, 2008, after the Deceased’s Day was unable to enter the Republic of Korea, MM arbitrarily forged relevant documents, etc., and arranged that it holds 51% of the Plaintiff’s shares.

On the other hand, in the case of 2015Guhap75640, the JJ tried to kill himself by providing money to 00 and 00 Korean public officials, and ZM, as alleged in the legal brief dated July 16, 2018, while conducting the case, such as having been present at the date of pleading and submitting written applications and reference materials, the JJ refused to provide three family members other than the JJ himself/herself with the purpose of increasing capital and deducting money from the Plaintiff Company. From July 2005 to July 17, 2007, the LM refused to provide evidence to the Plaintiff Company, and the National Tax Service and the Plaintiff Company refused to provide an external audit from 000 to 00.

B) Accounting of the Plaintiff and the Plaintiff’s audit report related to the outstanding loan

(1) The Plaintiff’s account book includes the details of payment of interest to the deceased and his heir monthly from July 2002 to June 201 (in the case of the network, from June 2010). The money in the name of the interest was deposited into the account in the name of the deceased and the heir every month.

(2) The Plaintiff’s long-term loans indicated in the statement of financial position are KRW 35,809,878,349, KRW 21,643,128,739, KRW 39, KRW 21,647, KRW 619, KRW 79, KRW 39, KRW 39, KRW 382,51, KRW 482,517, KRW 127, KRW 39, KRW 49, KRW 49, KRW 49, KRW 482,517, KRW 127, KRW 39, KRW 39, KRW 49, KRW 495,00, KRW 495,07, KRW 495,09, KRW 5969, KRW 5964,969, KRW 5969, KRW 5969, KRW 5969, KRW 9696, KRW 4969, KRW 596, etc.

(3) As of June 30, 2010, among the 38 audit reports prepared by W Accounting Corporation, the Plaintiff’s shareholder is MM (71%) and CCC (29%) as of June 30, 2010. The above long-term loan sources are "MM out," "9.5% of interest rate," and "payment plan during the business year 2014." The details of transactions with specially related parties include interest costs (other than loan interest) incurred in relation to MM in addition to MM, and obligations with related parties are as follows. Among them, long-term loans are borrowed from the Plaintiff, a shareholder and executive officer, for the purpose of construction funds.

(4) As of June 30, 201, among the 39 audit reports prepared by W Accounting Corporation, the Plaintiff’s shareholder is MM (51%) cCC (29%) and JJ (20%) as of June 30, 201, and the details of long-term loans are the same as those of the 38th period if the lender is excluded from being changed to “individual, etc.” but the details of transactions with related parties are not specified. In this regard, the said auditor could not carry out the audit procedure required in the standards for accounting audit on loans and major accounts and the balance of the accounts related thereto due to the restriction on the scope of audit by W Accounting Corporation. Since the above matters are of importance to influence on the financial statements, he did not express his opinion on the financial statements.”

(5) The JJ received a prior tax investigation and conducted a tax investigation to the heir’s deposit and key loan holders. On April 30, 2012, GG and CCC imposed a large amount of gift tax and additionally imposed a large amount of inheritance tax on the heir, and the Plaintiff’s accountant in charge of the Plaintiff’s bookkeeping at the time of the settlement of accounts for the business year 2012 (from July 1, 2011 to June 30, 2012) (Article 40), the J has the accounting officer take charge of the Plaintiff’s books deleted the key loans specified in the statement on the statement on the statement on the settlement of accounts for the business year 201 (39) and again prepared the financial statements on the settlement of accounts for the business year 2012 (40).

As a result, there are no long-term loans and accounts payable in the statement of financial position of the plaintiff in the statement of financial statements of the 40th settlement, and only 390,872 won are included in the interest expenses

(6) From the settlement of accounts of the business year 2012 (No. 40), the Plaintiff’s external auditor was changed from WS accounting corporation to WS accounting corporation. The SS accounting corporation stated that the loans and accounts appropriated in WS accounting statement in WS accounting corporation for the first quarter of the 40 audit report were deemed to have never existed in the past, and thus re-preparation the financial statements retroactively after cancelling the loans and accounts payable." The Plaintiff failed to obtain the presentation of major accounting books, evidential documents, and materials related to the business operator’s statements, and due to the limitation of audit scope by WS accounting corporation, the Plaintiff could not carry out the important audit procedures required in the standards for accounting audit, such as loans, accounts payable, money payable, securities available for sale, corporate tax, persons with special relationship, and contingent liabilities, and the closing of audit procedures."

(7) On the ground that the Plaintiff’s financial statements for the business year 2013 (from July 1, 2012 to June 30, 2013), the SS Accounting Corporation failed to express its opinion on the Plaintiff’s financial statements on the grounds that it was unable to carry out an important audit procedure required in the standards for accounting audit, including cash and cash assets, borrowings, accounts payable, corporate tax expenses, transaction with a person with a special relationship, contingent liabilities, acquisition of managerial confirmation, etc., and the procedure for audit completion.

C) Details of the instant tax investigation and reinvestigation

(1) At the time of the instant tax investigation, the Plaintiff’s H accounting corporation, who was in charge of filing corporate tax returns for the business year 2012 (the 40th period), stated that the KH accounting corporation’s member, at the time of the instant tax investigation, knew the investigator of the KH accounting corporation, who was in charge of filing corporate tax returns, could have been at issue in the subsequent tax investigation if deleted the disputed wage. However, the Plaintiff’s representative, JJ did not have any choice but could not assert the removal of the disputed wage.

(2) In the course of the instant tax investigation, the investigating authorities concluded that: (a) the Plaintiff had terminated the key borrowed money at the time of the settlement of accounts in the year 2012 as a processing debt; (b) however, it was confirmed that the shareholders confirmed the details of financial transactions remitted to the Plaintiff; and (c) the Plaintiff was asked to vindicate whether the pertinent borrowed money was adequate under the tax adjustment at the time of the extinguishment of the obligation; and (d) the Plaintiff was virtually exempted from the heir’s debt.

(3) In accordance with the re-investigation Order issued by the Tax Tribunal on October 18, 2017, the investigating authority requested the JJ to submit data on the source and the route of entry of the disputed loan to the creditors of the JJ claiming that the said creditors are the companies located in the Z, but the JJ confirmed the creditors of the loan at issue that there is no evidence to prove the cash profit accrued in the companies located in the ZJ. The investigating authority, in order to confirm whether to waive the claim of the MM, provided that the MM sent contact to the MM through the tax agent affiliated with the SS accounting corporation, but did not confirm that the MM did not obtain the address or contact address in the case of the CCC or GG.

D) Demanding confirmation of claims by MM

From September 25, 2012, MM has a claim of KRW 29,074,00,000 against the Plaintiff as of September 25, 2012, and the Plaintiff does not pay interest on the above claim to MM after July 201, 201. The Plaintiff sent a claim confirmation to the Plaintiff.

Facts without dispute over the basis of recognition, Gap evidence 4, 9, 11-16, 23-25, 28-30, Eul evidence 1-3, 5, 8, 11-14 (including each branch number)

2) Determination

The exemption of an obligation does not necessarily require an explicit declaration of intent, and it should be recognized in cases where it can be seen as the exemption of an obligation by an obligee’s act or an interpretation of an obligee’s expression of intent. However, for such recognition, it shall be determined whether to apply the exemption of an obligation by strict interpretation of an obligee’s act or an expression of intent in accordance with the content of the pertinent legal relationship (see, e.g., Supreme Court en banc Decision 2004Da50426, Feb. 15, 2007). In full view of the following circumstances revealed by the aforementioned evidence and the entire purport of oral argument, the evidence submitted by the Defendant alone is insufficient to recognize that the inheritor exempted the obligee from the obligation to the Plaintiff as the obligee of the disputed loan as alleged by the Defendant. Since there is no other evidence to acknowledge otherwise, it is unlawful that the exemption of an obligation was included in gross income for the business year 2012, and this part of the Plaintiff’s assertion is justified (the Plaintiff’s exemption of an obligation may be excluded from the profit of the Plaintiff due to the expiration of an obligation).

A) The Defendant deleted the key debt in the statement of financial position that the Plaintiff had entered in the previous statement of financial position, and then failed to include the interest expense or pay interest, and deemed that the inheritor, the obligee of the key loan, was exempted from the obligation of the Plaintiff. However, even if the inheritor is the obligee of the key loan, there is no person who actually expressed his/her intent of exemption from the obligation among the inheritors, and instead, MM demanded the Plaintiff to verify the amount of the claim and the unpaid interest on the premise that there is a KRW 29,074,00,000 for the Plaintiff’s claim even after the Plaintiff ceased to pay interest and deleted the obligation such as the key loan from the Plaintiff’s statement of financial position.

B) Unless there exist special circumstances, the obligor’s unilateral act alone cannot be exempted from the obligor’s obligation to the obligee. In light of the Plaintiff’s representative director, J andCC, the director, the JJ argued that “MM included the key debt in the Plaintiff’s financial statements as if the heir were to pay interest to the deceased and its heir and embezzled the Plaintiff’s funds.” After the previous tax investigation, the JJ stated that “M would have made false representation of the key debt in the Plaintiff’s financial statements and embezzled the Plaintiff’s interests to the deceased and its heir,” and that it would have deleted the key debt in the Plaintiff’s financial statements from the Plaintiff’s financial statement or its heir’s intent to delete the key debt in the Plaintiff’s loan account book, even if the Plaintiff’s intent to delete the loan and the key debt stated in the above financial statements were to have existed in the Plaintiff’s financial statements.” In addition, it is difficult to view that the Plaintiff’s intent to delete the loan and the key debt in its own financial statements, including the Plaintiff’s intent to delete it from the Plaintiff’s financial statements.

C) Even if the Plaintiff did not take measures to restore the borrowed amount in the statement of financial position, such as a revised report, until now, and even if the Plaintiff suspended the payment of interest and there was no active measures to recover the claim from the inheritor, the JJ did not take a regular account or conduct the management of the company, such as the Plaintiff’s refusal of the audit opinion on the financial statements for several years since 2012, which had the Plaintiff take office as the representative director, and had the Plaintiff deleted the borrowed amount. As seen earlier, the MF requested the Plaintiff to verify the claim. GG and the CC did not participate in the claim for the borrowed amount in the past or its nominal deposit in Korea, and the JJ consistently filed a complaint by asserting that the MF was not the genuine creditor of the Plaintiff and the Plaintiff embezzled its funds, and the J has consistently prepared additional civil and criminal measures. In light of the above, it is difficult to view the above circumstances as the grounds for waiver of each claim for the borrowed amount as the creditor of the loan at issue.

B. Personnel expenses, entertainment expenses, welfare expenses, and travel expenses and transportation expenses of the instant case

1) Legal principles

In an administrative litigation seeking revocation of a taxation disposition on the grounds of its illegality, in principle, the tax authority bears the burden of proof as to necessary expenses or losses, which are the basis of the determination of taxable income. However, since matters concerning necessary expenses or losses are generally favorable to the taxpayer and most of the facts constituting the basis of the determination of taxable income are difficult for the tax authority to prove, the burden of proof may be attributed to the taxpayer if it is reasonable to allow the taxpayer to prove the burden of proof in consideration of the difficulty of proof or equity between the parties (see, e.g., Supreme Court Decisions 91Nu10909, Jul. 28, 1992; 2010Du4599, Oct. 31, 2013). In a corporate tax disposition revocation lawsuit, the presumption of absence of necessary expenses, which the taxpayer did not perform the verification activities, should be presumed to be fair to impose the burden of proof on the taxpayer (see, e.g., Supreme Court Decision 2002Du5828, Sept. 28, 2004).

2) Personnel expenses of this case

former Corporate Tax Act (Amended by Act No. 14386, Dec. 20, 2016; hereinafter the same shall apply)

Article 19(2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 27828, Feb. 3, 2017; hereinafter the same) provides that "loss expenses recognized as deductible expenses" shall be losses or expenses incurred in connection with the business of the corporation, which are generally recognized as losses or directly related to profits, except as otherwise provided for in this Act and other Acts, and Article 43(4) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 27828, Feb. 3, 2017; hereinafter the same) provides that "compensation paid to an officer of a non-standing corporation shall be included in deductible expenses except for cases of avoidance of wrongful calculation falling under Article 52 of the Corporate Tax Act." In other words, remuneration paid by a corporation to an officer for the performance of duties of the corporation is, in principle, expenses disbursed for the performance of duties of the corporation, but since such remuneration is paid as compensation for the performance of duties, it shall be proved that the officer of an non-standing corporation actually performed his duties.

CCC did not enter the Republic of Korea at all within the period subject to the instant tax investigation (from July 1, 2011 to June 30, 2015), and the Plaintiff paid the instant personnel expenses to CCC during the business year 2012, 2014, and 2015, there is no dispute between the parties. The Plaintiff asserts that CCC received a face-to-face report from the Plaintiff’s employee in the ZZ State in relation to the settlement of funds, and submitted Gap evidence 17 and Gap evidence 20. However, the above "matters to be reported" is not stated in the "matters to be reported" that the report on monthly expenses from August 201 to December 2015 was stated, and the representative director at the bottom of the above "CCC" did not have any other evidence to acknowledge that CCC was in charge of the above matters to be reported, and there is no other evidence to acknowledge that CCC was in charge of the above matters to be reported by CCC’s representative director at the time of receipt of the report.

Therefore, it is legitimate that the Defendant did not recognize the instant personnel expenses as the Plaintiff’s deductible expenses. This part of the Plaintiff’s assertion is rejected.

3) Entertainment expenses, welfare expenses and travel expenses and transportation expenses of the instant case

A) “Generally acceptable cost” under Article 19(2) of the former Corporate Tax Act refers to the cost that is deemed to have been disbursed under the same situation by another corporation operating the same kind of business as the taxpayer. Whether it constitutes such cost ought to be objectively determined by comprehensively taking into account the process, purpose, form, amount, effect, etc. of disbursement (see, e.g., Supreme Court Decision 2007Du1242, Nov. 12, 2009).

B) Entertainment expense expenditure portion

Since entertainment expenses are expenses necessary for facilitating corporate activities and promoting corporate growth in proportion to the business size of the enterprise, they shall be strictly interpreted. If the other party is a business-related person and the purpose of spending is to promote the smooth progress of transaction by promoting friendship among business-related persons through entertainment activities, etc., such expenses shall be deemed entertainment expenses under the Corporate Tax Act, but if not, they shall not be readily concluded as entertainment expenses (see, e.g., Supreme Court Decision 2007Du1800, Jun. 24, 2010).

원고는 이 사건 접대비와 이 사건 복리후생비 중 2013 사업연도분, 이 사건 여비교통비는 모두 ZZ국 00당 국회의원, ZZ국 이익단체 인사들, ZZ국 사업가들을 국내로 초청하여 그 항공료와 숙식비용, 선물비용 등을 부담한 것으로서 원고의 접대비라고 주장하나, 원고의 사업은 오로지 이 사건 부동산을 임대하는 것이고, 2013 사업연도부터 2015 사업연도까지 이 사건 부동산의 임차인은 DDD 주식회사, 주식회사 QQQ은행, NNN 보험 주식회사 등 국내 회사였던 점에 비추어 보면, 위와 같은 지출이 원고의 사업과 관련하여 지출된 것이라고 보기 어렵다. 원고의 이 부분 주장도 받아들이지 아니한다.

C) Parts of purchase cost of uniforms

Comprehensively taking account of the respective descriptions and arguments set forth in Article 17 and 21, the Plaintiff paid KRW 10,230,000 per capita for the purchase of the uniforms of five female employees around September and October 2014 (i.e., KRW 1,908,000 + KRW 138,000). It can be acknowledged that the Plaintiff calculated welfare expenses (the instant welfare expenses for the business year 2015).

Article 45 of the former Enforcement Decree of the Corporate Tax Act provides welfare expenses to be included in deductible expenses for workplace sports expenses, workplace entertainment expenses, workplace meal expenses, operating expenses of employee stock ownership association, insurance premiums and charges to be borne under various Acts, congratulatory investigation expenses to the extent deemed reasonable by social norms, and other similar expenses. The above expenses for purchase of uniforms do not constitute welfare expenses under the former Corporate Tax Act and its Enforcement Decree.

However, if a corporation pays to its employees for the provision of labor, it may be included in the expenses of the corporation as personnel expenses, regardless of its title. However, even in such a case, it is recognized that the price for the provision of labor related to the business of the corporation is normal as the price for the provision of labor related to the business of the corporation. The Plaintiff, who runs the real estate leasing business of this case, paid a small amount of clothes up to two million won to female employees on or around September 2014 and October 2014, does not have any explanation to understand the situation and necessity of the payment. However, in light of the above, the Plaintiff asserts that the Plaintiff paid expenses as entertainment expenses to those who are not objectively related to the Plaintiff’s business, such as members of the National Assembly or interest organizations in the territory of the ZZ, as seen earlier, and there is no other evidence to acknowledge this portion of the Plaintiff’s assertion. This part of the Plaintiff’s assertion is not acceptable.

C. Whether the instant disposition is lawful and the scope of revocation

In the event that the amount of the outstanding loan is excluded from the taxable income, the legitimate tax amount of the corporate tax for the business year 2012 shall be KRW 35,253,138 (including additional tax) (including additional tax) (hereinafter the same shall apply). Therefore, the portion exceeding the above legitimate tax amount among the dispositions in this case shall be revoked in an unlawful manner.

5. Conclusion

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

[Attachment 1]

Table 3

○ Imposition of Corporate Tax

(1) Business year 2012 (from July 1, 2011 to June 30, 2012): 12,350,700,154 (including additional taxes)

(2) Business year 2013 (from July 1, 2012 to June 30, 2013): 32,604,193 (including additional taxes)

(3) Business year 2015 (from July 1, 2014 to June 30, 2015): 1,180,500,238 won (including additional taxes)

○ Details of JJ's notice of change in income amount

(1) 31,493,134 won reverted to year 2012

(2) 184,981,140 won reverting to the year 2013.

(3) 435,790,343 won reverting to the year 2014

(4) The total amount of KRW 951,240,460, which reverts to the year 2015, shall be 298,975,843.