Cho High Court Decision 201Do2808 ( November 15, 2011)

Since land and buildings are calculated by dividing them into the sales price, the disposition imposed by deeming it unclear is unlawful.

Since it is determined that the sale price of the instant real estate is calculated separately by distinguishing the land and other land and buildings from each other at the time of the sale of the instant real estate, the disposition of imposition by deeming that the sale of the instant real estate constitutes a case where the distinction between the instant land

2012Guhap4463 Revocation of Disposition of Corporate Tax Imposition

XX Co., Ltd

Head of Seocho Tax Office

May 25, 2012

September 14, 2012

1. The Defendant’s disposition of imposing corporate tax of KRW 000 for the business year 2007 against the Plaintiff on July 1, 201 is revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. On December 26, 2006, the Plaintiff sold to XX Construction Co., Ltd. (hereinafter referred to as "GG construction") and the Plaintiff’s (hereinafter referred to as “the real estate of this case”) for KRW 000,000, but at the same time, the Plaintiff entered into a real estate sales agreement with a trust company designated by XX Construction and entered into a security trust agreement and completed the registration of ownership transfer on the ground of trust to OO real estate trust company. In addition, on the same day, the Plaintiff prepared a letter of commitment that “the Plaintiff will additionally pay KRW 00,000, which is equivalent to 50% of the transfer income tax to be borne by the Plaintiff, in addition to the sales price.”

B. On February 14, 2007, the Plaintiff again drafted a real estate sales contract with the content of selling the instant real estate as follows.

C. The Defendant conducted a corporate tax survey on the Plaintiff: (a) deemed that the Plaintiff omitted corporate tax by means of arbitrarily calculating the transfer value by parcel, such as: (b) selling the instant real estate to XX Construction in the aggregate at KRW 000; (c) setting the transfer value of the instant land as land for business use; and (d) setting the transfer value of the instant real estate by means of arbitrarily calculating the transfer value by parcel; and (b) on July 1, 201, the Plaintiff corrected and notified the Plaintiff of KRW 00 of the corporate tax by recalculationing the corporate tax on the transfer income of the land for business use, etc. for which the portion of the instant land belongs for non-business use, by applying Article 100(2) of the Income Tax Act mutatis mutandis to Article 100(2).

D. On August 2, 2011, the Plaintiff filed an appeal with the Tax Tribunal on August 2, 201. On November 15, 2011, the Tax Tribunal dismissed the claim on the part (i) above, and accepted the claim on the part (ii) above, while forest part among the land in XX Dong does not constitute non-business land. According to the decision of the Tax Tribunal, the Defendant made a decision to reduce the amount of KRW 00 of the corporate tax for the business year 2007 (hereinafter “instant disposition”).

[Reasons for Recognition] Facts without dispute, Gap evidence (including each of the items of natural disaster), 2, 5 evidence, Eul evidence No. 1.2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The primary argument

XX Construction purchased the instant real estate to construct apartment. In consultation with the Plaintiff, the instant real estate was classified into the instant land and land for factory, XX Dong land, and the price was set differently depending on whether the instant real estate is included in its use and its neighboring city tax and apartment construction site. Therefore, the instant real estate sale does not constitute “when the distinction between the value of the land and the building is unclear” under Article 100(2) of the Income Tax Act, and thus, the instant disposition based on the premise is unlawful.

2) Preliminary assertion

If the market price of the instant land is deemed KRW 000 per square meter as the Defendant’s assertion, the right corporate tax amount to be additionally paid is KRW 000,00, and the exceeding part of the instant disposition is unlawful.

B. Defendant’s assertion

1) In light of the fact that the Plaintiff entered into a real estate sales agreement with XX construction on December 26, 2006 and entered the real estate sales agreement only in 000 won, the Plaintiff should be deemed to have sold the real estate en bloc without distinguishing the value of the land by parcel.

2) In the case of the instant land, the land category is higher than the officially announced price of the factory site, and the land price calculated by dividing the instant land into real estate in light of the fact that: (a) the Plaintiff sold 000,000-0 land near the instant land at KRW 00 per square meter higher than the Plaintiff’s sale price; and (b) the sale price determined by the Plaintiff was nonexistent in light of the fact that the Plaintiff sold 000,000 land at the time of the Plaintiff’s purchase and sale of the land near the boundary of the factory site at KRW 00 per square meter lower than the Plaintiff’s sale price of the factory site; and (c) the surrounding licensed real estate agents, etc. confirmed that the price of the instant land was KRW 000 per square meter, etc., the sale price

(c) Related statutes;

As shown in the attached Table related Acts and subordinate statutes

(d) Facts of recognition;

1) The instant land is located outside of the scheduled apartment site, and the factory site and XX Dong land are located within the scheduled apartment site. The land outside the scheduled apartment site is located outside of the said scheduled apartment site, and the land outside the said planned apartment site was sold in 000,000 square meters per square meter on March 22, 2007, and 438.2 square meters per square meter on September 15, 2008, and the land outside the said planned apartment site was sold in 000,000 square meters per square meter on September 15, 2008, and was included in the planned apartment site, and was sold in 3,343 square meters per square meter on December 26, 2006, and the land outside the said planned apartment site was sold in 00,000 square meters per square meter on the same day on the same day.

2) The Plaintiff requested an appraisal corporation to conduct retroactive appraisal on the instant land. According to the result of the appraisal by an appraisal corporation from April 16, 2010 to April 19, 2010, the appraisal price per square meter of the instant land as of February 14, 2007 is 00 won.

3) Around February 201, 201, LA and 6 others sold the instant land to 000 won, and to CC Project Project Project Project Co., Ltd, the entire apartment site (57,482m2) including the land and the site for factory and the site for apartment construction (57,482m2).

4) The nextB, the representative director of XX Construction, is entitled to the total purchase amount of KRW 000 as stated in the trading agreement drawn up on December 26, 2006, the apartment construction site of KRW 2.5 million per square year, the apartment construction site of KRW 2.5 million per square year, and the building site of KRW 000,000 including value-added tax, and the aggregate amount of KRW 00,000, the apartment site of KRW 000, the building site of KRW 000, the building site of KRW 000, and the building site of KRW 00,000, which are not included in the apartment construction site of KRW 200. The instant land not included in the apartment construction scheduled site of KRW 00 is purchased at the Plaintiff’s request as it is not necessary for the corporation’s business purpose, and the price of KRW 00,000 per square year, which is lower than the market price of KRW 00 per square year.

[Ground of recognition] Facts without dispute, Gap evidence 3, 4, Gap evidence 6 to 14, witness B's testimony, the purport of whole pleadings

E. Determination

1) According to Article 55-2(1)1 and 3 of the Corporate Tax Act, where a domestic corporation transfers land, etc. located in an area prescribed by the Presidential Decree and the ratio of increase in land price exceeds a certain ratio, or transfers land, etc. for non-business use, etc., the corporate tax amount on capital gains for each business year shall be additionally paid in addition to the corporate tax amount on income for each business year. However, in the calculation of capital gains, where land, buildings, or several parcels of land are acquired or transferred together with each other in the calculation of capital gains, if the actual transaction value of each real estate is separately recorded, it shall be calculated for each real estate. However, in cases where the classification of each real estate value is unclear by acquiring or transferring each real estate in a lump sum, the Corporate Tax Act does not provide for the classification of each real estate value. Provided, That Article 100(2) of the Income Tax Act and Article 48-2(4)1 of the Enforcement Decree of the Value-Added Tax Act, which applies mutatis mutandis under Article 166(6) of the Enforcement Decree of the Value-Added Tax Act, if the classification is unclear.

2) In light of the following circumstances, i.e., the Plaintiff’s purchase of the instant real estate to construct apartment units, i.e., the instant land outside of the scheduled apartment site. On the other hand, the instant land is located within the pre-determined apartment site and the total area of the instant land seems to have reasonable grounds to change the sale price of the instant land in excess of 12 times. ② The Plaintiff’s purchase and sale of the instant land at a higher or lower price than the instant land, and it is difficult to conclude that the sales price of the instant land is difficult to be deemed as the market price because the Plaintiff’s purchase and sale price of the instant land is considerably lower than that of the instant land, and the Defendant’s sale price of the instant land is considerably lower than that of the instant land, and the Plaintiff’s sale and sale price of the instant land is considerably lower than that of the instant land to the Plaintiff’s purchase and sale price of the instant land at KRW 00,000,000 per square meter as of February 14, 2007.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is so decided as per Disposition.