A. The meaning of interest and commission under Article 15(1) of the former Regulation of Tax Reduction and Exemption Act (No. 1723, Nov. 20, 1965)

(b) Whether a bad debt can be treated as a common loss with the tax-free business where a bad debt occurs in a corporation's taxable business which operates both a taxable business and a tax-free business but separately manages it

(c) Whether special deduction for bonus under the Income Tax Act is made on bonuses of the nature of allowances paid periodically each month (affirmative);

A. Article 1(1) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 1723, Nov. 20, 1965) provides that a domestic branch of a foreign bank shall be exempted from income tax or corporate tax with respect to the interest and fees that the domestic branch of the foreign bank loaned and received in foreign currency to a national. In light of Article 11 of the former Enforcement Decree of the Corporate Tax Act (amended by the Presidential Decree No. 1978, Dec. 30, 1978), if a domestic branch of the foreign bank carries on a business to lend foreign currency to a national and receive interest and fees, it shall be interpreted that the domestic branch of the foreign bank shall be exempted from corporate tax and income tax corresponding to the income accruing from such business, and it shall not be interpreted that the interest and fees received by the Plaintiff less the deductible expenses from such business, is exempted from corporate tax corresponding to the tax base amount corresponding to the total tax base amount, and it

B. Article 14 of the Enforcement Decree of the Corporate Tax Act provides that a corporation which operates a tax-free business and operates a taxable business, and keeps separate accounts for allowances for bad debts only for the taxable business, and even if the amount of losses is treated as losses within the limit of Article 19 of the Enforcement Decree of the Corporate Tax Act, it shall not be deemed an erroneous accounting under tax law. Even though Article 9 of the Enforcement Decree of the Corporate Tax Act provides that the amount of losses should be offset against the amount of allowances for bad debts already appropriated in the case of a corporation's partial business that manages separate accounts for tax-free business and taxable business, this provision does not mean that the amount of bad debts should be offset against the amount of allowances for bad debts in the other business sector. Thus, if a corporation that operates a taxable business and operates separate accounts by dividing the allowances for bad debts appropriated in the Korean won loan business into the accounts of allowances for bad debts limited to the Korean won loan business without jointly

C. A bonus, regardless of corporate achievements, which is characterized as a supplementary meaning of remuneration or salary, shall be considered as a bonus under Article 21 (3) of the former Income Tax Act in full view of the current methods of paying remuneration for most Korean companies and the purport of the provisions of Article 21 (1) and (3) of the former Income Tax Act (amended by Act No. 315, Dec. 5, 1978). Therefore, in calculating the labor income tax, special bonus deduction shall be made.

A. Article 15(1) of the former Regulation of Tax Reduction and Exemption Act (Act No. 1723, Nov. 20, 1965); Article 11(b) of the former Enforcement Decree of the Corporate Tax Act (the Presidential Decree before December 30, 1978); Article 14(2) of the Corporate Tax Act; Article 9(c) of the Enforcement Rule of the Corporate Tax Act; Articles 21(1) and 21(3) of the former Income Tax Act; Article 41 of the former Enforcement Decree of the Income Tax Act (the Presidential Decree before December 31, 1981)

Bank Co., Ltd., Attorney Kim Jin-jin, Park Jong-ok, Counsel for the plaintiff-appellant of the Bank;

Attorney Shin Jae-soo, Counsel for the plaintiff-appellant

Seoul High Court Decision 80Gu427 delivered on July 9, 1981

The part of the judgment of the court below against the plaintiff regarding each corporate tax and defense tax corresponding to the common deductible expenses of the bad debts allowance shall be reversed, and this part of the case shall be remanded to the Seoul High Court.

The remaining appeals by the plaintiff and the defendant are dismissed.

The costs of a final appeal concerning the dismissal of an appeal shall be borne by each appellant.

(1) We examine the grounds of appeal on the same records as the Plaintiff Kim Jin-jin and the Plaintiff’s attorney Kim Jin.

With respect to No. 1:

Article 15(1) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 1723, Nov. 20, 1965; hereinafter the same) provides that a domestic branch of a foreign bank shall be exempted from income tax or corporate tax for the interest and fees that it has leased and received in foreign currency to a national under the conditions as prescribed by the Presidential Decree. In light of the purport of the above provision, in a case where a domestic branch of a foreign bank lends foreign currency to a national and carries on a business in which a domestic branch of the foreign bank receives interest and fees, it shall be exempted from income tax and corporate tax for such business. In other words, it shall be interpreted that a domestic branch of the foreign bank is exempted from income tax and corporate tax corresponding to the income accrued from such business, and it shall not be interpreted that a domestic branch of the foreign bank is exempted from corporate tax corresponding to the total amount of

In the same purport, the decision of the court below that, in calculating the corporate tax exempted by the plaintiff's domestic branch operating a business of lending foreign currency to the Korean national, the income derived from deducting the expenses from the interest and commission received by the plaintiff as tax-free income, and that corresponding corporate tax should be calculated and exempted pursuant to Article 11 (1) of the Enforcement Decree of the former Corporate Tax Act, is justified, and it cannot be accepted in the

With respect to the second ground:

According to the facts established by the court below, if the plaintiff's corporate tax for 197 years and 1978 is determined to calculate income from foreign currency loans, the defendant shall regard the allowance for bad debts in the foreign currency loan account as common deductible expenses, and treat the amount calculated by deducting the income from other deductible expenses as tax-free income, and the remaining amount of the allowance for bad debts shall be treated as deductible expenses because the plaintiff established the Korean won loan account, which is the only taxable business, and the allowance for bad debts shall be treated as deductible expenses and deducted from deductible expenses under Article 14 of the Corporate Tax Act, Article 9 of the Enforcement Decree of the Corporate Tax Act, and Article 9 of the same Enforcement Decree provides that the allowance for bad debts shall be calculated based on the total amount of the loan and other bonds corresponding to the allowance for bad debts which the plaintiff would have to pay for bad debts separately from deductible expenses under Article 14 of the same Act, and Article 9 of the same Enforcement Decree provides that the allowance for bad debts of the corporation shall be appropriated separately from deductible expenses, regardless of the initial bad debts loan.

If each allowance for bad debt of taxable business and tax-free business should be treated as a common loss, it would be against the purpose of the Corporate Tax Act that allows the same tax as the bad debt allowance to be paid if the bad debt is not appropriated in the other business part in the next year, and the allowance for bad debt appropriated in the other business part in the next year is not returned, and the bad debt allowance account to be returned to gross income is not established at all and for two years. Therefore, it would be contrary to the purpose of the Corporate Tax Act that allows the bad debt allowance to be paid in the next year if the bad debt is deducted from gross income if it is calculated for two years without bad debt, while the bad debt is returned to gross income in the next year.

In this respect, the court below erred by misapprehending the legal principles on separate accounting and allowance for bad debts, and the illegality affected the conclusion of the judgment.

(2) We examine the grounds of appeal by the defendant's attorney.

According to the reasoning of the judgment below, the court below acknowledged the fact that the plaintiff entered into a labor-management agreement on January 13, 1978 and paid the plaintiff's 400 percent of the basic monthly salary to the general employees in March, June, September, and December as bonus, and paid the above bonus in installments each month at the request of the employees in accordance with the above provision on March, 1978, and found that the above bonus was paid in addition to the monthly salary under the above provision, regardless of the company's achievements, it appears that the above bonus has the nature of the bonus as a supplementary allowance for remuneration or salary regardless of the company's achievements. However, considering the above purport of Article 21 (1) and (3) of the former Income Tax Act (amended by Act No. 3150, Dec. 5, 1978), the court below's determination that the bonus of the above nature constitutes bonus under the above Article 21 (3) of the Income Tax Act, and thus, it cannot be viewed that it was unlawful on the ground that it did not constitute a special bonus under the above provision.

Therefore, the part of the judgment below regarding each corporate tax and defense tax corresponding to the common deductible expenses of the bad debts allowance among the judgment below is reversed, and this part of the case is remanded to the court below. The remaining appeal by the plaintiff and the defendant's appeal are all dismissed, and the costs of the appeal as to the dismissal of the appeal are assessed against the losing party by the assent of all participating Justices.

Justices Kim Jung-soo (Presiding Justice) and Lee Jong-young's Lee Jong-young