early 207west227 ( October 14, 2009)

The deposit of a term deposit shall be made to a person with a special relationship and whether it falls under a provisional payment in charge of security disclosure

Unless a bank's loan to a person with a special relationship with the deposit of a term deposit of a juristic person and its collateral is separately made, the act of providing security by a juristic person constitutes direct lending to a person with a special relationship or acts corresponding thereto cannot be deemed as an act of offering security, and the same applies even if a juristic person provided as security for a term deposit,

The contents of the decision shall be the same as attached.

1. On March 14, 2007, the part exceeding KRW 1,064,524,840 of the disposition imposing corporate tax of KRW 1,776,756,180 against the Plaintiff for the business year of 2005 (the part of KRW 712,231,340) shall be 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. The plaintiff is a corporation that carries on a new building sales business, and the changeB and redCC (hereinafter referred to as "related parties of this case") are representative directors of the plaintiff.

B. The Plaintiff deposited KRW 20,380,000,000 as a term deposit with AA bank (hereinafter “the term deposit in this case”) out of the money acquired by the sale of a building between December 2, 2002 and November 2005 (hereinafter “the term deposit in this case”), and the persons specially related to this case borrowed the amount equivalent to the amount of the term deposit in this case as security.

C. Under Article 53(2) of the Enforcement Decree of the Corporate Tax Act, the Plaintiff’s offering of the instant term deposit as security for loans to the persons specially related to the instant case is substantially the same as lending funds directly to the persons directly related to the instant case, and the amount equivalent to the instant term deposit shall be deemed as the “provisional payment in charge of business” under Article 28(1)4(b) of the Corporate Tax Act, and shall not include KRW 872,652,353 of the interest paid on the loan corresponding to the amount of provisional payment in deductible expenses in deductible expenses in the business year 2005 pursuant to Article 53(2) of the Enforcement Decree of the Corporate Tax Act. In addition, by applying the provisions of the rejection of wrongful act and calculation under Article 52 of the Corporate Tax Act, the Plaintiff recognized the amount of KRW 397,024,603 as recognized and included the excess amount of the entertainment expenses in gross income for the business year.

D. In response to the above disposition, the Plaintiff filed an appeal with the Tax Tribunal, but only accepted the part on which the sales price was imposed by deeming the sales price discount amount as entertainment expenses, and the assertion on the non-deductible of the provisional payment amount or the rejection of wrongful calculation and calculation were not accepted. In accordance with the purport of the decision of the Tax Tribunal, the Defendant reduced corporate tax for the business year 2005 to KRW 1,776,756,180 for the Plaintiff (hereinafter “instant disposition”).

E. Under Article 53(2) of the Enforcement Decree of the Corporate Tax Act, the amount of tax to be reduced is KRW 712,231,340 if the Defendant included KRW 872,652,353, which was not included in deductible expenses as interest paid on a loan corresponding to the provisional payment, in deductible expenses.

[Ground of recognition] Unsatisfy, Gap evidence No. 1, Eul evidence No. 1-4, Eul evidence No. 2

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

It cannot be included in the meaning of provisional payment, which is not related to the corporation's business, regardless of the name of "the amount of loans that are not related to the corporation's business," and thus, the disposition of this case is unlawful as it violates the principle of no taxation without law.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

Inasmuch as a bank’s loan to a person with a special relationship with the deposit of a term deposit of a juristic person and the deposit of a term deposit of a juristic person as collateral is separate, the act of providing security to A cannot be deemed as a direct lending to a person with a special relationship or an act corresponding thereto. The same applies to a case where a juristic person provides a term deposit as collateral and renders a benefit for a person with a special relationship to receive a loan (see, e.g., Supreme Court Decisions 2004Du13660, May 25, 2006; 2006Du19037, Apr. 23, 2009).

As seen earlier, it is recognized that the act of depositing time deposits by the Plaintiff, the act of depositing time deposits by the Plaintiff, and the act of lending to the persons specially related to the instant case by the AA bank as security was separately conducted. Barring any special circumstance that denies the appearance of a juristic act separately conducted and is assessed as one act conducted through a series of procedures, the Plaintiff’s act of depositing time deposits and offering security cannot be deemed as a direct lending to the persons specially related to the instant case

Therefore, in the disposition of this case, the part that deemed the Plaintiff’s act of depositing time deposits and providing security to the related parties of this case as the act of lending and excluded the interest paid on the loan from the deductible expenses is unlawful. Thus, the portion that exceeds the legitimate corporate tax of 1,064,524,840 won (712,231,340 won) calculated after the aforementioned amount of the interest paid in the disposition of this case was industrialized as deductible expenses should be revoked.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted on the grounds of its reasoning, and it is so decided as per Disposition.