Losses from the evaluation of inventory assets due to the studio shall not be included in the calculation of losses.

Since there is no dispute between the parties that the inventory assets subject to the appraisal loss were not disposed of, the above loss cannot be included in deductible expenses as a decrease loss, and it is impossible to include the book value in deductible expenses because the book value is not reduced by the value appraised as of the last day of the business year.

Article 42 of the Corporate Tax Act: Appraisal of uf85e Debt

Article 78 of the Enforcement Decree of Corporate Tax Act

[Supreme Court Decision 2007Du12729 (No. 21, 2007)]

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The records of this case and the judgment of the court below and the grounds of appeal were examined. However, the grounds of appeal by the appellant are not included in the grounds provided for in each subparagraph of Article 4(1) of the Act on Special Cases Concerning the Procedure for Appeal, and the appeal is dismissed pursuant to Article 5 of the same Act. It is so decided as per Disposition by the assent

[Seoul High Court Decision 2006Nu22493, May 18, 2007]

The plaintiff's appeal is dismissed.

Expenses for appeal shall be borne by the plaintiff.

1. Purport of claim

The Defendant’s imposition disposition of KRW 14,590,690, corporate tax for the business year of 1999 against the Plaintiff on March 2, 2004; KRW 92,924,330, corporate tax for the business year of 200; and KRW 288,338,290, corporate tax for the business year of 2001.

2. Purport of appeal

The part of the judgment of the court of first instance is revoked. The disposition of imposition of KRW 8,430,052 among the disposition of imposition of KRW 14,590,690 on March 2, 2004 against the plaintiff for the business year of 1999, the part of KRW 8,430,052 among the disposition of imposition of KRW 92,924,334,104 among the disposition of imposition of corporate tax for the business year of 2000, and the disposition of imposition of KRW 288,338,290 shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning for this Court’s explanation concerning this case is as stated in the reasoning of the first instance judgment, in addition to the parts used or added by the court below as stated in the second instance judgment, and therefore, it shall be cited in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Parts used or added;

(a)Nos. 5, 12 to 15 shall be followed by:

No. 337,020,214 won for the products returned in 1999, the inventory assets subject to appraisal loss in the business year of 199 were most goods and products returned from retail, etc. between the business year of 1996 and 199, and the value of the assets was considerably lowered at the time of 199.

The plaintiff alleged that the inventory assets subject to the appraisal loss in the business year 1999 were recorded in Gap evidence 6-1 through 3 (the defective statement of goods, products, and the defective statement of Eul evidence 8-1; hereinafter the same shall apply). However, according to Gap evidence 1999, which the plaintiff submitted to the defendant in the business year corporate tax return for the business year 1999 (the evidence No. 6-2 is attached to the evidence No. 6-2, and the evidence No. 19 and Eul evidence No. 7 are the same as the evidence No. 7) the plaintiff accounting of 850,374,912 out of the inventory assets in the business year 1999 as the appraised loss but it accounts as the losses, but the tax adjustment of the reservation remains as the assets of the corporation. Thus, the above inventory assets subject to appraisal should be presented in the inventory assets statement for the business year 199, 200, and 201, the plaintiff's reasonable evidence No. 1 to No. 301 and No. 90 of Gap evidence No. 20.

(b)be engaged in the 6th parallel 3rd parallel of conduct."

(c)On the 6th page, the following shall be added:

"In accordance with corporate accounting standards, corporate accounting theory and practice, inventory assets are defined as assets existing in the form of raw materials or expendable goods that are held for sale or that are put in the process of producing assets and providing services in the normal course of business, and the loss of inventory assets is classified into "evaluation loss (if the inventory assets are evaluated by law, the difference between the market price and the cost method of the inventory assets) caused by the decline in the market price of the inventory assets below the book value and "evaluation loss" caused by the difference between the quantity on the account book and the actual quantity on the account book of the inventory assets (the difference between the inventory on the account book calculated by the Continuous Records Act and the actual inventory identified by the on-site investigation). In the case of the loss of inventory assets, the loss of inventory assets shall be directly deducted from the book value and appropriated in the cost on the income statement, and the normal issue in the case of the loss of inventory assets shall be added to the sales cost, and the loss of inventory assets shall be included in the non-business expenses (see, e.g., corporate accounting standards)., Article 47(2).

On the contrary, in the evaluation of assets, the Corporate Tax Act does not include the marginal profit from the evaluation of assets, which is the unrealistic profit, in the gross income by adopting the acquisition cost principle, but does not allow the inclusion of marginal profit in the calculation of deductible expenses (this is because it is difficult to uniformly assess the market value of assets as of the end of the taxable period, and there is a possibility that all assets subject to taxation may be abused as an arbitrary method of dealing with taxable income because it is rare in practice). However, in exceptional cases where assets cannot be sold at the arm's length price due to damage, spoilage, etc. as inventory assets, the book value shall be reduced by the value appraised as of the last day of the taxable year and the reduced amount may be included in the calculation of deductible expenses by appropriating it as deductible expenses (Article 42 (3) 1 of the former Corporate Tax Act and Article 78 (3) 1 of the

Meanwhile, in the taxation practice, where the depreciation or disposal of inventory assets is objectively recognized, the amount appropriated as a depreciation or disposal loss on the account book can be included in the deductible expenses. [Therefore, even if the inventory assets of this case are not accounted as deductible expenses for the business year 1999 where the causes such as the destruction or decomposition occurred, it shall be deemed that it can be included in the deductible expenses for 2001 business year, which had an accounting awareness of the above causes, until the inventory assets are disposed as deductible expenses. Further, the plaintiff may include the inventory assets of this case as deductible expenses due to the depreciation or disposal (the defendant also included the inventory assets whose depreciation or disposal was confirmed through the on-site inspection of the court of first instance, as it is recognized that the plaintiff also included the amount as deductible expenses for the above 17,69,69, and69 won as deductible expenses for the actual 198 business year, and the plaintiff did not assert that the above reasons were not attributable to the defendant before the above amendment of the former Corporate Tax Act for the business year. This is without merit.

(d) The 6th parallel 20th parallels were written in the way that the 6th parallel 20th parallels " was remarkably depreciated".

(e)On the 8th page, the following shall be added:

"The plaintiff, even if he included the appraised loss of the business year 199 as the appraised loss due to the exhaustion, and did not include the reserved tax adjustment in the account book, he asserts that the appraised loss should be included in the deductible expenses of the business year 1999, so long as it was finalized in the business year 199, and so long as it was accounted as the above, it should be included in the deductible expenses of the business year 1999, and in this case, it should be deducted from the amount of tax base as

However, since there is no dispute between the parties that the inventory assets subject to the appraisal loss for the business year 1999 were not disposed of, the above loss cannot be included in deductible expenses as a decrease loss, and the plaintiff did not include the above loss in deductible expenses by reducing the book value at the market price which can be disposed of as of the last day of the business year pursuant to Article 78 (3) 1 of the former Enforcement Decree of the Corporate Tax Act, and by appropriating the reduced amount as deductible expenses for the business year, the above loss cannot be included in deductible expenses, and the plaintiff's above assertion is without merit."

(f)in Part 10, the following shall be added to the second part:

Article 13 (Tax Base)

The corporate tax base on the income of a domestic corporation for each business year shall be the amount calculated by deducting the amount under the following subparagraphs in sequential order from the income of a domestic corporation for each business year:

1. "The amount of losses incurred during each business year within the five years prior to the first day of the current business year which were not thereafter deducted in the calculation of the tax base;

3. Conclusion

Therefore, the judgment of the first instance court is just in its conclusion, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.