When transferring the goodwill along with the fixed property for business, spring of all of the transfer proceeds as temporary property income.

All fixed assets for business, such as cable broadcasting facilities, are attached to the cable broadcasting business license, and the defendant's disposition of this case, which reported all of the transfer proceeds of the business of this case as temporary property income, is legitimate.

Article 20-2 of the Income Tax Act

Article 40-2 of the Enforcement Decree of Income Tax

1. The plaintiff's appeal shall be lodged.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked.

The Defendant’s disposition of imposition of global income tax of KRW 7,253,660 for the Plaintiff on April 5, 2006 shall be revoked.

1. The court's explanation concerning the instant case is the same as the opening of the first instance court's judgment except for the addition of evidence Nos. 6 and No. 7 to evidence Nos. 8 (2) of the Administrative Litigation Act, and Article 420 of the Civil Procedure Act, as it is, in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. If so, the plaintiff's claim shall be dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.

Busan District Court 2007Guhap3047 (Law No. 15, 2008)

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s disposition of imposition of global income tax of KRW 7,253,660 against the Plaintiff on April 5, 2006 shall be revoked.

1. Details of the disposition;

The following facts can be acknowledged in full view of the following facts: there is no dispute between the parties, or the whole purport of each statement in Gap evidence 1 through 3, Gap evidence 5-5, Eul evidence 1 through 5.

A. The Plaintiff, together with the ○○○○○○○, engaged in cable broadcasting in the name of ○○○○○○○○○○, and transferred to the ○○○○ Co., Ltd. on January 16, 2003 the Plaintiff’s share 1/2 of the Plaintiff’s cable broadcasting license granted by the government, and the Plaintiff’s share 1/2 of the subscription rights, transmission system, subscriber management system and transmission network facilities, cable broadcasting-related office and equipment, and ② the Plaintiff’s share 1/2 of the Plaintiff’s share among the optical cable units from the ○○○○○○○○○’s office to the ○○○○○○○○○○○○○○○○○○’s office (hereinafter “instant business license, etc.”) at KRW 180,00,00.

B. As to this, the Defendant considered the sales proceeds of the instant goodwill, etc. as temporary property income under Article 20-2 (1) 2 of the Income Tax Act, and imposed KRW 7,253,660 on the Plaintiff on April 5, 2006 pursuant to Article 4 (1) 1 of the Income Tax Act and Article 87 of the Enforcement Decree of the same Act (hereinafter “instant disposition”).

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful in calculating the comprehensive income tax by treating the total transfer price, including the price, as temporary property income, in the case where the business right is transferred along with the fixed business assets such as machinery and equipment and business facilities, notwithstanding that it is not subject to global income or transfer income tax, since the actual value of the fixed business assets such as cable broadcasting facilities, etc. transferred by the plaintiff exceeds the transfer price of the business of this case and the above transfer did not occur, the disposition of this case is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Judgment as to the Plaintiff’s assertion

Article 40-2 (3) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003; hereinafter the same) provides that "business rights" shall not include business rights transferred along with business failure assets (referring to the assets referred to in subparagraphs 1 and 2 of Article 94 of the Act). Article 94 subparagraph 1 of the Income Tax Act provides that "land or buildings", "right to acquire real estate, superficies, right to lease on a deposit basis, right to lease on a deposit basis, and right to lease registered real estate."

In this case, under the opposite interpretation of the above provision of the Enforcement Decree of the Income Tax Act, the income gained by transferring the goodwill with the fixed assets for business, such as the cable broadcasting facilities, which are not real estate or rights related thereto, shall be deemed as temporary income from the transfer of the business (see, e.g., Supreme Court Decision 2003Du7088, Jan. 28, 2005). Meanwhile, it is recognized that the Plaintiff was included in the object of transfer of the cable broadcasting facilities, which are fixed assets for business at the time of transfer of all rights related to the cable broadcasting business including the right to permit the cable broadcasting as above. However, it is difficult to view that the fixed assets for business including the cable broadcasting facilities, which are included in the object of transfer, are all incidental to the cable broadcasting business license and have independent value separately granted from the cable broadcasting business license (see, e.g., Supreme Court Decision 2003Du7088, Jan. 28, 2005).

(2) Judgment on the Plaintiff’s assertion

On the other hand, the plaintiff cited Gap evidence 4, Gap evidence 5-1, Gap evidence 5-2 (decision), Gap evidence 5-3, and Eul evidence 5-4 (Report of Decision in lieu of Gap evidence 5-3) as evidence for the value or value of the cable broadcasting facilities, which are fixed assets for business that he transferred. However, Gap evidence 4 is different from the time when the transfer contract of the business right of this case was concluded on January 22, 2001, and there is no evidence that the evaluation is consistent with the cable broadcasting facilities, etc. included in the object of transfer, and it is difficult to view Gap evidence 5-1 through 4 as objective evidence for the value or value of cable broadcasting facilities, etc. included in the object of transfer, and there is no reason to acknowledge that the above evidence alone exceeds the real value of the fixed assets of this case, etc. of the above business facilities, etc., and there is no reason to acknowledge otherwise.

(3) Therefore, the instant disposition, which calculated global income by deducting the amount equivalent to 80/100 of the total income amount from the necessary expenses, from the total income amount, is lawful, by deeming that the necessary expenses are not verified for the transfer of the instant goodwill, etc. pursuant to Article 87 subparagraph 4 of the Enforcement Decree

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

public official law, order of law,

Income Tax Act (amended by Act No. 7006 of Dec. 30, 2003)

Article 4 (Classification of Income)

(1) The income of a resident shall be classified as follows:

1. Global income:

The sum of interest income, dividend income, real estate rental income, business income, labor income, temporary property income, pension income and other income generated in the current year;

Article 20-2 (Temporary Property Income)

(1) The temporary property income shall belong to the following incomes in the current year:

2. Income accruing from the transfer of mining rights, fishing rights, industrial property rights, industrial information, industrial secrets, trademark rights, and business rights prescribed by Presidential Decree), rights incidental to permission to collect earth, sand, and rock, rights to develop and use underground water, and other similar assets or rights;

(2) The temporary property income amount shall be the total income amount minus the necessary expenses required for it.

(3) The scope of temporary property incomes shall be determined by Presidential Decree.

Article 27 (Calculation of Necessary Expenses)

(1) In calculating real estate rental income, business income, temporary property income, other income, or forest income, the necessary expenses to be included shall be the sum of the expenses corresponding to the total amount of income in the year concerned, which is generally accepted.

(2) The expenses corresponding to the total amount of incomes in the current year, which are not appropriated as the necessary expenses before the current year, shall be considered as the necessary expenses.

(3) Necessary matters for the calculation of necessary expenses shall be prescribed by Presidential Decree.

Article 94 (Scope of Transfer Income)

(1) The transfer income shall be the following incomes generated in the current year:

1. Income accruing from transfer of land (referring to a lot of land subject to registration of land category in the cadastral record under the Cadastral Act) or buildings (including the facilities and structures annexed to such buildings);

2. Income accruing from transfer of any right to the real estate falling under any of the following items:

(a) Right to acquire real estate (including the right to acquire a building upon completion of its construction and its appurtenant land);

(b) Superficies;

(c) Chonsegwon and registered real estate lease; and

Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173 of December 30, 2003)

Article 40-2 (Scope of Temporary Property Income)

(3) The term "business rights" in Article 20-2 (1) of the Act shall include the economic benefits derived from obtaining the authorization, permission, license, etc. from the administrative agencies, but the goodwill transferred along with the fixed property for business (referring to the property under subparagraphs 1 and 2 of Article 94 of the Act) shall not be included.

Article 87 (Calculation of Other Necessary Expenses for Income, etc.)

75/100 (80/100 in case of subparagraphs 3 and 4) of the incomes or the temporary property incomes falling under one of the following subparagraphs which the resident receives shall be considered as necessary expenses:

4. The temporary property incomes in Article 20-2 (1) of the Act and other incomes in Article 21 (1) 7 of the Act, for which the necessity is not confirmed or of which the income amount falls short of 80/100; and