(a) Whether the disposal of treasury stocks is a transaction of profit and loss subject to taxation; and

(b) the meaning of the total amount of capital stipulated in Article 62 of the Emergency Order on Economic Stabilization and Growth;

A. Where a stock company disposes of its own stocks, the difference between the acquisition value and the transfer value should be regarded as the same as the disposal of other assets, so the difference between the acquisition value and the transfer value shall be treated as the profit and loss from the sale of securities subject to taxation

(b) The increased amount of capital or total amount of capital as stipulated in Article 62 of the Emergency Order Concerning the Stabilization and Growth of the Economy refers to the total amount of capital calculated based on the total amount of the face value of the shares issued by the Company and the substantial factors for the reduction of capital.

Articles 342 and 459 of the Commercial Act, Article 62 of the Emergency Order Concerning the Stabilization and Growth of the Economy (SP)

Attorney Lee Jong-ho, et al., Counsel for defendant-appellant

Head of Southern District Tax Office

Seoul High Court Decision 78Gu435 delivered on October 23, 1979

The appeal is dismissed.

The costs of appeal shall be borne by the plaintiff.

1. We examine the Plaintiff’s ground of appeal No. 1.

Although the original stock company's acquisition of treasury stocks is limited to special cases stipulated in Article 341 of the Commercial Act, it is clear that treasury stocks are transferable assets as well as other securities, such disposal is also regarded as one transaction, and it seems reasonable to treat the difference between the acquisition value and transfer value as profit and loss from the sale of securities, and the difference between the face value and transfer value of treasury stocks at the time of disposal as one transaction. The difference between the acquisition value and transfer value of treasury stocks at the time of disposal is not different in nature from that of the merged surplus fund stipulated in Article 459 of the Commercial Act. Thus, the court below did not regard the disposal of treasury stocks of the plaintiff company as capital transaction, but it is just to consider the disposition of treasury stocks of the plaintiff company as a profit and loss transaction subject to taxation, and it does not seem that the court below erred in fact-finding of the plaintiff company's stock evaluation. Thus,

2. We examine the second ground for appeal.

The purport of Article 62 of the Emergency Order on Economic Stabilization and Growth, where a domestic corporation increases its capital from December 31, 1974 to the business year ending from the business year to December 31, 1976, which includes the date on which the registration for change of capital is made, to levy a tax after deducting the amount calculated in accordance with the formula prescribed in the above Emergency Order from the income amount in each business year from the business year to the business year which ends from the business year to which the date on which the registration for change of capital is made belongs, is to induce the company to convert the above Emergency Order so that the corporate restructuring bonds can be converted into investment. As such, the increased amount of capital or the total amount of capital in this context refers to the total amount of the face value of the company's issued stocks and is not calculated based on the substantial capital reduction factors, so the judgment of the court below is just and it is not acceptable to accept the grounds for appeal against the judgment below.

3. Therefore, this appeal is dismissed as it is without merit. The costs of appeal are assessed against the losing party and it is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yoon So-young (Presiding Justice)