[1] In a case where a sales contract for the land subject to a permission for a land transaction contract under the Act on the Utilization and Management of the National Territory is in a state of flexible invalidation because it does not obtain a permission for a transaction, whether the status of the purchaser can be deemed to be transferred to a third party only by agreement between the seller, the buyer, and the third party to transfer the status

[2] In a case where a sales contract for the land subject to a permission for a land transaction contract under the Act on the Utilization and Management of the National Territory is in a state of flexible invalidation because it did not obtain a permission for a transaction, whether it constitutes a transfer of assets subject to capital gains tax or an income from the transfer

[3] The case holding that where the first sale contract for the land subject to permission for a land transaction contract under the Act on the Utilization and Management of the National Territory is cancelled under the agreement and the second sale contract is concluded and permission for land transaction is obtained after the second sale contract is concluded, the transfer according to the first sale contract cannot be deemed as taxable object of capital gains tax

[1] Where a sales contract is concluded without permission by the competent authority on the land subject to permission for a land transaction contract under the Act on the Utilization and Management of the National Territory, the sales contract is in a state of flexible invalidation, and even if the seller, the buyer, and the third party agreed on the sale contract in a state of flexible invalidation to be transferred the status of the purchaser, in light of the legislative intent of the land transaction permission system under the Act on the Utilization and Management of the National Territory, the above agreement takes effect only when the permission by the competent authority on the sale contract between the seller and the buyer is obtained, and it cannot be said that the status of the purchaser under the contract is transferred from the buyer to the third party only by agreement between the seller and the third party without such permission.

[2] In a case where a sales contract for the land subject to a permission for a land transaction contract under the Act on the Utilization and Management of the National Territory is in a state of flexible invalidation due to the failure to obtain a permission for a transaction, it cannot be said that the transferor constitutes a transfer of assets subject to capital gains tax or an income accrued from the transfer of assets,

[3] The case holding that, where the first sale contract for the land subject to permission for a land transaction contract under the Act on the Utilization and Management of the National Territory is cancelled under the agreement and the second sale contract is concluded and permission for land transaction is obtained after the conclusion of the second sale contract, the transfer of the real estate subject to the transfer income tax becomes null and void if the agreement on the sale contract for the real estate is cancelled, and thus the first sale contract becomes null and void, and thus the first sale contract cannot be deemed null and void, and thus, the transfer of the land subject to the transfer income tax cannot be deemed null

[1] Article 21-3 of the Act on the Utilization and Management of the National Territory / [2] Articles 4(3) (see current Article 88(1)), 23 (see current Article 94) of the former Income Tax Act (amended by Act No. 4803, Dec. 22, 1994); Article 21-3 of the Act on the Utilization and Management of the National Territory / [3] Articles 4(3) (see current Article 88(1)), 23 (see current Article 94) of the former Income Tax Act (amended by Act No. 4803, Dec. 22, 1994)

[1] Supreme Court en banc Decision 96Da7762 delivered on July 26, 1996 (Gong1996Ha, 2600) / [2] Supreme Court en banc Decision 90Da12243 delivered on December 24, 1991 (Gong1992, 642) Supreme Court Decision 92Nu8361 delivered on January 15, 1993 (Gong1993, 754 delivered on March 20, 197) 95Nu18383 delivered on March 29, 197 (Gong1997Sang, 105) / [3] Supreme Court Decision 98Du5811 delivered on June 13, 200 (Gong200, 1683) / [3] Supreme Court Decision 92Nu9497989 delivered on July 19, 198 (Gong2949, Jul. 29, 19997)

Plaintiff (Attorney Choi Jin-chul et al., Counsel for the plaintiff-appellant)

Samsung Head of Samsung Tax Office

Seoul High Court Decision 97Gu26335 delivered on July 8, 1998

The part of the lower judgment against the Plaintiff is reversed, and the case is remanded to the Seoul High Court.

1. On October 26, 1989, the lower court: (a) concluded a contract with the Plaintiff and Nonparty 1 (hereinafter referred to as “Plaintiffs, etc.”) to sell the instant land to Nonparty 2 and 3 (hereinafter referred to as “Nonindicted 2, etc.”) on October 17, 1990; (b) concluded a contract with Nonparty 1 and 9 to sell the instant land to Nonparty 2 and Nonparty 1 and 9 (hereinafter referred to as “Nonindicted 2, etc.”) on October 17, 1990; and (c) concluded a contract with Nonparty 1 and 9 to sell the instant land to Nonparty 2 and Nonparty 1 and Nonparty 2 for the same purchase and sale of the instant land at KRW 1,116,00,000,000 among the price for the instant land; and (d) concluded a contract with Nonparty 1 and Nonparty 2 for the sale of the instant land at KRW 90,90,000,00 for the remaining price for the Korea National Housing Corporation, etc.

In addition, the court below determined that since the cancellation of the first contract as of November 10, 1994 was not aimed at extinguishing the first contract, it was merely a tool to change the status of the purchaser of the first contract to Nonparty 3 and 229, etc., the first contract cannot be deemed null and void, and furthermore, since the plaintiff et al. transferred the right to acquire the land of this case, the income from the transfer was reverted to the year 190 in which the price is settled.

2. However, in a case where a contract of sale and purchase is concluded without permission from the competent authority on the premise that a contract of sale and purchase under the Act on the Utilization and Management of the National Territory should be permitted, the contract of sale and purchase is in a state of flexible invalidation. Even if the seller, the buyer, and the third party agreed on the contract of sale and purchase under the current Act on the Utilization and Management of the National Territory to be transferred the buyer’s status, in light of the legislative intent of the permission system for the contract of sale and purchase under the Act on the Utilization and Management of the National Territory, the agreement becomes effective only when the permission from the competent authority is obtained for the contract of sale and purchase between the seller and the buyer, and the third party without such permission, it cannot be said that the status of the purchaser under the contract of sale and purchase cannot be transferred from the buyer to the third party (see Supreme Court Decision 96Da762, Jul. 26, 196). If the contract of sale and purchase is invalid due to the failure to obtain permission for the contract of sale and sale, the transferor can only be deemed as valid.

In addition, the facts and records established by the court below are based on the facts and records. After the first contract, there was a dispute, such as being accused of a criminal complaint from the distribution comprehensive merchant corporation, the plaintiff et al., and the plaintiff et al. were filed a lawsuit against the non-party 2 et al. on September 1993 on the ground that he was his representative, and they denied his power of representation in the lawsuit, and the first contract was not approved for a land transaction contract and was null and void for not less than one year. The first contract was rescinded by agreement on November 10, 1994, and the second contract was concluded with the non-party 3 et al. and the non-party 229 on November 11, 1994, to substitute the amount received from the non-party 2 et al. under the first contract with the non-party 3 and the non-party 229 on November 29, 194.

As above, the plaintiff et al. should cancel the first contract that is null and void because it did not obtain permission for a land transaction contract, and conclude a new contract with the non-party 3 and 229. On the other hand, when the contract for real estate is terminated by agreement, the transfer that is subject to capital gains tax becomes null and void and thus the transfer that is subject to capital gains tax has never existed (see, e.g., Supreme Court Decisions 88Nu8609, Jul. 11, 1989; 92Nu17884, May 11, 1993). Thus, the transfer pursuant to the first contract of this case cannot be deemed as subject to capital gains tax.

Therefore, the court below held that the first contract cannot be deemed null and void, and the income accrued from the transfer of the right to acquire the land of this case was reverted to 190. The court below erred by misapprehending the legal principles on land transaction permission, cancellation of agreement, taxable objects and the period of attribution of income, thereby affecting the conclusion of the judgment. The ground of appeal pointing this out is justified.

3. Therefore, the part of the judgment of the court below against the plaintiff shall be reversed, and the case shall be remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all Justices who reviewed the appeal.

Justices Shin Shin-chul (Presiding Justice)