Whether the interest accrued from the rental deposit should be deducted in calculating the deemed rent at the time of determination of estimated tax investigation under the former Income Tax Act (affirmative)

According to Article 29(1) of the former Income Tax Act (amended by Act No. 4661 of Dec. 31, 1993) and Article 58(3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 13802 of Dec. 31, 1992), income generated from a rental deposit can be included in the total amount of income only when the amount of income generated from a rental deposit is deducted from the calculation of deemed rent and the amount of income falls short of the amount calculated by multiplying the rental deposit by the term deposit of one year by the term deposit of one year, and the same is not different from the case of estimated investigation and determination of income amount.

Article 29 (1) of the former Income Tax Act (amended by Act No. 4661 of Dec. 31, 1993) (see current Article 25 (1)), Article 58 (3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 13802 of Dec. 31, 1992) (see current Article 53 (2) and (3))

Plaintiff

The Director of Gangnam District Office

Seoul High Court Decision 95Gu21060 delivered on September 3, 1996

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

According to the reasoning of the judgment below, the court below rejected the Plaintiff’s assertion that, at the time of the final return of global income tax base for 1992, the Plaintiff, a real estate rental business entity, filed a return of 168,103,00 won multiplied by 62% of the total amount of income at the time of the final return of global income tax base for 1992, and paid the comprehensive income tax accordingly, the Defendant paid the total amount of income reported by the Plaintiff compared with the total amount of income reported at the time of the final return of value-added tax base (the amount calculated by multiplying the rental deposit by one-year fixed deposit deposit interest rate for the rental deposit) by 33,789,747 won was omitted, which is the amount equivalent to the above amount of income at the time of the final return of global income tax base for 20,949,643 won and additionally imposed global income tax on global income tax base for 12,569,780 won. The Plaintiff’s assertion that the above amount of income should not be separately determined by the Plaintiff’s final return.

However, Article 29 (1) of the former Income Tax Act (amended by Act No. 4661 of Dec. 31, 1993) provides that where the amount of income generated by a resident from a real estate or a real estate right to such real estate falls short of the amount calculated by multiplying the interest rate as prescribed by the Presidential Decree by the deposit interest rate of financial institutions taking into account such deposit, etc., the amount calculated as prescribed by the Presidential Decree shall be included in the gross income in the calculation of real estate income. Accordingly, Article 58 (3) of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 13802 of Dec. 31, 1992) provides that the calculation formula of the amount to be included in the gross income shall be in the calculation of rental deposit (a drop number of rental deposit, etc. in the relevant taxable period - repayment period of loans after the commencement of rental business) 】 (a) year interest rate of 1/365 x 1) year interest rate of rental deposit in the relevant rental business 】

However, according to each of the balance sheet (Evidence 1), profit and loss statement (Evidence 7), and total balance sheet (Evidence 10) that the court below rejected, the plaintiff held a deposit close to the amount of a security deposit in relation to the real estate rental business of this case and acquired interest income as alleged in such statement. Thus, the court below should have reviewed whether the plaintiff raised an objection to the fact that there is a interest income as alleged by the plaintiff in relation to the rental business, but the court below rejected the plaintiff's assertion on the ground of its stated reasoning, but the court below erred by misapprehending the legal principles on deemed rent and failing to exhaust all necessary deliberations. The ground of appeal pointing this out is with merit.

Therefore, the judgment of the court below is reversed, and the case is 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 case.

Justices Jeong Jong-ho (Presiding Justice)