In calculating the amount of liquidation income, which is the tax base of corporate tax, the purport of Article 43 (7) of the former Corporate Tax Act that applies mutatis mutandis Article 16 subparagraph 3 of the same Act to the exclusion of corporate tax from deductible expenses, and whether special surtax on gains accruing from the transfer of real estate held as of the date of dissolution after the date of dissolution shall be deducted from the total

Article 43 (1) of the former Corporate Tax Act (amended by Act No. 4664 of Dec. 31, 1993) provides that where a domestic corporation is dissolved, the liquidation income amount shall be the amount calculated by deducting the total amount of paid-in capital or investments and surplus funds (total amount of equity capital) as of the date of dissolution (the date of dissolution registration) from the value of residual assets of the domestic corporation. Article 116 (1) and (2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080 of Dec. 31, 1993) provides that the value of residual assets under Article 43 of the former Corporate Tax Act shall be the amount calculated by subtracting the total amount of liabilities (excluding the total amount of equity capital) from the total amount of assets as of the date of dissolution, and Article 9 through 21 of the former Corporate Tax Act provides that Article 16 of the same Act shall not apply mutatis mutandis to the calculation of the amount of liquidation income of the domestic corporation for each business year, even if it is not included in deductible expenses under corporate tax law or corporate accounting.

Articles 2 (see current Article 3), 6 (see current Article 8), 9 (see current Article 14), 16 subparagraph 3 (see current Article 21 subparagraph 1), 43 (1) (see current Article 79 (1)), 7 (7) (see current Article 79 (6)), 59-2 (see current Article 99), 12 (2) (see current Article 19), and 116 (see current Article 121) of the former Corporate Tax Act (Amended by Presidential Decree No. 14080, Dec. 31, 1993);

International Emter Co., Ltd. (Attorney Sick-il et al., Counsel for the defendant-appellant)

The Director of the National Tax Service

Daejeon High Court Decision 97Gu3031 delivered on April 24, 1998

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal (to the extent of supplement in case of supplemental appellate brief not timely filed) are examined as follows.

1. On the second ground for appeal

Article 43(1) of the former Corporate Tax Act (amended by Act No. 4664 of Dec. 31, 1993; hereinafter the same) provides that where a domestic corporation is dissolved, the liquidation income amount shall be the sum of paid-in capital or contributions as of the date of dissolution (the date of dissolution registration) and surplus funds (the total amount of equity capital) shall be the amount obtained by subtracting the total amount of paid-in capital or contributions as of the date of dissolution (the date of dissolution registration) from the value of residual assets from its dissolution. Article 116(1) and (2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080 of Dec. 31, 1993; hereinafter the same shall apply) provides that Article 43(7) of the former Corporate Tax Act (amended by Act No. 4664 of Dec. 31, 199) provides that the amount of residual assets under Article 43(1) of the former Corporate Tax Act shall not be deducted from the total amount of corporate tax for each business year.

Therefore, the court below rejected the plaintiff's claim that the special surtax on the transfer of real estate during the period of liquidation should be deducted from the total amount of assets as of the date of determination of the residual assets value, and the defendant's disposition of this case that calculated the corporate tax amount based on the amount of liquidation income calculated without deducting the above special surtax is legitimate. The court below's decision is just, and there is no error in the misapprehension of legal principles as to

2. On the first ground for appeal

The main point of this part of the claim is that even if the plaintiff included the special surtax amount on the real estate in the balance sheet of liquidation income in calculating the liquidation income amount, the total amount of assets that was not deducted and the above total amount of assets was deducted in other deductions column 15 (B) 16 of the former Enforcement Rule of the Corporate Tax Act (property value as of the date on which the special surtax is finalized) did not affect the amount of liquidation income which is the basis of calculating the tax base, the tax disposition in this case, which re-calculated the liquidation income amount by adding the above deductible amount to the residual property value, violates the substance over form principle under Article 14(2) of the Framework Act on National Taxes, but this is a new argument in the party members, and as seen above, so long as the above special surtax amount cannot be deducted from the liquidation income amount, it shall not be accepted as a measure against the substance over form principle.

3. Therefore, the appeal is dismissed, and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Seo-sung (Presiding Justice)