Daegu High Court 2010Nu2792 (Law No. 28, 2012)

early 209Gu2276 (2010.05)

Where the amount actually recovered from the disposition immediately after the disposition falls short of the principal, the gross income amount of interest income shall not be paid [Korean plaque]

(Reversal) There is considerable room to view that the claim of this case was objectively and objectively impossible to recover its entire amount at the time of the instant disposition. Since the amount actually recovered immediately after the instant disposition falls short of the principal, the total amount of interest income shall be deemed non-existent.

Article 51 (7) of the Enforcement Decree of the Income Tax Act

2012Du24344 Disposition of revocation of the imposition of global income tax, etc.

United Kingdom A

Head of the Gu Tax Office

Daegu High Court Decision 2010Nu2792 Decided September 28, 2012

January 29, 2015

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

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1 and 2

The court below determined as follows, based on the adopted evidence: ① the Plaintiff paid the Plaintiff KRW 11, 206, i.e., the actual manager of the BB Housing Construction Co., Ltd. (hereinafter referred to as the “B Housing”), and ② the Plaintiff collected KRW 11,00,000 from August 22, 2006 to December 11, 2007, 207, i.e., the sum of KRW 11,000,000, i.e., the Plaintiff paid KRW 11,000,000, i.e., the amount of this case’s interest and KRW 11,000 from August 22, 2006 to December 11, 2007.

Examining the reasoning of the judgment below in light of the records, the above fact-finding and judgment of the court below are just, and there is no violation of the law of logic and experience and the principle of free evaluation of evidence, or there is no violation of

2. Regarding ground of appeal No. 3

A. Article 39(1) of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009; hereinafter the same) provides that "the year to which the total amount of income and necessary expenses of a resident belong shall be the year in which the date when the total amount of income and necessary expenses are determined." Article 39(4) of the former Enforcement Decree of Income Tax Act (amended by Presidential Decree No. 22034 of Feb. 18, 2010; hereinafter the same shall apply) provides that "the date when the total amount of income and expenses of a non-business loan are received shall be the date when the principal and expenses of the non-business loan are paid according to the agreement, or when interest are paid prior to the date of payment of interest pursuant to the agreement, or when interest is received from a debtor who is excluded from the calculation of total income pursuant to Article 51(7) of the former Enforcement Decree, it shall be the date when the debtor is found to have recovered the total amount or amount of expenses collected from the bonds under Article 50(2).

The legislative purport of Articles 45 subparag. 9-2 and 51(7) of the former Enforcement Decree of the Income Tax Act is to consider interest income paid in non-business loans as fixed and deemed as income subject to income tax. However, even if the interest was paid, in exceptional circumstances where it is objectively evident that the payment of the interest income becomes impossible to recover due to the debtor’s bankruptcy, etc. and there is no possibility of realizing the future interest income, it would not be subject to taxation of interest income tax exceptionally (see Supreme Court Decision 2009Du13160, Sept. 8, 201). Therefore, if the amount collected by the time when the final return on the tax base of the non-business loan or the tax base and amount of tax are not recoverable prior to the determination and correction of the principal due to the occurrence of a specific cause not attributable to the collection of the interest income, such determination shall not be subject to taxation of interest income tax even if there is an interest income in the taxable year prior to the collection of the principal, and the final return on tax base or amount of interest income collected cannot be determined based on the basis of the debtor’s.

B. According to the reasoning of the judgment below and the record, the plaintiff was provided as security the above OE 10,000 O2, 106, and 17 OE 27, and 26,000 OE 27,000,000,000 won for 20,000 won for 20,000,000 won for 20,000 won for 20,000,000 won for 20,000,000 won for 20,000,000 won for 30,000,000 won for 20,000,000 won for 20,000,000 won for 30,000,000 won for 20,000,000 won for 20,000 won for 20,000 won for 20,000,000 won for 20,00

Examining these facts in light of the legal principles as seen earlier, since SongD, SongCC, or Masan Construction, as of March 1, 2009, which was at the time of the instant disposition, appears to have never existed with sufficient means to repay a large amount of debt to creditors including the Plaintiff, there is a lot of room to deem that the Plaintiff’s claim in this case was objectively objectively impossible to recover the entire amount at the time of the instant disposition. In this case, the Plaintiff’s total amount of interest income collected by the Plaintiff up to the time immediately after the instant disposition was rendered (=OOOOO on March 28, 2007 + + OOOOOOO on April 27, 2009) should be deemed to have not been included in the total amount of interest income for the Plaintiff’s claim in 206 and 207.

Nevertheless, solely for the reasons indicated in its holding, the lower court determined that the instant disposition was lawful by deeming that the Plaintiff’s claim in this case was in a state in which all or part of the principal and interest could not be recovered from the obligor or a third party, and that the Plaintiff’s interest income was fully realized, even if the instant disposition subsequently rendered impossible to recover the remainder of the claim in this case due to the discontinuation of business, etc. of SongD’s business, on the ground that the tax liability for interest income, which was specifically realized prior to the occurrence of a cause for impossibility of recovery, could not affect any and all of the tax liability for interest income, which was imposed on the said interest income, was erroneous by misapprehending the legal doctrine

Supreme Court Decision 2005Du5437 Decided October 28, 2005 cited by the court below is related to the issue before the enactment and enforcement of Article 51(7) of the former Enforcement Decree of the Income Tax Act, and it is not appropriate to invoke the case in this case.

3. Conclusion

The lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.