[1] Requirements for inclusion of bad debt in deductible expenses and the business year to which it reverts due to impossibility of collection

[2] In a case where the settlement of accounts that caused bad debt at the time of settlement of accounts is not made, whether a request for correction can be made on the grounds of revision of the accounting book (negative)

[1] In full view of the provisions of Articles 9(3) and 17(1) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998), Articles 12(2)8 and 21 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 15970 of Dec. 31, 198), and Article 9(2) of the same Act (amended by the Ordinance of the Ministry of Finance and Economy of May 24, 1999), etc., the Corporate Tax Act provides that claims not collectible due to the debtor's insolvency should be deductible expenses in calculating the income of the corporation for each business year. In light of the above, since Article 20 of the former Corporate Tax Act, Article 46(2)7 and Article 47(1) of the Enforcement Decree of the same Act shall be included in the calculation of the income of the corporation, if it is clearly impossible to collect bad debt from the corporation's gross income and it shall be included in the calculation of the income.

[2] As long as a bad debt was not dealt with at the time of settlement of accounts, a request for correction under Article 45-2 (1) of the former Framework Act on National Taxes (amended by Act No. 6303 of Dec. 29, 2000) cannot be made on the ground that the error in accounting was corrected later.

[1] Article 9(3) of the former Corporate Tax Act (amended by Act No. 581, Dec. 28, 1998; see current Article 19(1)); Article 20 (see current Article 52); Article 12(2)8 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970, Dec. 31, 1998; see current Article 19 subparag. 8; see current Article 62); Article 46(2)7 (see current Article 8(1) of the former Enforcement Decree of the Corporate Tax Act (amended by Act No. 5581, Dec. 24, 1998; see current Article 9(2) of the former Enforcement Decree of the Corporate Tax Act (amended by Act No. 15970, Dec. 9, 199); Article 9(2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1981, Feb. 19, 19, 297)

[1] Supreme Court Decision 87Nu465 delivered on September 27, 1988 (Gong1988, 1352) Supreme Court Decision 89Nu2097 delivered on September 12, 1989 (Gong1989, 1517) Supreme Court Decision 91Nu1684 delivered on January 21, 1992 (Gong1992, 93) (Gong2001Du489 delivered on September 24, 2002)

Plaintiff of New Urban Gas Administrator of the Reorganization Company

Racing Head of the Tax Office

Daegu High Court Decision 2001Nu2288 delivered on July 19, 2002

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

We examine the grounds of appeal.

According to the reasoning of the judgment below, the court below determined that the part of the disposition of this case included the interest rate for the loan of this case in the gross income under Article 20 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) and Article 46 (2) 7 and Article 47 (1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998; hereinafter the same) is unlawful, since it is based on the premise that the amount equivalent to the interest can be collected. Thus, if the interest rate as well as the principal difference cannot be collected at all due to the debtor's insolvency, it shall not be included in the gross income regardless of whether the loan of this case was accounts as bad debts. Thus, since the loan of this case was in a state in which its principal and interest can be fully recovered in the business year 1998, the part of the disposition of this case included the interest rate for recognition

However, in light of the provisions of Articles 9(3) and 17(1) of the former Corporate Tax Act, Articles 12(2)8 and 21 of the former Enforcement Decree of the Corporate Tax Act, and Article 9(2) of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 86 of May 24, 199), etc., the Corporate Tax Act provides that a debtor's non-collectionable claim due to the debtor's insolvency constitutes a bad debt amount which is deductible expenses deducted from the profits in calculating the income of the corporation for each business year. In this light, regardless of whether the interest recognized as deductible expenses pursuant to Article 20 of the former Corporate Tax Act, Articles 46(2)7 and 47(1) of the former Enforcement Decree of the Corporate Tax Act, regardless of whether it is impossible to recover, if it falls under bad debt amount stipulated in the following provisions, the claim itself exists, and thus, it can be deemed that it constitutes a bad debt amount under Article 20-14(2) of the former Framework Act.

Nevertheless, the lower court determined that the instant interest cannot be included in the gross income solely on the ground that it was impossible to recover, notwithstanding that it did not account as bad debts, erred by misapprehending the legal principles on bad debts and impossibility of recovery, which affected the conclusion of the judgment.

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 participating Justices on the bench.

Justices Cho Cho-Un (Presiding Justice)